the concept of capabilities in an organization and how to capitalize on the capabilities
Abstract
The research paper aimed at discussing capitalization on capabilities. The definition of capitalization and the reason for capitalization were discussed in the paper. Capitalization on capabilities was shown as presenting numerous advantages to the organization at large such as improved performance, increased efficiency, gaining competitive advantages, and increased profitability and growth. Some of the theories used in the research include egalitarianism, the classical or traditional theory, the Human Relations or Neo-classical theory, the decision-making theory, the systems approach, theory X and Theory Y, and scientific management theory. Capitalization on capabilities is characterized by various trends in the modern business world that cut through trends in leadership, innovation, human resource, and organization structure. The competitive policy impacts capitalization on capabilities both positively and negatively. The policy is put in place to regulate anticompetitive behaviors in the market.
- Introduction
- Purpose of the Study
The objective of this research paper is to understand the concept of capabilities in an organization and how to capitalize on the capabilities. This helps in understanding the actions of companies in the market and how they compete with another through the use of their capabilities. Valuation of organizations based on their capabilities would help determine the best performing organizations.
- The Literature Review: Background
- What is Capitalization?
Capitalization describes the company’s valuation process. The market capitalization of business is equal to the number of shares outstanding or the number of shares available for purchase or purchased, multiplied by the prevailing market price for the shares.
- Why Capitalization?
The use of capitalization to exhibit the size of an organization is essential as the firm size is a primary determinant of multiple features that investors have a great interest such a risk.
- Essentials of Capitalization for a firm or a corporation
Capitalization of a firm is characterized by the shares of the company, the cost of the shares, and it is a crucial aspect used by investors in decision making.
- Advantages of Capitalizing on Capabilities
what individuals respect about organizations is not how their specific management approaches or how they are structured, but their capabilities which include their ability to respond to changing needs of customers or innovate. The organizational capabilities are crucial intangible assets of the company. These capabilities cannot be touched or seen, but they have the potential of making all the difference in the business world, considering the market value.
These capabilities, including collective abilities, skills, and expertise of a company, comprise the investment outcome in training, staffing, communication, compensation, alongside other human resources. The capabilities represent the ways that individuals ad resources are incorporated with the purpose of accomplishing work. Further, capabilities form the personality and identity of the company by describing what is considered good at doing. They are also perceived as stable over time, and competitors find it challenging to copy than product strategy, capital market access, or technology. In most cases, managers may not pay attention to them as they are not easy to measure compared to tangible investments, including plant and equipment. Nevertheless, these capabilities are found to give investors confidence, especially in future earnings. When compared to other firms, the differences in the intangible assets explain whys the market valuation of one company is higher compared to the other.
Capabilities in an organization merge when a firm delivers on the combined abilities and competencies of its employees. An employee possesses the required literacy or may exhibit leadership skills, although the organization at large may or may fail to embody similar strengths. In addition, capabilities put an organization in a position of turning its technical knowhow into outcomes. For instance, a core competence in marketing will not add value if the company is not in a position to spark change.
The talent capability of an organization describes the skills that are required in an organization. When tapped well, talent can contribute to an increase in productivity and increased retention in the organization. The overall performance of an organization improves when organizations capitalize on talent capability. Speed is also a key capability of an organization that involves the recognition of opportunities and acting to them quickly. These allow an organization to exploit new markets, build new employee contacts, create new products, or execute new processes of a business. Where time-saving is achieved, it translates to improvements in labor productivity and also increased responsiveness and enthusiasm to opportunities. The next advantage can be seen where the organization demonstrates a shared mindset and coherent brand identity. This cuts across both employees and customers of an organization where the focus is ensuring they develop a positive and consistent image of and also experiences with the company. This increases customer loyalty and retention of employees in the organization. As a result, productivity improves where the employees feel more motivated and recognized.
Accountability is also a key capability in an organization, which ensures that the company taps high performance from its workers. This is helpful for high performance and a good reputation for the company. Further, an organization can gain tremendous benefits from maximizing collaboration capability by ensuring efficiency and leverage. The efficiencies occur through economies of scale, pooling of technologies or services, or through sharing of talents and concepts.
The learning capability of an organization allows it to generate and generalize ideas through experimentation, benchmarking, competence acquisition, and regular improvement. In the case of individuals, learning includes letting go of the old practices and embracing new practices in the organization. Moreover, the organization focuses on leadership capability to ensure that they produce the most effective leaders in the company. The clear leadership brand makes the leaders be easily identified by the competitors in the industry.
