Assessing Strengths and Weaknesses: Internal Analysis

Presented by: Anshu Sharma Harleen Kaur

What is Internal Analysis?

The process of identifying and evaluating an organizations specific characteristics
Resources, capabilities, and core competencies Looks at organizations
Current vision Mission(s) Strategic & financial objectives Strategies

Why Do an Internal Analysis?

Enables a firm to identify its strengths and weaknesses. Enables a firm to make good strategic decisions.

Information from internal environment provides basis for developing strategic alternatives.

Organizational Capabilities
Organizational capabilities/competencies
The complex and coordinated network of company routines and processes that determines how efficiently and effectively the organization transforms its resources into products (goods & services) Involves complex pattern of coordination between people, & between people and resources Its an internal activity that a company performs better than other internal activities

Core Competencies
Core competencies
A well-performed internal activity that is central, not peripheral, to a companys strategy, competitiveness, and profitability
Major value-creating skills and capabilities that
are shared across multiple product lines or multiple businesses Results from the collaboration among different parts of an organization

Gives a company a potentially valuable competitive capability

Core Competencies
Types of Capabilities/Core Competencies
Skills in manufacturing a high quality product System to fill customer orders accurately and swiftly Fast development of new products Better after-sale service capability Superior know-how in selecting good retail locations Innovativeness in developing popular product features Merchandising and product display skills Expertise in an important technology Expertise in integrating multiple technologies to create whole families of new products

Resources
Are the source of a firms capabilities Are broad in scope Cover a spectrum of individual, social and organizational phenomena.
Are a firms assets, including people and the value of its brand name

Resources
Tangible resources
Financial resources

Physical resources
Technological resources Organizational resources

Intangible resources
Human resources Reputation resources

Strengths and Weaknesses

Strengths
Resources that an organization possesses and capabilities that the organization has developed Both can be exploited and developed into a sustainable competitive advantage

Weaknesses
Resources and capabilities that are lacking or deficient; and that Prevents an organization from developing a sustainable competitive advantage

How to Do an Internal Analysis

Approaches to internal analysis

(1) Value Chain Analysis (2) Competitive Strength Assessment (3) An Internal Audit (4) Internal Environmental Analysis Process (5) Capabilities Assessment Profile

(2) Assessing Organizations Competitive Strength

How does the firm rank relative to key rivals on each industry KSF and relevant measure of competitive strength . Does the firm have a sustainable competitive advantage or disadvantage What is the ability of the firm to defend its position in light of
Industry driving forces Competitive pressures Anticipated moves of rivals

Assessing Organizations Competitive Strength

1. List industry key success factors and other relevant measures of competitive strength 2. Rate firm and key rivals on each factor using rating scale of 1 - 10 (1 = weak; 10 = strong) 3. Decide whether to use a weighted or unweighted rating system 4. Sum individual ratings to get overall measure of competitive strength for each rival 5. Determine whether the firm enjoys a competitive advantage or suffers from competitive disadvantage

Assessing Organizations Competitive Strength

A weighted competitive strength analysis is conceptually stronger than an unweighted competitive strength analysis because
All the strength measures are not equally important. E.g., in an industry with strong product differentiation, the significant strength measures may be
Brand awareness Reputation for quality Amount of advertising Distribution capability, etc.

Some KSF/Strength Measures

Quality/product performance Reputation/image Manufacturing capability Technological skills Dealer network/Distribution channels New product innovation Financial resources Customer service capability

(3) Using an Internal Audit

Internal Audit
A thorough assessment of an organizations various internal functional areas Strategic decision makers use the internal audit to assess the organizations resources and capabilities from the perspectives of its different functions

Using an Internal Audit

Six primary functional areas
Production-operations Marketing Research & development Financial and accounting Management, including HRM Information System

Depending on products, markets, and industries, individual organizational structures may vary and, therefore, may emphasize different sets of functional areas

(4) Using an Internal Environmental Analysis Process

Assesses an organizations internal activities
Step 1: Survey strengths and weaknesses Step 2: Categorize these strengths & weaknesses (S&W) in terms of resources & capabilities Step 3: Investigate the potential of strengths to lead to competitive advantage Step 4: Evaluate the ability of these competitively resources & capabilities to serve as the basis for an appropriate competitive strategy

(5) Capabilities Assessment Profile

Resembles the internal environmental analysis
Similarity: Focuses on deeper evaluation of S&W Difference: Focuses only on a firms capabilities

Analysis consists of 2 phases Phase I: Identify distinctive capabilities Phase II: Develop and leverage distinctive capabilities

Capabilities Assessment Profile

Identifying Distinctive Organizational Capabilities
Step 1: Prepare current product-market profile
Emphasize organization-customer interactions What is the organization selling? Who are the organization selling to? Is the organization providing superior customer value & desirable benefits?

Capabilities Assessment Profile

Step 2: Identify sources of competitive advantage & disadvantage in the main product-market segment
Determine why customers choose the organizations products vs. those of competitors Involves information on cost, product, and service attributes

When customers purchase What theyre actually purchasing What bundle of attributes satisfies their needs

Capabilities Assessment Profile

Step 3: Describe all organizational capabilities & competencies
Examine resources, skills, & abilities of the various divisions Determine which resources, skills, & abilities lead to a competitive advantage

Step 4: Sort the core capabilities/competencies according to strategic importance

Can capability provide wide access to a number of different markets? Does the capability provide tangible customer benefits? Is the capability difficult for competitors to imitate?

Capabilities Assessment Profile

Step 5: Identify and agree on the key capabilities or competencies
Provide basis for resource allocation

Classifying an Organizations S&W

Past performance trends
Measures such as financial ratios, operations efficiency, etc,

Specific goal or targets

Organizations goals are statements of desired outcomes

Comparison against competitors

How are competitors doing?

Personal opinions of decision makers & consultants

THANKYOU!!!!