Internal analysis is the process of identifying and evaluating an organization's  specific characteristics, including its resources, capabilities and core  competencies. An internal analysis is comprised of looking at the following  elements, organization's current vision, the mission, strategic objectives and  strategies. Resources are the assets that an organization has for carrying out  whatever work activities and processes relative to its business definition,  business mission and goals and objectives. Commonly, these resources are as  follows, financial resources, physical assets, human resources, intangible  resources and structural cultural resources, organizational resources must be  processed or used in some way to get value out of them. The various resources  are the inputs for the organizational capabilities. Now, organizational capabilities are the complex and coordinated network of organizational routines and  processes that determine how efficiently and effectively the organization  transforms its inputs, its resources, into outputs, their products and or services.  Sustainable competitive advantage is the prolonged maintenance of competitive advantage capabilities that lead to a competitive advantage today may not  necessarily continue to do so as the market conditions shift, competition  changes, dynamic, flexible capabilities are an organization's ability to build,  integrate and reconfigure capabilities to address rapidly environmental changes  or shifts. Distinct organizational capabilities are the extraordinary and unique  capabilities that distinguish the organization from its competitors. They allow the  organization to develop a sustainable competitive advantage to outperform its  competition. Three characteristics that make a capability distinctive are as  follows, it contributes to superior customer value and offers real, measurable  benefits to the customers. It's difficult for competitors to imitate or to duplicate,  and it allows the organization to use the capacity in a variety of ways. Core  competencies are the organization's major value creating skills and capabilities  that are shared across multiple product lines or multiple businesses, this internal sharing process is what distinguishes core competencies from distinctive  capabilities. The relationship between organizational capabilities, distinctive  organizational capabilities and core competencies are as follows, organizational  capabilities are the fundamental building blocks for developing core  competencies. Now, every organization has organizational processes and  routines to get work done next the major value creating skills and capabilities  are created from the organization's many capabilities. And finally, if these core  competencies are established, they can improve and enhance organizational  capabilities while contributing to the development of certain distinctive  organizational capabilities, a competitive advantage is what sets an organization apart. You see, without a sustainable competitive advantage, the organization's  long run success and survival are uncertain. The aggregate reason for doing an  internal analysis is to assess what the organization has or does not have, or  what it can do or what it cannot do, in other words, its strengths and 

weaknesses. Strengths are resources that the organization possesses and  capabilities that the organization has developed, both of which can be exploited  and developed into sustainable competitive advantage. Weaknesses are  resources and capabilities that are lacking or deficient and that prevent the  organization from developing a sustainable competitive advantage. Now they  need to be corrected, particularly if they're in important areas that are preventing the organization from attaining the sustainable competitive advantage relative to the value chain analysis, customers demand some type of value from the goods  and services they purchase. Customer Value emerges from the following three  broad categories. The product is unique and different. The product is low priced  and/or the providing organization has the ability to quickly respond to specific or  distinctive customer needs. Value chain analysis is a systematic way of  examining all of the organization's functional activities and how well they create  customer value. It assesses the organization's ability to create customer value  through its activities. In other words, what are the organization's strengths and  weaknesses in these areas? There are nine areas of value assessment made  up of five primary activities and four support activities. Primary activities are  those that actually create customer value. These activities include inbound  logistics, operations, outbound logistics, marketing and sales and customer  service support activities provide support for the primary activities, as well as for  each other. These activities include procurement, technological development,  human resource management and firm infrastructure. Now, if an organization  can perform any of these activities more effectively or efficiently than its  competitors, it should be able to achieve a competitive advantage. The  advantage of the value chain analysis technique is that it emphasizes the  importance of customer value and how well an organization performs the  primary and support activities to create customer value. That stated, this  technique may be somewhat confusing and complex to use in assessing  organizational strengths and weaknesses. Organizational work activities do not  always align efficiently into the primary and support activities framework. What  do we do if the organizational work activities don't line up efficiently with the  primary and support activities framework? Well, we take a look at the internal  audit the internal audit approach starts with the premise that every organization  has certain functions that it must perform, an internal audit is a thorough  assessment of an organization's various internal functional areas. Now, strategic decision makers use the internal audit to assess the organization's resources  and capabilities from the perspective of its different functions. The following six  primary functional areas are productions, operations, marketing, research and  development, R and D, finance and accounting management, including human  resource management and IT information systems, depending on products,  markets and industries, individual organizational structures may vary, therefore  they may emphasize different sets of functional areas. The internal 

