Strategic Process - Dynamic Capabilities

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Strategic Process - Dynamic Capabilities

By | Feb. 2013
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I. What are dynamic capabilities? Provide an illustration.
Dynamic capabilities has been introduced as an extension of the resource-based view of the theory of the firm. Unlike RBV, they refer to dynamic markets, where competitive environment is shifting. More precisely, dynamic capabilities are organizational and strategic routines by which managers alter their resource base to implement new value-creating strategies. These routines integrate, reconfigure, gain and release resources. According to us, a good illustration of dynamic capabilities can be the market of cameras, where during technological disruption - which was switching from analog to digital cameras – many companies to reach competitive advantage had to adapt their portfolio of resources. Sony, Nikon or Samsung were doing this by configuring their assets, also by acquisitions with e.g. software companies, whereas Kodak – contemporary leader on the market – relied on RBV and lost its good position.

II. Do dynamic capabilities represent a necessary and sufficient condition for competitive advantage? Dynamic capabilities are necessary, but not sufficient conditions for competitive advantage. Increasing competitive advantage lies in the resource configurations that managers build using dynamic capabilities, not in the capabilities themselves. In other words, a company can have in its strategies effective routines and this could increase competitive advantage. The problem is that competitors are not dormant and may employ more effective dynamic capabilities.

III. Why are “effective” dynamic capabilities in highly dynamic industries simpler than in moderately dynamic industries? Managers usually have not enough attention for analyzing complicated routines at any time the dynamic industry changes. If dynamic capabilities are simpler, managers can focus only on the most important issues, what makes their work more efficient. What is more, complicated routines constrain...