STRATEJİK YÖNETİM - Deneme Sınavı - 5

Internal analysis

Some or all of the following reasons are why organizations carry out an internal analysis for their businesses (Campbell et al., 2002);

to identify resources, competences, and core competencies to be developed and exploited;

to evaluate how effectively value-adding activities are organized;

• to identify areas of weaknesses to be addressed in future strategy and its implementation;

• to evaluate the performance of products;

• to evaluate financial performance, particularly in comparison with competitors;

• to evaluate investment potential if finance is being sought from external sources;

• as a first step in assessing the suitability, feasibility, and acceptability of future strategies.

Some or all of the following aspects of a business or organization can be the subject of internal analysis:

Resource analysis,

Competence audit and analysis, and the sources of distinctive capabilities,

Internal activities analysis using porter’s value chain framework,

Performance analysis (evaluating performance using financial/non-financial indicators),

Human resources and culture,

Financial resources and financial performance,

Products and their positions in markets.

Internal analysis is a three-step process (Hill & Jones, 2010; p.74):

To be competitive and profitable, managers must look for the firm’s existing resources and capabilities because this can be much easier and less costly then searching for new ones outside. Managing and leveraging these resources effectively and creatively can give the firm a competitive edge over its competitors.

When a company has a long-lasting business advantage against competing firms that is a significant edge over the competition, it is said to have a competitive advantage.

According to Enz (2010), a firm’s ability to create competitive advantage through capitalizing on resources or capabilities depends on the answers to the following six questions:

1. Does the resource or capability have value in the market? These types of resources allow a firm to exploit opportunities and/or neutralize threats.

2. Is the resource or capability unique? If an organization is the only one with a particular resource or capability, then it may be a source of competitive advantage. If numerous organizations possess a particular resource or capability, then the situation is described as competitive parity — no company has the advantage. Note that uniqueness does not mean that only one organization possesses a capability or resource — only that few firms do. The uniqueness dimension also implies that a resource or capability is not easily transferable. That is, it is not readily available in the market for purchase.

3.Is there a readily available substitute for the resource or capability? Sometimes, competing organizations may not have the exact resource or capability, but they have easy access to another resource or capability that will help them accomplish the same results. For example, some car rental companies have arrangements with airports that allow them to lease space on the airport premises. This provides a location benefit. However, the benefit is not as large as it could be because competitors offer frequent and convenient shuttle service to car rental lots just outside these airports. Positive answers to the first two questions and a negative answer to the third question mean that a resource or capability has the potential to lead to a competitive advantage for the firm. However, that potential is not realized unless two other questions are also answered in the affirmative:

4 Do organizational systems exist that allow the realization of the potential? For the potential to be realized, the firm must also be organized to take advantage of it. Disney is a master of exploiting profit potential from its animated features. Even before a movie is released, toys featuring the major characters and soundtrack are available for purchase. Characters quickly become part of parades and shows at Disney’s theme parks, and sometimes a major attraction or ride is developed.

The Gap Analysis is an internal evaluation tool that helps firms to identify performance deficiencies. At a Gap Analysis process, what company managers do at the first step is to compare the firm’s current state to the desired future state, and identify and understand the gaps that exist between the two states. Later, they develop a series of actions/strategies that will bridge the identified gaps

Matching the opportunities in the environment with corporate resources

Core competencies

Availability of substitute products

Managers must decide on the proper balance between costs and benefits for the customers

Strategic flexibility

Vision

Obtaining a guide for new opportunities both inside and outside the firm

Information and control systems may not be effective

Stratgic plan

Long term objectives