Dynamic Capabilities - Research Paper Example

Dynamic Capabilities 02

Part A: Literature Review of Dynamic Capabilities

Introduction

The dynamics capabilities perspective has surfaced as an effort to unravel the complex challenge of sustainable competitive advantage in the current dynamic business setting (Breznik & Lahovni, 2016). Therefore, among the most important organizational goals is maintaining a dynamic fit between what the company should offer and what the business environment dictates. For an organization to achieve this, it should be in a position to change its processes (Wang & Ahmed, 2007). This paper seeks to perform a comprehensive literature review on dynamic capabilities. The paper will further analyze Norrkopin Company in regard to its dynamic capabilities. Finally, operation strategy matrix of Slacks will be used to analyze the strategy of Norrkopin Company.

Dynamic Capabilities

According to Jiao et al (2010) dynamic capabilities refer to the strategic principle to creation, maintenance as well as upgrading sustainable competitiveness. For almost two decades, persistent competition has driven companies to continually adapt, renew, re-configure and also recreate their capabilities and resources in accordance with the competitive environment. This is in line with Pablo et al (2007) who further explains that dynamic capabilities are the organizational behavioral orientation to continually integrate, reconfigure replenish and restructure its resources and capabilities, and also improve and reconstruct its fundamental capabilities in response to the varying business environment to achieve and uphold competitive edge. On the other hand, Wang et al (2007) explain that dynamic capabilities summarize insight from earlier work on distinguishing competence, organizational routine, architectural knowledge, core competence, core capability, combinative capability as well as architectural competence. Wu et al (2013) defines dynamic capabilities as a unique form of organizational capabilities that are intentionally operated for modifying the functional capabilities. Whereas functional capabilities are perceived as the means that an organization uses in solving problems, dynamic capabilities are the abilities an organization uses to change the manner in which the organization solves its problems (Breznik & Lahovni, 2016). Ambrosini & Bowman (2009) add that it is noteworthy that even though dynamic capabilities are mostly implemented to counter the external environmental changes, dynamic capabilities are not equivalent to impromptu problem solving that mostly entails improvisational responsive activities. Rather, dynamic capabilities are steady procedures or replicable practices. Dynamic capabilities are definite and specialized processes, learned and steady patterns of combined activities or capabilities to carry out specific tasks within a satisfactory and repetitive manner (Breznik & Lahovni, 2016). Therefore, as Teece (2007) explains dynamic capabilities are not just processes, but entrenched within processes.

According to Ambrosini & Bowman (2009) processes are confinable configuration and amalgamation of resources and hence can be conveyed more easily in the organization or across organizations. Capabilities refer to organizational ability to arrange and organize resources, normally by combining and encapsulating both processes and tactic components such as knowledge and leadership entrenched within the processes (Breznik & Lahovni, 2016). Therefore, capabilities are normally organizational-specific and created with time using intricate interactions among the organizational resources. This therefore indicates that core capabilities in regard to integration of resources and capabilities play a big role in organizational strategic direction. Accordingly, as Dangol & Kos (2014) suggests dynamic capabilities focus on organizational constant pursuit of the restitution and recreation of resources and capabilities to handle the environmental change. Therefore, dynamic capabilities are the definitive firm’s capabilities that favor the long-term performance of the organization.

Dynamic Capabilities and Operations Strategy

As aforementioned, capability is the ability to carry out a specific task while ability is the capacity to act and therefore dynamic capability is the capacity of a firm to constantly and steady create, expand or modify its resource base in accordance with the changing environment (Wang & Ahmed, 2007). Dynamic capabilities integrate organization learning and hence organizational improvement with time. Therefore dynamic capabilities are actually constructs for aiding in understanding how an organization creates and enhances its operational capabilities over time as well as how an organization adapts and uses its resources within the changing business environment (Breznik & Lahovni, 2016).

