Strategic capability and competencies

Question 1

An organisation needs to be able to build a sustainable competitive advantage, in the context of the macro and micro forces that it exists and operates within. What does the development of strategy need to recognise?

Strategic capabilities are both what?

Expand on this.

What is this often referred to?

What does it provide?

What does it fail to recognise?

Answer 1

needs to recognise the capabilities and competencies that exist currently within an organisation, and how these need to evolve as part of the realisation of the perceived vision

Both common and unique within organisation
(1) Common, because different capabilities are required by all organisations e.g., financial planning
(2) Unique, because every organisation has a unique mix of individuals with their own capabilities e.g., director is a world-renowned specialist

= resource-based strategy = provide organisation ability to recognise and apply its resources

Fails to recognise that the manner in which resources are applied/utilised by different individuals will drive the capabilities of the organisation

Question 2

Differentiate between a strategic capability and a strategic competence.

Answer 2

Strategic capability = the potential that exists within an organisation to achieve an outcome; it has the appropriate mixture of resources available

Strategic competence = the understanding of how to use the organisational capabilities to drive a successful strategic outcome

Question 3

Grant (1998) illustrated the relationship between what?

What did he suggest?

Briefly explain his diagram. (2)

Answer 3

between originating resources and the application of these resources

These combined with external industry factors will enable the formation of a strategy that will lead to competitive advantage

1. ‘Tangible resources’, ‘intangible resources’, and human resources’ feed into ‘organisational capabilities’
2. ‘Organisational capabilities’ and ‘industry key success factor’ feed into ‘strategy’ and produce ‘competitive advantage’

Question 4

SOURCES OF STRATEGIC CAPABILITY - RESOURCES

It is useful to identify the resources that are available to a particular organisation before assessing its capabilities and its competencies.

How will resources always be assessed?

What are the tangible resources? (2)

What are the intangible resources? (3)

What are the human resources? (4)

How does Carter (1999) categorise motivation?

Answer 4

assessed at a snapshot moment in time, e.g., use of a SWOT analysis

Tangible = (1) financial resources and (2) physical resources e.g., land, buildings, machinery, vehicles etc.

Intangible = (1) technology, (2) reputation, and (3) culture = the way people within the organisation behave towards others (internal and external)

Human = (1) individual and combined SKILLS of its employees, (2) current and historic KNOWLEDGE, (3) COMMUNICATION channels and (4) MOTIVATION:

(+) attitude, (+) energy = spectators
(+) attitude, (-) energy = players
(-) attitude, (+) energy = walking-dead
(-) attitude, (-) energy = cynics

Question 5

SOURCES OF STRATEGIC CAPABILITY - CAPABILITIES

What is organisational capability? At the macro level? At the micro level?

How is it defined by Lynch (2015)?

How can human capability best be realised according to Martin (2007)? (2)

Answer 5

Organisational capability = the potential to use 1 or more organisational resources individually or jointly, to achieve a specific outcome

Macro level = the ability of the organisation to utilise its resources to achieve its larger strategic vision

Micro level = the ability of the organisation to utilise its resources to achieve specific organisational/ operational task

Lynch (2015) = the skills, structures and leadership of the organisation behind all its assets together and allow them to interact efficiently

Through the development of:
1. sensitivity = the capacity to distinguish preconditions that are similar but not exactly the same, and
2. skill = the capacity to carry out an activity so as to consistently produce the desired result

Question 6

SOURCES OF STRATEGIC CAPABILITY - CAPABILITIES

What does Kay (1993) suggest? (the distinctive capabilities of an organisation’s resources will enable it to?)

What are the 3 core competencies that Kay (1993) identified are required?

Therefore, what 3 aligned perspectives do the capabilities of the organisation need to be understood from?

