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Critically Evaluate Internal Analysis

1315 words - 6 pages

In order to develop a good strategy it is essential that you know your strengths and weaknesses, i.e. what it is you are good at. An internal analysis is “a process of identifying and evaluating an organizations’ specific characteristics, including its resources, capabilities, and core competencies” (p. 106, Coulter 2005). Internal analysis is important in order to find out where improvements are needed and what you could exploit more in order to gain competitive advantage. Internal analysis takes an inside-out perspective compared to the outside-in perspective of the external analysis. The question here is what you can do yourself. Other relevant questions are if the resources and ...view middle of the document...

The RBV is interesting since it tries to find the underlying causes for sustainable competitive advantage.
The competence based view
This view focuses on the distribution and use of resources and the processes that link them together. It is also about how to link knowledge and different activities together and how to best use your resources. Competencies are all about how you combine resources in order to achieve your goals. Not all competencies are essential to gain competitive advantage, but the ones that strengthen it are called core competencies. These are the roots of a company’s competitive advantage and are usually symbolized as the root system of a tree.
So far we have described two perspectives on how to gain competitive advantage from analyzing internal perspectives. They can be summarized as follows:

Dynamic Capabilities View
The third perspective is the dynamic capabilities view. The RBV sees the organization as a collection of resources, but another way to perceive organizations is to see them as a collection of capabilities. In times of rapid changes, companies somehow need to sustain their competitive advantage position and renew and/or change their resource and competence basis. They have certain capabilities and resources that can be coordinated and utilized in different ways, and the dynamic capabilities view is about an “organization’s ability to build, integrate, and reconfigure capabilities to address rapidly changing environments” (p.109). If the company is successful in this it helps them on their way to fulfill the organizational goals. This framework facilitates the analysis of both sources and methods of wealth creation, and finds that the internal processes in the firm are important to take care of since they are the main source of wealth creation.
The main purpose however of an internal analysis is to evaluate the strengths and weaknesses. An assessment is made whether or not you possess the right resources and if you possess the right competencies and capabilities. There are methods you can use in order to analyze the internal environment. First you can conduct a value chain analysis and find out what it is that your customers value most and what activities the firm is currently conducting. Secondly, the internal side of the SWOT-analysis can be used to summarize the strengths and weaknesses found. These methods that have been mentioned here will be further explained in the Tools-section.

Analytical Tools
The following tools can be used to conduct an internal analysis:

The VRIN framework was developed by Barney in 1991 and shows what kind of attributes a product should possess in order to be competitive.
Value Chain Analysis helps you identify the things that your customers value most and what things your company can do to improve customer value. The analysis follows three steps; 1) activity analysis, 2) value analysis, 3) evaluation & planning.
A SWOT-analysis enables you to assess your...

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