Analyzing Strategic Assets and Organizational Rent

The provided assignment requires students to analyze the concept of strategic assets and organizational rent, exploring their role in corporate strategy. The task involves researching and applying theoretical frameworks, such as Amit and Schoemaker's 1993 paper, to demonstrate a comprehensive understanding of these concepts. The assignment also prompts students to consider external sources of innovative capabilities, dynamic core competences, and the importance of strategic alliances or mergers and acquisitions. A well-structured essay is expected, incorporating relevant examples and supporting arguments with academic literature.

Assignment 2
Management in practice
Thoa Vu
S3634643

Table of Contents
Introduction..........................................................................................................................................2
Research Question..............................................................................................................................2
Managing Strategic Capabilities...................................................................................................2
Strengths and Limitations................................................................................................................5
Applicability and Recommendations............................................................................................5
Conclusion..............................................................................................................................................6
Appendix.................................................................................................................................................7
References..............................................................................................................................................8
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Introduction
Keep working on the last assignment about diagnosing Fusion management issue, it is going
to go more deeply in the way how to solve those problems. Firstly, it is necessary to
rephrase the problems which are relevant to the chosen management challenges. Next, it is
able to review the literature which is business strategic capabilities as an evidence for
recommendations. Besides using appropriate theories and frameworks, it is vital to point out
its strengths and weaknesses to clarify the successful possibility. Next step is going to
explain why Fusion should consider applying these recommendations. In the first
assignment, it is clear that Fusion is confronting the challenge of integrating culture and
system into one, so they need to find out strategies that help them build signature corporate
culture based on Strategic Capabilities (including employee skills as well). In the appendix, it
is going to illustrate some of my own reflection on the last assignment.
Research Question
A research question is necessary to help readers feel clear and motivated about what they
are finding in the paper (Mattick 2018). A good research question should be narrow and
precise about the management challenge which Fusion is facing and the strategies in the
research (Bryman & Bell 2011). As a result, it is possible to point out Fusion's most
significant challenge and give out some recommendations to solve problems. The research
question in this assignment should be: How can Fusion appropriately integrate culture and
systematic under a unified entity by researching strategic capabilities method?
Managing Strategic Capabilities
Firstly, strategic capabilities are defined as the resources and competencies which are
beneficial for the company to develop and compete with their components (Ansoff 1979). It is
asserted that a valuable strategic capability can create competitive advantages which satisfy
customers in a large scale (Wattenbergh 2014). In terms of the theory, resources are both
tangible and intangible assets which are available to be used by the organization, such as:
human resources, financial - visible benefits; patent, brand image - invisible value (Amit &
Schoemaker 1993). Meanwhile, competencies are viewed as the ability of those assets to be
used effectively for the industry, customers’ satisfaction and rarity in imitating, for example:
skills, ability and adaptability (Prahalad & Hamel 1990). In general, strategic capabilities is
classified into three categories: distinctive, threshold and redundant, whose definitions will
be presented in the table below:
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Term Definition Example (applied to Fusion)
Distinctive
Capabilities
The company’s uniqueness which is
difficult to imitate by other rivals, and
it should be superior than those
competitors to be outstanding and
special in the industry (Mooney
2007).
It is undeniable that Fusion
owns some superior tactics in
order not to be copied by their
rivals. Clearly that there is not
so many companies who
provide such a wide range of
products/services as Fusion
has been doing recently. As a
result, Fusion can become a
famous brand which is able to
provide diverse types of
services professionally.
Threshold
Capabilities
The requirements for an organization
to be able to compete in the industry
(Wattenbergh 2014).
There are some significant
threshold capabilities which
make Fusion qualified to
compete in the market, such
as: skillful employees who are
specialists in marketing and
displaying from different
cultures and countries;
infrastractures to develop their
retail services, merchandising
system and provide Fusion with
the availability to keep up with
the most updated retail trend
around the world.
Redundant
Capabilities
Just by its name, redundant
resources/competencies are those
assets which are not directly generate
the company profit and customers’
satisfaction (Rouse 2015).
Redundant resources can be
perceived as computers,
telecommunications, operating
systems as Fusion runs their
activities in different countries,
which results to the needs of
long-distance communication
effectively, not to mention of
their business transactions
which mostly rely on online
marketing and other online
platform.
About relevant tools and theories, VRIO is applied to identify competitive competencies
which brings financial advantages for the company. In terms of VRIO, Value is about how
customers view the worthiness of that products with their lives. For value analysis, it is
necessary to consider three main factors which are value chain and value network, activity
system mapping and benchmarking. Meanwhile, Rarity presents for the limitations of the
product in the industry (Grant 2014); in which it requires deep research about the rivals to
ensure the uniqueness in business strategies. However, rare capabilities can be limited due
to expiry of patent or de-valued brands. In addition, Inimitability illustrates the level of
difficulties to copy their strategies and finally to what extent the business supports that
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strategies (Grant 2014). After reviewing through four categories, it is reasonable to point out
which one can become sustainable/temporary/parity strategies for the entity.
