Achieving Sustainable competitive advantage – Organization

Capability Profile (OCP) and Strategic Advantage Profile (SAP)

Strategic capabilities and core competences are critical to

developing competitive advantage for every company. Capabilities

are defined as “complex bundles of skills and accumulated

knowledge that enables firms to coordinate activities and make

use of their assets (Day, 1990). An organization needs to have a

wide range of capabilities in several areas in order to create

profitable value which results in strategic advantage. They are

the outcome of organization's activities leading to rewards in

terms of economic parameters, such as profit of shareholder value

and/or non financial parameters, such as market share or

reputation. Hence, the value of human capital in developing and

using capabilities and, finally, core competencies cannot be

overstated. Different firms need different capabilities and all

firms will not involve the same capabilities. (Benedetto et al,

2003). For example a big company would have better financial

capability strength compared to a small company and similarly

would differ in responding to changes too. Hence the strategists

should be able to identify the strengths of their functional

capabilities which lead an organization to its competitive

advantage (Harrison, 1996). The core functional capability

factors of any organizations are:

The Strategic Advantage profile will therefore help examine the

organization’s strategic capabilities. The above analysis on

flydubai’s capability factors is interpreted using a rating scale

of -5 (Weaknesses), 0 (Normal) and +5 (Strength) which has helped

us identified the strong and weak capabilities.

Analysis of the capability factors of flydubai

Capability Factor Weaknesses

-5

Normal

0

Streng

th

+5

Financial Capability Factors

(a) Sources of Funds

(b) Usage of Funds

(c) Management of funds

+5

+5

+5

Marketing Capability Factors

(a) Product related

(b) Price related

(c) Promotion related

0

0

+5

(d) Integrated and Systematic +5

Operations capability factors

(a) Production system

(b) Operations and control

system

(c) R&D system

0

+5

+5

Personnel Capability factors

(a) Personnel system

(b) Organizational and

employee characteristics

(c) Industrial relations 0

+3

+5

Information management capability

factors

(a) Acquisition and retention

of information

+4

+4

(b) Retrieval and usage of

information

(c) Processing and usage of

information

(d) Transmission and

dissemination of information

(e) Integrative, systematic

and supportive

-2

+4

+3

General Management Capability

factors

(a) Genera management system

(b) Factors related to

general managers

(c) External relations

(d) Organizational climate

-2

+4

+4

+3

Organization Capability Profile

The Organization Capability Profile defines the resources,

abilities and knowledge that helps a firm to offer quality

goods/services to its customers. It therefore helps analyze the

nature of impact which helps determine the areas an organization

have competitive strength or weakness and can accordingly improve

on those areas. In short, alliance of both strategic planning and

generic capabilities is essential for high performance. (Regan et

al, 2004)

Capability

Factor

Nature of

Impact

Competitive Strengths or

weaknesses

Finance Competitive strength is its

capital structure which is fully

owned by the government and

shares the same shareholder like

Emirates.

Have good relations with other

banks which have high confidence

in us.

Since the company is owned by

government it doesn’t face

difficulty in laws and

regulations as it is booming

through the process of

liberalization.

Marketing It offers value for money

products at an affordable price

but at the same time they are

expensive for additional

services like excess baggage and

date change fees.

Limited promotional techniques.

First low cost airline of its

kind which has explored

different business avenues.

Operations Good production system as it has

added state of the art device to

run its flights and operations.

Good R & D system which provides

digital news update with the

help of touch screen.

Expansion of terminal 2

Disadvantage is the on- time

delivery from its supplier

Boeing which can affect the

company’s profits and

reputation.

Personnel Highly qualified personnel to

ensure the reliable carrier

service.

High goodwill of company since

it shares the same shareholders

as Emirates which has a brand

image in the global market.

Employee satisfaction is fair

due to unusual working hours and

difficulty in getting leave

approvals.

Information Has good availability of

computerized information system

with good coverage.

The weakness which is identified

is in terms of its IT staff

where they are not able to deal

with employees issues at the

same time when the request for a

problem is sent due to limited

staff in IT department. The

cases are resolved from IT on

the basis of priority which

leads to loss of time for the

employees and affects their

productivity.

Lack of understanding between

the top management and IT due to

issues not being resolved at the

same time.

General

Management

The company’s mission and vision

are well identified to achieve

the strategic objectives.

No doubt flydubai has assembled

a highly professional and

experienced management team who

are responsible for the

strategic direction. However the

drawback here is the managers

need to think from the

employee’s perspective in terms

of granting leave approvals

since staff is limited and work

load is more.

Their flight inaugurations play

an important role in the

development of external

relations between two nations

since they are expanding their

destinations rapidly.

Based on flydubai’s OCP, below

are the opportunities

identified:

Based on flydubai’s OCP, below

are the gaps identified and

recommendations provided:

More geographical development

since flydubai is constantly

working on increasing more

destinations to its

portfolio.

