Capabilities: A source of strategic advantage

Introduction

Competitive advantage can be termed as the fuel of sustainable corporate growth in face of competition and can only emerge from effective strategy. Strategy, is about “...superior skills in understanding and satisfying customers” (Day, 1990 cited in Wit et al. 2004, p. 278). In the last few decades as the business environment has taken new twists, the perspectives on strategy have evolved using the framework of various eclectic schools of thought within two broad approaches: the prescriptive approach and the descriptive/emergent approach (Mintzberg et al., 1999). Some schools propose that strategy formation is the outcome of systematic analysis and logical planning. It is a deliberate process that is carried out by specialists who ensure that strategy implementation is the direct translation of the planned strategy. Others, like the learning school, argue that strategy is emergent. It takes shape as the result of learning that happens during organisational functioning at all levels. “...strategists can be found throughout the organisation, and so called formulation and implementation intertwine” (Mintzberg et al., 1999, p.25) but is facilitated and enabled by a ‘strategy champion’ – usually the CEO (Stalk et al., 1992, p.62). One supporter of the latter approach is Henry Mintzberg who argues that “Strategy is pushed along by sheer creativity of managers, because they explore new ways of doing things” (Mintzberg et al., 1999, p.29).

Literature Review

The debate on ‘what constitutes strategy?’ is intense. Is effective strategy an outcome of analysing the industry or is it about identifying and consolidating organisation’s ‘resources’ and ‘core competences’ into capabilities? The former is a market-based (MBV), outside-in, prescriptive viewpoint (Chamberlain, 1932; Caves and Porter, 1977; 1978;