Value Capabilities, Rare Capabilities Costly-to-Imitate Capabilities and Non-substitutable Capabilities - Essay Example

Name: Tutor: Course: Institution: Date: Table of Content Introduction:……………………………………………………3-4 Value Capabilities:…………………………………………….4-5 Rare Capabilities:……………………………………………..6-8 Non-substitutable Capabilities:………………………………....8-9 Costly to imitate Capabilities:………………………………..…9-11 Conclusion………………………………………………………11-12 References:…………………………………………………………13 Introduction Competitive advantage is an aspect that guides an organization into profit making in its existing market. Different aspects of business give it a competitive edge this is mostly in line with consumer behavior and understanding what the customer wants. Business entities center their activities around its current and potential customers, which makes the customer the most integral component of business. Without clients, businesses could not exist and, as a result, every business has to have a good understanding of the customers in a bid to provide the products and services that will best satisfy their needs. Firms that have a high value for their clients struggle to have a better understanding of their interests by undertaking studies or providing platforms through which clients can present their opinions (Ndubisi, 2006). Studying the customer’s buying behavior is another very common and effective approach to acquiring more knowledge about their perception or attitude towards particular goods and services. Customer behavior is simply a learning process aimed at gaining knowledge about the way individuals or groups of people choose, secure, utilize, and dispose of goods and service. Also, it involves the study of the ideas and experiences that emerge as customers seek to satisfy their needs and the possible impacts of the aspects towards the society and the individual client. In every company in the world, there are goals set so as to achieve them for the success of the company. By doing so, it brings about strategic management, which involves the formulation and implementation of the major goals and initiatives taken by the corporation's top management on behalf of owners considering the resources and an assessment of the internal and external environments in which the organization competes with (Barney & Hesterly, 2008). Strategic management involves coming up with the company’s objectives, developing procedures and plans that will see to it that the company’s goals are achieved and also allocating resources so as for making sure the plans are implemented. In almost all businesses one, must find a competitor. To emerge the top of the competition, a business must have a concept that will describe the business attributes. This is called competitive advantage and is what companies strive to achieve. Hindrances to success in investment are at a high level and in many businesses make it hard for the many businesses to grow well. So as to be able to limit these factors, businesses have to come up with better strategies so has to be successful. Many companies that offer services are vastly available however it takes a lot to stand out among the many companies or emerge at the top. Competition is a major factor that differentiates the strength of enterprises and leads to the development of quality products. Businesses face high competition from different companies globally, for example, the company Toyota have managed to stay on top because they have the best strategic management and competitive advantage. They have been able to establish throughout the world with their various products like the Prius, Corolla, IST, Lexus and even bikes. The Four Criteria of Sustainable Competitive Advantage. (Dallas, 86) make a company so successful are: Value Capabilities, Rare capabilities Costly-to-imitate capabilities and non-substitutable capabilities. Value Capabilities Companies have threats as expressed in the Strength Weakness Opportunity and Threat (S.W.O.T) analysis. When faced with a threat the company will have to neutralize it to stay afloat in the market. This threat can present themselves in various forms. Examples of threats that may face a company include; mergers and acquisitions which in some cases are aimed to eliminate the company from the market entirely. This is usually done by big stake organizations when feeling threatened or in light of new factors by the competing company. The factors may be in the form of various factors of production. The factors of production, in this case, the factor of production may be capital in the form of technology advancement. The factor of production may be labor where a company may poach a valuable target. An example of a company acquiring technology to stay ahead in the market is the Nokia group of enterprises which uses Android technology. This is technology that was used initially employed by the company Apple Inc. By utilizing capabilities to exploit opportunities or neutralizing competition or a threat, a company or organization will create value for its products for the customers. External factors such as economy of the world have a significant impact on marketing and purchasing of products in markets. Development of the goods and services, therefore, call for maximum input to have quality output and a better shot at staying ahead of the competition. Through valuable capabilities, companies or organizations can neutralize threats and also be able to exploit certain opportunities. Businesses have to watch out for opportunities to rise in the market. Toyota has created various products to be able to sell them and increase its market share and give quality to its customers at favorable market prices. This is because Toyota watches out for competing companies giving Toyota a chance to produce best products. Once an opportunity arises like the need for eco-friendly cars, they sell their products at affordable prices to the customers. Toyota does this, and they neutralize the competition they face. A good example is seen when Toyota releases new products in the market. The product is always top of the line and countering a competitor like Tesla or General Motors. The products are always released during a spectacle event or release by a competing company. This is aimed at countering or neutralizing competitors’ efforts or products to stay ahead in the market. Rare Capabilities Companies have realized that there is an edge in having unique capabilities at their disposal in a competitive environment. This is usually in line with production or operational needs. A unique ability may be the difference between companies’ bottom lines at the end of