MGMT 4813 Strategic Management Internal Analysis Sharon D ✓ Solved

MGMT 4813 Strategic Management Internal Analysis Sharon D.

Internal Analysis (SW of SWOT) Identify strengths and weaknesses that generate competitive advantages and disadvantages. Qualitative and quantitative measures of competitive advantage Qualitative assessment—VRIO analysis (Barney, 1995 article available for download on Blackboard) VRIO framework helps to identify competitive advantages, disadvantages, competitive parity, and economic profits (normal or above normal).

Qualitative Assessment of Competitive Advantage--Conceptual Background Identify internal strengths and weaknesses, critical resources and capabilities using value chain analysis. Identify a firm’s sources of economic value added versus competitors.

Resources and Capabilities include Tangible (i.e., physical property, financial resources) or intangible (i.e., intellectual property, goodwill). Capabilities refer to a company’s skills at coordinating and using its resources, a distinctive (core) competency that can be leveraged across multiple products or markets.

The Resource-Based View Firm-specific theory explains why some firms perform better than others. It assumes a firm’s resources and capabilities are the primary drivers of competitive advantage and economic performance.

Resource heterogeneity - firms have different resources/capabilities; Resource immobility - costly for firms to acquire or develop resources/capabilities; some may be difficult to transfer without selling the firm as a whole.

Examine a firm’s value chain to identify potential sources of competitive advantage. If any exist, assess the sustainability of competitive advantages using the VRIO framework.

Using its value chain, a firm that has a competitive advantage has created a wider wedge between customers’ willingness to pay and its opportunity costs associated with providing a product or service. Analyze cost of value chain activities and customers’ willingness to pay relative to the competition.

Utilize the VRIO Framework to evaluate resources and capabilities: Valuable, Rare, Costly to Imitate, and Organization.

Assess how these resources can lead to competitive implications, including temporary advantages and sustained advantage depending on their properties.

Paper For Above Instructions

Introduction

Internal analysis is a fundamental component of strategic management that allows firms to assess their strengths and weaknesses in relation to the external environment. This paper will explore the internal analysis process using the VRIO framework to evaluate the resources and capabilities of a hypothetical firm. By utilizing qualitative and quantitative measures of competitive advantage, we aim to identify sustainable competitive advantages within the firm's value chain.

Understanding Internal Strengths and Weaknesses

In strategic management, identifying internal strengths and weaknesses is crucial. Strengths can include unique resources or capabilities that provide a competitive edge, while weaknesses may represent deficiencies that can hinder performance. Applying the VRIO framework, we assess resources based on four criteria: Value, Rarity, Inimitability, and Organization. For example, a company that possesses innovative technology (valuable and rare) but lacks the organization to exploit it efficiently may experience limited success.

Resource-Based View (RBV)

The Resource-Based View provides a theoretical foundation for understanding how internal resources drive performance. According to Wernerfelt (1984), the unique combination of tangible and intangible resources can yield heterogeneity in firm performance. A firm that invests in research and development will develop capabilities that competitors may struggle to imitate due to high costs (Barney, 1991).

Value Chain Analysis

Value chain analysis is an effective tool for identifying competitive advantages across various activities within a firm. By dissecting the primary and support activities, firms can discover how specific resources contribute to overall value creation. Research & Development (R&D), for example, can lead to innovative products while efficient customer service enhances customer satisfaction, thereby increasing willingness to pay.

Assessing Competitive Advantages

Utilizing the VRIO framework, we can systematically evaluate which resources and capabilities may confer sustainable competitive advantages. Resources must be valuable (enable the firm to capture opportunities), rare (not easily available to competitors), costly to imitate (difficult for competitors to replicate), and organized effectively to be exploited.

Case Study: Hypothetical Company

Let us consider a hypothetical tech company, “Tech Innovations,” which specializes in developing cutting-edge software solutions. An internal analysis reveals several strengths: a strong patent portfolio, skilled workforce, and robust research capabilities. An analysis through the VRIO lens indicates that these resources are valuable (they drive innovation), rare (patents limit competition), and somewhat inimitable (high costs and expertise are required to replicate them).

Value Chain Insights

An investigation of Tech Innovations’ value chain reveals that its primary activities are particularly advantageous. The company’s commitment to R&D results in superior products that stand out in the marketplace. This differentiates Tech Innovations from competitors who lack such capabilities.

Sustainability of Competitive Advantages

To determine the sustainability of these competitive advantages, we explore three factors: market conditions, the potential of resource substitutes, and competitor actions. Tech Innovations’ strong brand loyalty and established customer base (due to ongoing support and high-quality service) make its advantages sustainable in the short to mid-term, especially if the firm continually innovates and adapts.

Conclusion

The internal analysis facilitates a deeper understanding of the critical resources and capabilities that comprise a firm’s competitive advantages. By applying the VRIO framework, companies can effectively assess their strategic position. The synthesis of internal strengths leads to superior performance, informing strategic decisions that enhance sustainability.

References

  • Barney, J. (1995). Looking Inside for Competitive Advantage. The Academy of Management Executive (1993-2005), 9(3), 49-61.
  • Wernerfelt, B. (1984). A Resource-Based View of the Firm. Strategic Management Journal, 5(2), 171-180.
  • Peteraf, M. A. (1993). The Cornerstones of Competitive Advantage: A Resource-Based View. Strategic Management Journal, 14(3), 179-191.
  • Hill, C. W. L., & Jones, G. R. (2004). Strategic Management: An Integrated Approach. 6th Ed.
  • Barney, J. B. (1986). Strategic Factors Markets: Expectations, Luck, and Business Strategy. Management Science, 32(10), 1231-1241.
  • Barney, J. B. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1), 99-120.
  • Udemba, N. F. (2020). Skills Needed for Successful Management of Small and Medium Scale Manufacturing Industries by Entrepreneurs in Anambra State, Nigeria. European Journal of Education Studies.
  • Grant, R. M. (1991). The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formulation. California Management Review, 33(3), 114-135.
  • Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2007). Strategic Management: Competitiveness and Globalization. 7th Ed.
  • Teece, D. J. (2007). Explicating Dynamic Capabilities: The Nature and Microfoundations of (Sustainable) Enterprise Performance. Strategic Management Journal, 28(13), 1319-1350.

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