Managing Capability Nandos Executive Summary

This report aims to describe and evaluate capabilities it will use the resource based view to examine them in more detail and the importance of them. After this the report will then evaluate Nandos resources and capabilities and will discuss ways in which these may possibly lead to a competitive advantage. Subsequent to this it will go on to divulge using an assortment of analytical frameworks associated with Nandos to investigate in more detail the competitive advantage they have over their competition. After this it will ascertain how the management of Nandos is able to develop and manage these capabilities.

Introduction

This report will be based around Nandos the restaurant chain. Nandos whose food, along with wacky advertising campaigns has captured the hearts of thousands of beloved customers. The origins of Nandos can be traced back to South Africa where the first restaurant opened in 1987, with Portuguese style food an ingrained idea within the business; basing their menu around chicken has afforded them the chance to gain a substantial stake in their chosen market. It has had rapid expansion overseas seeing triumph in many of the 25 countries they operate, although it has not been successful everywhere they ‘laid their eggs’.(REFERENCE IN HERE) In order to comprehend the strategy as well capabilities the companies possess, it is essential to look at all the pieces of the Nandos puzzle, this report will do this by drawing on real life examples of how Nandos have utilised resources and capabilities, in addition will be using analytical frameworks to support findings and present further understanding.

Resource Based View

The resource-based view of strategy conjoins both resources and capabilities together; Grant states that it is the ‘principle foundations of strategy along with correct understanding and implementation of these are a firm’s key basis to profitability’. (Grant 2007)

Grant deems it important to distinguish between resources and the capabilities of a firm; resources are, ‘The productive assets owned by the firm whereas capabilities are what the firm can do’ (Grant 2007). One of the foremost sources of profitability is the competitive advantage in their market. ‘Establishing competitive advantage can be achieved through the development and deployment of resources and capabilities, and thus has become the primary goal for strategy.'(Grant Page 124).

Furthermore, Grant affirms that if external environment alters drastically, this in turn could have an effect on the markets an organisation operates in; then the need for a secure basis of internal resources and capabilities becomes of utmost importance an formed within the firm (Grant Book). This strong assortment of resources and capabilities can utilised by the firm to exploit different markets in which these capabilities could complement, instead of allowing the market in which they operate along with customers to control how they should go about doing business, further supporting the significance of competitive advantage in a market, as well as the need to possess this.

Resources and Capabilities as a source of Competitive Advantage

Resources are defined as the productive assets of a business, these consist of; tangible( ) Intangible() and human( Knowlede) Grant 2007

Resources and Capabilities as Sources of Competitive Advantage

Resources are the productive assets, both tangible (such as cash and plant), intangible (technology, reputation & culture) and human (skills, capacity for communication and collaboration & motivation), in control by the organisation (Grant, 2007).

Capabilities are defined as the things a firm can do (2007, p. 130-131), these capabilities are formed by a firm’s capacity ‘to utilize and deploy their resources for a desired end result’ Helfat & Lieberman (2002 p.135 quoted in Grant 2007). The RBV of competitive advantage is born out of having a capability or resource that has the two following conditions; scarcity & relevance. This advantage however is only useful and an advantage if it is durable, hard to imitate and replicate by other firms (Grant, 2007). In Appendix 1 the tangible, intangible and human resources of JnJ have been identified, along with their capabilities, I shall now define what a core and dynamic capability is with some brief examples of JnJ’s taken from the resources in the table. I shall then go on to show linkages further and ultimately if and how they provide JnJ with a competitive advantage, part 3 will go onto use frameworks to evaluate further if these are in fact sustainable.

The nature of competitive adavantage is formed through a cpabilitiy or resource which have two conditions; there relevancy and there scarcity ‘The benefits from these resources and capabilities depend not just on their ability to establish a competitive advantage but also on how long that advantage can be sustained’ (BOOK 2009). Also it is dependent on how resilient the company’s capabilities are; as well as if a rival company can replicate specific capabilities. Figure 1 shows Nandos tangible,intangible and human resources identified, as well as their current capabilities, this report will now analyse what a core and dynamic capability is, including certain relevant examples related to Nandos from Figure 1. After this, I will go onto discuss in depth the linkages and how they may be able to present Nandos with effective advantage over their competition, following on from this, I will then utitlise certain frameworks and analyse and determine whether these are sustainable or not.

Grant believes that Capabilities can be defined as either ‘core’ or ‘distinctive’, the differences between the two is; core are the main fundamental capabilities a company must possess to compete in the chosen market, whereas distinctive are the capabilities which spate the company from the competition, giving them a competitive advantage.(Grant 2009) I will now look further into Nandos capabilities with reference to their capabilities in forms of core an distinctive.

