How to Dynamic Capabilities Are Differentiated From Operational Capacities?
Strategic management refers to the implementation and incorporation of the policies and objectives sketched by any organization through its top management thereby taking into account the resources as well as evaluating the internal and the external environmental conditions. Nonetheless, through the formulation of an effective strategic management the company strives to attain its objectives. However, the branch of strategic management is further segmented into 2 parts termed as the prescriptive approach and the descriptive approach. The prescriptive approach provides guidance in sketching and developing the strategies whereas the descriptive approach aids in its implementation and usage (Wu, 2008). There are few approaches that are considered to design strategies in regards to strategic management. Often the standard linear approach is termed as the traditional approach that abides by specific procedures in sketching strategies. The linear approach is much sequential where identification of a specific set of mission is nurtured. After that a situational analysis is conducted considering the external and internal situations of the company. Framing of goals thereby keeping alignment with the mission and the outcome of the analysis made is also nurtured. On the basis of this evaluation and setting objectives an action plan is laid in order to attain every objective set. However, there are shortcomings to this well thought and pre-planned linear approach. Firstly, this sort of approach does not tend to fit in all sorts of organization. This is because at times the linear approaches due to its schematic nature may become time consuming, then the organizational culture may be different which may not allow the linear approach and others. Again on the contrary, it is noted that the linear approach which comprises certain shortcomings, there is organic approach to strategic management which is more flexible, termed as “self-organizing system” and more naturalistic in nature (Greckhamer et al., 2008).
The term “stakeholder approach” was coined during the middle of 1980s. The force that directed the way of strategic management was to attempt and assemble a system that was receptive to the worries of administrators who got struck by phenomenal levels of ecological movement and change. Conventional strategy structures were not supporting the administrators to grow new strategic dimensions and also were not aiding the managers see how to construct new phases of opportunities amidst such turbulence. Thus Freeman during 1984 pointed that the existing theories relating to strategic management are not consistent in regards to the quantitative change as well as the types of change that have been taking place within the market thereby conceptualising an all new approach termed as the stakeholder approach. The stakeholder approach was certainly an answer to the threats and the challenges posed by the changing market in those days (Freeman & Velamuri, 2008).
A conspicuous play on ‘stockholder’, the approach looked to expand the idea concerning strategic management past its customary monetary roots by characterizing stakeholders as a gathering or person who is influenced by or may influence the accomplishment of an association's targets (Freeman et al., 2010). The motivation behind stakeholder approach was to frame strategies to deal with the horde gatherings and connections that brought about a key mould. Further the stakeholder approach indicates that the supervisors are expected to comprehend the worries of shareholders, company representatives and workers, clients, providers, moneylenders as well as society with a specific end goal to create objectives that the stakeholders will bolster. This support appears important for long haul achievement. In this manner, administration of any company ought to effectively investigate its associations with all partners so as to create business procedures (Welch & Jackson, 2007).
Nonetheless, the stakeholder approach is a theory pertaining to strategic management and organizational management and considering business ethics which circumscribes around certain moral values thereby lending support in managing companies. Freeman was seen to develop 2 papers upon the subject of stakeholders’ simulation. One of these papers concentrated on the requirements of the supervisors to maintain relationship with the stakeholders where the stakeholders were observed within a wider strategic sense and were known to influence or get influenced by the association’s objectives (Freeman, 2010).
Therefore all these concerns and issues gave birth to the concept of stakeholder approach to strategic management. Hence the other paper was such designed that it mostly contained the techniques and the strategies to be implemented in dealing with stakeholder issues. The point that Freeman’s stakeholder approach denotes is that the most significant insight must be rendered to the stakeholder relationship and not focusing merely on sketching, incorporating and assessing of the strategies (Freeman et al., 2010).
Considering Toyota’s “brake pedal recall” as an example which attracted heavy fine amount levied by the US transportation safety departments amounting to $ 16 million, it is noted that the company failed to realize the stakeholders’ significance related with the company. This is because Toyota was seen to hide its problem thereby not anticipating for its consequences. It is expected that a big company like Toyota that deals with a large segment of public must have taken precautions and dealt with the problems pertaining to brakes pedal through the incorporation of stakeholders approach and its strategies. This is because the automobile manufacturers are liable to look out for the safety measures of its cars and vehicles thereby keeping in accordance with the safety measures act, the government and the safety measures agencies (Lackzniak & Murphy, 2012). However if the stakeholder approach is implemented then it must have worked through the following way:
As a result Toyota was observed to recall as many as 340 000 cars globally due to its fault in stakeholder approach theory. Therefore, it certainly gives an image regarding the importance of stakeholders approach to strategic management (Bauman, 2011).
Dynamic capabilities is a theory that was coined by David Teece, Gary Pisano and Amy Shuen during 1997 in a research paper indicating a company’s capacity to collaborate, construct and design differently considering its internal as well as external environments and the comprising competitions so that the organization might keep in accordance with the ever changing environment. The dynamic capacities system breaks down the sources and strategies pertaining to wealth formation and caught up by private firms working in conditions of quick technological change (Teece, 2009).
