UNIT-4 Topics

Analysis of Internal Resources

Strength & Weakness
Resource Audit
Strategic Advantage Analysis
Value Chain approach to Internal Analysis
Method of Analysis and diagnosing
corporate capabilities.
Deployment Matric
Strategic Advantages Profile
SWOT Analysis
Analysis of Internal
Resources
What is an internal analysis?
An internal analysis is the thorough examination of a
company's internal components, both tangible and
intangible, such as resources, assets and processes.
An internal analysis helps the company decision-
makers accurately identify areas for growth or
revision to form a practical business strategy or
business plan. Often, those creating the company's
business strategy pair an internal analysis with an
external analysis to create a full picture of how the
company functions both as an individual entity and as
a part of the larger competitive industry.
Companies can choose from a variety of frameworks for
conducting an internal analysis. Each uses slightly different
tools, strategies and objectives to identify key information
about the internal processes, resources and structures of
the business. A few of the most common examples of
internal analysis frameworks include:
Gap analysis: A gap analysis identifies the gap between a
business goal and the current state of operations.
Companies use gap analyses when they need to identify
weaknesses in the business.
Strategy evaluation: A strategy evaluation is an ongoing
internal assessment tool used at regular intervals to
establish if a company is meeting its objectives as outlined
in a business strategy or plan or not.
SWOT analysis: A SWOT (Strengths, Weaknesses,
Opportunities and Threats) analysis helps to give
companies a broad overview of all internal functions. SWOT
analyses are ideal for evaluating the full range of a
company's abilities.
VRIO analysis: A VRIO (Valuable, Rare, Inimitable and
Organized) analysis helps organize business resources. It is
ideal for assessing and categorizing a company's resources.
OCAT: An OCAT (Organizational Capacity Assessment Tool)
assesses internal performance in a variety of specific
dimensions. Companies can use the OCAT to establish
specific areas of strength or growth.
McKinsey 7S framework: The seven S's are strategy,
structure, systems, shared values, skills, style and staff. The
McKinsey 7S framework ensures that businesses align
these seven elements for maximum success.
Core competencies analysis: The core competencies
analysis identifies the unique combination of qualities that
separates the business from competitors. It's best used
when determining ways to improve business operations
over a direct competitor.
Why is an internal analysis important?
Internal analyses help business leaders identify ways
in which they can improve company functions. A few
of the most important reasons to conduct an internal
analysis include identifying:
 Company strengths
 Structural weaknesses
 Business opportunities
 Possible threats
 Viability in the marketplace
Company strengths
Strengths might include the quality of the employees,
the availability of necessary resources or consumer
brand recognition. Strengths help companies increase
their overall success and viability and using an
internal analysis is effective for identifying strengths.
Structural weaknesses
Internal analyses can help find a company's weaknesses, which
might be factors like lack of effective training, old or out-of-date
technology or poor interdepartmental communication.
Weaknesses might have minor company impacts like slowing the
spread of internal information or major consequences like the loss
of income.
Business opportunities
Another benefit of an internal analysis is identifying opportunities
for the business. Opportunities for a company usually include
areas for growth both internally and externally. Examples might
include updating the computer system or introducing a new
product to the market.
Possible threats
Often, threats come from external sources. However, identifying
external threats as a part of an internal analysis can help
companies prepare for them by optimizing business strengths,
improving weaknesses and creating new opportunities for
growth.
Viability in the marketplace
One of the most valuable benefits of an internal analysis is finding
Resource audit
 Resource audit is an internal strategic analysis
technique used to understand the current state of
an organisation's resources and competencies. It
helps to identify what the organisation currently has
that we can build on and what are the areas that it
needs to improve upon. Broadly these resources are
categorised into two groups - tangible or hard and
intangible or soft. The tangible resources comprise
physical, financial and human assets, whereas the
intangible competencies include the intellectual
capital and brand equity.
 As the name suggests, the resource audit technique
can be used as a check list in taking stock of the
hard and soft aspects of the organisation's
resources. These range from the buildings and
financial assets to intellectual capital and brand
Given below is the list of the resources under the
relevant categories:
Physical
Buildings, Land
Equipment. Equipments
Materials etc.
Financial
Cash flow
Credit
Human
Staff, roles and responsibilities
Expertise and experience
Know-how
Trade marks and copyrights
Intellectual property
Reputation
Brand awareness and brand equity
Goodwill in the market and among customers
Strategic Advantages Analysis & Strategic
Advantages Profile:
 The strategic advantage analysis & diagnosis allows to
determinate & examine the firm's various functional areas like
finance, accounting, marketing, distribution, production &
operations to find the core competencies in that area so that
we could determine whether the strength or weakness is of
strategic importance to gain advantages among competitors.
 After performing SAA we create a Strategic advantages
profile(SAP).It shows strength & weaknesses of an
organization. Preparation of SAP is very similar process to the
ETOP.
 SAP is a summary statement which provides an overview of
the advantages & disadvantages in key areas likely to affect
future operations of a firm. It is a total for making systematic
evaluation of strategic advantage factors which are significant
for the company in its environment.
 SAP is the technique of analyzing the internal factor of the
organization by preparing a critical picture of different
capacity factors. It is a relative strength of the company over
its competitors.

