CE 726 STRATEGIC CAPABILITY

							      CE 726


STRATEGIC CAPABILITY
ASSESSMENT OF
STRATEGIC
CAPABILITY
     DETERMINATION OF STRATEGIC CAPABILITY :
     ”Resources and Competences”

   STRATEGY DEVELOPMENT IS CONCERNED
    WITH CHANGING STRATEGIC CAPABILITY
    BETTER TO FIT A CHANGING
    ENVIRONMENT.
   STRATEGY DEVELOPMENT IS CONCERNED
    WITH CREATION OF NEW OPPORTUNITIES
    BY STRETCHING AND EXPLOITING THE
    STRATEGIC CAPABILITY.
    STRATEGIC CAPABILITY
   STRATEGIC CAPABILITY IS ABOUT THE
    ABILITY TO PROVIDE PRODUCTS/ SERVICES
    WITH FEATURES THAT ARE VALUED BY THE
    CUSTOMERS.
   STRATEGIC CAPABILITY STARTS WITH THE
    RESOURCES.
   RESOURCES ARE IMPORTANT BECAUSE
    THEY NEED TO BE DEPLOYED INTO THE
    ACTIVITIES THAT AN ORGANISATION
    UNDERTAKES TO CREATE COMPETENCES.
     TO TEST THE STRATEGIC CAPABILITY;

   WHAT ARE OUR RESOURCES ?
   WHAT MAKES US DIFFERENT THAN OUR
    COMPETITORS?
   AT WHICH ACTIVITIES WE ARE MOST
    SUCCESSFUL? (STRENGTHS)
   WHAT ARE THE REASONS OF FAILURE/
    LOW COMPETITIVE ADVANTAGE?
    (WEAKNESSES)
      WHAT ARE THE SOURCES OF
      STRATEGIC CAPABILITY ?
   THE DIFFERENCES IN PERFORMANCE BETWEEN
    THE ORGANISATIONS IN THE SAME MARKET IS
    RARELY EXPLAINABLE BY DIFFERENCES IN THEIR
    RESOURCE BASE SINCE RESOURCES CAN
    USUALLY BE IMITATED OR TRADED.
   SUPERIOR PERFORMANCE IS DETERMINED BY
    THE WAY IN WHICH RESOURCES ARE DEPLOYED
    TO CREATE COMPETENCIES IN THE
    ORGANISATION’S ABILITIES.
TYPES OF RESOURCES
   PHYSICAL RESOURCES
   HUMAN RESOURCES
   FINANCIAL RESOURCES
   INTELLECTUAL CAPITAL (INTANGIBLE
    RESOURCES)
RESOURCES
   IF ORGANISATIONS ARE TO SURVIVE, THEY
    MUST BE COMPETENT TO PROVIDE THE
    PRODUCT FEATURES REQUIRED BY
    CUSTOMERS AT THE THRESHOLD LEVEL.
   IF THEY ARE TO OUTPERFORM
    COMPETITORS, THEY MUST HAVE UNIQUE
    RESOURCES AND COMPETENCES.
     What is core competency?
   IT MUST RELATE TO AN ACTIVITY OR
    PROCESS THAT FUNDAMENTALLY
    UNDERPINS THE VALUE IN THE
    PRODUCT/SERVICE (AS SEEN THROUGH
    THE EYES OF CUSTOMER)
   BETTER THAN COMPETITORS
   IT SHOULD BE ROBUST (DIFFICULT TO
    IMITATE)
   ABOUT PORTER’S VALUE
   CHAIN ANALYSIS
DIFFERENCES BETWEEN VALUE CHAINS ARE A KEY
  SOURCE OF COMPETITIVE ADVANTAGE BETWEEN
  THE COMPETITORS
VALUE: WHAT A COMPANY CREATES IS MEASURED
  BY THE AMOUNT BUYERS ARE WILLING TO PAY
  FOR A PRODUCT OR SERVICE.
DIFFERENCE BETWEEN VALUE AND COST
  DETERMINES A COMPANY’S PROFITABILITY.
COMPETITIVENESS STEMS FROM LOWER COSTS OR
  HIGHER VALUE
      HOW TO CREATE VALUE?
   COMPETENCE IN SEPARATE ACTIVITIES
    (PRIMARY ACTIVITIES)
   COMPETENCE IN LINKING ACTIVITIES TOGETHER
    (SUPPORT ACTIVITES)

