2.1 Strategic Capabilities of Organisations

0:00hello and welcome to the second video in the second module of the course where we are learning about business strategy while in this module we are discussing strategic capabilities of organizations so that we are looking inside of these organizations as we have highlighted in the previous video strategic capabilities are the capabilities of an organization that contribute to its long-term survival or competitive advantage so you see these strategic capabilities are in a way assets or ways of doing things that allow us to stay on the market or even grow within the market so that we know from the previous video already let's build on that resources are the assets that

0:40organizations have or Co upon and competencies are the ways to use those assets so that these are used or deployed effectively so you see there are two components that we need to understand there are resources which can be also our machinery or the employees that we have and then we have competencies this is about whether we use these resources that we have effectively let's look at some examples I try to bring three examples of trotty G capabilities physical financial and human so resources are what we have here we have machinery buildings raw materials product patents as our physical strategy capabilities and we need to have some ways of achieving

1:27utilizations of planned efficiency productivity and flexibility this is about whether we do it well then as a financial capabilities we have our balance sheet cash flow suppliers and funds and as as whether we do it well we need the ability to raise funds and manage cash flows creditors and so on finally we have human strategic capabilities this is about managers employees partners suppliers customers and whether we do it well it's about how people gain and use skills knowledge and build relationships all of this is going to adapt long term survival and competitive advantage thus if you were annoying your own funny you don't see that you need to

2:14look not only at what you have but also and whether you are utilizing what do you have well alright and that is all for this step analyzes and identification of strategic capabilities we now have to move forward all of these is useful however its static so these strategic capability is an understanding of them is rather a snapshot in Demon's time are we doing this well right now but what if conditions change well then we are moving to another concept which is called dynamic capabilities here is the definition dynamic capabilities express organizations ability to renew and recreate its strategic capabilities to meet the needs of changing environment so we see it's not only

2:58about having resources and using them well it's also about the capability to adapt these to the changing needs of the market so we need to also identify the need to change let's say we are running a company that has been successful for 10 years however all of a sudden our revenues are going down and profits are going down even more first step is to identify the knee that something needs to be changed then we identify ok these are the resources and these are the capabilities that we should be changing maybe it's the way we produce the product so that we cut the cost and then we need to adapt this we need to change

3:39the way that we do things and this is called a dynamic capability if the conditions on the market change we need to adapt ourselves alright so far we discussed strategic capabilities we discussed the resources and competencies and then we touched upon dynamic capabilities free concept in this video so far now let's move to the fourth one which is maybe my favorite one it's about trash hold and distinctive capabilities here the definitions are beautiful and you are going to see it threshold capabilities are those needed for an organization to meet the necessary requirements to compete in a given market and achieve our t parity with competitors in that market just to

4:25put beside some people refer to it as Minimum Viable Product so there are some minimum requirements given by the market that you need to meet in order to even stay in this market so let's say if you think about some retail or clothing stores well something that we might not even think about is IT infrastructure they need to have a great delivery and ordering system so if they are running out of some clothing they need to quickly order it so that their their central unit delivers the required clothing so it's an IT infrastructure that simply every clothing store in a given City needs to have so that it can

5:06even compete within a market let's say another say threshold competence would be a design of a store or opening a course you need to be open at least from 8:00 in the morning until 5:00 you mean aiming otherwise people wouldn't even come to your store if you didn't have these opening hours so see these threshold capabilities or minimum requirements are just necessary for every organization to stay within and survive within the market however we just don't want to stay and survive in the market we want to grow and expand them get some more profits folded we have the second term which is the distinctive capabilities so and these

5:48are usually referred to as core competencies these two terms are essentially the same so core competencies or distinctive capabilities are a linked set of skills activities and resources that together deliver customer value differentiate business from its competitors and potentially can be extended and developed so you see now if we wanna grow we need to identify some strategic capabilities that we can say expand so that our customers will say hey this company is great it has this great little thing that I like I'm going to purchase its product well if I should think of an example think about beads as the headphones brand well I'm not sure how long this video will

6:35survive on the internet maybe beats will not be around us in five or ten years however beats are meeting these threshold capabilities they are producing headphones in a certain design in a certain way let's set certain price and people like them that's the minimum that people ask for our adult beats is doing one core competence that is amazing which is the celebrity marketing you can see a lot of commercials where celebrities football players singles same writers movie stars are wearing Beats headphones so that they can then charge premium price for bids because you see all of these celebrities wearing them and then when you wear them you

7:21feel sort of hey I paid for these so there are some people who really appreciate it so this is a core competence they are doing something extra which is putting a lot of resources and a lot of money into this celebrity marketing so you see we have the threshold competencies and then we have these core competencies or distinctive capabilities that can help us distinguish from our competitors and that is all from this video I am looking forward to seeing the upcoming videos