Which term describes the firm's capacity to renew competencies to match a changing environment?

• A. Static Resources
• B. Financial Accounting Systems
• C. Dynamic Capabilities
• D. Brand Equity

Answer: (C)

Dynamic capabilities describe a firm’s ability to renew and reconfigure its competencies to keep pace with a changing environment. This means sensing shifts in technology, markets, or regulations; seizing new opportunities; and transforming resources and routines to maintain or create competitive advantage. It’s about ongoing renewal, not just what the firm currently possesses.

Static resources are valuable but don’t inherently adapt when conditions change. Financial accounting systems are about recording and reporting financial data, not renewing capabilities. Brand equity reflects customer perceptions, not the organization’s capacity to reconfigure itself.

An example is a company that shifts from selling hardware to offering cloud-based services, retraining staff, altering development processes, and building new infrastructures—actions driven by dynamic capabilities to stay relevant.