No firm is equally strong in all its functions. In other
words, every firm has strength as well as weakness.
The strategists must be aware of the strategic
advantages or strengths of the firm to be able to
choose of the best opportunity for the firm. On the
other hand they must regularly analyze their strategic
disadvantages or weaknesses in order to face
environmental threats effectively.
 Strategic advantage analysis would look what
unique strengths the company has, and
whether these strength are likely to be
sustainable, that is long-term. For example,
ownership of more sophisticated equipment than
competitors have is not a STRATEGIC advantage,
because competitors can buy this equipment
tomorrow
What is the difference between competitive
advantage and strategic advantage?
 Competitive advantage is your ability to outcompete in a
market. Strategic advantage is your ability to
outcompete more generally including your returns to
stakeholders such as investors, employees and
communities.
 The term “strategic advantages” refers to those
marketplace benefits that exert a decisive influence
on an organization's likelihood of future success.
These advantages frequently are sources of an
organization's current and future competitive success
relative to other providers of similar products.
 The relationship between strategic management and
competitive advantage lies in your management's
strategies being vehicles that increase your edge
over the competition. Competitive advantage is when
one company produces a product or service that meets
the customer's needs in a way that their competitors
 Value chain approach to Internal Analysis
 Value chain analysis (VCA) is a process where a firm
identifies its primary and support activities that add
value to its final product and then analyze these
activities to reduce costs or increase differentiation.
 Value chain analysis is a strategy tool used to analyze
internal firm activities. Its goal is to recognize, which
activities are the most valuable (i.e. are the source of
cost or differentiation advantage) to the firm and which
ones could be improved to provide competitive
advantage.
 In other words, by looking into internal activities, the
analysis reveals where a firm’s competitive advantages
or disadvantages are.
 The firm that competes through differentiation
advantage will try to perform its activities better than
competitors would do. If it competes through cost
advantage, it will try to perform internal activities at
 Analysing and Diagnosing Corporate
Capabilities
 Corporate capabilities are what a business does and
can do and is an encapsulation of end-to-end
functions into an abstraction that is agnostic to the
underlying process and supporting system. The
capabilities of a company are the building blocks of
what constitutes the enterprise and necessary to
operationalize the strategic intent and achieve
business results.
 Not all company capabilities are the same. Not every
company needs or has all capabilities. The sector, the
industry, the geography, the types of products/services,
the customer segments, the competitive dynamics are
some of the factors that influence and shape the
capabilities a company needs.
 For example, today’s retailers are desperate for omni-channel
capabilities to compete with the e-commerce giants. On the other hand,
for a B2B (Business to Business) company, while online commerce
may play a smaller role, digital capabilities which optimize the supply
chain – the procure to pay value chain – are extremely valuable.
 Corporate capabilities refer to the collective skills, resources,
competencies, and capacities that a company possesses, enabling it to
perform various functions and activities effectively and efficiently to
achieve its strategic goals and objectives. These capabilities encompass
a wide range of aspects.
 Overall, corporate capabilities are essential for a company's
competitiveness, sustainability, and long-term success. They represent
the collective strengths and competencies that enable a company to
achieve its objectives and fulfill its mission in a dynamic and
competitive business environment.
 Categories of Corporate Capabilities
Corporate capabilities can vary widely depending on the industry, size, and
focus of the company. However, here are some common categories of
corporate capabilities:
 Operational Capabilities: These are the capabilities related to the day-
to-day functioning of the company. This includes manufacturing,
logistics, supply chain management, procurement, and distribution.
 Technological Capabilities: In today's digital age, technology plays a
crucial role in the success of businesses. Technological capabilities
encompass software development, IT infrastructure, data analytics,
cyber-security, and innovation in technology.
 Financial Capabilities: Financial capabilities involve managing
financial resources effectively. This includes financial planning,
budgeting, accounting, risk management, and access to capital markets.
 Human Resource Capabilities: People are often considered a
company's most valuable asset. Human resource capabilities encompass
talent acquisition, employee training and development, performance
management, employee relations, and organizational culture
development.
Strategic Capabilities: Strategic capabilities are the abilities to develop
and execute long-term strategies to achieve the company's goals. This
includes strategic planning, business development, mergers and
acquisitions, partnerships, and competitive analysis.
Innovation and R&D Capabilities: Innovation is crucial for staying
competitive and meeting evolving customer needs. Innovation and R&D
capabilities involve research and development, product design, new
product development, and intellectual property management.
Quality and Process Improvement Capabilities: Ensuring quality
products and services while continuously improving processes is essential
for sustainable success. Quality and process improvement capabilities
include quality management systems, Six Sigma, Lean principles, and
Total Quality Management (TQM).
Risk Management Capabilities: Identifying, assessing, and mitigating
risks is essential for protecting the company's assets and reputation. Risk
management capabilities encompass risk assessment, risk mitigation
strategies, insurance management, and crisis management.
These categories overlap and interconnect, and companies often develop
unique capabilities tailored to their specific business environment and
strategic objectives.
Resource Deployment Matrix
 SWOT Analysis
INTRODUCTION
 A scan of the internal & external environment is an important
part of strategic planning process. Environmental factors
internal to the firm usually can be classified as strengths [S] or
weakness [W] & those external to the firm can be classified as
opportunities [O] or threats [T].
 Such analysis of the strategic environment is referred to as a
SWOT analysis. It involves the collection & portrayal of
information about internal & external factors which have or
may be have, an impact on business.
 It is a non-financial planning tool. It links the analysis in terms
of advantages and disadvantages; and the internal and external
business environment (in a matrix format).
 The Strengths and Weaknesses are defined by measures such
as market share, loyal customers, level of customer satisfaction
and product quality.
 Opportunities are new potential areas for business in the
future, such as new markets, or new conditions in existing
markets. Threats describe how the competition, new
✓ To help decision makers share & compare ideas
AIM OF SWOT ANALYSIS

