Competence Analysis: An approach to a firm´s competence domain

Table of Contents

1. Introduction
1.1 Problem Discussion
1.2 Problem Formulation
1.3 Purpose
1.4 Choice of company

2. Theory Part
2.1 Resource-based View (RBV)
2.2 Competence-based view
2.3 Dynamic capabilities approach

3. Empirical Part

4. Analytical discussion
4.1 Definition of terms
4.2 Presentation of model
4.3 Evaluation of model

5. Conclusion

6. References

Appendix
Appendix 1: PSA-Group

Table of Figures

Fig. 1: INTERPLAY BETWEEN COLLECTIVE LEARNING, INTERNAL & EXTERNAL FACTORS WITHIN THE SCA SYSTEM

Abstract

Staying one step ahead of competition requires a sufficient short and long term strategy. To formulate these strategies it is of great importance to analyse the inner competence of a firm. For the last decades several researchers have been developing different approaches to determine idiosyncratic factors generating sustainable competitive advantage (SCA) by a value creating strategy.

In the analytical discussion we have developed our own model by considering the existing approaches and adding some new important factors as driver and forces of SCA. Thus, the model is applied to Peugeot to show its feasibility. The model shows the synergy through the collective learning between the internal factors: resources, capabilities, competences, core competence; and the external factors: customer relationship, competitors and stresses the importance of interaction between these factors to shape the SCA of a firm placed in a highly competitive market.

1. Introduction

Our introduction describes the key approaches on the competence domain. We stress the essence of the presented theories and their role for understanding sources and drivers of sustainable competitive advantage (SCA). Furthermore we will present our problem formulation and end up with a presentation of our case company.

In order to stay competitive in the future it is important to develop a strategy where not only the external but also the internal factors are taken into consideration. Different theories have highlighted different thinking about the inner competences of a company.

The resource-based view, mainly influenced by Penrose, Wernerfelt and Barney, stresses the importance of having a set of unique resources.^[1] The competence-based view on the other hand highlights the contribution of competences and core competences to the long term success of a company. Because competences besides other factors constitute dimensions of strategy, Prahalad and Hamel underlined the role of the linkage between competences and the focus to strategy at the corporate level.^[2] The latest theories about the dynamic capability approach, developed mainly by Teece et al., stress the essence of the knowledge set as a distinguishing and providing driver of sustained competitive advantage. These theories have to be understood by managers, modified and incorporated into the process of short and long term strategic planning by every firm in order to be successful in its business. To generate future competitive advantage it is important to find out what distinguishes a company from the competitors by looking at these inner competences.^[3]

1.1 Problem Discussion

As mentioned above discussing strategy in terms of resources, capabilities and competences a main focus is given to the SCA. Different theories view several and often different aspects as mainly influencing sources to SCA. Similarities concern the path dependence that is embodied in resources, capabilities, competences or either core competences. They also create the SCA of a company at a current and future competitive position. Concerning the different roots that underlie the approaches we have come up to the following problem formulation.

1.2 Problem Formulation

How can the different approaches contribute to identify sources and drivers of the SCA for a company placed in a highly competitive and dynamic market?

1.3 Purpose

With the help of our case company, we apply the different views on SCA in order to develop our model that contributes to the identification of the sources and drivers of SCA.

1.4 Choice of company

We have decided to focus on the automobile industry which is a highly and competitive market. In our analysis, we will apply our findings to the PSA group which is the second biggest European car manufacturer. We have chosen to narrow down our data researches to Peugeot cars division. PSA is an interesting case since we consider SCA to play an important role in the automobile industry and being a major issue concerning a firm short and long term strategy.

2. Theory Part

In the theory part, we will introduce the three basic approaches incorporating the drivers and sources of sustainable competitive advantage. At first, the resource-based view (RBV) of a firm is presented, following a presentation of the competence-based view and finishing with the dynamic capability approach.

2.1 Resource-based View (RBV)

The RBV is since some decades ago an influential framework to understand the strategic management. The RBV proposes that a firm only can create sustainable competitive advantage from having a set of unique resources that creates value in the marketplace.^[4]

In 1984, Wernerfelt proposed to look at firms in terms of resources rather than in terms of products. This gives a richer perspective on the growth prospect of the firm.^[5] Influenced by Wernerfelts statement about the balance between exploitation of existing resources and development of new ones, Barney stated that a resource is valuable when it enables strategies which improve efficiency and effectiveness by exploiting opportunities and neutralizing threats. Barney’s research basically suggests that different firm performance can be attributed to a firm’s possession of rare, valuable, sustainable and difficult-to-imitate resources.^[6]

Barney views the firm as a bundle of resources which are heterogeneous and immobile across firms. To his opinion the RBV examines the link between firm’s internal characteristics and performance.^[7] These internal characteristics cover the firm resources which include all assets, capabilities, organizational processes, firm attributes, information and knowledge. Therefore he classifies the firm resources into three categories which are physical capital resources, human capital resources and organizational capital resources. Whereas physical capital resources include plant, equipment, location, assets, human capital resources cover workforce, management team, training, experience, and organizational resources cover aspects as culture and reputation.^[8]

In contrast, Grant goes further in explaining the sources of competitive advantage, namely resources and capabilities. Grant views resources as inputs into the production process and the source of a firm’s capability. Because a few resources on their own are productive, teams of resources are necessary to perform some task or activity. This procedure is called capability.^[9] That is why he defines “capability a routine or a number of interacting routines”.^[10] Grant stresses this relationship of resources and capabilities which is the ability of an organization to create cooperation and coordination within teams.^[11] For this, Grant identifies two components which create the rent-earning potential of resources and capabilities: the sustainability of competitive advantage and the appropriability for evaluating rent-earning potential derived from resources and capabilities need to be fulfilled. Meaning that a firm should possess the ability to praise and make efficient use of the returns derived from resources and capabilities. Important resources and capabilities fulfil the determinants of the sustainability of competitive advantage. The determinants are durability, transparency, transferability and replicability.^[12]

[...]

^[1] Barney, (1991), p. 103-105

^[2] Prahalad et al., (1990), p. 91

^[3] Teece et al., (1997), p. 517 ff

^[4] Barney, (1991), p. 104 ff, Wernerfelt (1984), p. 178 ff

^[5] Wernerfelt, (1984), p. 178

^[6] Barney, (1991), p. 105

^[7] Ibid, p. 101 ff

^[8] Ibid, p. 104

^[9] Grant, (1991), p. 119

^[10] Ibid, p. 122

^[11] Ibid

^[12] Ibid, p. 124-129