a financial period. This is to mean that having one unique capability in the production process or operational process of an organization may allow the business or organization to profit more. This is because the resulting output or product from the unique aspect of the capability may give the company a better product or output than the existing products produced by other companies in the market. This may lead the consumers to opt for this particular business rather than its competitors. This, in turn, will grow the profit margin of the chosen company compared to others in the market. This as earlier described is the first step to understanding consumer behavior. The company that understands what their consumers want and how to best produce consumer goods and services get a unique edge compared to others in the market. The capabilities in question, in this case, are those that are few and that the company possesses. These capabilities bring about different features from what other companies or organization possess. This, in turn, brings about the difference in products that are in the market and also give the company a unique advantage over the other competitors existing in the market. Toyota has been able to create unique features for its products that make them marketable in the motor industry and the world. An example is the design of the Toyota Prius which stands out from other cars in fuel consumption and carbon emissions. This car was created with the environment in mind. The models of the Prius and other Toyota car products can withstand various conditions for example low fuel conditions. The Toyota products can function well at economical prices. This is also another attribute that the company is banking on. Rare capabilities are developed through understanding the customer’s buying behavior. This helps a firm understand the psychology behind the consumer’s thoughts, reason, and feelings. These feelings are the ones that guide the selection and differentiation of particular products of service and are based on consumer attributes. The understanding consumer is a study that will also shine a light on the contribution of environmental aspects such as culture and media towards the choice of product amidst the existence of many alternatives. It is also possible for companies to build a strategy around this and understand the contribution of the limitations related to the lack of sufficient consumer knowledge. The inability to process the available information to the decision made by the client may be checked down to poor information flow, and this may be the basis of a limited capability. Conveying a message properly by an organization allows the consumer to make a buy decision quicker. This can be viewed as an exceptional capability because consumers forego they feel they do not need. Convincing power, in this case, is the key aspect of the outstanding capability. An example is a company like Twitter that allows users to send simple messages globally. This aspect trumps the telephone company texting method of relaying information because telephone companies are limited to certain territories. This means that telephone companies will only allow the client to send a text message or a limited amount of text messages. This is also limited to the range of coverage in that the user can only send text messages to people in a certain region, and an extra cost may be required to send a text message to a wider range. This limitation is only seen in telephone companies compared to Twitter, which offers global access at no charge and only requires one to have an internet access. A consumer will easily understand the message of universal coverage compared to the message by telephone companies of limited coverage and messaging options. Studying the behavior of customers in the buying process is vital especially because it improves the competitive advantage of the company and the level of awareness of the clients. This also gives the company a better understanding of consumer wants and their needs or tastes (Porter, 2008). The analysis of limited capabilities in an organization can be acquired through technology. Prior knowledge of certain technologies like computers and programming develops the capability of a company to gain a competitive edge in the market. This is mostly done through analysis. In their research, Herold and Marolt stated that prior knowledge on various technology and specifically computers, and the consumer behavior towards buying computers affects competitive advantage in a business particularly a business in the technology industry. Consumers who were comfortable with the use of the internet had a more optimistic approach towards the technology use. This gives the businesses in the technology industry an edge compared to others. Other aspects might lead a client to change to a different preference affecting a competitive business advantage. It is the responsibility of the organization to find out these aspects and focus their products or production process towards them. These are what are referred to as limited capabilities and should be harnessed to give companies an edge in the market (Herold and Marolt, 2011). Non-substitutable Capabilities The coca cola recipe has been revered as one of the most highly kept secrets. This granted the company numerous years of profit being the only ones who could produce the product. This gave Coca-Cola a strategic position in the soft beverage market for close to two centuries. Initially, the company operated as almost a monopoly due to its customer base and lack of sufficient competitors in the beverage market. The drink company fount a competitive edge through a non-substitutable capability which was the Coke drink recipe. Non-substitutable capabilities are capabilities that do not have any substitutes in the market. This means that there are no replacements to the asset or factor of production that is owned by this particular company. This means that the company can use no other product like the ones used to originally in Coke drink production and can’t be replaced with a different drink. The harder it is to substitute, the more strategic value of the capabilities will be increased. This is because only one of a kind of the product or ingredient is available in the market. The company guards it with high priority this is because and to find another one will be difficult. To make the capabilities hard to find a substitute, the company must obtain a patent on the recipe. Through patenting, it will be hard for organizations who are competitors to create something similar or imitate the recipe. Competitors