Dynamic Capabilities and Strategic Management

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Course Title: Strategy & Policy
Section: A
Semester: Fall 2012
Program: MS-Mgt

Assignment #5
[Position Paper: Dynamic Capabilities and Strategic Management]

Submitted to: Dr. Sarwar M. Azahar

Submitted by: Syed Shahid Hussain12013092-016
Maham Shahid12014092-001
Rehman Asif12013092-011

Due Date: 13th December 2012
Submission Date: 13th December 2012
Marks:

Comments:
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Dynamic Capabilities and Strategic Management
(Teece et al., 1997)

INTRODUCTION
Strategic management deals with the fundamental question of achieving and sustaining competitive advantage which is the striving force for any organization (Rumeltet et al.,1994).Previous strategic theories emphasized the issue of sustainability and protection of firm’s competitive advantage derived from the valuable, rare, inimitable and non-substitutable resources of the firm that facilitate or restrict the choice of market entry and the expected profit (Wernerfelt 1989).Globalization and other national, international level competitive forces are leading to rapid technological change. This rapid technological change is a great threat for the firms to sustain their competitive advantage. To cope up with such rapidly changing environment firms need to develop new dynamic competencies and capabilities.

Previously introduced three paradigms are Competitive Forces Approach (Porter, 1980), Strategic Conflicts Approach (Shapiro, 1989) and Resource-Based Approach (Penrose, 1959; Rumelt, 1984; Teece, 1984; Wernerfelt, 1984) that have been reviewed in this research paper. These paradigms are absent to address the questions of why and how the competitive advantages are developed in the rapid changing, complex and turbulent environment. A new comprehensive framework (fourth paradigm) titled ‘Dynamic Capability Approach’ has been developed by integrating the previous three approaches to address the importance of why and how questions to achieve and sustain the firms’ competitive advantage in a rapid changing environments.

The objective of this position paper is to provide a brief review of the article, pointing out the underline assumptions of the authors by keeping in view the different theories and researches. Furthermore, this review paper highlights the gap to be concentrated by the future researchers. Finally this study takes a critical position in a different perspective by suggesting a few other related concepts of prominent scholars and researchers need to be considered in the framework of dynamic capabilities presented by the authors.

Review of Previous Strategic Paradigms
1. Competitive Forces Paradigm
According to the competitive forces paradigm by Michael E. Porter (1980), the sources of competitive advantages and determining & limiting strategic actions are inherent in industry or industries. The essence of competitive strategy formulation in this perspective is related to the industry level environment. Porter’s five forces model is very famous in this regard and companies find a position within the industry where they can be best defend themselves against these forces. The economic rents or profits in this competitive forces model are monopoly rents (Teece, 1984).The entry decisions are...
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