✓ To bring a clearer common purpose &

✓ To organize important factors linked to success &

understanding of factors for success

✓ To provide linearity to decision making process

failure in the business world

allowing complex ideas to be presented

systematically.

STAGES OF A SWOT ANALYSIS

1. Identify.
2. Draw conclusions.
3. Translate into strategic action
HOW TO USE THE TOOL
To carry out a SWOT analysis, write down answers to
the following questions where appropriate, use similar
questions & whenever possible, consider your answers
from your own point of view & from the point of view
of the people you deal with.

✓ What advantages does your company have?

Strengths:

✓ What do you do better than anyone else?

✓ What unique or lowest-cost resources do you have

✓ What do people in your market see as your

access to?

✓ What factors mean that you "get the sale"?

strengths?

✓ What could you improve?

Weaknesses:

✓ What should you avoid?

✓ Where are the good opportunities facing you?
Opportunities:

✓ What are the interesting trends you are aware of?

✓ Changes in technology and markets on both a broad and

Useful opportunities can come from such things as:

✓ Changes in government policy related to your field.

narrow scale.

✓ Changes in social patterns, population profiles, lifestyle

✓ Local events.
changes.

✓ What obstacles do you face?

Threats:

✓ What is your competition doing that you should be

✓ Are the required specifications for your job, products or

worried about?

✓ Is changing technology threatening your position?

services changing?

✓ Do you have bad debt or cash-flow problems?

✓ Could any of your weaknesses seriously threaten your
✓ Consolidate strengths
ADVANTAGES

✓ Minimizes Weaknesses
✓ Helps to Grab Opportunities
✓ Minimizes Threats ✓ Facilitates Planning
✓ Facilitates Alternative Choices ✓ Helps to Innovate
✓ Ensure Survival & Success

✓ It does not show has to achieve a competitive

DISADVANTAGES

✓ Provides a static assessment in time

advantage

✓ May lead the firm to over emphasize single internal

or external factors in formulating strategies