An expanded paradigm is needed to explain how competitive advantage is gained and held. Firms resorting to a resource-based strategy attempt to accumulate valuable technology assets and employ an aggressive intellectual property stance. However, winners in the global marketplace have been firms demonstrating timely responsiveness and rapid and flexible product innovation, along with the management capability to effectively coordinate and redeploy internal and external competencies. This source of competitive advantage, dynamic capabilities, emphasizes two aspects. First, it refers to the shifting character of the environment; second, it emphasizes the key role of strategic management in appropriately adapting, integrating, and re-configuring internal and external organizational skills, resources, and functional competencies toward a changing environment. Only recently have researchers begun to focus on the specifics of developing firm-specific capabilities and the manner in which competencies are renewed to respond to shifts in the business environment. The dynamic capabilities approach provides a coherent framework to integrate existing conceptual and empirical knowledge, and facilitate prescription. From the above case:

1. For capabilities to achieve and sustain competitive advantage, they must meet certain requirements, Analyze four of such requirements.
2. Discuss four tools that strategic managers can use to diagnose firms' strategic resources and capabilities.