For many organizations, operations strategy focuses on the specific organizational activities that ensure the effective utilization of production capability as well as technology to achieve business and organizational objectives (Jentsch et al, 2012). Teece (2007) explains that organizational operations strategy directs main decisions that are made at all organizational levels, combines ideal and practical experiences, business, market and also environmental prerequisites and also considerations how to effectively use organizational capabilities to formulate and implement operations strategy.

According to Pablo et al (2007) operations strategy refers to the goals and guidelines that outline how a company aims to direct and grow all the resources invested in operations. The foundation of operations strategy includes competitive precedence, decision classifications, as well as competitive capabilities. Competitive priorities typify quality, flexibility, cost, as well as delivery. Jentsch et al (2012) further explain that competitive capabilities refers to the ability of organizational operations to satisfy market demands in regard to quality, delivery, flexibility, and cost using operational resources.

Dynamic capabilities can be seen through the ability of an organization to adapt in terms of strategic flexibility of resources as well as the configuration between organizational resources, and steadily changing strategic needs. Many studies have illustrated the ability to become accustomed to changes and align internal resources with external demands is important to organizational survival (Jentsch et al, 201). According to Pablo et al (2007) organizations that are able to effectively adapt to environmental changes display dynamic capabilities. In regard to operations strategy, organizations with high dynamic capabilities focus on developing capabilities as navigated through organizational strategic choices. For instance, when organizational strategic orientation is to attain differentiation, the organizational dynamic capabilities may strategically focus on concentrating its assets to develop innovative capability which consequently results to higher innovation levels. On the other hand, Makadok, (2001) suggests that when a firm adopts a cost leadership strategy, the organization might focus on efficient production and reducing general costs. Therefore, dynamic capabilities create capability development that is normally steered by organizational operations strategy.

Conclusion

The literature review indicates that dynamics capabilities are the strategies that enable an organization to adapt to changing business environment and maintain a sustainable competitive advantage. Dynamic capabilities achieve this by enabling organizations to constantly reconfigure, restructure and improve its recourses and capabilities in response to changing environment. In regard to operations strategy, operations strategy play a significant role in steering organizational direction and hence dynamic capabilities equally play a role in directing organizational strategic decisions (Jiao et al, 2010). This means that dynamic capabilities develop capability development that steers organizational operations strategy.

Part B: Case Study

Introduction

This part will analyze a case study, Norrköping. Norrköping is a big converting plant within the Carlsen group. In 2001 the machine was among most developed type of machine which allowed expansion of manufacturing capacity as well as allowed Carlsen to attain new standards of manufacturing superiority for its products. As the case study indicates, the Norrköping plant was developed to serve the photoresist market and provide capacity for an increasing market. The plant also provided a new technology in accordance with the changing and evolving technologies. Accordingly, this part will discuss how the performance objectives of Norrkopin have changed and use slacks matrix for operations strategy, discuss how Norrkopin has changed their operation strategies.

How Performance objectives of Norrkopin have Changed

Initially, Norrköping plant was developed to serve the photoresist market whose objective was to harness economies of scale and introduce new technology. Previously, Carlsen’s photoresist imaging business was the market leader before Saviste Graphics, introduced a new coating technology that posed a major threat to Norrköping plant. This is one aspect that changed objectives of Norrköping. Accordingly, the performance objectives of Norrköping shifted to introducing technology that was able to produce higher quality products, improved standards and modification of coating technology. In addition, the business teams were reorganized which saw to the process technology being redeployed.

Therefore, the performance objectives of Norrköping have changed from just serving photoresist market and harness economies of scale to introducing technology with higher capacity, higher speedy, higher technology and also significantly reduce production costs. According to Newbert (2007) firms need to constantly adapt, renew, re-configure and recreate their capabilities and resources according to the competitive environment. Accordingly, when Norrköping plant was faced with competition from another company, it had to re-configure and recreate its capabilities and resources. This indicates that Norrköping plant uses dynamic capabilities to improve on its performance objectives.

