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Capabilities_CC_CA_c_

Capabilities_CC_CA_c_ - Part 1 Strategic Management Inputs...

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Unformatted text preview: Part 1 * Strategic Management Inputs Valuable capabilities allow the firm to exploit opportunities or neutral~ ize threats in its external QWKKQRKCCKQQK. Rare capabilities are capabilities that few, it any, competitors possess. Costly-to-imitate capabilities are capa— bilities that other firms cannot easily develop. Table 3.4 The Four Criteria of Sustainable Competitive Advantage , Bare Capabilities " fiNonsubsfitutable capabilities H - No strategic equivalent I Food Co., the firm mentioned earlier in this chapter. Recall that Artemis uses natural ingredients in its foods for pets. However, competitors such as Natural Balance can and do use the same or similar ingredientsf’2 suggesting that Artemis’s competitive advantage is likely imitable. The length of time a firm can expect to retain its competitive advantage is a function of how quickly competitors can successfully imitate a good, service, or process. Sustainable competitive advantage results only when all four criteria are satisfied. Valuable Valuable capabilities allow the firm to exploit opportunities or neutralize threats in its external environment. By effectively using capabilities to exploit opportunities, a firm creates value for customers. Under former CEO lack Welch’s leadership, GE built a valu— able competence in financial services. It built this powerful competence largelv through acquisitions and its core competence in integrating newly acquired businesses. In addi- tion, making such competencies as financial services highly successful required placing the right people in the right jobs. As Welch emphasized, human capital is important in creating value for customers.93 Ra re Rare capabilities are capabilities that few, if any, competitors possess. A key question to be answered when evaluating this criterion is, “How many rival firms possess these valuable capabilities?” Capabilities possessed by many rivals are unlikely to be sources of competi— tive advantage for any one of them. Instead, valuable but common (i.e., not rare) resources and capabilities are sources of competitive parity."4 Competitive advantage results only when firms develop and exploit valuable capabilities that differ from those shared with competitors. Costly to Imitate Costly-to—imitate capabilities are capabilities that other firms cannot easily develop. Capabilities that are costly to imitate are created because of one reason or a combination of three reasons (see Table 3.4). First, a firm sometimes is able to develop capabilities because of unique historical conditions. “As firms evolve, they pick up skills, abilities and resources that are unique to them, reflecting their particular path through history?” A firm with a unique and valuable organizational culture that emerged in the early stages of the company’s history “may have an imperfectly imitable advantage over firms founded in another historical period”%—one in which less valuable or less competi- tively useful values and beliefs strongly influenced the development of the firm’s culture. Briefly discussed in Chapter 1, organizational culture is a set of values that are shared by members in the organization, as we explain in Chapter 12. An organizational culture is a source of advantage when employees are held together tightly by their belief in it.97 L—n 4—iw4r-aAmp-onnmnan 5 new Mum». ‘M'Imi'llm' mu flmw» ...
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