Strategic capabilities refer to the resources and competencies of an organization that are required for it to operate within an industry and remain competitive (Yang, 2015). Resources refer to what an organization uses in order to achieve success. These include its assets such as human resources and its brand value. Organizational resources can be categorized as either tangible or intangible.
Tangible vs. Intangible Resources
Tangible resources refer to assets that can be seen such as property, plant and equipment and human resource among others. The utilization of these resources can have a huge impact on organization’s competitiveness and profit margin. For instance, diamonds is a very important tangible resource for such firms as Cartier. The company controls about 95% of the globe’s diamond mines (Espedal, 2010). Cartier manages time, quantity, quality, size, and destination of the gems that is released into the world’s market. As a result, Cartier is able to control market price hence stage-manage its profit margins.
On the other hand, intangible assets refer to all organizational assets that cannot be seen on put on our hands. These include goodwill, brand value and reputation among others (Yang, 2015). For instance, if everything tangible that Coca Cola Company owns was tortured and burned down, the company will still possess brand value, secret recipe, distribution channels, human resources and its good publicity that it has built for many years. By use of these, Coke Company would be capable of going to a bank, take a loan and rebuild its infrastructure and still remain competitive in the production of soft drink.
Core competence refers to the things and activities that an organization does to achieve a competitive advantage over other companies. According to (5.6 Developing Strategy through Internal Analysis | Principles of Management 2017, Strategic Capability, 2017) organization’s competences are rare, unique, valuable, and expensive to copy and cannot be substituted. For example, for Cartier to be able to control the supply of diamond in the market, it must be highly efficient and competent in anticipating the demand of diamond. If they were not, then other companies would take over and it would experience some variations in its demand and supply curve. As a result, Cartier will not control the price, and this means a loss or reduction of its profits margin. Cartier’s capability to anticipate demand offers it a competitive advantage and more profits over its competitors. This has made Cartier to control the world’s gem market (Espedal, 2010). Another good Company example to illustrate this is, is Starbucks. After realizing that it was experiencing a dramatic growth, Starbuck strategically planned to use internet as its distribution channel. However, this did not work for it since it lacked capabilities needed to distribute its products (unique coffee) through this channel. This forced Starbuck to re-strategize its plans by focusing on the accessible capabilities to develop more value through its supply chain.
Conclusively, an essential key to achievement arise when the connection between strategic capabilities of a firm and its competitive advantage are casually confusing and the competitors cannot substantiate how the organization uses these capabilities as a base for its competitive advantage.
- 5.6 Developing Strategy through Internal Analysis | Principles of Management. (2017). [online] Open.lib.umn.edu. Available at: https://open.lib.umn.edu
- Espedal, B. (2010). Management Development: Using Internal or External Resources in Developing Core Competence. Human Resource Development Review. 4, 136-158.
- Yang, C.-C. (2015). The integrated model of core competence and core capability. Total Quality Management & Business Excellence. 26, 173-189.