Internal Analysis

McGraw-Hill/Irwin
Strategic Management, 10/e

Course coordinator
Copyright 2007 The McGraw-Hill
Companies,
Inc. All rights
reserved.
Prof. Begum
Khaleda
Khanam

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SWOT Analysis
A traditional approach to internal analysis:
SWOT is an acronym for the internal
Strengths and Weaknesses of a firm and
the environmental Opportunities and
Threats facing that firm.
SWOT analysis is a historically popular
technique through which managers create
a quick overview of a companys strategic
situation.

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Limitations of SWOT Analysis

A SWOT analysis can

overemphasize internal strengths
and downplay external threats
A SWOT analysis can be static and
can risk ignoring changing
circumstances
A SWOT analysis can
overemphasize a single strength or
element of strategy
A strength is not necessarily a
source of competitive advantage

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Value Chain Analysis (VCA)

The term value chain describes a way

of looking at a business as a chain of
activities that transform inputs into
outputs that customers value
Value chain analysis (VCA) attempts
to understand how a business creates
customer value by examining the
contributions of different activities
within the business to that value
VCA takes a process point of view

Concept: Company Value

Chain
A companys business consists of all activities

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undertaken in designing, producing, marketing,

delivering, and supporting its product or service
All these activities that a company performs
internally combine to form a value chainso-called
because the underlying intent of a companys
activities is to do things that ultimately create
value for buyers
The value chain contains two types of activities
Primary activities (where most of
the value for customers is created)
Support activities that facilitate
performance of the primary activities

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The Value Chain

Making Meaningful
Comparisons
Managers need objective standards to use

when
examining internal resources and value-building
activities
Strategists use the firms historical experience as a basis
for evaluating internal factors
Benchmarking, or comparing the way our company
performs a specific activity with a competitor or
other company doing the same thing, has become a
central concern of managers in quality commitment
companies worldwide

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Objectives of Benchmarking

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Identify best and most efficient means of

performing various value chain activities
Learn what is the best way to perform a
particular activity from those companies who
have demonstrated that they are best-inindustry or best-in-world at performing
the activity
Learn what other firms do to perform
an activity at lower cost
Figure out what actions to take to
improve a companys own cost