PRIMARY ACTIVITIES ARE DIRECTLY CONCERNED
  WITH THE CREATION OR DELIVERY OF A
  PRODUCT OR SERVICE.
SUPPORT ACTIVITIES HELP TO IMPROVE THE
  EFFECTIVENESS OF PRIMARY ACTIVITIES.
VALUE CHAIN DESCRIBES THE ACTIVITIES WITHIN AND AROUND AN
ORGANISATION WHICH TOGETHER CREATE A PRODUCT/SERVICE.
PRIMARY ACTIVITIES (DIRECTLY CONCERNED
 WITH THE CREATION OR DELIVERY OF A
 SERVICE OR PRODUCT):

   INBOUND LOGISTICS: ACTIVITIES CONCERNED WITH
    RECEIVING, STORING, AND DISTRIBUTING THE INPUTS
    TO THE PRODUCT OR SERVICE.(MATERIALS HANDLING,
    STOCK CONTROL ETC.)
   OPERATIONS: TRANSFORM VARIOUS INPUTS INTO FINAL
    PRODUCT/SERVICE.
   OUTBOUND LOGISTICS: COLLECT, STORE, AND
    DISTRIBUTE THE PRODUCT TO CUSTOMERS.
   MARKETING AND SALES: PROVIDE THE MEANS WHEREBY
    USERS ARE MADE AWARE OF THE PRODUCT AND ARE
    ABLE TO PURCHASE IT.
   SERVICE: INCLUDES ALL ACTIVITIES WHICH ENHANCE OR
    MAINTAIN THE VALUE OF THE PRODUCT SUCH AS REPAIR,
    TRAINING, SPARES ETC.
SUPPORT ACTIVITIES (HELP TO IMPROVE
 EFFICIENCY OF PRIMARY ACTIVITIES):

   PROCUREMENT: PROCESSES FOR ACQUIRING THE
    VARIOUS RESOURCE INPUTS TO THE PRIMARY
    ACTIVITIES.
   TECHNOLOGY DEVELOPMENT: ALL VALUE ACTIVITIES
    HAVE A ‘TECHNOLOGY’.
   HUMAN RESOURCE MANAGEMENT: CONCERNED WITH
    RECRUITING, MANAGING, TRAINING, DEVELOPING, AND
    REWARDING PEOPLE.
   INFRASTRUCTURE: SYSTEMS OF PLANNING, FINANCE,
    QUALITY, INFORMATION MANAGEMENT. IT CONSISTS OF
    STRUCTURES AND ROUTINES OF THE ORGANISATION
    WHICH SUSTAIN ITS CULTURE.
                  VALUE ADDED BY A CONTRACTOR



INPUTS:             CONTRACTOR’S
                    RESOURCES:                     OUTPUT:
RAW MATERIALS
                    EXPERIENCE IN                  CONSTRUCTED FACILITY
EQUIPMENT
                    CONSTRUCTION
LABOUR
                    ABILITY TO PROCURE
…                   AND MANAGE
                    RESOURCES
                    CONTACTS
                    (SUBCONTRACTORS
                    ETC.)
                    …



                Organisation adds its value here
VALUE CHAIN IN CONSTRUCTION

                     FIRM INFRASTRUCTURE

                   HUMAN RESOURCE MANAGEMENT
                    TECHNOLOGY DEVELOPMENT

                         PROCUREMENT



   INBOUND CONSTRUCTION     OUTBOUND       MARKETING   SERVICE
   LOGISTICS                LOGISTICS      AND SALES




         BUSINESS DEV., BID PREPARATION ETC..



       SUBCONTRACTORS,
       EQUIPMENT PARK
       ETC.


