Part 4: Capabilities analysis

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Overview of Strategic Management Will Mitchell
Duke University, The Fuqua School of Business

• Part 4 Capabilities analysis
• Value chain
• VRIN
• Background Strategy primer

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Competitive Advantagegt Performance
Framework
Competitive Analysis

Vision
Market Positions
Capabilities Analysis
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Capabilities Analysis

• Goal Reinforce /or create capabilities that
  provide efficiency differentiation advantages,
  while enabling ongoing innovation
• Assess current capabilities Identify
  capabilities that underlie your ability to offer
  create goods services.
• Opportunities treats Identify new capabilities
  needed to address opportunities threats

Background Strategic analysis primer
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Types of Capabilities

• Functional organizational capabilities
• Functional capabilities What you can do
• Organizational capabilities How you do it
• Necessary key capabilities
• Necessary capabilities Maintain pace with rivals
• Key capabilities Create competitive advantage
• VRIN test Valuable, Rare, Inimitable,
  Non-substitutable

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Capabilities in the Value Chain

• Goal Reinforce /or create capabilities that
  provide efficiency differentiation advantages,
  while enabling ongoing innovation
• Identify key capabilities that pass the VRIN
  test Valuable, Rare, Inimitable,
  Non-substitutable

Organization HR, financial systems, IT,
logistics,alliance management,
Sales service
Marketing
Production servicedelivery
Development
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Tashas value chain

• Key capabilities
• Necessary capabilities
• Weaknesses

General management
Ability to replicate as franchise?
Scale to multiple locations
Day- time
clients
Word of mouth
marketing
High quality food service
Mall locations
Staff training
Build relationships
Set up
Ability to lead trendiness?
Design
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Medical Support value chain

• Key capabilities
• Necessary capabilities
• Weaknesses

Political negotiating relationship
ability Political risks as outsider

• Limited scale
• Operating level?

Hospital clients
Education MoH partners
Data management management education skills

• Relationship management
• Senior mgmt buy in

• IT statistics
• General mgmt

Alliance mgmt skills
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Acme Clinic CKD Value Chain

• Key capabilities
• Necessary capabilities
• Current weaknesses

Champion for new venture
Medicaid emphasis
Marketing
Clinical skills
Support services
CKD patient base
Renal MDs

• Location
• Acme referrals

• Acme Hospital parent
• Drug contracts

Transplant reputation
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Johannesburg Hospital Value Chain

• Key capabilities
• Necessary capabilities
• Weaknesses

• Improved internal systems
• MoH relationship issues
• Continued staff system needs

Clinical care
Support care
Patientbase
Public
Ancillaryservices
Folateng
Folateng base
Strategy framework
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Arbor Health Value Chain

• Key capabilities
• Necessary capabilities
• Current weaknesses

• New budgeting procedures
• New patient care model
• Communication barriers
• Centralized systems
• No successor to founder

Seek MCO contracts
Patient base
Support services
Clinicalskills
Fixed fee
Marketing
Managed care
Founder reputation
Strategy framework
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Florida Air Inc.Value Chain

• Key capabilities (VRIN)
• Necessary capabilities
• Current weaknesses

Founders enthusiasm
Little experience
Airport slots
Flight crew,
ground staff
Reservations scheduling
Planes maintenance
Businessv.Tourist
Marketing
Multiple media Business,pleasure,travel
trade relationships
Limitedsupply (airportinterest)
Hire or contract?
Create or contract?
Buy orlease?
Strategy framework
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Your Current Capabilities

• Outline your value chain identify your key
  capabilities
• Report back the key capabilities that underlie
  your current competitive advantage

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Your Current Value Chain
Organization



Your competitive advantages disadvantages
Differentiation, efficiency, innovation
Your necessary capabilities
Your key capabilities (VRIN)
Strategy framework
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Testing Your Capabilities

• How have you tested that your key capabilities
  really pass the VRIN test?

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Capability Webs
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Often, Small Capabilities Create Capability Webs

• Individually imitable capabilities
• In aggregate, VRIN

Mayo Clinic
Kulula Airlines
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Capability Webs Complex Inter-related Operating
Systems
Flexible routes
Direct ticket sales
High utilization
Quick, accurate boarding pass handling
Quick turn-arounds
Multiple short haul routes

• Strong organizational capabilities
• Flexible workers (not just work rules)
• Positive employees (despite low wages)
• Effective supplier management
• Strong political skills
• Strong logistics IT skills

Quick, effective baggage handling
Effective maintenance by third-party firms
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Potential Capability Webs at Florida Air
Business flightschedules
Businessrelationships
Tourist visioncapabilities
Blockbookingw/ employers
FL Airflyer plan
Carrierschedulecoordination
Tourist pricing
Businessservices
Check insystems
Partnerflyer plans
Blockbookingw/ agents
Business vision capabilities
Charteropportunities
Tourist siterelationships
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Sustained Advantage Southwest Air v. Regional,
Major US, EU competitors
ROS 1991-2006
Annual ROS
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Outline a revised value chain that would address
threats /or capture opportunities
Organization



Your new competitive advantages
Capabilities that you need to address threats
take advantage of opportunities
Strategy framework
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Elements of Strategic Management

• Competitive advantage performance
• Strategic vision
• Market positions competitive analysis
• Capabilities analysis
• Constant Strategic leadership