Expansion of Terminal 2 is a

Delay in delivery of

aircrafts since they have a

very limited choice of

suppliers which can lead to

loss of revenue, customer

dissatisfaction & impact

huge opportunity in terms of

its airport capacity which is

important for the growth of

any aviation industry.

High goodwill of company has

led to attracting more

customers

route extensions. Hence they

should try looking for other

suppliers like Air Bus

Delay in resolving IT related

issues due to limited staff

in IT department. Hence they

should hire more staff so

that employee’s concerns are

resolved and doesn’t result

in loss of productivity.

Lack of managers

understanding towards

employees leads to employee

dissatisfaction and low

morale which in turn affects

their productivity. Hence

they should hire more staff

to have a good control on

work load to ensure employee

benefits are not sacrificed.

Fly Dubai’s Value creation and Sustainable Competitive Advantage

Firm’s

capabilities

Are the

capabiliti

es

valuable?

Are the

capabiliti

es rare?

Are the

capabiliti

es costly

to

imitate?

Are the

capabilitie

s organized

for usage?

Are the

capabilitie

s strengths

or

weakness?

Finance

capabilities

Yes Yes No Yes Strength

and

distinctive

competence

Marketing

capabilities

Yes No No Yes Strength

Operations

capabilities

Yes Yes Yes Yes Strength

and

sustainable

distinctive

competence

Personnel

Capabilities

Yes No No Yes Strength

Information

management

capabilities

No No No Yes Strength

General

Management

Capability

Yes No No Yes Strength

Appendix 3 – Organizational capabilities of Fly Dubai

OCP – Fly Dubai

Capability Factors Functions related to capability

factors

Finance capability factors – relates to the availability (where a

company receives its sources of finance), usages (how the funds

are utilized ) and management of funds (how well the funds are

managed for investment purposes)

The Company acquires sustenance from a variety of sources to

ensure that the company’s revenues are stable and adequate for

goals and mission of the organization. These include

availability, usage and management of funds.

In terms of sources of funds the capital structure of Fly Dubai is

very satisfactory due to it being fully owned by government and

shares the same shareholder’s like Emirates since the capital is

provided by the government. The organization has the capability

to raise capital in the market but no need has arisen so far. The

financial affair of the corporation is controlled by our treasury

department who monitors the overall requirements of cash flow and

fund transfers to meet the overall objectives. Further on also

helps to enhance the capital structure and manage the long term

capital cost. The company shares a very healthy financing pattern

as discussed above due to it being fully capitalized by the

government which also results in a healthy reserves and surplus

position.

In terms of usage of funds ample no of investment opportunities are

available due to Fly Dubai’s expansion which drives investment

and economic growth between UAE and Fly Dubai destinations

including Russia. Fly Dubai’s fresh and current air links will

play an important role in not only increasing investment

opportunities in both the countries but will also open up grounds

for partnerships, including oil & gas, mass media, manufacturing

and general trading which will help Russia to reach out to

audience worldwide. As compared to other airlines our company

pays rich dividends to its shareholders and maintains a very

cordial, strong and healthy relationship (Sheikh Ahmed Bin Saeed

Al Maktoum chairman and chief executive Emirates Airlines and Fly

Dubai) as the company has already achieved its first full year of

profitability for the financial year 2012.

In terms of management of funds the company has a very strong and

effective accounting system which provides well-timed and precise

analysis of financial, budget reports as well as financial

developments indicating the overall proficiency and effectiveness

using the KPI and benchmarking approach which helps in achieving

the overall organizational goals. Their financial ratios indicate

the company’s strong cash flow since it is owned by government

and there is no difficulty at all in managing the funds. The

company also takes into consideration the inflation rate which

has been beneficial as the company’s cost in crude oil will

reduce with an expectation of fall in UAE’s inflation rate. It

also benefits from taxes since the currency of UAE has been

stable and it has been pegged to USD which has been the strongest

currency in the world. Moreover they have a lot of upcoming

projects including the expansion of terminal 2, launching of

business class, and new aircrafts in the pipeline.

Marketing capability factors - relates to the product (offering

wide variety of products to customers), pricing (value that will

purchase a set quantity of a product or service), promotion

(various channels/medium required for promotion of a

product/service), and distribution of products or services

(performance of the marketing department in terms of the

company’s image compared to the competitors)

These factors relate to the price, product, place and promotion

of the goods and services. A very important aspect in analyzing

the business includes analyzing the market in several ways which

will help the company identify their areas of weakness and

develop further ways for improvement.

The product factor includes examining those products and services

which Fly Dubai offers to its customers. It offers value for

money products at a very affordable price and therefore is

dedicated in providing high quality on inflight products which

offer an amazing menu with an extensive range of duty free items

which satisfies overall market requirements. Fly Dubai also

adopts a differentiation strategy from its other competitors by

adding extra flights to the famous destinations that have a great

response from their target market. Moreover they offer a great

airline service and technology for all classes and have also won

appreciation for their excellent service quality.

The price factor of the low cost model consists of everything what

a customer would need while travelling which is the seat price,

inclusive of all taxes & hand baggage. The passengers also have

an option to pay for the additional services such as extra

baggage, extra leg room, inflight entertainment and meals served

on board. However the date change fees and excess baggage is

proven to be expensive compared to other airlines.