SUPPORT ACTIVITIES : PROJECT MANAGEMENT, CONTRACT MANAGEMENT ETC.
VALUE CHAIN: BID PREPARATION
TIME-COST DATA
                                      SUBCONTRACTORS’ OFFERS
SITE EXPENSES
                                      COST OF INPUTS (MATERIAL, LABOUR ETC.)
OVERHEAD
                                         DATA COLLECTION ACTIVITIES
PLANNING ACTIVITIES
                                                   DIRECT COST
     INDIRECT COST
                                                   ESTIMATION
       ESTIMATION



                      IDENTIFICATION OF RISK PREMIUM

                    IDENTIFICATION OF PROFITABILITY RATIO


                REFINING THE BID CONSIDERING COMPETITIVENESS

                           BID PREPARATION
VALUE CREATION
   VALUE CREATION   BY PRIMARY
    ACTIVITIES
   VALUE CREATION   BY SUPPORT
    ACTIVITES
   VALUE CREATION   BY RELATIONS
   VALUE CREATION   BY COMBINING
    BUSINESSES
VALUE SYSTEM IS THE SET OF INTER-ORGANISATIONAL LINKS AND
RELATIONSHIPS WHICH ARE NECESSARY TO CREATE A PRODUCT OR SERVICE
           VALUE CREATION BY COMBINING BUSINESSES

                                        STEEL
                                     FABRICATION

                         Aggregate          Materials
Landfill
             QUARRYING          CONCRETE MIX            CONSTRUCTION


                                ASPHALT PLANT                 Waste



 WASTE MANAGEMENT
     COMPANY


                 INTEGRATED STRUCTURE
       INTERNAL APPRAISAL
   CORPORATE TRADING PERFORMANCE: REVIEW OF
    FINANCIAL PERFORMANCE (BALANCE SHEET
    INFORMATION)
   PERFORMANCE INDICATORS : BID SUCCESS RATIO ETC.
   CURRENT SERVICES AND PRODUCTS: TRACING ORIGINS
    OF COST AND PROFIT
   ORGANISATIONAL ANALYSIS: IDENTIFICATION OF AREAS
    OF SKILL
   COMPANY POSITION IN MARKETS
   CONTROL SYSTEMS
   ASSETS-RESOURCES
   POLICIES/STRATEGIES
  QUESTIONNAIRE FINDINGS (1)
             STRENGTHS/WEAKNESSES   MEAN   STD. DEV.
FINANCIAL RESOURCES/CREDIBILITY     4.22     0.88
TECHNICAL CAPABILITY                4.00     0.76
MANAGERIAL CAPABILITY               3.65     0.71
ORGANISATIONAL STRUCTURE            3.38     0.78
LOW COST CONSTRUCTION               3.57     0.95
QUALITY OF WORK AND SERVICES        4.20     0.66
HUMAN RESOURCES                     3.50     0.85
GOOD MARKETING                      3.32     0.81
IT DEVELOPMENTS                     3.68     0.79
COMPANY IMAGE                       4.32     0.77
INNOVATION IN SERVICES              3.38     0.74
EXPERIENCE/KNOWLEDGE                4.33     0.75
RESEARCH AND DEVELOPMENT            2.37     0.86
CLIENT RELATIONS                    4.07     0.78
RELATIONS WITH COMPETITORS          3.65     0.73
     QUESTIONNAIRE FINDINGS (2)
COST INCREASE DUE TO PRIMARY ACTIVITIES : 60%
COST INCREASE DUE TO SUPPORT ACTIVITIES: 40%

COST OF POOR QUALITY (REWORK) = 3
COST OF POOR PLANNING (DELAY) = 2
COST OF POOR CONTRACT MANAGEMENT (CLAIMS)= 2
COST OF POOR INFORMATION FLOW = 2
COST OF POOR SELECTION OF RESOURCES = 2
Where 1: negligible, 2: considerable, 3: significant
QUESTIONNAIRE FINDINGS: SOURCES OF
COMPETITIVE ADVANTAGE IN TURKISH
CONSTRUCTION INDUSTRY
CRITERIA               MEAN VALUE   STD. DEV.
COST-TIME                 4.33         0.9
QUALITY                   3.47        0.95
CLIENT RELATIONS          4.33        0.73
FINANCIAL CAPABILITY      4.00        0.71
TECHNICAL                 3.78         0.9
COMPETENCY
MANAGERIAL                3.50        1.03
COMPETENCY
EXPERIENCE                3.80        0.88
INNOVATION                3.13        1.19
POLITICAL POWER           4.47        0.83