It seems likely that those differences persist for several years because there are mobility barriers between he strategic groups. If both propositions are true, then an industry can be viewed as being composed of groups of firms, each group consisting of firms following similar competitive strategies. The competitive strategy of a firm is that firm’s choice with regard to the strategic dimensions of its particular industry. Examples of strategic dimensions are advertising levels and product differentiation.
Groups of firms following similar competitive strategies are called strategic groups. Firms within a strategic group closely resemble one another. Profitability differences between firms in the same strategic group are likely to be small. However, profitability differences between firms in different groups may be large. Thus, strategic planners can use the concept Of strategic groups to construct a map showing the competitive strategies of their own company and those Of their competitors.
It is missing an independent selection mechanism that explains Which resources are valuable and which are not. ROB is static. It assumes that resources simply exist and the firm’s task is to choose from among the existing resources, neither asked where these resources came from nor how they were developed and maintained over time. Dynamic capabilities Can be defined as the capacity of an organization to purposefully create, extent or modify its resource base. Dynamic capabilities can be distinguished from operational capabilities, which pertain to the current operations of an organization.
Thus, operational capabilities are any type to capability that the organization uses in its effort to earn a living in the present, Dynamic capabilities, by contrast, are aimed at change. They alter the resource base of an organization. Gorging alliances or making acquisitions are typical examples. Note, further, that trough dynamic capabilities the organizational resource base is purposefully created, extended or modified. That means there must be some degree of intent, either on the part of top management or at lower levels in the organization.
Furthermore there must be an alliance partner. Prom this respective, the strategic management of the organization therefore entails the purposeful application of dynamic capabilities to change the resource base Of the organization. The extension of ROB with the concept of dynamic capabilities also allows for the possibility Of delving deeper into the nature Of the resources and capabilities that generate sustainable competitive advantage. There are specific factors and circumstances that contribute to dynamic capabilities being valuable, rare or inimitable.
Some features include the following:
- Co-specialization: meaning that assets are uniquely valuable only when used in combination. Asset orchestration: this term is used to denote the managerial search, selection and configuration/coordination of resources and capabilities. The term attempts to convey that, in an optimal configuration of assets, the whole is more valuable then sum of its parts.
- Tacit knowledge: if capability is partly based on tacit knowledge, it is impossible to make it fully explicit. The capability can therefore not be dully articulated. It partly resides in people’s heads and behaviors.
- Firm specificity: Dynamic capabilities are often dependent on the firm’s historical development and unique circumstances. They are usually developed in practice through learning by doing,
Isolating mechanisms: prevent other firms competing away the profit that a firm earns from its capability.