CAPABILITIES AND COMPETENCIES

Capability-based strategies are based on the notion that internal resources and core competencies derived from distinctive capabilities provide the strategy platform that underlies a firm's long-term profitability. Evaluation of these capabilities begins with a company capability profile, which examines a company's strengths and weaknesses in four key areas:

Managerial Marketing Financial Technical Then a SWOT analysis is carried out to determine whether the company has the strengths necessary to deal with the specific forces in the external environment. This analysis enables managers to identify: external threats and opportunities, and distinct competencies that can ward off the threats and compensate for weaknesses.

 Capability-based strategies,

sometimes referred to as the resource-based view of the firm, are determined by: (a) those internal resources and capabilities that provide the platform for the firm's strategy and (b) those resources and capabilities that are the primary source of profit for the firm. A key management function is to identify what resource gaps need to be filled in order to maintain a competitive edge where these capabilities are required. Several levels can be established in defining the firm's overall strategy platform (see figure).

 At

the bottom of the pyramid are the basic resources a firm has compiled over time. They can be categorized as technical factors, competitive factors, managerial factors, and financial factors. Core competencies can be defined as the unique combination of the resources and experiences of a particular firm. It takes time to build these core competencies and they are difficult to imitate. Critical to sustaining these core competencies are their:

Durability - their life span is longer than individual product or technology life-cycles, as are the life spans of resources used to generate them, including people. In transparency - it is difficult for competitors to imitate these competencies quickly. Immobility - these capabilities and resources are difficult to transfer.

CORE COMPETENCIES.
Core

competencies are those capabilities that are critical to a business achieving competitive advantage. The starting point for analyzing core competencies is recognizing that competition between businesses is as much a race for competence mastery as it is for market position and market power.

Senior

management cannot focus on all activities of a business and the competencies required to undertake them. So the goal is for management to focus attention on competencies that really affect competitive advantage.
Competencies are not seen as being fixed .

Core Core

Competencies should change in response to changes in the company's environment. They are flexible and evolve over time.

 What

is Core Competency? Core competency is a unique skill or technology that creates distinct customer value. As an organization grows, develops and adjusts to the new environment, so do its core competencies also adjust and change. core competencies are flexible and developing with time. They do not remain rigid and fixed. The organization can make maximum utilization of the given resources and relate them to new opportunities thrown by the environment.

 Resources

and capabilities are the building blocks upon which an organization create and execute value-adding strategy so that an organization can earn reasonable returns and achieve strategic competitiveness. Resources are inputs to a firm in the production process. These can be human, financial, technological, physical or organizational. The more unique, valuable and firm specialized the resources are, the more possibly the firm will have core competency

 Resources

should be used to build on the strengths and remove the firms weaknesses. Capabilities refer to organizational skills at integrating its team of resources so that they can be used more efficiently and effectively. Organizational capabilities are generally a result of organizational system, processes and control mechanisms. These are intangible in nature. It might be that a firm has unique and valuable resources, but if it lacks the capability to utilize those resources productively and effectively, then the firm cannot create core competency.

 The

organizational strategies may develop new resources and capabilities or it might make stronger the existing resources and capabilities, hence building the core competencies of the organization . Core competencies help an organization to distinguish its products from its rivals as well as to reduce its costs than its competitors and thereby attain a competitive advantage. It helps in creating customer value .

Core

competencies give way to innovations. Using core competencies, new technologies can be developed. They ensure delivery of quality products and services to the clients. These decide the features and structure of global competitive organization.