Organizational capability includes customer connectivity, which includes establishing lasting trust with targeted customers. Customers are key in an organization as they contribute to the profitability of the business, and the ability to connect with customers forms a strength to the business. Customer connectivity also increases their loyalty in your products and provides a competitive advantage in the market. The next capability includes strategy unity, which is an important aspect of a business as it spells the understanding of employees about the strategy of the organization. A proper understanding of the strategy helps the organization achieve its goals and succeed in their operation as everybody knows what is expected to be done.
Innovation in a business is an essential capability which includes doing something new in both process and content. Innovation is focused on the future success of the company and its delights customers, excites employees, and builds confidence among the investors in the business. The efficiency capability of an organization is crucial in cost management and allows the company to grow and realize large profit margins.
- Summary and Conclusion
Capitalization is also known as market capitalization, and it includes the valuation of a company through the use of its outstanding shares multiplied by the price of each share in the market. Capitalization is used especially by the investors in investment decisions. Capitalizing on capabilities is key in an organization as it focuses on the value of the organizational capabilities, which determine the growth¸ performance and profitability of the company.
III. Structures of the U.S Tariffs System: A Framework
- Theoretical Framework for Capitalizing on Capabilities
This section explores the theories that help understand capitalization on capabilities. There are numerous existing theories of a firm that describe the firm, its components, and the factors that determine its growth and performance.
Egalitarian theory
Egalitarianism describes a philosophical perspective that stresses equal treatment and equality across religion, gender, political beliefs, and economic status. In the business setting, the egalitarianism company describes the organization that advocates and also employs the egalitarian structure for the employees of the company. This is interpreted that employees at all levels of the business will enjoy the same organizational status and workplace benefits—the theory advocates for various benefits, including equality and shared recognition. The main advantage of this approach is providing an opportunity for all employees to ensure that they contribute equally and also share success recognition. Every employee to be responsible for the individual and also the team tasks in the absence of a chain of authority. In this way, the organization culture encourages personal accountability and also provides employees with more freedom. Besides, the egalitarian organization can make use of its structure to recruit and attract employees in the organization.
The classical or traditional theory
The traditional or classical theory focuses on the formal structure of a company. The theory takes into consideration the company as a machine, while human resources are seen as distinct parts or components of the organization. This approach is characterized by the detection of errors and seeking ways to correct them when they occur. This theory is aimed at improving the output of the organization. The theory assumes that the workers within the organization are relatively stable based on the change happening in the firm. In this approach, the authority and control need to be vested on a central administration, which helps in attaining an integrated and centralized system. The classical theory also emphasizes the technological factor of the business and looks at ways of making the employees within the company to become more productive. The approach addresses the organizational structure, which should be designed to improve the efficiency of employees.
Human Relations or Neo-classical theory.
The neoclassical theory addresses the human factor. The approach was pioneered by Elton Mayo, who focused on human relations to enhance both productivity and satisfaction levels of employees in an organization. The theory was initially described by the experiments referred to as Hawthorn experiments that were performed at Illinois plant of a Western Electric Company and were carried out between the years 1927 and 1932. The human relations movement explores the elements that foster improved performance on the part of employees. The enhancement of employees’ working conditions, enhancing their social relations, lowering the working hours, and also improving monetary gains help in productivity enhancement. The Hawthorne studies were performed to investigate the impact of better physical facilities on the output of employees. Various experiments were carried out on the employees to establish the influence of distinct conditions one the workers’ efficiency. The first stage of the experiment included five girls who engaged in electrical assembly testing. The experiment showed that there was a substantial improvement in the performance of the girls. the improvements subjected to the girls initially were all systematically removed. There was an observed fall in the output level, although it was more than the initial performance. The third phase of the experiments reintroduced the improvements, where the productivity roared. The final phase pf the Hawthorne studies included an investigation of the work practices that consisted of fourteen men and four supervisors who were working in a bank wiring observation room. The studies showed that a company is a formal arrangement that is characterized by human resources and organizational functions, and it is also a social system with successful operation happening only with the use of psychology principles alongside other behavioral sciences. The observations deduced on the need to take into consideration the impact of social factors as they improve employee productivity. The approach also stressed informal groups in organizations, appropriate leadership, and proper communication between the top management and the staff members, which facilitates understanding between the employees and management.
