Determining key capabilities of a firm using analytic hierarchy process

According to the theory of competence-based competition, core competencies are derived from capabilities that are strategically valuable to the firm. This paper provides a structured framework for determining the key capabilities using the analytic hierarchy process. One distinctive characteristic of this framework is that quantitative (financial) as well as qualitative (non-financial) measures are employed providing a balanced scorecard for capability evaluation. The framework is illustrated using a manufacturing company as an example. The analysis may be viewed as a benchmarking exercise in order to find the competency gaps within the company. The results obtained are to be exploited by the company to undertake strategic investment decisions such as capability development, outsourcing, focusing or diversification with regards to new products, services or markets. The framework is generic in nature and is applicable to benchmark a public or service sector organization.