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Capabilities_CC_CA_d_ - @2007 Mustang Engineering Used with...

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Unformatted text preview: @2007, Mustang Engineering Used with permission. UPS has been the prototype in many areas of the parcel delivery business because of its excel— lence in products, systems, marketing, and other operational business capabilities. “Its fundamental competitive strength, however, derives from the organization’s unique culture, which has spanned almost a century, growing deeper all along. This culture provides solid, consistent roots for every— thing the company does, from skills training to technological innovation.”98 Culture may also be a competitive advantage at Mustang Engineering (an engineering and project management firm based in Houston, Texas). Established as a place where people are expected to take care of people, Mustang offers “a company culture that we believe is unique in the industry. Mustang is a work place with a family feel. A client once described Mustang as a world—class company with a morn-and—pop culture.”9 A second condition of being costly to imitate occurs when the link between the firm’s capabilities and its competitive advantage is causally ambiguous.100 In these instances, competitors can’t clearly understand how a firm uses its capabilities as the foundation for competitive advantage. As a result, firms are uncertain about the capabilities they should develop to duplicate the benefits of a competitor’s value-creating strategy. For years, firms tried to imitate Southwest Airlines’ low—cost strategy but most have been unable to do so, primarily because they can’t duplicate Southwest’s unique culture. Of all Southwest imitators, Ryanair, an Irish airline headquartered in Dublin, is the most suc- cessful. However, “Ryanair is also one of Europe’s most controversial companies, praised by some, criticized by others.”101 As such, the firm’s long-term future does not appear to be as certain as Southwest’s. Social complexity is the third reason that capabilities can be costly to imitate. Social complexity means that at least some, and frequently many, of the firm’s capabilities are the product of complex social phenomena. Interpersonal relationships, trust, friend— ships among managers and between managers and employees, and a firm’s reputation with suppliers and customers are examples of socially complex capabilities. Southwest Airlines is careful to hire people that fit with its culture. This complex interrelationship between the culture and human capital adds value in ways that other airlines cannot such as jokes by the flight attendants or the cooperation between gate personnel and pilots. Nonsubstitutabie , Nonsubstitutable capabilities are capabilities that do not have strategic equivalents. This final criterion for a capability to be a source of competitive advantage “is that there must be no strategically equivalent valuable resources that are themselves either not rare or imitable. Two valuable firm resources (or two bundles of firm resources) are strategi- cally equivalent when they each can be separately exploited to implement the same strat- egies.”102 in general, the strategic value of capabilities increases as they become more difficult to substitute. The more invisible capabilities are, the more difficult it is for firms to find substitutes and the greater the challenge is to competitors trying to imitate a firm’s value—creating strategy. Firm-specific knowledge and trust—based working relationships between managers and nonmanagerial personnel, such as existed for years at Southwest Airlines, are examples of capabilities that are difficult to identify and for which finding a substitute is challenging. However, causal ambiguity may make it difficult for the firm to learn as well and may stifle progress, because the firm may not know how to improve processes that are not easily codified and thus are ambiguous.103 Mustang Engineering’s culture makes it a business that is costly to imitate. Nonsubstitutable capabilities are capa- bilities that do not have strategic equivalents. segugqedeg pue ‘seomosaa 'seumuov :uoueziuefiio leurew. eqi fiuiugtuexg . g Jeideug ...
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