then won’t be able to replicate the value of the product. There have been cases of corporate espionage that have led to the prosecution of employees in the pursuit of maintaining the credibility of the organization through the secret of operations. Costly to imitate Capabilities A brand is a vital tool for the consumer and the organization. To the consumer a brand communicates quality and to the organization brand recognition is a costly to imitate capability. Consumers of for example Apple products know their preferences using the Apple logo which has no comparison to any other logo due to patenting. The performance of the Apple products according to consumer preference will be much greater than other computers in some cases. Product superiority is based on consumer preference as well. The consumer may relate this particular brand to quality and will serve to the benefit of the company. The company prides itself in confidentiality when it comes to technology, and trustworthy labor ensures this. This, therefore, grants Apple another costly to imitate capability, in this case, a stable workforce. The company has sued Samsung over patent breach rights used on one of the Samsung products. This goes to show the lengths the company will go to protect it is costly to imitate capabilities. Apple won the case and got compensation for damages resulting to low sales. The competitive advantage, in this instance, was breached by Samsung, and that is why Apple Inc. had to go after its competitor. The availability of another strong brand, in this case, made the consumers have a variety of choices of high quality the loyal consumers, however, would prefer the original. Costly to imitate capabilities are the capabilities that competing companies or organizations cannot easily develop imitate they include as earlier mentioned assets such as brand. Competition in the market has led to the development of exceptional staff and organizational culture and other companies also develop their culture. Coca-cola being a leader company in its market had to come up with products and develop products that its competitors could not imitate. For example, the soft drinks they make have a unique brand and taste. A company such as Coca-Cola Ltd. has reasons that will lead to a company to develop costly to imitate capabilities. A company’s unique historical conditions may be a reason to develop costly to imitate capabilities. Due to organizational evolution, companies tend to develop or acquire capabilities that are unique. Some companies start off wanting to build computers but due to differentiation branch out to other products. Companies improve their on their designs and periodically capitalize on the development of better products and a better brand image. Various companies become a product of social complexity. This means that most of the company’s capabilities are made out of social interaction. Relationships such as friendship among employees and between the suppliers and customers are examples of social complexity as an example of costly to imitate capabilities. Relationships within the company and with external stakeholders allow the business to get a response on the best way to develop the final products. Coca-Cola has been able to create good relationships with the major stakeholders, like management. Employees are encouraged to build such relationships with suppliers and even with customers. This gives the organization a chance to collect opinions and analyze data so as to assess on what products are best for the consumers. This information guides on what is to be developed by the company to give better results to the consumer. Through social events and social media organizations are building complexity that is costly to imitate capabilities. This is giving them an edge and keeping businesses competitive. An organization such as Coca-Cola attends supply chain workshops to improve its performance and stay ahead (Sheehan, 2011). Another costly to imitate capability as practiced by organizations is the ambiguous cause. The company’s competitors, in this case, fail to understand how the company is using its skills. This is mainly an evasive maneuver by organizations to allow it to gain competitive advantage. This plan confuses competitors in this case other companies or agencies. They are simply stunned at what their competitors are developing and hence don’t know what to prepare. This is mostly where competitors thrive on duplicates or imitate their products from other business. This can be used as a benchmarking strategy in creating lots of income for the competitors. Conclusion Companies aim to achieve sustainable competitive advantage through the four criteria that are; the costly to imitate capabilities such as the brand and culture, valuable capabilities to neutralize competition, non-substitutable capabilities to stand out from the contest and unique capabilities to give the company a better competitive edge. Companies need to stay ahead of their competitors from the start from idea formulation to policy making and implementation. Production of high standard products should be strategic and even marketing and selling the products. The idea of partnerships should not sideline the business from its core business or lead it to give away strategic positions. Competition in different levels of the firm; Global or State level should be considered vitally if the business is to make its mark in achieving a market share. Better factors of production in any business case are factors that will give an organization an edge in obtaining a better market share. Business strategies should always be in line with an organizational ability to improve its performance by evaluating consumer behavior and developing products that are in line with consumer wants and needs. Strategies should aim to have the capabilities discussed to be useful in the market environment. References Herold, D., &Marolt, P., 2011. Online society in China: Creating, celebrating, and instrumentalising the online carnival, New York: Routledge. Barney, J., & Hesterly, W. (2008). Strategic management and competitive advantage: concepts and cases. Upper Saddle River, NJ: Pearson/Prentice Hall. Dallas Hanson, Michael Hitt, Duane Ireland & Robert Hoskisson. Strategic Management: Competitiveness and Globalisation, 86,104, 165,166 Porter, M. (2008). Competitive advantage: Creating and sustaining superior performance. Simon and Schuster. Ndubisi, N., 2006. Marketplace behaviour of Malaysian consumers, Bradford, England: Emerald Group Pub. Sheehan, B., 2011. Marketing management, Lausanne, Switzerland: AVA Pub. Read More