Above is about the way discovering strategic capabilities and how it helps organizations
determine sustainable competitive advantages. However, what organizations can do to
manage the growth of strategic capabilities? It is assumed that there are some different
ways to approach the management of developing strategic capabilities. First, it is leveraging
capabilities, means changing them to adapt in other part of business to share the best
practice (Linz 1980). Furthermore, it is able to stretch competencies to build new products or
services based on existing resources (Wang & Chen 2015), which is exceptionally important
with creativity and product innovation. Another thing is external capability development - put
more capabilities in business activities by merges, acquisitions and alliances (Foster &
Handy 2008). Protect strategy is a guide to protect products, services and strategies from
being imitated or outflow (Hagedoorn & Duysters 2002). In addition, the ceasing activities
presents sub-activities which is not the core of value delivery to the customers (Linz 1980).
Last but not least, it is undeniable about the importance of managing human resources,
which is about training programs, developing employees’ skills as well as organizational
studies (Linz 1980).
In my perspective, it should focus on developing internal capabilities (leveraging and
stretching capabilities) to give out some reasonable solutions for Fusion Corporations. The
reason of choosing internal elements and human resources management is that external
factors have greater rate of change by time, while internal resources can ensure a firm
foundation for long term operation (Grant 1991). About internal capabilities, it includes
leveraging and stretching competencies; the former illustrates the acts of finding benefits in
one part of an organization, which can be transferable to others, the latter shows the way it
innovates products or services based on existing capabilities (Wang & Chen 2015). In
overall, to deal with the change of resources and competencies, it is logical to mention about
an important theory - dynamic capabilities (Zawislak 2013). This approach discusses about
the demand of building, adapting and updating organizational resources and capabilities with
aim to catch up with continuous change of external environment as well as maintaining
competitive advantages (Winter 2003). Dynamic capabilities consist of few steps - gathering
knowledge, changing routines, testing and improving; which possibly enhance diversity,
innovation and creativity for static capabilities (Lei & Bettis 1996). The key main idea of
dynamic theory is about learning from experiences, through feedback to implement new
approach into existing capabilities with a view to further improve (Winter 2003). Comparing
to Fusion rivals - CPM Company - specialized in digital marketing solutions with nationwide
companies and employees; it can be seen that CPM does not cover such a wide range as
Fusion, yet just one special field - digital marketing and merchandising; which proves that
their priority is about using effectively existing internal capabilities to be sustainable in the
industry. Also, it is convinced that CPM is very successful and popular for their brand images
and their achievement so far. However, Fusion still need to outsource numerous of
capabilities, especially international human resources. For example, when Fusion need an
accountant for Japanese branch, it is necessary to find a bilingual accountant who can both
speak Japanese and English, otherwise it can have unexpected financial risks.
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Strengths and Limitations
The VRIO model helps evaluating the strategic capabilities of the company which identifies a
resource’s worthiness together with its oddity, inimitability and the possibility for the company
to take advantage of such resources. Hence, what is considered to be the strength of VRIO
is that such model support the evaluation of each competitive competency individually, as a
result, a more accurate and broader idea on the company’s real challenges can be
represented and therefore, it can assist the policy maker in the company in making proper
decisions to improve the laxity (Jurevicius 2013). The VRIO framework is particularly
advantageous for evaluating and analyzing a firm’s strategic capabilities and its potential for
exploiting these resources to achieve competitive advantage, which is good, however, VRIO
standing alone does have a limitation on analyzing and monitoring the macro-environmental
aspects that affect the company (Jurevicius 2013). Moreover, there is a lack of assessment
on the influence of the external environment on the company when using solely VRIO
(Jurevicius 2013). Consequently, to assure a favourable outcome for the firm and mitigate
the limitations, an integrated analysis should be implemented where VRIO will complement
other methods such as SWOT or PESTLE.
The second factor next mentioned is managing strategic capabilities theory. Clearly it has
always been a helpful strategy to classify an organizational asset and significantly effective
in building and improving new strategies for competitive aspects. Furthermore, it ensures a
smooth flow of information production to reach higher efficiency. However, it still exists some
limitations which are necessary to be identified. The most significant issue can be addressed
is the capabilities are valuable but not effectively usable by the leaders (Johnson 1984). The
point is that managers do not understand the delivery of value comes from skills and
knowledge based and fail to monitor the outputs to customers. The next problem is the
potential of using invaluable competencies (Johnson 1984). It is explained why managers
should consider carefully before making the decision of cutting investment in any
departments (by using VRIO to clarify competitive advantages) due to the fact that some
important aspects may be underestimated and overlooked. In addition, in contrast to the last
limitation, competencies sometimes understood, yet over formalised.
Applicability and Recommendations
The International Fusion Corporation is a centralized integrated solution for all retail
marketing and display needs. Fusion consists of a number of specialist agencies that are
leaders in their respective fields for innovation and forward thinking which together provide
customers with cohesive marketing, retail advisory and consultancy. In the current Fourth
Industrial Revolution where modernization and imaginativeness are considered pioneer
factors for a successful corporation, resources and capabilities which form the strategic
capabilities will play a significant role for Fusion in order to provide clients with great delight
which will be the crucial success factors. Therefore, it’s essential to identify the resources
and capabilities which are considered to be the root of sustained competitive advantage.