Answer 6

suggests the distinctive capabilities of an organisation’s resources will enable it to develop and fulfil its strategy, while retaining competitive advantage

1. The architecture requires an organisation to design and maintain a network of internal and external relationships.
2. The reputation requires an organisation to monitor, understand, maintain and build the manner in which it is viewed by its stakeholders
3. The innovative capability requires an organisation to be prepared to develop and exploit boundary-stretching ideas

(1) Organisational = how the infrastructure, and its leadership, enable the utilisation of the resources.
(2) Potential = how differing resources are stretched, and their utilisation is maximised
(3) Challenge: how the current accumulation of resources has arisen, and what is required to achieve the strategic objectives

Question 7

SOURCES OF STRATEGIC CAPABILITY - CORE COMPETERNCIES

The ability to demonstrate competence requires what?

Organisational competence could be seen to describe what?

Is competence variable or fixed?

What is a core competence?

Answer 7

the appropriate resources combined with the capability to utilise and apply those resources

how well (or not) an organisation is able to perform its required activities

Variable = will frequently change based upon the rationality or irrationality of human behaviour

Core competence = at any particular moment of time, the ability of an organisation to align its resources and its capabilities in the satisfaction of stakeholder (particularly customer) expectations

Question 8

SOURCES OF STRATEGIC CAPABILITY - ACHIEVING COMPETITIVE ADVANTAGE

The achievement of a sustainable competitive advantage is assumed to be one of the core methods of adding value within an organisation.

What 2 basic types of competitive advantage does Porter (2004) suggest exist?

It is important to make a distinction between what? (2)

What do each of these describe?

Answer 8

1. Cost advantage = where the organisation is able to deliver a greater level of profitability and financial benefit compared to its competitors
2. Differentiation advantage = where the organisation is able to deliver a product or service that is distinct from that of its competitors

Make a distinction between (1) threshold capabilities (the normal day-to-day operating level of an organisation, which allows it to survive) and (2) core competencies (aspects of an organisation that are harder/impossible, for competitors to imitate or obtain, e.g., reputation of a key individual)

Threshold capabilities = describes the alignment of resource and capability to meet stakeholder expectations, fulfil strategic objectives/goals, and maintain economic position

Core competencies = describes the particular alignment of resource and capability which enables an organisation to have a unique product/service/reputation enabling it to maintain or gain a leading market position

Question 9

UNDERSTANDING, ACHIEVING AND SUSTAINING COMPETITIVE ADVANTAGE

What does Arie de Geus (1999) suggest may be the only sustainable competitive advantage?

What does this recognise?

How does this link to Argyris ladder of inference?

Answer 9

‘the ability to learn faster than our competitors … may be the only sustainable competitive advantage.’

recognises the need for a continuous learning approach to allow the organisation to evolve

Humans continually learn and develop approach to decision-making and interaction with other human beings = organisation needs to capture and enable the individual and team learning, but also recognise that the organisation itself has the capability of changing its behaviour

Question 10

UNDERSTANDING, ACHIEVING AND SUSTAINING COMPETITIVE ADVANTAGE

Lynch (2015) suggests that competitive advantage is derived from the interaction of what 6 core operational aspects?

Answer 10

1. Differentiation = the recognition of an organisation’s unique features or attributes, often represented through branding
2. Low costs = the ability to source resources at a lower level of cost than competitors (e.g. bulk purchasing power).
3. High performance or technology = the alignment of particularly skilled people, patented products and leading-edge technology that is hard to replicate
4. Quality = actual or perceived differentiation from the customer perspective
5. Service = going above and beyond customer expectation
6. Culture, leadership and style = the dynamic and charismatic bringing together of employees in a way that differentiates the organisation from its competitors
   E.g., Google has relaxed office designs = differentiate and help stimulate a creative approach

Question 11

UNDERSTANDING, ACHIEVING AND SUSTAINING COMPETITIVE ADVANTAGE

When appropriate, an organisation is able to achieve competitive advantage through what?

How can organisations create an agile and more focused approach?

What is horizontal integration? Name an example.

What is vertical integration? Name an example.