Kuuluvainen (2012) explains that dynamic capabilities are the organizational behavioral orientation to continually integrate, reconfigure replenish and restructure its resources and capabilities, and also improve and reconstruct its fundamental capabilities in response to the changing business environment to achieve competitive advantage. In this regard, Norrköping objectives have changed from aiming at just satisfying the serving photoresist market and harness economies to implementing the latest technologies in order to produce the best quality products and correspond with the changing competitive environment. Performance objectives of Norrköping have also changed to focus on reducing operations costs and increasing production capacity. This is in accordance with the changing business environment.

Norrkopin’s operation strategies

Operations strategy matrix for Norrkopin

Resource development

QUALITY of products

High tech machine will produce quality products

SPEED of producing the products

DEPENDABILITY of the machine and employees

Recruit more experts in the relevant positions

Introduce machine and technology with higher capacity

FLEXIBILITY of response to environmental changes

Adapt,change and improve technology

COST in regard to reducing the operating costs

Improved technology will reduce production costs

Co-location to reduce distribution costs

Implement new, speedier and reliable technology to reduce operating costs

Size of the production plant

Size of coating machine

Number and type of distributors

Coating technology

Coating photoresist

Product improvement

Strategy to process improvement

CAPACITY

SUPPLY

NETWORK S

PROCESS

TECHNOLOGY

DEVELOPMENT and ORGANISATION

Capacity

In regard to capacity, Norrkopin has changed its operation strategies in various ways. First, Norrkopin introduced technology that has higher production capacity. In addition, Norrkopin also acquired the most advanced machine in order to enable it to increase its manufacturing capacity and be able to meet its market demands. According to Jiao et al (2010) capacity refers to the maximum level of the manufacturing or production operation can produce. Capacity is increased to meet the consumer demand by using the existing machinery more often, for instance adding more shifts or by acquiring equipment. In this case study, Norrköping plant has been redeveloped in order to meet the immediate and expected increasing consumer demand by acquiring additional equipment with higher capacity. Norrkopin with time has also introduced a more developed technology of coating machine that has larger capacity, increased speed and which is highly efficient in regard to being labor intensive. This is in line with Newbert (2007) who explains that technologies in manufacturing can increase productivity by dramatically increasing flexibility and increasing the daily productivity of the machinery. For instance, the acquired machine has higher productivity capacity and also has higher speeds, in addition to being able to fast respond to changes in the market. Moreover, increased capacity is likely to reduce the firms production costs because the machine will produce products in bulk and hence educe the production costs due to the economies of scale.

Technology/process development

As aforementioned, Norrkopin has also its operation strategies by introducing more advanced technology. With time, Norrkopin has not only improved its process development of production but has also acquired more advanced machines. The technology for Norrkopin has been implemented in various ways such as installing machineries to achieve advanced capacity level as well as to integrate technologies within the production line. According to WU et al (2013), the external environmental factors like technology developments continually change the competitive setting of companies. Organizational long-term competitive edge is hence rooted within the development of organizational dynamic capabilities to provide solutions to the external changes by reconfiguring the internal resources and capabilities. In this regard, Norrkopin through introducing new technology, the firm has reconfigured its internal resources and capabilities; this is where dynamics capabilities of Norrkopin come in. In addition, Norrkopin has implemented a high energy drying technology that requires a shorter machine and hence a smaller industrial plant to house the plant. This indicates that this technology is also likely to reduce the firm’s operational costs. Moreover, the technology has enabled Norrkopin to produce quality and cost performance in coating photoresist imaging film giving the company a competitive advantage over its rivals.

Conclusion

This part analyzed Norrköping, which has undergone various modifications in order to fit and adapt with the constantly changing business environment. To respond to the changes, Norrköping implemented new technology and acquired new machineries that have increased its production capacity. For example, with time Norrköping has implemented introduced a more developed technology of coating machine that has larger capacity, increased speed and which is highly efficient. In regard to technology, Norrköping, has used technology as a strategy to respond to the changing business environment. For example, the technology has enabled Norrkopin to produce the best quality products which gives it a competitive edge among its competitors.