Introduction

In the journal “Dynamic Capabilities and Strategic Management” by Teece, et al (1997), we learn that the dynamic capabilities framework analyzes the sources and methods of wealth creation and capture by private enterprise firms operating in environments of rapid technological chance. Teece, (1997) researched in this paper is the fundamental question in the field of strategic management is how firms achieve and sustained competitive advantage. Teece, et al (1997) approach is especially relevant is Schumpeterian world of innovation-based competition, price/performance rivalry, increasing returns, and the ‘creative destruction’ of existing competences.

The dominant paradigm in the field during the 1980s was the competitive forces approached by Porter (1980) whereby it focused on the external environmental theory as approach of business strategy formulation to achieve sustainable competitive advantage that lead to superior firm performance.

Models of strategy emphasizing the exploitation of market power

Competitive forces

Porter (1980) in the competitive forces model, five industry-level forces- entry barriers, threat of substitution, bargaining power of suppliers and rivalry among industry incumbents- determine the inherent profit potential of an industry or subsegment of an industry that allow better opportunities for creating sustainable competitive advantage.

Strategic conflict

Carl Shapiro’s 1989 article, confidently titled ‘The theory of business strategy’ announced the emergence of a new approach to business strategy, if not strategic management. That approach utilizes the tools of game theory to analyze the nature of competitive interaction between rival firms that can influence the behavior and actions of rival firms and thus the market environment.

Teece, D.J. et al (1997) focused this research has an orientation that concerned about in terms of implicit framing of strategic issues by suggest that building a dynamic view of the business enterprise to enhances the probability of establishing an acceptable descriptive theory of strategy that can assists practitioners in the building of long-run advantage and competitive flexibility.

Models of strategy emphasizing efficiency

Resource-based perspective

Teece, et al (1997) explained that the resource-based perspective approach see firms with superior systems and structures being profitable not because they engage in strategic investments that may deter entry and raise prices above long-run costs, but because they have markedly lower cost, or offer markedly higher quality or product performance.

Teece, et al (1997) argued the comparison of the resource-based approach and the competitive forces approach by (1) pick an industry; (2) choose an entry strategy based on conjectures about competitors’ rational strategies; (3) if not already possessed, acquire or otherwise obtain the requisite assets to compete in the market.

The dynamic capabilities approach

Teece, et al (1997) refer to this ability to achieve new forms of competitive advantage as ‘dynamic capabilities’ to emphasize 2 (two) key aspects that were not the main focus of attention in previous strategy perspective. Teece, et al (1997) defined the term ‘dynamic’ refers to the capacity to renew competences so as to achieve congruence with the changing business environment; certain innovative responses are required when time-to-market and timing are critical, the rate of technological change is rapid, and the nature of future competition and markets difficult to determine. Thus, ‘capabilities’ emphasizes the key role of strategic management in appropriately adapting, integrating, and reconfiguring internal and external organizational skills, resource, and functional competences to match the requirements f a changing environment. Teece, et al (1997) also defined the dynamic capabilities approach seeks to provide a coherent framework which can both integrate existing conceptual and empirical knowledge, and facilitate prescription.

To be continued..