The private enterprises competitive advantage is viewed as laying on unmistakable procedures (methods for organizing and consolidating) and moulded by the company's resource positions, for example, the association's arrangement of hard to-exchange learning resources and integral resources and the development paths it has received or acquired. The significance of path conditions is magnified where states of expanding returns exist. Regardless of whether as well as how a company's competitive advantage is dissolved relies on upon the dependability of market requirements and the simplicity of replicability which is growing inside and imitability which is replication by contenders (Teece, 2007).
On the off chance that if it is right where the structure proposes that private resources formation in administrations of fast technological change relying on vast measure on sharpening inward technological, hierarchical, and administrative procedures within the firm. Precisely tracing new opportunities as well as arranging adequately and productively to grasp them are for the most part more major to private resources creation than the theory of strategizing where through strategizing one signifies taking part in business lead that makes contenders shaky, magnifies adversary's costs and expenditures thereby eliminating new entrants (Ambrosini & Bowman, 2009).
Dynamic capabilities are differentiated from operational capacities which relate to the present organizational operations. Dynamic abilities allude to the limit of an association to intentionally make, augment or change its asset base. The essential presumption pertaining to the dynamic capabilities system is that special attention to be rendered to core competency ought to alter short term contending situations that may be utilized in framing a more drawn out competitive advantage. However, there are 3 main ingredients of dynamic capabilities that are necessitated to combat with the threats that keep on evolving. The companies along with their work force must be fast learners and must be able to construct strategic resources. The upcoming strategic resources like capability, updated technology as well as consumer feedback should be amalgamated thereby metamorphosing the existing strategic resources (Teece, 2009).
Teece through dynamic capabilities proposed that business is charged with the fast pace of corporate structure that puts emphasis on the capacity in comprehension of opportunities and threats, grabbing of opportunities and maintenance of the competition by enhancing, collaborating, safeguarding as well as reshaping the organization’s intangible as well as tangible resources (Teece, 2007).
The best examples of companies that have emerged globally thereby maintaining its competitive advantage in the global market are Apple and IBM. Basically these 2 companies have exhibited their dynamic capabilities while evolving continuously with the rapid change in the global environment. The company Apple happens to display totally unique characteristics in this case. This is because the association has never been ideally hailed as “a technological leader” but still it has proved its incompatible technique and strategy by marketing to the targeted consumers items and goods that are technology based and valued by the targeted segment. IBM, on the contrary, happens to be technologically strategized where it has exhibited its innovation within the internal and the external environment (Harreld et al., 2007).
Moreover, the successful transformation of IBM from “electromechanical tabulating machines to mainframe computer systems” has earned the company a successful IT market where it efficiently provides services and conducts business pertaining to software as well as cloud computing. According to the researchers, both these companies happen to overcome their shortcoming mostly termed as ‘path dependence’. It is noted that the associations that exhibit greater pat dependence find it difficult to transform or reconfigure in accordance to how they have been conducting their business processes even at times while there have been rapid changes felt around the globe. However, both Apple and IBM have not created their prologue out of the shadows of their past. This helped both the associations to reconfigure their business structure and efficiently work as new entrants to different business forms (Pitelis & Teece, 2010).
Sustainability is a corporate approach that makes long haul stakeholder worth by executing a business technique that incorporates thinking about each measurement regarding the business workings corresponding to the social, ecological, financial and cultural condition. It likewise details procedures in constructing an organization that cultivates long life-span by implementing straightforwardness and legitimate representative and work force advancement (Spedding & Rose, 2007).
Thus it can also be stated that sustainable approach is a corporate development upon more conventional expressions portraying moral corporate practice. Expressions, for example, corporate social responsibility (CSR), corporate citizenship keep on being utilized, however, are progressively replaced through the usage of more extensive term ‘the sustainable approach’. Not at all like expressions that emphasize on included strategies, has teh sustainable approach depicts business functionalities circumscribed around the social as well as environmental contemplations (Van Kleef & Roome, 2007).
Further the current market has been displaying certain trends corresponding to decision making situations that keep on changing thereby ushering in strategic management. However, this strategic management in the recent times has known to become more complex due to its confrontations with challenging situations and market threats. As an outcome, there has been inadequate information which has given rise to new strategies and policies to determine the influence of strategies concerning sustainability interests. Nonetheless, it leads to partial exhibition of the environmental scarcities pertaining to financial transactions where they are handled through certain managerial structures which are not connected with the financial success of the association. It leads to lack in data and information as well as integration corresponding to environmental management. As a result, researches have been conducted concerning areas of sustainability management and approach. The concept of sustainable development came into existence during 1987 after the release of report “Our Common Future” by World Commission of Environment and Development (Boons & Lüdeke-Freund, 2013).
