Terms Of Distinctive Capabilities example essay topic

Threats to sustainability Imitation or substitution Market entry Powerful buyers and suppliers Unpredictable changes in external environment Factors beyond a firm's control (bad luck) Limitations of the REV Presented as static concept - however, many firms need to be able to cope with turbulent environments Suggests that managers may have limited ability to create sustained competitive advantages (empirical support by 'perpetually failing firms' - firms that consistently earn normal or below-normal returns Difficult to test empirically - data problem (at the level of the unit of analysis, Le., resources and capabilities) What is the appropriate level of analysis? How deeply does one have to look? Principles of capabilities-based competition Goal: Build difficult-to-imitate organizational capabilities that distinguish a company from its competitors Principles: o The building blocks of strategy are business processes o The transformation of processes into valuable strategic capabilities is a key to success o Capabilities are created by making strategic investments in support infrastructure o CEO must be responsible, because competing on capabilities involves cross-functionality Some lessons learned from the capabilities perspective A capability begins and ends with the customer (or supplier) The longer and more complex the string of business processes, the harder it is to transform into a capability or to duplicate or imitate Outsourcing can be dangerous A strategy for growth: Transfer essential business processes to New geographic areas (e. g., Wal-Mart) or to New businesses (e. g., Honda) There is a difference between capabilities and core competencies Core competencies Coordinate diverse production skills and integrate multiple streams of technology Are communication, involvement, and a deep commitment to working across organizational boundaries Do not diminish with use, but are enhanced as they are applied and shared Are the glue that binds existing businesses Are difficult to imitate, especially if they are a complex harmonization of individual technologies and production skills Are corporate resources and may be reallocated by corporate management Tests to identify core competence: Does it provide access to a wide variety of markets? Does it make a significant contribution to the perceived customer benefits of the end product? Is it difficult for competitors to imitate?

Dynamic capabilities Definition: Ability to integrate, build and reconfigure internal and external processes and competencies to address a rapidly changing environment; ability to maintain and adapt the capabilities that are the basis of competitive advantage Hypothesis: Competitive advantage of a firm lies with its processes Roles of organizational and managerial processes: Coordination and integration Learning Reconfiguration. Bygones are rarely bygones: History matters. Path dependencies the more important, the greater the returns to adoption (e. g., through complementary assets, network externalities) Implications of dynamic capabilities and evolutionary perspective Steers managers toward creating distinctive and difficult-to-imitate advantage and avoiding games with customers and competitors Competitive advantage is not just a function of how to play the game of business, but also of how assets can be deployed and re-deployed in a changing market Strategy analysis must be situational Strategy involves choosing among and committing to long-term paths of competence development; strategic change is difficult and costly Entry decisions must be made with reference to competencies and capabilities Business opportunities lie close to firm's existing business Focus needs to be defined in terms of distinctive capabilities, not products.