Answer 11

the building of strategic alliances within its supply chain = formal or informal can lead to significant cost advantage

by removing layers of unnecessary management = recognition of where a task is best controlled in the supply chain can add value to all participants

Horizontal integration = allows competing organisations to work together to procure a greater critical mass from their suppliers
E.g., sourcing alliance between Tesco plc and Carrefour

Vertical integration = allows an organisation to work with its suppliers or customers to create a more efficient and competitive end-to-end supply chain

E.g., vendor-management techniques used by large packaging companies and their customers

Question 12

UNDERSTANDING, ACHIEVING AND SUSTAINING COMPETITIVE ADVANTAGE - THE VRIN OR VRIO FRAMEWORK OF COMPETITIVE ATTRIBUTES

Barney (1991) developed a framework to enable an organisation to do what?

What was this initially known as?

What is it known as now?

Summarise briefly the 4 different aspects of a VRIO framework.

Answer 12

to identify and consider the significance of its competitive attributes

Initially = VRIN framework = value, rarity, inimitability, and non-substitutability

Now = VRIO framework = value, rarity, inimitability, and organisational support

1. The VALUE of the resources and capabilities of an organisation will be determined by the ability of the organisation to deal with the opportunities and threats that exist and provide a perceived value to stakeholders
2. The RARITY of the resources and capabilities of an organisation will deter or prevent competition
3. The INIMITABILITY of the resources and capabilities of an organisation will prevent the competition from copying the success
4. The ORGANISATIONAL SUPPORT offered by the organisation can be a differentiator and can enhance competitive advantage

Question 13

UNDERSTANDING, ACHIEVING AND SUSTAINING COMPETITIVE ADVANTAGE - THE VRIN OR VRIO FRAMEWORK OF COMPETITIVE ATTRIBUTES - INIMITABILITY

The inimitability of the resources and capabilities of an organisation will define what?

What are the 3 different criteria around the inimitability of resources and capabilities that Johnson (2017) identifies?

Answer 13

define its position in the market at any particular moment in time.

1. Complexity = the development of internal or external linked activities/ processes can provide a unique position of competitive advantage
2. Causal ambiguity = the inability of competitors to understand the causes that underpin the competitive advantage of a particular organisation
3. Culture and history = the evolution of the resource, knowledge and capability across the history of the organisation can lead to a process that it is impossible for a competitor to imitate

Question 14

UNDERSTANDING, ACHIEVING AND SUSTAINING COMPETITIVE ADVANTAGE - THE VRIN OR VRIO FRAMEWORK OF COMPETITIVE ATTRIBUTES - NON-SUBSTITUTABILITY & ORGANISATIONAL SUPPORT

The non-substitutability of the resources and capabilities of an organisation will prevent what?

Why was non-substitutability replaced by organisational support?

What did this change also recognise?

Answer 14

prevent a competitor achieving the same strategic objective or goal

Barney later decided that the concept of non-substitutability was too closely aligned with inimitability

recognised the increasing expectation by customers of ongoing support for the product or service
= If an organisation is able to offer a particular package of support, this can lead to competitive advantage (e.g. tech companies)

Question 15

ASSESSING STRATEGIC CAPABILITY - SUPPLY CHAIN ANALYSIS

What is the organisational supply chain? (3)

In the context of strategic capability and competence, it is clear that the inputs within the supply chain will form the what?

The transformation process represents what?

The competence of the organisation and competitive advantage is evidenced by what?

This model can be used to assess what? (3)

Answer 15

organisational supply chain: (1) inputs (people, capital, material, knowledge), (2) transformation (USP), and (3) outputs (goods/services)

the resources

represents the capability of the organisation, and its individuals, to apply and use these resources to create a distinctive unique selling point (USP)

the ability to complete the supply chain by delivering goods/services to the customer or consumer

assess (1) the resources required; (2) the capability of the organisation to apply those resources; and (3) the competence of the organisation to utilise the resources and the capability to deliver an effective business model with sustainable competitive advantage

Question 16

ASSESSING STRATEGIC CAPABILITY - VALUE CHAIN ANALYSIS

Porter (2004) uses value chain analysis to understand and identify what? (2)

Porter separates the structure of the organisation into primary activities and support activities. What are the 5 primary activities?

