Unit 3: Overview – Evaluating the Internal Environment
In traditional approaches to assessing an organization’s internal environment, a manager’s primary goal would be to determine the firm’s relative strengths and weaknesses. These also are two elements of the SWOT analysis. There are many limitations of SWOT analysis, however, including its static perspective, the potential to overemphasize a single dimension of a firm’s strategy, and the likelihood that an organization’s strengths do not necessarily help the firm create value or competitive advantages.
There are two frameworks that serve to complement SWOT analysis in assessing a firm’s internal environment: Porter’s value chain analysis and the resource-based view of the firm. In conducting a value chain analysis, a manager first divides the firm into a set of value creating activities. These include primary activities such as inbound logistics, operations, and service as well as support activities that include procurement and human resources management. The manager then analyzes how each activity adds value as well as how interrelationships among value activities in the firm and among the firm and its customers and suppliers add value. Thus, instead of merely determining a firm’s strengths and weaknesses per se, the manager has analyzed them in the overall context of the firm and its relationships with customers, suppliers, and the value system.
Part of the internal strategy development process is determining what strategies a company can use best based on their resources. The company’s resources will help determine if it is best to differentiation based on a specific market segment (seniors), on cost (lowest price), or on a focused differentiation (always first with current technology). Each of these strategies requires different resources in personnel, material and speed of internal process.
Unit Learning Outcomes
At the conclusion of the unit, the learner will be able to:
1. Apply a value chain analysis and describe its value as an internal strategic tool. (CLO 3, 6)
2. Differentiate between the vision and mission of an organization and how they reflect an organization’s culture. (CLO 2)
3. Evaluate how organization’s business model, systems and culture affect the strategy and tactics the organization might use to meet goals and objectives. (CLO 2)