The place factor includes their operations which are run from their

main location which is in Dubai. Despite of them being profitable

they still have a scope for expansion within UAE and GCC

countries. As we all know Dubai has been known for its business

hub and Fly Dubai can exploit this opportunity to have a

strategic advantage over its competitors.

The promotion factor of Fly Dubai used various methods to manage

the expectations of the customers related to its experience.

Flydubai tries to introduce innovative advertising techniques but

they don’t develop a large marketing campaign since they are a

low cost airline which can be a disadvantage for them in order to

reach out to its potential customers since it mostly relies on

word of mouth.

The Integrated & Systematic factors include flydubai ensuring that the

product is the brand itself. The foundations for their brand

values are honest and uncomplicated. Flydubai CEO says “flydubai

tries to make travel a little less complex, a little less

stressful and a little less expensive.” It has a very effective

marketing management system where they have asked Splendid which

is a User Centered Design methodology to design and build a

complete new online experience for web and mobile including an

evolution of the flydubai digital brand.

Operations capability factors- relate to the production of

products or services (various methods used to produce

products/services from different resources), operations and

control system (designed to confirm that the daily activities are

in line with the planned objectives), R&D system (developing new

products or processes which is beneficial for the company’s

future growth).

In terms of its production system, their work systems are fully

integrated with all the departments that support efficiency and

productivity. The company has a good production system as it has

added state-of-the-art device to run its flights & operations.

Moreover it has also added destinations quickly in order to

receive remarkable results in short time which will help in

capacity expansion. The time when flydubai started its operations

there was recession-hit Dubai in 2009. The company took it as a

challenge and brought up-to-date systems, processes and highly

qualified personnel to ensure the dependable carrier service.

In terms of its operations & control systems, they spend good amounts

of their financial plan on further development of human resources

which results in a high service quality and helps improve

customer satisfaction. Moreover they do have a fair reliable

supplier Boeing which is fuel efficient, cost effective, provide

logical and technical support, and repair manufacturing defects.

The only disadvantage is the on-time delivery which is not very

effective.

In terms of its R & D, it has built collaborations with DTI

solutions & Newspaper direct which provides passengers digital

news updates on all local and international flights through a

touch screen facility. Hence the technology partnership has

benefited the organization since this is a value added feature

which leads to customer satisfaction. It however doesn’t possess

any patent rights.

Personnel capability factors - relate to the existence and use of

human resources and skills and the factors relate to personnel

system (the type of candidates decided by the Human resource

department on the basis of their experience), organizational and

employee characteristics (determine the relationship between

organization structure and employee characteristics), industrial

relations (employment relations between employer and employee).

In terms of its personnel system, it has high qualified personnel to

ensure the company’s operations run smoothly. The HR carefully

selects the candidates on basis of their experience which best

suits the job vacancy.

In terms of its organizational and employee characteristics, the company

offers benefits such as increments, bonuses on the basis of their

hard work and overall profits generated for the company.

In terms of its industrial relations, employee working conditions are

fair since the company is a low cost airline which has limited

staff which results in more work, putting in more working hours

and not getting leave approvals which results in low morale

&demotivation for the employees.

Information Management capability factors - relate to the design

and management of the flow of information from outside into, and

within an organization for the purpose of decision making and

factors relate to acquisition and retention of information,

processing and synthesis of information (conglomerate all the

ideas into a complex whole), retrieval and usage of information

(information need from a pool of resources of information),

transmission and dissemination (two way communication without any

delay and how much is the real time response allowed), and

Integrative, systematic and supportive factors (understanding

between top management and IT and if efficient IT professionals

are available in the organization).

In terms of acquisition and retention of information, processing &synthesis

information, retrieval and usage of information and transmission and

dissemination of information they have good availability and

widespread use of the information system since people do online

booking. All the members have an optimistic approach in sharing

information with others.

In terms of integrative, systematic and supportive, it has identified

weakness in terms of having limited staff working in the IT

department where they are unable to address employee queries in a

timely fashion which leads to loss in time & productivity. These

further result in issues between top management and IT due to

queries not being handled on time.

General management capability factors - relate to the

integration, coordination and direction of the functional

capabilities towards common goals. Factors related to the general

management system (overall capability of how liable is the

general management system in terms of day to day activities),

general managers, external relationships and organizational

climate.

In terms of general management system, it has clearly identified its

mission and vision which are well aligned with the organization’s

objectives. The company offers good benefits for top managers for

accomplishing these objectives.

In terms of factors related to general managers, the drawback is

the understanding between the employee and the manager since in

certain areas employee expectations are not met especially in

terms of getting their leaves approved and also the distribution

of work needs to be more fair and done on an equal basis.

In terms of external relations, as the company keeps increasing its

destinations, this factor plays a very important role in

developing and managing its public/external relations well. Since

it shares the same shareholder like Emirates it holds a strong

advantage with respect to its public image compared to its

competitors.