Dynamic Capabilities And Capability-Led Strategies Essay.

Dynamic capabilities and capability led strategies

Appropriate strategies are significant in terms of increasing the brand awareness in the new markets. Costco developed strategies like maintaining thin profit rates in order to provide products with extremely low prices to the customers. It has also helped them to increase the revenue generation rate from the markets of United States. However, in terms of future growth and expansion of the business, the company needs to focus on management issues, which are the main internal problems (Lee, Nguyen and Szkudlarek 2020). The assignment highlights the challenges faced by Costco in terms of developing their future profitability, and the importance of dynamic capabilities that can mitigate the issues.

The dynamic capabilities can be considered as the deep-rooted or in-built capacity of the company that helps them to utilise their resources simultaneously with the rapidly changing business environment (Suddaby et al. 2020). The companies with dynamic capabilities focus on their capital investments and internal resources, instead of focusing on the changing market trends or the government policies. The main purpose of the dynamic capability is to help the company gaining a competitive advantage from the market, by providing tough competition to the other companies in the industry (Kattel and Mazzucato 2018). Companies uses dynamic capabilities to focus on their internal strengths, such as the company fundings or the employees. According to the provided case study, it can be observed that Costco mainly focuses on providing high compensations to the workforce. The company has also developed a suitable and positive workplace, so that the wellbeing of the employees is maintained. With the help of the capital investments of the company, Costco provides frequently provides rewards to the employees, that are also beneficial for increasing the motivation of the employees as well as the growth of productivity rate. The capability led strategies are the approaches taken by the company, based on their resource capacity, which also increases the productivity efficiency of the company (Brandon-Jones and Knoppen 2018). However, it is important for the company to identify the gaps within their internal capability, in order to develop strategies without any issues. Evaluating the dynamic capabilities has mainly three steps, which are to identify the opportunities led by the capabilities, capturing value from the identified opportunities and renewing the capabilities on a continuous basis.

It has been observed from the case study that Costco has utilised their capabilities, in order to develop a lower cost structure for the products in the market. The pricing ranges of the Costco products are extremely low, for which their profitability margin is also critically low in the market. Due to this strategy, the company has achieved a competitive advantage from the market, because other companies within this industry are not able to achieve product pricing range (Jones, Harrison and Felps 2018). In addition, the company is also able to deliver the same benefits of the products to the customers, as well as high quality products at a lower rate, which increases the chances of company to attract maximum number of customers from the market and increase the market share profits. The companies utilise the resource-based views which allows them to identify the distinctive competencies, which ultimately led to a significant value creation (Mikalef et al. 2020). In this case the main resources of the Costco are the reputation of the firm, installed customer base, capital investments and the brand equity. According to the case study, it can be observed that Costco has utilised their resources effectively in terms of developing a unique price strategy. This strategy has helped them to achieve higher number of customers responses, as a result, it increased their sales up to 9.1%, indicating increasing profitability through capability led strategies.

Usage of capabilities to develop value and competitive advantage

The major problem of Costco that has been identified from the given case study is the management issues of the company. The company focused on rapid expansion, in the Seattle region of America. However, they failed to advertise the requirement for employees, as well as the need for public relations for enhancing the brand recognition in the market. The complaints against the company also arose regarding very limited opportunities to the women, for growth in the company and regarding future career perspectives. The market trends are rapidly changing, and the participation of women in the workforce has increased gradually (Lee, Nguyen and Szkudlarek 2020). However, Costco failed to acknowledge these issues, which increased their internal issues. Due to lack of appropriate advertisements regarding the job vacancies and job openings, the company faced problems regarding developing a strong workforce for the new warehouse club in the new market. The particular reason behind the issues of Costco is their unorganised management structure. Appropriate recruitment and selection procedures are extremely important for the companies, in order to develop a strong workforce, which also has the ability to provide the company a competitive advantage from the market (Långstedt 2018). In addition, due to the rapid expansion of the business, the companies faced difficulties in terms of managing the various types of cultures that has been incorporated in the business. It became difficult to focus on the issues of the management and various other aspects of the businesses.

Maintaining the workplace diversity is extremely important for the company, in terms of preventing any cultural conflicts from arising. Developing essential strategies that has the ability to respect the cultural differences of the employees within the organisation is important for preventing any cultural conflicts from occurring within the company (d'Iribarne et al. 2020). The rapid unorganised growth of Costco increased difficulties for the company, which can be mitigated with appropriate strategies and structural management. Without the incorporation of the appropriate management and strategies without the organisation, integration of multicultural employees within the organisation increases agreements (Lee, Nguyen and Szkudlarek 2020). In addition, it can be seen from the provided case study that the company was unable to attract reliable and skilled employees within the organisation due to their marketing failure and managerial issues. These issues also increase the chances of misunderstanding among the employee groups in the company. The working style among the teams become unorganised, which negatively effects the outcomes of the operations of the company (Udriyah, Tham, and Azam 2019). For example, companies like Costco are build in the global setting, therefore, they had to take responsibility of managing the employees belonging from various cultures. As a consequence, the management procedures within the companies become difficult and complex. Professional communications also become an issue for the company to manage, because of the cultural and language differences of the employees. In addition, the developing new strategies or multiple strategies for managing the company in the new market is also a concern for the managerial decision.

