Strategic Capability

“An internal capacity for leveraging resources and competences is a prerequisite for creating competitive advantage. Discuss, with references to theory and real world organization of your choice”.

Strategic management is a multi faced and vast area of study with many theorists presenting differing views as to what is crucial to the successful formulation of strategy. This essay will present an explanation of the internal capacity of leveraging resources and competences and show how they are creating competitive advantage. This will be illustrated through the identification of the key drivers of competitive advantage. A strategic capability analysis of an organisation, namely Marks and Spencer. will be undertaken in order to identify which capabilities meet the criteria of value, rarity, robustness and non-substitutability. This study will be used to emphasise the impact of these key drivers which are likely to have an impact on the competitive advantage and on the organisation structure. This framework will be applied to the Marks&Spencers example. The way in which Marks&Spencers gain its competitive advantage will be identified by the key drivers of strategic capability and the impact they have on the industry will be than discussed further, highlighting the internal capacity for leveraging resources and competences. In conjunction with the capability analysis, SWOT analysis will help to identify the main strengths, weaknesses, opportunities and threats in example of M&S.

Before attempting to explain the internal capacity for leveraging resources and competences it is necessary to define the purpose of strategy in order to understand how strategic capability could contributes towards it. Johnson et al suggest that:

�Strategic capability can be defined as the adequacy and suitability of the resources and competences of an organisation for it to survive and prosper.’

(Johnson et al, 2005:117)

Johnson et al considers that the strategic capability can be distinct as the sufficiency and appropriateness of the resources and competences of an organisation for it to live and flourish through activities are different from others.

To understand what the capabilities of the organisation are, the structure of resources and competences will be examined. A company capability could be divided into internal and external factors. Internal factors which are strengths and weaknesses, resources and competences. Furthermore, external factors include environmental scanning PESTEL analysis, Porters Five Forces Framework (Porter, 1998:22), opportunities and threats. This essay will underline the internal factors for capacity of leveraging resources and competences as a prerequisite for creating competitive advantage. The fundamental notion of strategic capabilities is resources. Resources could be divided in tangible and intangible. Tangible are those resources that are physical assets of the organisation and intangible are the non-physical assets of the organisation. According to Johnson et al (2005:118), it is suggested that physical, financial, human and intellectual capital resources could be considered as organisation resources. These resources are important for the organisation. It depends on each organisation how they are going to mange them. Furthermore, competencies are shown in the performances and procedures that are used. Competencies are the ability to do the activities and how the resourses are arranged. Johnson et al suggest using the uniqueness of the resourses:

�Clearly, competitive advantage cannot be achieved if the strategic capability of an organisation is the same as other organisations. It could, however, be that a competitor possesses some unique or rare capability providing competitive advantage. This could take the form of unique resources.’

(Johnson et al, 2005:125)

This suggests that the strategy should be unique, different from its competitors. To be hard to be imitated is creating a sustainable competitive advantage. If there were only one perfect position, there would be no necessitating for strategy. Furthermore, according to Michael E. Porter:

�Strategy is the creation of a unique and valuable position, involving a different set of activities. The essence of strategic positioning is to choose activities that are different from rivals’.

(M. E. Porter, Harvard Review)

However, creating sustaining competitive advantage in business is not just uniqueness or being different. While well-built core competencies and competitive capabilities are key support in performing strategy, they are just as significant for securing a competitive edge over competitors in position where it is quite easy for rivals to copy smart strategies. Thomson et al (2004) states that:

�Any time rivals can readily duplicate successful strategy features, making it difficult or impossible to out strategize rivals and beat them in the marketplace with a superior strategy, the chief way to achieve lasting competitive advantage is to out execute them.’

(Thomson et al, 2004:254)

Moreover, it is very hard to create a strategy which nobody could copy and that the strategy would last long term. Usually, the core competence or capability emerges incrementally. As Johnson et al (2005) illustrates in The Risk of Strategic Drift. This is understood as step by step changes. What was working in the past, will be working in the future. There are no significant changes in the existing strategy. Johnson et al uses the study of strategic lenses and suggest that:

�Experience lens views strategy development as the outcome of individual and collective experience of people in organizations who influence strategy or make strategic decisions and the taken-for-granted assumptions most obviously represented by cultural influences.’

(Johnson et al, 2005:45)

Here the culture of the organization is driving the strategy. Culture could determine the position of strategic progress. Thomson et al (2001) have identified strategic culture as:

�A strong culture is a valuable asset when it matches strategy and dreaded liability when it doesn’t.’

(Thomson et al 2001:415)

Internal capacity of culture can act as an ally; it can inspire people to achieve their goals of the strategy. On the other