It is capability that is the essence of superior performance

In order for Nandos or any company for that matter, to stay in a position that is both profitable and sustainable is a very hard thing to do. The understanding of their capabilities is imperative, as if they don’t understand them then they could find themselves out of the market or even worse out of business.

Capabilities are split up into to two different sectiosnScarce capabilities are widely available in their chosen market. If this is the case in Nandos chosen market then there is no real chance of gaining a larger segment of the market, they have to give the customer something new and different. Another factor is the relevance of these capabilities to the company and chosen market, as if they are not giving the target market what they want then they can’t stay competitive, for example Nandos is established as a company who solely serve chicken, but what’s to say people go and eat at KFC as they just serve chicken as well, it’s the taste and quality of the food which keeps customers coming back, as well as Nando’s unique restaurant experience which is relevant to the market they are in.

When we apply this to Nando’s they have a specific part of the company that they focus everything around and that’s chicken, they only serve chicken on their menu, which in some areas could be beneficial as no other large company is dedicated to that type of menu other than KFC but there’s is Kentucky fried chicken and they are a fast food restaurant rather than Nando’s established as a restaurant/takeaway so they aren’t in direct completion in their markets.

Core Competences & Dynamic/Distinctive Competences

Linkages of Resources and Capabilities

Evaluating Strategic Capability

1.2 Relationship between capabilities and competitive advantage

2.4 Development of Capabilities

2.5 Competition Analysis

3.0 Value Chain Analysis

3.1 SWOT Analysis

3.2 Balanced Scorecard

3.3 Bench Marking

3.4 Ratio Analysis

3.5 VRIN Analysis

4.0 Contribution by managers to develop capabilities

5.0 Conclusion

Acquisition of GBK over the last few months….

Tangible

Intangible

Human

Financial( Cash, securtities,borrowing capacity)

Physical

(plant,equipment,land,mineral reserves)

Technology (patents,copyrights,

trade secrets)

Reputation(brands, relationships)

Culture

Skills/Know-how

Capacity for communication and collaboration

Motivation

Organisational Capabilities

Strategy

Industry key factors success factors

Competitive AdvantageRelationship amongst resources capabilities and competitive advantageC:UsersTomDesktopvalue_chain_analysis.gif

Nandos SWOT Analysis

Strengths

Advantages of proposition?

Capabilities?

Competitive advantages?

USP’s (unique selling points)?

Resources, Assets, People?

Experience, knowledge, data?

Financial reserves, likely returns?

Marketing – reach, distribution, awareness?

Innovative aspects?

Location and geographical?

Price, value, quality?

Accreditations, qualifications, certifications?

Processes, systems, IT, communications?

Cultural, attitudinal, behavioural?

Management cover, succession?

Weaknesses

Disadvantages of proposition?

Gaps in capabilities?

Lack of competitive strength?

Reputation, presence and reach?

Financials?

Own known vulnerabilities?

Timescales, deadlines and pressures?

Cashflow, start-up cash-drain?

Continuity, supply chain robustness?

Effects on core activities, distraction?

Reliability of data, plan predictability?

Morale, commitment, leadership?

Accreditations, etc?

Processes and systems, etc?

Management cover, succession?

Opportunities

Market developments?

Competitors’ vulnerabilities?

Industry or lifestyle trends?

Technology development and innovation?

Global influences?

New markets, vertical, horizontal?

Niche target markets?

Geographical, export, import?

New USP’s?

Tactics – surprise, major contracts, etc?

Business and product development?

Information and research?

Partnerships, agencies, distribution?

Volumes, production, economies?

Seasonal, weather, fashion influences?

Threats

Political effects?

Legislative effects?

Environmental effects?

IT developments?

Competitor intentions – various?

Market demand?

New technologies, services, ideas?

Vital contracts and partners?

Sustaining internal capabilities?

Obstacles faced?

Insurmountable weaknesses?

Loss of key staff?

Sustainable financial backing?

Economy – home, abroad?

Seasonality, weather effects?

DepartmentAreas FinanceReturn On Investment

Cash Flow

Return on Capital Employed

Financial Results (Quarterly/Yearly)Internal Business Processes Number of activities per function

Duplicate activities across functions

Process alignment (is the right process in the right department?)

Process bottlenecks

Process automationLearning & GrowthIs there the correct level of expertise for the job?

Employee turnover

Job satisfaction

Training/Learning opportunitiesCustomerDelivery performance to customer

Quality performance for customer

Customer satisfaction rate

Customer percentage of market

Customer retention rate

http://www.businessballs.com/balanced_scorecard.htm