Assessing Strengths and weaknesses: Doing an Internal analysis Team 5 Strategic Management Assessing Strengths and weaknesses: Doing an Internal analysis Team 5

Internal Analysis Overview Internal Analysis – the process of evaluating an organization’s resources and capabilities. Evaluates the organizations resources, capabilities, and core competencies Determines their strengths and weaknesses

Organizational Resources Resources (assets) Financial - available equity (stock) Physical - buildings Human - skills and abilities of employees Intangible - trademarks Structural-cultural – culture Competitive Advantage Must be combined and used in some way to add value

Organizational Capabilities Organizational capabilities – which are the various routines and processes that transform those inputs (resources) into outputs (products). Change as conditions and competitors change Organizational routines and processes – are the regular, predictable, and sequential work activities done by organizational members Dynamic capabilities – an organizations ability to build, integrate, and reconfigure capabilities to address rapidly changing environments.

4.1 Describing what an Internal Analysis is Core Competencies: major value –creating capabilities that are essential to an organization’s business They are not sources of competitive advantage themselves but can contribute to developing distinctive capabilities and improving other organizational capabilities. Distinctive Organizational Capabilities: the special and unique capabilities that distinguish an organization from its competitors

4.1 Describing what an Internal Analysis is Contributes to Superior Customer value Is difficult for competitors to imitate Can be used in a variety of ways Distinctive Organizational Capabilities

4.1 Describing what an Internal Analysis is The Role of Strengths and Weaknesses Strengths - resources an organization possesses and capabilities an organization has developed, both of which can be developed, both of which can be developed into sustainable competitive advantage. Weaknesses - resources and capabilities that are lacking or deficient and prevent the organization fro developing a sustainable competitive advantage

How to do an Internal Analysis In three parts: Organization’s work: value chain analysis Internal audit Capabilities assessment profile Strengths and Weaknesses

Value Chain Analysis Examining functional activities where they create value and how well they create customer value Observe the five primary activities: Inbound logistics Operations Marketing and sales Outbound logistics Customer service Observe the four secondary activities: Procurement Technological development Human resource management Firm infrastructure

Internal Audit Six organizational functions to audit the firm: Production-operations Marketing Research and Development Financial-accounting Management Information systems

Capabilities Assessment Profile The two phases: Identifying distinctive capabilities Developing and leveraging capabilities The five steps in assessing organizational capabilities: Preparing a current product-market profile Identifying sources of competitive advantage and disadvantage Describing organizational capabilities and competencies Sorting them according to their strategic importance Identifying and agreeing on the key competencies and capabilities

Strength and Weaknesses It can be measured according to four criteria: Past performance trends Organizational goals Competitor comparisons Personal opinions of strategic decision makers or consultants

Internal Analysis Importance Understanding a business in depth is the goal of internal analysis. This analysis is based on resources and capabilities of the firm. Any analysis of company strengths should be market oriented/customer focused because strengths are only meaningful when they assist the firm in meeting customer needs.