Answer 16

(1) understand the sequential process of value creating activities that exist within an organisation, and (2) identify the resources and capabilities required to deliver competitive advantage

Primary activities:
(1) Inbound logistics = receiving, handling and storing inputs to the production system
(2) Operations = the transformation of the raw materials into the final product or service
(3) Outbound logistics = storage, stock control and transportation of finished products
(4) Marketing and sales = informing customers of the product, persuading them to buy it, and enabling them to do so (advertising, promotion, sales)
(5) Service = the enhancement addition of value to a product or service = installation, repair, training, spares or ongoing support and consultation

Question 17

ASSESSING STRATEGIC CAPABILITY - VALUE CHAIN ANALYSIS

Porter separates the structure of the organisation into primary activities and support activities. What are the 4 support activities?

What is the purpose of Porter’s value chain?

Answer 17

Support activities:
(1) Procurement = the processes used for acquiring the resources required for primary activities
(2) Technology development = the range of technological activities that enable a continuity of throughput within an organisation
(3) Human resource management = recruitment, managing, training, developing, and rewarding of people
(4) Firm infrastructure = the formal systems of planning, finance, quality control, information management, governance and leadership within the organisation

Purpose = to encourage a deeper consideration and understanding of the strategic potential of an organisation, having first understood how the value chain exists today

Question 18

ASSESSING STRATEGIC CAPABILITY - BENCHMARKING AND GAP ANALYSIS

Gap analysis is an important method of enabling what?

What do these represent?

What are the 3 benefits of benchmarking?

Answer 18

Enabling the people leading an organisation to determine which aspects of the operational flow, the resources and the capabilities are operating as intended, and which areas may need attention

they represent the gaps between what was expected compared to what actually happened

The benefits of benchmarking can include:
1. the alignment of performance against strategic and operational goals and objectives
2. the acceleration of management of change, having recognised the need for such change
3. the improvement of operational processes

Question 19

ASSESSING STRATEGIC CAPABILITY - BENCHMARKING AND GAP ANALYSIS

Lynch (2015) suggests that the real benefit is to use the benchmarking exercise as a means of what?

What is the natural sequence that should follow as a result of a benchmarking exercise? (4)

The application of this type of cumulative approach enables what?

Answer 19

as a means of enhancing overall competitive advantage within the wider operational environment

1. explore the results and analyse the reasons for the differences
2. redefine performance targets after discussion with key employees
3. redevelop the assets and systems using the learning from the benchmarking exercise
4. develop new performance objectives for individuals and groups, changing expectations and attitudes to what is possible as a result of the learning from the benchmarking exercise

enables the use of benchmarking in the assessment of strategic capability = improve competitive advantage by increasing efficiency and effectiveness

Question 20

ASSESSING STRATEGIC CAPABILITY - SWOT ANALYSIS

The resources of the organisation can be analysed to determine what?

What will a deeper analysis enable organisation to understand?

Where does the benefit of a SWOT analysis come from?

What is the TWOS approach?

What is another alternative approach?

Why do alternative approaches exist?

Answer 20

to determine the respective strengths and weaknesses that exist

enable the organisation to understand its capabilities in the utilisation of its resources, and how these capabilities are perceived and demanded by the various stakeholders (its competencies)

benefit comes from the recognition of how the strengths and weaknesses identified within the internal environment can be used to enhance the opportunities or thwart threats that are perceived within the external environment

TWOS = Weihrich (1982) = analytical approach = consider external environment, identify the resources and capabilities required to operate within that environment, then assess against strengths and weaknesses

SOARR = situation, opportunity, action, result, reflect

Many organisations will take classic strategic tools but adapt them to meet their specific requirements

Question 21

ASSESSING STRATEGIC CAPABILITY - THE MCKINSEY 7S FRAMEWORK

The 7s framework is a strategy model based around what? What is the principle behind the model?

In our consideration of strategic capability, this model can help to provide significant depth in what?

What are the 7s?

