Imagine that you have been retained as a consultant to REI, a diversified U.S. retailer of outdoor adventure outerwear, gear, and travel expeditions. What might be some common approaches that you would recommend to REI for improving its core competencies and competitive capabilities?

Question

What will be an ideal response?

Answer 1

REI might pursue one or more of the three most common approaches to capability building: (1) developing capabilities internally, (2) acquiring capabilities through mergers and acquisitions, and (3) accessing capabilities via collaborative partnerships.
Capabilities develop incrementally along an evolutionary development path as organizations search for solutions to their problems. The process is a complex one, since capabilities are the product of bundles of skills and know-how that are integrated into organizational routines and deployed within activity systems through the combined efforts of teams that are often cross-functional in nature, spanning a variety of departments and locations.
An acquisition aimed at building a stronger portfolio of resources and capabilities can be every bit as valuable as an acquisition aimed at adding new products or services to the company's lineup of offerings. The advantage of this mode of acquiring new capabilities is primarily one of speed, since developing new capabilities internally can, at best, take many years of effort and, at worst, come to naught. Capabilities-motivated acquisitions are essential (1) when the company does not have the ability to create the needed capability internally (perhaps because it is too far afield from its existing capabilities) and (2) when industry conditions, technology, or competitors are moving at such a rapid clip that time is of the essence.
A third way of obtaining valuable resources and capabilities is to form collaborative partnerships with suppliers, competitors, or other companies having the cutting-edge expertise. There are three basic ways to pursue this course of action:

1. Outsource the function in which the company's capabilities are deficient to a key supplier or another provider.
2. Collaborate with a firm that has complementary resources and capabilities in a joint venture, strategic alliance, or other type of partnership established for the purpose of achieving a shared strategic objective.
3. Engage in a collaborative partnership for the purpose of learning how the partner does things, internalizing its methods and thereby acquiring its capabilities.