However, sustainability refers to the management of the “triple bottom line” concerning areas of financial, environmental and social of the associations. Quite often the 3 factors are referred to as “people, planet and profit”. Nonetheless it is the aspect of climate change that adds on to the complications of a firm’s searching for its sustainability. The approaches and strategies that are designed to formulate sustainability in the long haul might be considered as sustainable approach. The successful distribution pertaining to a specific business plan is highly tinted with the effective strategies of the organization that addresses the environmental issues. However, these sustainable strategies are directly related with cost reduction as well as brand value. Therefore it is recommended for the companies to strategise its business plan thereby keeping in mind the aspects of carbon management. Nonetheless sustainable approach is something that is quite closely related with eth corporate social responsibility. Rather these terms like CSR as discussed above are going in vogue thereby making ways for sustainable approach that is all inclusive (Al-Majed et al., 2012).
Carbon management naturally refers to contributing to eco-diversity by minimizing the green house gas emissions or actively participating in programs that deal with the maintenance of bio-diversity of the 3rd planet. Climate risk is something that poses itself as a threat corresponding to the corporate chain, resources safety as well as competitive advantage of any association. Again on the contrary, it is noticed that the sustainable approach designed by the company must maintain alignment with the stakeholder approach of the company as the stakeholders include the government, work force, suppliers and others. For example, the BP oil spill in Mexico serves as a glaring example to the aspect that businesses must design effective sustainable approach. Nonetheless, as Forbes (2010) printed that “the success of a business needs to be considered in the context of human and environmental impacts; the most sustainable businesses are those that are able to positively impact all their constituents to maximize long-term economic opportunities”. BP was very late in acknowledging its mistake and thus it took a toll not only upon the company but also on the eco-diversity of earth. Therefore this instance establishes the fact that sustainable approach is significant to strategic management (Sorensen, 2010).
All the approaches discussed above are viable in nature and are correlated with each other. Certainly the stakeholders remain to be significant parts of any associations and thus must be considered whenever strategizing business policies. Similarly dynamic capabilities lead to competitive advantage and viable growth while same is the case for sustainable approach. The benefits of all these approaches are development, growth and competitive advantage of the firm. The implementation issues might be external or internal and appear challenging due to certain limitations like the competitors’ threats, time constraints, governmental issues, finances and others (Wang & Ahmed, 2007).
Al-Majed, A. A., Adebayo, A. R., & Hossain, M. E. (2012). A sustainable approach to controlling oil spills. Journal of environmental management, 113, 213-227.
Ambrosini, V., & Bowman, C. (2009). What are dynamic capabilities and are they a useful construct in strategic management?. International journal of management reviews, 11(1), 29-49.
Bauman, D. C. (2011). Evaluating ethical approaches to crisis leadership: Insights from unintentional harm research. Journal of Business Ethics, 98(2), 281-295.
Boons, F., & Lüdeke-Freund, F. (2013). Business models for sustainable innovation: state-of-the-art and steps towards a research agenda. Journal of Cleaner Production, 45, 9-19.
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Greckhamer, T., Misangyi, V. F., Elms, H., & Lacey, R. (2008). Using qualitative comparative analysis in strategic management research: An examination of combinations of industry, corporate, and business-unit effects. Organizational Research Methods, 11(4), 695-726.
Harreld, J. B., O'Reilly, C. A., & Tushman, M. L. (2007). Dynamic capabilities at IBM: Driving strategy into action. California Management Review, 49(4), 21-43.
Laczniak, G. R., & Murphy, P. E. (2012). Stakeholder theory and marketing: Moving from a firm-centric to a societal perspective. Journal of Public Policy & Marketing, 31(2), 284-292.
Pitelis, C. N., & Teece, D. J. (2010). Cross-border market co-creation, dynamic capabilities and the entrepreneurial theory of the multinational enterprise. Industrial and Corporate Change, 19(4), 1247-1270.
Sorensen, S. (2010). Forbes Welcome. [online] Forbes.com. Available at: https://www.forbes.com/2010/07/07/sustainability-gulf-spill-technology-bp.html [Accessed 20 May 2017].
Spedding, L. S., & Rose, A. (2007). Business risk management handbook: A sustainable approach. Elsevier.
Teece, D. J. (2007). Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance. Strategic management journal, 28(13), 1319-1350.
Teece, D. J. (2009). Dynamic capabilities and strategic management: Organizing for innovation and growth. Oxford University Press on Demand.
Van Kleef, J. A. G., & Roome, N. J. (2007). Developing capabilities and competence for sustainable business management as innovation: a research agenda. Journal of Cleaner Production, 15(1), 38-51.
Wang, C. L., & Ahmed, P. K. (2007). Dynamic capabilities: A review and research agenda. International journal of management reviews, 9(1), 31-51.
Welch, M., & Jackson, P. R. (2007). Rethinking internal communication: a stakeholder approach. Corporate Communications: An International Journal,12(2), 177-198.
Wu, W. W. (2008). Choosing knowledge management strategies by using a combined ANP and DEMATEL approach. Expert Systems with Applications,35(3), 828-835.
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