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7. Internal Analysis
Dickson K.W. Chiu
PhD, SMIEEE
1
What is an Internal Analysis?
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Looks at the organization’s
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Vision
Mission
Strategic objectives
Identifies and evaluates resources,
capabilities, and core competencies
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Company Vision
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Massively inspiring
Overarching
Long-term
Driven by and evokes
passion
Fundamental statement
of the organization’s
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Company vision
Values, Aspiration, Goals
E.g., Disneyland: “To be
the Happiest place on
earth”
Hierarchy of Goals
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Mission Statements
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Purpose of the company
Basis of competition and
competitive advantages
More specific than vision
Focused on the means by
which the firm will compete
E.g., FedEx: “To produce
superior financial returns for
our shareholders as we
serve our customers with
the highest quality
transportation, logistics,
and e-commerce.”
Company vision
Mission statements
Hierarchy of Goals
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Strategic Objectives
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Operationalize the mission
statement
Provide guidance on how the
organization can fulfill or move
toward the “higher goals”
More specific, a more well-defined
time frame, measurable (yardstick
for rewards and incentives),
consistent with vision and mission,
realistic (challenging but doable),
timely
E.g., P&G: “Increase sales growth
6% to 8% in each of the next five
years”
Company vision
Mission statements
Strategic objectives
Hierarchy of Goals
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A Quick Review of Organizational
Resources
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Organizational Resources (assets)
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Financial resources: debt capacity, credit lines,
etc.
Physical assets: buildings, equipment and
fixtures
Human resources: experience, knowledge, etc.
of employees
Intangible resources: brand names, patents
Structural-cultural resources: culture, work
systems
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The Strategic Role of Organizational Resources
and Organizational Capabilities
Performance Results
Competitive Advantage
DistinctiveOrganizational
Capabilities
Organizational
Resources
Financial assets
Physical assets
Human resources
Intangible assets
Structural-cultural
assets
Organizational
Capabilities
Core
Competencies
Organizational processes
and routines
Accumulated knowledge
Actual work activities
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From Resources to Organizational
Capabilities
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Organizational capabilities
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Competencies or skills that a firm employs to transform inputs to
outputs, and capacity to combine tangible and intangible
resources to attain desired end
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Outstanding customer service
Excellent product development capabilities
Innovativeness of products and services
Ability to hire, motivate, and retain human capital
Organizational routines and processes
Capabilities – patterns of coordination
Sustainable competitive advantage
Dynamic capabilities
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Characteristics of Distinctive Organizational
Capabilities
• Contributes to
Superior Customer
Value
• Can Be Used
in a Variety
of Ways
Distinctive
Organizational
Capabilities
Dickson Chiu 2006
• Is Difficult
for Competitors
to Imitate
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The Role of Strengths and Weaknesses
Strengths: Resources that an organization
possesses and capabilities that an organization has
developed. Both can be exploited and developed
into a sustainable competitive advantage
Weaknesses: Resources and capabilities that are
lacking or deficient. Prevent an organization
from developing a sustainable competitive
advantage
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How to do an internal analysis: value chain
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Using a value-chain analysis
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The premise behind value chain analysis is that customers
demand value from goods and services they obtain
Customer value
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Product is unique and different
Product is low priced
Quick response to specific or distinctive customer needs
A value chain is a systematic way of examining
organization’s functional activities
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Primary and Support Activities in the Value
Chain
Human Resource Management
Technological Development
Service
Marketing and Sales
{
Outbound Logistics
Operations
Procurement
Inbound Logistics
Support
Activities
{
Firm Infrastructure
Primary Activities
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How to do an internal analysis –
internal audit
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Using an internal audit
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Thoroughly assesses an organization's
various internal functional areas
Are the necessary resources available so that
the people in these functional areas can
perform their assigned work activities and
how well do they perform these assigned
work activities?
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Using an internal audit
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Six Primary Functional Areas
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Productions-Operations
Marketing
Research and Development
Financial and Accounting
Management (including HRM)
Information Systems
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How to do an internal analysis – Capabilities
Assessment Profile
Complex Analysis of Capabilities
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Not as easily identifiable as organizational functions
Hard for competitors to imitate
Two-phased Capability Assessment
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Phase I: Identify distinctive capabilities
Phase II: Develop and leverage these distinctive capabilities
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Identifying Distinctive
Organizational Capabilities
Prepare current product-market profile.
Step 1
Identify sources of competitive
advantage and disadvantage in
the main product-market segments.
Step 2
Describe all the organizational
capabilities and competencies.
Step 3
Sort the core capabilities and
competencies according to
strategic importance.
Step 4
Step 5
Identify and agree on
the key capabilities
and competencies.
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Criteria to Judge Organizational Strengths
and Weaknesses
Past Performance Trends
Comparison Against Competitors
Are organizational
resources and capabilities
strengths or weaknesses?
Personal Opinions of Strategic
Decision Makers or Consultants
Specific Goals or Targets
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Why Do an Internal Analysis?
1.
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It is the only way to identify an
organization’s strengths and weaknesses
It’s needed for making good strategic
decisions
Dickson Chiu 2006
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