How are these elements split? (2)

Answer 21

based around the need to understand the alignment between 7 core internal aspects of an organisation = principle behind model is that each of 7 elements is constantly interacting with each of the other elements in the daily operation of an organisation

in the identification of the alignment of resources and capabilities, which can then be translated into the competencies required to deliver strategic competitive advantage

7 Ss = structure, strategy, systems, skills, style, staff and shared values

split into hard and soft elements:
1. Hard elements are easier to define and identify, and are largely determined by the strategic activities of the people within the organisation

2. Soft elements are less tangible, are part of the culture of the organisation and are largely determined by the manner in which the people within the organisation interact and communicate

Question 22

ASSESSING STRATEGIC CAPABILITY - THE MCKINSEY 7S FRAMEWORK

What are the 7s?

What would be an ideal tool for this concept to be recorded and updated for management and trend reporting purposes?

Answer 22

Hard elements:
1. Strategy = the vision of achieving sustainable competitive advantage
2. Structure = the organisational hierarchy and lines of accountability
3. Systems = the activities, policies and procedures that enable day-to-day tasks to be completed

Soft elements:
4. Style = the nature of leadership
5. Staff = the mixture of employees and the combination of the capabilities
6. Skills = the specific competencies of each individual employee within the organisation
7. Shared values = the core values of the company that are evidenced in the corporate culture and the general work ethic

Excel = create a matrix that requires each cell to be completed in recognition of how resources and capabilities of the organisation can be utilised to achieve competitive advantage

Question 23

MANAGING STRATEGIC CAPABILITY - DEVELOPING STRATEGIC CAPABILITY

Capabilities are a link between resources and competencies.

What must be considered?

How can this be approached/achieved? (3)

Answer 23

need to consider how to nurture, maintain and develop the organisational capabilities that are required to fill the strategic objectives

(1) An increase in capabilities could be achieved through the addition of new resources e.g., the recruitment of particular expertise and sharing amongst current staff

(2) The development of brand-new capabilities within the organisation through the use of organisational learning organisation, and the innovative alignment of existing resources to produce a new capability
E.g., adapting machine to create a new added-value dimension to products

(3) Additional capabilities could be aligned with the organisation through strategic alliances.

Question 24

MANAGING STRATEGIC CAPABILITY - PEOPLE AS A RESOURCE

An organisation can enhance and manage the strategic capability of individuals through what 5 things?

Why can people be a dangerous resource to rely upon? (3)

Answer 24

1. the development of a skills and knowledge to meet competence requirements and expectations
2. targeted training and development of particular skills and a breadth of cross-functional knowledge
3. the identification of ‘rising stars’ through succession planning
4. the recognition of individuality through effective leadership; and
5. the development of a dynamic team environment

People can also be a dangerous resource to rely upon if they:
(1) have too much autonomy or power = used to dominate decision-making;
(2) have an inappropriate attitude and approach to others = prejudicial behaviour or the exclusion of people; or
(3) could cause substantive damage to the organisation, its capabilities and competencies through (a) leaving and taking their knowledge with them, (b) using their knowledge to disrupt the flow of a system, or (c) creating reputation damage by disclosing corporate confidentiality

Question 25

MANAGING STRATEGIC CAPABILITY - MONEY AS A RESOURCE

What are the 3 distinct categories the resource of money falls into?

This requires the organisation to recognise what? (2)

Why can money as a resource create the ultimate risk to an organisation? (2)

Answer 25

1. Profitability = the capability of the organisation to ensure that its income exceeds its costs
2. Wealth = the creation of tangible (money) and intangible wealth (reputation)
3. Liquidity = the realisation of cash from operational and funding activities to ensure that employees and creditors can be paid in full and on time

Recognise that financial literacy is a core capability at differing levels of operation:
(1) Intelligent analysis of the supply chain and the value chain requires the ability to assign monetary values to the respective chains
(2) Efficient and effective use of resources throughout the organisation will be better handled by people who understand the monetary value and significance of the resource that they are dealing with

Risk = (1) if there is insufficient working capital cash to pay creditors, they can force the closure of an organisation through the courts

(2) If stakeholders perceive that the monetary control within an organisation is inappropriate or inefficient, they may decide to withdraw their stake, not extend credit, or refuse to continue to provide supplies = lead to closure