Question

When evaluating if a firm’s capability is a potential competitive advantage, the strategic analyst examines whether the capability is valuable to establish how the capability measurably affects the profits of the firm.

Group of answer choices

True

False

Answer 1

Answer: True

Capitalizing on capabilities such as training, staffing, effective compensation, communication , human resources etc are effective tools to provide a competitive advantage in the market by adding value to the organization's commodities / services can affect the profit levels of the organization.

Most of these capabilities are intangible in nature and as such cannot be accurately measured, but when it comes to the terms of profits, costs and savings, these capabilities can be measured it terms of values on how much they contribute or affect the overall profits of an organization.

For example, an organizational capability such as innovational talent and heavy research and development emphasis, can lead the organization to manufacture high quality and unique products thus creating a competitive edge unlike any other available product in the market. As a result, unique and high quality product attracts a lot of buyers and subsequently more profits are generated through increased sales.