Module 1

Internal Environment Analysis

Content

• Resources• Capabilities• Competencies ( distinctive & core)• Competitive advantage • Sustainable Competitive advantage

Importance of analysis of internal organization

– Global mind-set’• Ability to study an internal environment in ways that do

not depend on the assumptions of a single country, culture, or context

– Analyze firm’s portfolio of resources and bundle heterogeneous resources and capabilities• Understand how to leverage these bundles

– An organization's core competencies creates and sustains its competitive advantage

Conditions Affecting Managerial Decisions About Resources, Capabilities, and Core

Competencies

Resources, Capabilities, and Core Competencies

• Resources, capabilities and core competencies are the foundation of competitive advantage.

Resources

• Competitive advantage is generally based on the unique bundling of several resources.

• Tangible resource• Intangible resources

Tangible Resources

These are the assets that can be seen and quantified.1. Financial resources ( borrowing capacity, ability

generate internal fund)2. Organizational resources( formal reporting

structure, planning, coordinating system)3. Physical resources ( access of raw material,

location of the plant)4. Technological resources ( patent, copyright,

trademark)

Intangible Resources

These are the assets that can be seen and quantified.1. Human resources (knowledge, trust)2. Innovation resources (ideas, capacity to

innovative)3. Reputational resources (brand name, reputation

with suppliers)

Capabilities

• Capabilities exist when resources have been purposely integrated to achieve a specific task or set of tasks.

Capabilities- example

1. Distribution : effective use of logistic2. HR : retaining employees, job satisfaction3. MIS :control of inventory4. Marketing : innovative product design, customer

satisfaction 5. Management : effective organization structure 6. Manufacturing : quality , 7. R & D : Innovative technology

Capabilities

Following characteristic of capabilities are source of competitive advantage:

• Valuable• Rare• Costly to imitate• Nonsubstitutable

Core competencies

Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rival.

It distinguishes company from the competitors and reflects firm’s strength.

Competitive advantage sustainable competitive advantage