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Firstly, Fusion’s human resources is a source of differentiation. With diversified employees
who are specialists in marketing and displaying from different cultures and countries,
Fusion’s human resources can be considered valuable for the unique skills and capabilities
which applicable to boost product or service differentiation and perceived customer. Apart
from being valuable, it is also a rare capability because there’s hardly a company can offer
such integrated solutions due to the limited capacity of human. Furthermore, maintaining
such complex structure of employees can be really costly not only because of the large
salary budget but also the complicated recruitment process, hence, it is expensive to imitate.
Last but not least, Fusion’s organization is eligible to exploit this capability with their
specialized bureaus around the world (Hong Kong, China, and London) such as OPG Global
Solutions, Display & Design International, The Vault, 24 Digital, Construction Zone, Zone
Design, Play Retail, Unlimited Packaging & Display and Retail Reactive. However, human
resources itself are much likely to be replaced and changeable in a short time and able to be
outsourced by money, which is seen as competitive disadvantages (Johnson, Scholes &
Whittington 2005). The only thing that should be focused on is developing training system
and retaining skilled employees by appropriate reward systems, which definitely helps
motivating employees’ loyalty with the company.
Secondly, Fusion’s Cross-cultural branding and strategy can be another competitive
competency. Fusion Group across the APAC region has been recognized as the best
provider of brand and communication strategy. Beside such worthiness, it is also a rare
resource since not many companies in the marketing and retail service can operate a brand
across different cultures and markets around the world. Moreover, the budget barrier of
handling various overseas offices together with emerged social complexity when managing
such expanded network make it challenging to imitate. Lastly, being equipped with 12 offices
across the region and a multicultural, multi-disciplined team, Fusion is certainly organized to
capture value from this capability. Therefore, if Fusion invested more money on advertising
and marketing about multinational working environment, cross cultural colleagues and
communications. Take Apple as an example about working place, they are also a cross
culture company, which provides a creative and comfortable vibe for employees to work in
the most relaxing mode. Spreading the cross-cultural branding is a reasonable
recommendation to think of due to the globalisation trending when everyone cares about
cultural and economic integration.
Finally, Fusion who owns numerous digital works and mostly relies on digital marketing, it is
logical that Fusion should pay attention to protect products to prevent from copying as well
as develop internal capabilities (technology development besides human resources). As the
reason of flourish increasing of Internet and AI (Artificial Intelligence), it is profound that
Fusion should keep an eye on current development of technology to not be left out in such
fast-innovative world.
Conclusion
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In conclusion, the report firstly illustrates some research about management strategic
capabilities to have deeper understandings about the theories. It has also gone through
VRIO framework - a part of diagnosing competitive advantages with company capabilities as
well as a way of developing company’s resources - leveraging, stretching, protecting,
ceasing and managing human resources. After that, it finished the dynamic capabilities
analysis to show that successful company should modify, transfer and adapt resources to
ensure competitive advantages. The report also pointed out some strengths and limitations
which are relevant to the theory - managing capabilities. Since then, it is rational to give
Fusion some recommendations about managing human resources and branding, which is
applicable in the industry as well as the company itself.
Appendix
After finishing the first assignment and receiving some feedback from tutor, there are some
key points I have learned. Firstly, there are some difficulties for me in based knowledge
because I have not done Strategic Management course before (I have taken these two
courses this semester). As a result, there are multiple times that I have to do myself
research about new theories and frameworks to ensure the quality for the paper. However,
going through these challenges, it is reasonable to say that I feel more motivated and have a
deeper understanding due to my own research on the internet, which surely provides large
scale of knowledge, yet necessary to be selective to put in the assignment. I feel quite
challenging, but interesting when having to combine PESTLE and VUCA framework to
analyse macro elements which influence on Fusion’s further growth because of some
reasons. When choosing three main factors which mostly important to Fusion’s
development, it is a bit of difficulties in selecting information to see which ones should be the
priority to put it in the analysis. For example, there are a number of factors which can affect
the profit of Fusion, however, I finally found out Australian jobless rate and exchange rate
are the most important things which can directly influence on its benefit. In overall, while
doing macro analysis, I have learned that every element in our lives (society, politics,
economics and so on) have their own affects to the world. In addition, when going to industry
analysis, it is quite complex to analyse the ranking of each element to see if it affected to
Fusion in large scale or not. Especially in power of suppliers’ part, at first it is not so clear for
me about Fusion’s suppliers because not like supermarket, where relies on a huge number
of small suppliers to earn benefit, Fusion has their own capabilities which is always available
to use (skills and knowledge). Furthermore, I have not experienced to work with a company
in real life as in this assignment. It is difficult for me to gather information on their website
and the Internet because I have not seen much its data online. However, after attending
class with Fusion’s representatives, I have been provided more important information and
useful approach to finish my assignment. In overall, it is an interesting, yet challenging task
to be completed in my last semester.
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