4. INTERNAL ANALYSIS
“Everything as it
exists in nature has
one perfect
purpose. One
should look for that
one attribute that
makes it unique
from all other things”
Aristotle
5. • All organizations have
strengths and weaknesses in
the functional areas of
business.
• No enterprise is equally
strong or weak in all areas.
• Internal
strengths/weaknesses,
coupled with external
opportunities/threats and a
clear statement of mission,
provide the basis for
establishing objectives and
strategies.
6. • A firm’s strengths that cannot be
easily matched or imitated by
competitors are called
distinctive competencies.
• Strategies are designed in part
to improve on a firm’s
weaknesses, turning them into
strengths, and maybe even into
distinctive competencies.
• Building competitive advantages
involves taking advantage of
distinctive competencies.
• Distinctive competence (how
the organisation is better than or
different from its competitors).
7. • The process of performing an
internal audit closely parallels the
process of performing an
external audit.
• Representative managers and
employees from throughout the
firm need to be involved in
determining a firm’s strengths
and weaknesses.
• Performing an internal audit
requires gathering, assimilating,
and evaluating information about
the firm’s operations.
8. • Compared to the
external audit, the
process of performing an
internal audit provides
more opportunity for
participants to
understand how their
jobs, departments, and
divisions fit into the
whole organization.
9. • Resources are only
valuable if they have
one or more of the
following
characteristics:
• Rare
• Hard to imitate
• Not easily substitutable
10. • Competences are the roots
which give an organization its
competitive strengths and
which provide the nutrients
for future business
development through
intermediate core products
and/or services.
• Core competences could be
found in technology, skills
that a firm has developed
over time, processes or
business practices (ISO,
Malcolm Baldrigde Awards,
TQM), link with market needs
11. Core competences are
typically characterized as:
• Unique to the firm
• Sustainable because they are
hard to imitate or to substitute
• Once the strategic core
competences have been
found, they must be nurtured
at board level by strategic
investments in people,
technology, processes and
infrastructure.
12. End products and services
Core products and services
Core products and services
The Visible Corporation
Core competences
The unseen roots of competition
13. • VALUE CHAIN ANALYSIS
• Porter describes the business of a
firm as a value chain, in which total
revenues minus total costs of all
activities undertaken to develop
and market a product or service
yields value.
14. • Value Chain Analysis refers to the
process whereby a firm determines the
costs associated with organizational
activities from purchasing raw
materials to manufacturing products to
marketing those products.
• All firms should use value-chain
analysis to develop and nurture a core
competence and develop this
competence into a distinctive
competence.
15. 1 Company Head Office Activity
SECONDARY
6 10 14
ACTIVITIES
2 Human Resource Development 18
11 15
M
3 7 Technology Development 19
ar
gi
12
n
4 8 Procurement 16 20
5 9 13 17 21
Service
Inbound Sales &
Logistics Operations Outbound Marketing
logistics
PRIMARY ACTIVITIES
16. • Porter suggested that all businesses have a
continuous flow of activity in their business.
• The primary activities are as follows
Obtain raw materials
Get raw materials into factory
Inbound
Logistics
Make the product
Operations
Store the product
Transport to Warehouse
Outbound
logistics
Sell the product
Sales &
Marketing
Service
Maintain and refresh the product for the customer
17. • The primary or the WE ARE THE
CONSULTANTS!
basic activities are EXPERTS FROM
INBOUND TO
activities that exist in OUTBOUND
LOGISTICS
their own right.
• They are activities that
can be outsourced to
other organisations.
• Primary activities, in
essence are
businesses in their own
right. Expl. Unilever-
Frytol bottling.
18. • Within an organisation
there are three areas
that need to be
managed. These are:
• People
• Information &
Technology
Development
• Money
• These activities are
inherent within the
primary activities of
the firm.
19. • A core competence is a value-chain activity
that a firm performs especially well.
• When a core competence evolves into a
major competitive advantage, it is called a
distinctive competence.
• Firms use benchmarking to determine
whether its value chain activities are
competitive compared to rivals.
• This entails measuring the costs of value
chain activities across an industry to
determine “best practices” among
competing firms for the purpose of
duplicating or improving upon those best
practices.
20. • From the Value chain, the
firm can determine its
distinctive competence over
its competitors and also
know its strengths and
weaknesses.
• Therefore you can
capitalise on your strengths
and gain competitive
advantage.
• If it is a weakness-improve
upon it. Since it is a
competitive disadvantage
you can outsource it.
21. • Before strategy implementation, one
needs to know and study the
organisation’s resources as a whole in
terms of
• Organisational Culture
• Management style
• Marketing
• Finance
• Research and Development
• Operations and Production
• Management Information systems
22. • Internal Factors versus External Factors
• The RBV approach to competitive
advantage contends that internal
resources are more important than
external factors for a firm in achieving and
sustaining competitive advantage.
23. • Internal resources come from
three categories.
• a. Physical resources: plant,
equipment, location,
technology, raw materials,
machines, etc.
• b. Human resources:
employees, training,
experience, intelligence,
knowledge, skills, abilities, etc.
• c. Organizational resources:
firm structure, planning
processes, information
systems, patents, trademarks,
copyrights, databases, etc.
24. • The Basic Premise is that
• The mix, type, amount, and nature
of a firm’s internal resources should
be considered first and foremost in
devising strategies that can lead to
sustainable competitive advantage.
• Firms should pursue strategies that
are not currently being
implemented by any competing
firm.
26. Questions to ask after a SWOT analysis:
Which strengths represent distinctive competencies?
Do they compare favorably with what are believed
to be market or industry success requirements?
Which weaknesses disqualify the organization from
pursuing certain opportunities?
Does a pattern emerge from the SWOT analysis?
27. The purpose of the analysis is to establish
1. the effectiveness of the business
performance in the environment in which it
operates and
2. the business’s position in the market. This
includes establishing the internal strengths
and weaknesses of the business and
external opportunities and threats offered
by market conditions, competition and
customer behavior.
28. • The internal audit identifies the strengths
and weaknesses of business activities.
• The components of the internal audit
include evaluating the effectiveness of the
business’s structure, culture, financial
performance, people (and management),
business operations (processes and
technology used), strategic purpose and
planning and its market environment.
31. • Fen Side Golf Course is an internationally
known Scottish golf facility. It is not just an
eighteen hole world-class golf course, it
has a five star hotel with 250 luxury
rooms, and private leisure centre, indoor
tennis courts, as well as a series of top
class restaurants.
• Below are a series of nine activities that
add value to the Fen Side experience.
Print out the value chain above and place
the appropriate letter (below) onto the
value chain.
• .
32. • A. All staff are trained to the highest
industry standards.
• B. The hotel management team focus on
goals set out in their strategic plan.
• C. All golf course fairways are trimmed and
watered daily.
• D. Fresh fruit and vegetables are delivered
and prepared every day.
• E. The hotel has an advanced room
reservation system.
33. • F. Fen Side is promoted through
magazines targeted at the wealthy and
influential.
• G. The whole experience is based upon
high quality, professional service at every
stage.
• H. Limousines are available to take guests
to airports as they finish their stay.
• I. Fen Side has a series of contracts with
suppliers of meat and fish