Problems of Costco

Cross cultural management is beneficial in terms of evaluating the cultural differences of the international markets. Global companies like Costco have to deal with employees from various backgrounds as well as external factors like shareholders, stakeholders, political factors, and the different types of customers (Alam and Rasheduzzaman 2018). Therefore, the management strategies of the home country, will not be valuable for the companies in the host country. Therefore, cross-cultural management helps the company to develop global strategies that are beneficial for managing the internal and external factors, without many obstacles. Promoting open communication, is a major factor of the cross-cultural communication, that helps the company to understand the demands as well as concerns of the employees belonging from various cultural backgrounds. Fostering strong and stable relationship with the help of frequent conferences, meetings and workshops is an effective element of the cross-cultural management (Beil and Garcia Mayor 2018). It increases unity among thee work team, which is also beneficial for increasing the productivity rate of the overall company operations. As per the case study, Costco failed to consider the diverse factors of the new market, and also did not provided opportunities for women participations in the company operations. Therefore, the company faced backlashes from the market, which they managed to mitigate with appropriate cross-cultural management strategies in the future.

In order to solve the managerial decision issues within a global company like Costco, it is important to considering diversity strategies as the part of the companies hiring processes. The company can also ensure that the specific leadership styles are aligned with the main objectives of the company. It will also ensure the recruitment of the appropriate talents, without any biased judgments based on the cultural differences (Davis and Knight 2018). The most important factor is to develop an appropriate action plan, including all the details such as marketing of the company, job opening, public relation needs and other factors. It will be beneficial in terms of guiding company in a right path, that will help them to achieve the desired objectives in a short time span. In addition, enhancing and promoting the equal rights within the company is also essential, because it helps the employees to feel inclusive in the organisation, resulting in the increased productivity rate.

References

Alam, J. and Rasheduzzaman, M., 2018. Cross-cultural project on human resource management: an overview. International Journal of Science and Business, 2(2), pp.101-114.

Beil, E. and Garcia Mayor, D., 2018. The Challenge of Cross-Cultural Adjustment: The Case of Expatriates on International Assignments between Africa and Sweden.

Brandon-Jones, A. and Knoppen, D., 2018. The role of strategic purchasing in dynamic capability development and deployment: A contingency perspective. International Journal of Operations & Production Management.

Davis, K. and Knight, D.B., 2018. Impact of a global engineering course on student cultural intelligence and cross-cultural communication. Journal of International Engineering Education, 1(1), p.4.

d'Iribarne, P., Chevrier, S., Henry, A., Segal, J.P. and Tréguer-Felten, G., 2020. Cross-cultural management revisited: A qualitative approach. Oxford University Press.

Jones, T.M., Harrison, J.S. and Felps, W., 2018. How applying instrumental stakeholder theory can provide sustainable competitive advantage. Academy of Management Review, 43(3), pp.371-391.

Kattel, R. and Mazzucato, M., 2018. Mission-oriented innovation policy and dynamic capabilities in the public sector. Industrial and Corporate Change, 27(5), pp.787-801.

Långstedt, J., 2018. Culture, an excuse?—A critical analysis of essentialist assumptions in cross-cultural management research and practice. International Journal of Cross Cultural Management, 18(3), pp.293-308.

Lee, E.S., Nguyen, D.C. and Szkudlarek, B., 2020. Global migration and cross-cultural management: Understanding the past, moving towards the future. The SAGE handbook of contemporary cross-cultural management, pp.409-423.

Mikalef, P., Krogstie, J., Pappas, I.O. and Pavlou, P., 2020. Exploring the relationship between big data analytics capability and competitive performance: The mediating roles of dynamic and operational capabilities. Information & Management, 57(2), p.103169.

Suddaby, R., Coraiola, D., Harvey, C. and Foster, W., 2020. History and the micro?foundations of dynamic capabilities. Strategic Management Journal, 41(3), pp.530-556.

Udriyah, U., Tham, J. and Azam, S., 2019. The effects of market orientation and innovation on competitive advantage and business performance of textile SMEs. Management Science Letters, 9(9), pp.1419-1428.