The decision-making theory
The decision-making theory describes an interdisciplinary model of arriving at certain decisions considered most beneficial during an uncertain setting. It explains how a rational person needs to behave under uncertainty and risk. The approach involves the adoption and the use of rational choice that aid in the management of business, private, or governmental organizations through an efficient approach.
The systems approach
The systems approach is a model that is established on the assumption that breaking down a sophisticated idea into a simple and easy one that allows an understanding of the units aids in better knowing the concept’s complexity. The systems approach was first proposed by Ludwig von Bertalanffy, where it was initially referred to as General System Theory. He perceived the organization as an open and organic system, made up of interdependent and interacting parts known as subsystems. The generalization under the system is that everything is interdependent and interrelated. The systems approach notes that a system is made up of interacting components arranged in a way that generates a unified whole.
The systems approach focuses on the overall effectiveness of the systems taking into account the interdependent of the subsystems. This approach, when applied in an organization, takes into account its objectives as well as the performance of the multiple departments making up the organization. The approach is useful in studying the functions of complex companies.an organization needs to bring together the various functions, including organizing, planning, controlling, and directing to attain the goals and objectives of the organization.
Contingency theory
The contingency approach sees organizations as open systems that require careful management meet ad also balance the internal needs as well as adapting to circumstances of the environment. In this approach, there is no defined best approach to organizing, and the appropriate form is based on the type of task, or the setting one is dealing with. The management under this theory is required to be concerned with alignment achievement and attaining good fits. This model was developed by Fred Friedler, and it focused on the leadership contingency approach in organizations. The model suggested that the leader-member relationship is high when the leader is generally respected and accepted by the followers. Further, the extent of the task structure is considered high is the task is found to be very structured. The organizational structure is found to impact the performance within the organization.
Theory X and Theory Y
Theory X and Theory Y were developed in 1960 by Douglas McGregor that were used to explain the beliefs of a manager concerning what motivates their employees and how it can impact their style of management. The approach notes that in an organization setting where the employees display a lack of motivation and dislike their work, it is essential to apply the authoritarian management style. The method is considered very hands-on and typically includes micromanaging the work of individuals to provide that it gets done, and it is known as Theory X. in contrast, McGregor suggested the Theory Y which notes that is the management perceives their employees as taking pride in the work assigned and deem it a challenge, then the leaders need to make use of a participative style of management. In this approach, the managers involve the employees and trust them with their work. The approach aims at motivating the employees to improve their performance.
The scientific management theory
Scientific management describes a theory that involves the analysis and synthesis of workflows in an organization. The primary purpose of the approach is enhancing economic efficiency, particularly in the productivity level of labor. The approach was established by Frederick Taylor, which has since transformed the way companies perceive their employees and the organization at large. The initial perception of employees was that they were lazy individuals and would work inefficiently and slowly to protect their job. Tylor suggested that production would ultimately improve if the optimization and simplification of jobs were taken into consideration. Besides, he proposed that the skills of an employee should be taken into consideration and matched to a particular job. The individual’s training is also key in assigning the employee a specific job. In his theory, Taylor initially created the concept of breaking down every job into its component parts and also timed every specific part to establish the significantly efficient approach of working. The principles of scientific management include looking at every task or job scientifically to establish the best method of performing the job. It also requires the hiring of the right workers for the specific job and also trains the employees to attain maximum efficiency as they work. The approach also expects the management to monitor employee performance, and give direction as well as training when the need arises. Scientific management suggests that work should be divided between the management and labor to ensure that the organization’s management can plan and engage in training while the workers can implement the job or task efficiently.
- The Evolving Trends of Capitalizing on Capabilities
As a team lead or a manager in an organization, it is essential to consider how your principles of leadership influence the individuals around you. The goal of a leader is to keep the workers guided, motivated, and engaged every time. The leadership of an organization should be adapted to the company’s needs, goals, and challenges experienced. There are multiple trends in the modern leadership approach in organizations.
First, there is an observed trend of a decrease of age-based seniority contrary to the past where the senior employees would be considered first during promotions to managerial or leadership positions in the majority of organizations. In the modern business world, the promotion also takes into consideration the leadership talent or the capacity of all employees. The primary factor in this approach is applying the relevant strategies that can potentially attract, engage, and ensure retention of workers across employees of different generations.