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COMMONWEALTH OF AUSTRALIA
Copyright Regulations 1969
WARNING
This material has been reproduced and communicated to you by or on behalf of the University of Newcastle pursuant to Part VB of the Copyright Act 1968 (the Act). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act.
DO NOT REMOVE THIS NOTICE
Strategic analysis: Internal environment
Strategic analysis: Internal environment
Learning objectives
1. Explain why strategic analysis of a firm’s internal environment is important
2 Outline what internal environment information is needed
3 Describe the differences between tangible and intangible resources
4 Define capabilities and discuss how they are developed
5 Discuss the characteristics of core competencies and their combination into a firm’s strategic competitive advantage
6 Outline and discuss the four criteria that identify a firm’s core competencies and hence strategic competitive advantage.
• Introduction• Why is strategic analysis of a firm’s internal environment important?• What strategic information is needed?
• Analysing the internal environment• Components of internal analysis• What are resources?• What are strategic capabilities?• What are core competencies?• Concept of strategic competitive advantage• Linking resources, strategic capabilities, core competencies and SCA to the
market• Straying from the SCA?• Analysing competitive strengths and weaknesses
• Conclusion: completing a SWOT analysis• Strategic analysis: summary.
References
• Hanson et al., (2014) Chapter 3 (especially pp. 72-94)
• Article 1(d): Viljoen and Dann (2003) Chapter 7 (especially pp.197-198)
Readings in bold black are important.
Analyse the environment
Identify opportunities and threats
Identify the organisation’s current vision,
mission and strategic
objectives
Reassess the organisation’s vision, mission and strategic
objectives
Formulate business strategies Implement
strategiesEvaluate results
Analyse the organisation’s
resources
Identify strengths and weaknesses
A business strategy process: Rational or formal model
(Source: Robbins, S. P., Bergman, R., Stagg, I. and Coulter, M. 2009. Management, 5th edition, Pearson Education, Australia: 276; and Robbins, S. P., Bergman, R., and Stagg, I. 1997. Prentice Hall, Australia: 248 ).
IntroductionWhy is strategic analysis of a firm’s internal environment
important?
A firm operating in an attractive industry (see Topic 3) does not automatically enjoy above average returns!
An ability to secure above average returns also requires a firm to utilise its resources in a superior way to its competitors:
• Superior use of resources creates greater value for customers than competitors can achieve
• Greater value for customers is the source of above average returns!
IntroductionWhy is strategic analysis of a firm’s internal environment
important?
Strategic analysis of a firm’s internal environment focuses on the first three stages of the resource-based model of above-
average returns.
IntroductionWhy is strategic analysis of a firm’s internal environment
important?
Strategic analysis of a firm’s internal environments therefore focuses upon examining the way a firm utilises its resources.
• Superior combinations and uses of resources = competitive strengths• Poor combinations and uses of resources = competitive weaknesses.
Strategic internal analysis aims to determine a firm’s competitive strengths and weaknesses relative to its rivals in its industry =
competitive position.
The stronger a firm’s competitive position, the more likely it will earn above average returns!
10
Analysing the internal environmentWhat strategic information is needed?
Strategic analysis of a firm’s internal environment requires information on:
Analysing the internal environment What are core competencies?
A core competence
‘… (an activity) a company does especially well in comparison to its competitors’ (Hamel and Pralahad,1990 cited in Viljoen and Dann, 2003:197, bracket
added).
Analysing the internal environment What are core competencies?
Core competencies
• Are combinations of strategic capabilities that serve as a source of competitive advantage for a firm over its rivals
• Distinguish a firm competitively and give it a unique identity against its competitors
• Emerge over time through an organisational process of accumulating and learning how to deploy different resources and capabilities.
Analysing the internal environment What are core competencies?
Characteristics of core competencies:
• Systems of integrated strategic capabilities• Based on strategic capabilities (skills and knowledge) rather
than products or services• Built up through organisational experience, commitment and
investment over time• Are in a constant state of adaptation and evolution• Limited in number (maximum 5?)• Difficult to replicate; they are areas where a firm dominates it’s
competitors• Areas of activity that provide major value to customers• Unique to each organisation – can’t be acquired in the market• Are deeply embedded in the firm’s organisation and systems• Difficult to readily observe.
(Hanson et al., 2014: 80-92; Viljoen and Dann, 2003:197-198; Hubbard et al, 1996: 127-129)
Analysing the internal environment What are core competencies?