environmental analysis process proposes assessing an organization's internal  activities by doing the following, surveying strengths and weaknesses. The  SWOT analysis, categorizing these strengths and weaknesses in terms of  resources and capabilities, investigating the potential of these strengths to lead  to competitive advantage, and evaluating the ability of these competitively  relevant resources and capabilities to serve as the basis for an appropriate  competitive strategy. The main aspect is its emphasis on linking the identification of organizational strengths and weaknesses with the development of an  appropriate competitive advantage, the capabilities assessment profile  resembles the internal environmental analysis process. The similarity is that it  focuses on deeper evaluation of an organization's strengths and weaknesses.  The difference is that it only focuses on an organization's capabilities. It's  important to note that the analysis of capabilities is complex because it is not as  easily identifiable as organizational functions or even the value creating primary  and Support Activity models, plus the complex nature of capabilities makes it  hard for competitors to imitate, and this is the basis for a sustained competitive  advantage assessment. Consists of the following two phases. Phase one  identify distinctive capabilities through an internal analysis activity, and phase  two, develop and leverage these distinctive capabilities through a strategy  development activity. Now the steps involved in phase one identifying distinctive  organizational capabilities include the following, number one, prepare a current  product market profile that emphasizes organization customer interactions.  States what the organization is selling, whom it is selling to, and whether or not  is providing superior customer value and desired benefits. Step two, identify  sources of competitive advantage and disadvantage in the main product market  segments. This step determines why customers choose the organization's  products rather than those of competitors, and involves information on cost,  product and service attributes, such as when customers purchase and what  they're actually purchasing. Three describe all of the organizational capabilities  and competencies in this step, the organization examines the resources, the  skills, the abilities of the various divisions, and then determines which of them  lead to a competitive advantage. Step four, sort the core capabilities and core  competencies according to strategic importance. In this stage, you got to judge  the strategic importance according to the capabilities, availability, its tangible  benefits, and its level of difficulty to imitate and step five, identify and agree on  the key capabilities and key competencies. Key Capabilities and Competencies  provide the basis for resource allocation. There are several criteria that can be  used to determine whether resources and capabilities are strengths or  weaknesses. So in order to determine whether resources and capabilities are  strengths or weaknesses, let's consider past performance trends, where they  include any organizational performance measures such as financial ratios,  operational efficiency metrics, employee productivity statistics, or data on 

adherence to quality control standards, any internal organizational performance  area that is measurable could be assessed by looking at the trends, comparing  specific performance goals or targets with actual performance, provides us with  clues to tell how well the various internal areas are performing. Comparing your  organization's performance with the performance of competitors helps to  

determine whether these strengths and weaknesses can be used to influence  the development of potential sustainable competitive advantage. Qualitative  opinions or assessments of organizational members can be useful in  determining areas of strength or weakness. For example, if outside consultants  are working with any of the organization's divisions or units, what opinions do  they have? What do they see as strengths or weaknesses? So we'll wrap it with  the front end. Why should we do an internal analysis? An internal analysis is a  process of identifying and evaluating an organization's specific characteristics,  including its resources, capabilities and core competencies. The following are  two basic reasons why conducting an internal analysis is essential. First, it's the  only way to identify an organization's strengths and weaknesses so that you can make your way through the SWOT analysis process. And finally, it's needed for  making good strategic decisions. The outcome of the process yields valuable  information about an organization specific, assets, skills, work routines and  processes. Information that is developed from an internal analysis, coupled with  the information that is gathered from an external analysis, provides the basis for  developing strategic alternatives. 



Last modified: Tuesday, July 1, 2025, 8:21 AM