The production and accounting can be considered as an internal business process while sales and purchasing can be an external business process. The success of a business remains on the effective management of both internal as well as external business processes.Capabilities based competition is one of the common things in the business process. In order to compete in the market, the organization must well assess their own capabilities along with its competitor’s capabilities. Such an assessment will help the organization in formulating strategies for future business. For example, the Indian automobile manufacturer, Tata has recently unveiled the cheapest passenger car called Nano for $ 2000. The Tata group expect a boom in the sales of their Nano car which will definitely reduce the sales of their competitors. So the competing automobile companies in India need to find an alternative to counter the competitions from Nano. Thus Capabilities based competition identifies an organization’s key business processes, manage them centrally, and invest in them heavily, looking for a long term payback.In order to make an organization capable of competing based on their capabilities they should focus on. a shift in their strategies to achieve aggressive goals, organise around the chosen capability and make sure employees have the necessary skills and resources to achieve it, make progress visible and bring measurements and reward into alignment and do not delegate the leadership of the transformation. The business strategies must be changed based on the requirements of the changing world. Globalization, Privatization and Liberalization policies have forced organizations to change their business strategies to exist in the market. The successful old strategies may not be suitable for the requirement of the modern world. For example, it is very difficult for a small scale industry to survive is an MNC start functioning around them.