The Dynamic Capability Theory

989 Words 4 Pages
The dynamic capability theory sets out to explain how competitive advantage is achieved. Teece et al. (1997) argue that successful companies in the global market place are able to demonstrate timely responsiveness to market dynamics and speedy product innovation. The approach explains that the way organizations develop firm specific competences to respond to changes in the business environment is ultimately related to the firm’s business processes, market positions, and opportunities. These three factors form the basis for determining DC’s. Processes encompass the way things are done in organizations and they have three roles; coordination, learning and reconfiguration. Positions define specific endowments of technology, intellectual property, …show more content…
A company has competitive advantage whenever it has an edge over its rivals in securing customers and defending against competitive forces (Thompson and Strickland, 2010).
Organizational performance is based upon the idea that an organization is the voluntary association of productive assets, including human, physical, and capital resources, for the purpose of achieving a shared purpose(Alchian & Demsetz, 1972; Barney, 2001; Jensen & Meckling, 1976; Simon, 1976).Organizations that earn “normal” returns are in competitive parity with other organizations in their industry. Organizations that persist in earning less than acceptable returns will find that resource-providers will withdraw their assets. The ability for a company to consistently make a profit, or a surplus of revenues over expenses is critical to the survival of an organization (Drucker, 1954). Accordingly, measures of profitability are among the most commonly used to represent organizational
…show more content…
Over the last few years, the Banking sector in Kenya has continued to grow in assets, deposits, profitability and products offering. The banking sector’s aggregate balance sheet grew by 3.4% from Kshs 3.26 tn in December 2014 to Kshs 3.37 tn in March 2015. (CBK report, 2015).
The growth in the commercial banking sector in Kenya has mainly been underpinned by: alternative banking channels such as mobile, internet and agency banking, industry wide branch network expansion strategy. The new regulations in this industry such as interest capping, non-performing loans and the capital base requirements may affect commercial bank performance and survival. To survive during these turbulent times, bank would therefore need to re-align their competitive strategies and core competencies. An organisation and in this case a bank without clear competitive strategies or that is stuck in the middle will find it hard to survive (Porter,

Related Documents

Related Topics