Establishing Organisational Capabilities

It is an essential part of developing a sustainable marketing strategy that you establish and assess your organisational capabilities.  It is key to identify where your organisation is superior to its competitors and potential competitors.

All organisations are made up of specific assets and competencies.  Do you know what they are in your organisation?

It is also true that no organisation is good at everything.  There will be things you do better than other parts of your business process.  There will be areas which need improvement or which need additional investment.  You may be spending too much on other processes.

The following is a list of the type of assets which make up an organisation:

  1.  Sales Advantage:  Market Share; Relative and Absolute Media Weight; Leverage over Suppliers; International Presence; Sales, Distribution and Service Coverage; Specialist Skills due to Scale.
  2. Production Processes:  Level of Contemporary Practice; Flexibility; Economies of Scale; Capacity Utilisation; Patents; Unique Processes and Services.
  3. Working Capital:  Quantity; Access to; Location of; Access to Credit.
  4. Sales/Distribution/Service Network:  Coverage; Relationships; Size; Quantity.
  5. Relationship with Others;  Suppliers; Financial Institutions; Joint Ventures; Joint Exploitation of Assets e.g. Technology.
  6. Property:  Type; Location; Ability to Expand; Quality.

So Muller Dairies have a significant asset in owning the patent to the corner yoghurt pot.  House of Fraser once had an asset in its store portfolio but, with changes to the retail sector, that asset turned into a liability as stores were often of Victorian construction, difficult to maintain, and unsuitable for modern technology installation.

However, you organisations assets must not be viewed in isolation.  You also need to establish your organisational capabilities.

A tool which can be used to ascertain your organisational capabilities is value chain analysis.  This is more normally used to discover where your target customers see value in your organisational processes so that scarce resources can be targeted on those which offer the most value to customers.  Areas where customers do not see value can have their costs minimised.

In value chain analysis, there are two categories of process: Primary activities such as manufacturing processes and product distribution and Support activities such as human resources management and procurement.

But key competencies can be classed as either primary or support activities.  Davidson (1997) split key competencies into three areas:

  1.  Marketing:  New Product Development; Business Analysis; Category Management; Brand Extension; Brand Equity Management; Unique Market Research Techniques; Planning Skills; Database Management; Advertising Development; Customer Targeting; Design Testing.
  2. Selling:  Supply Chain Management; Account Management; Relationship Development; Customer Service;  Building partnerships; Motivation and Control; Planning; New Account Development; Merchandising; Presentations Skills; Space Management; Negotiation Skills; Pricing and Promotion; Trade Marketing.
  3. Operation:  Motivation and Control, Process Engineering, Industrial Relations, Inventory Control, Cost Management, Productivity Improvement, Planning, Health and Safety; new Facility Development, Management Training and Development;  Speed of Response; Flexibility;  Total Quality Management; Purchasing; Payment Systems, Capacity Utilisation; Product commercialisation; Supplier Engagement; Property Skills; Global Operation.

I don’t quite agree with the content of Davidson’s key competency groups.  Some items classed in Selling or Operations are more obviously marketing functions and vice versa, but his point stands; You must strategically align you organisation’s assets with your competencies.

It is then possible to use them to build a low-cost, a differentiated or a niche position in the marketplace.

Jobber (1995) believes managers should ask four key questions when attempting to match organisational assets with business competencies:

  1.  Marketing Assets:  Does your current market segment allow you to take advantage of current market strengths?
  2. Cost Advantage:  Can you enter price sensitive segments consistent with an organisation that has a low-cost base?
  3. Technological Strengths:  Do you have superior technology that can be used to your competitive advantage?
  4. Managerial Capabilities and Commitment:  Do you have the managerial and technical skills to succeed in your chosen segment?

Most importantly of all, is entering a particular market segment compatible with your organisations long-term aims and objectives?  If not, you may only be diverting time and scarce resources away from the common goals of your enterprise.

This is where tools like the Shell Directional Policy Matrix can be used.  By using weighted criteria, you can assess potential target markets based on segment attractiveness and the strength of your organisational assets and competencies.