Distinctive Capabilities

Distinctive Capabilities

Identify an organization ‘s distinctive capabilities (competencies) is a vital part of market-driven strategy (Exhibit 1.1). “Capabilities are complex bundles of skills and accumulated knowledge, exercised through organizational processes, that enable firms to coordinate activities and make use of their assets.

Michael Porter indicates that “the essence of strategy is in the activities – choosing to perform activities differently or to perform different activities than rivals.”

Identifying Distinctive Capabilities

Understanding the organization‘s distinctive capabilities and how they relate to customers’ value requirements are important considerations in marketing strategy design.

A distinctive capability (1) offers a disproportionate (higher) contribution to superior customer value, or (2) enables an organization to deliver value to customers in a substantially more cost-effective manner.

Types of Capabilities

Classifying the organization’s capabilities is useful in identifying distinctive capabilities.

This process view of capabilities highlights the interrelated nature of organizational processes and points to several important issues.

· The market-driven organization has a clear external focus.

· Capabilities typically span several business functions, involving teams of people.

· Processes need to be clearly defined and have identifiable owners.

· Information should be shared with all process participants.

· Processes are interconnected to other processes and management needs to coordinate the linkages.

Implications of these changes include:

· Managing and participating in process-driven organizations create new skills requirements and challenges.

· Functional organizations require individual skills in information gathering, data analysis, and external collection.

· Process-driven organizations emphasize skills in relationship management, internet communication and persuasion, team building, information interpretation, and strategic reasoning.

Value and Capabilities

Value for buyers consists of the benefits and costs resulting from the purchase and use of products. Value is perceived by the buyer.