1. INTERNAL ENVIRONMENT ANALYSIS

2. Introduction
Strategic analysis of any Business enterprise involves two stages: Internal and External analysis.
Internal analysis is the systematic evaluation of the key internal features of an organization.

3. Four broad areas need to be considered for internal analysis
The organization’s resources, capabilities.
The way in which the organization configures and co-ordinates its key value-adding activities.
The structure of the organization and the characteristics of its culture.
The performance of the organization as measured by the strength of its products.

4. Internal analysis Analysis of the global business
Global value chain analysis: configuration and co-ordination
Resources, capabilities and core competences
Cultural and structural analysis
Global products and performance
Internal analysis

5. Resources
Resources are assets employed in the activities and processes of the organization.
They can be tangible or intangible.
They can be obtained externally (organization-addressable) or internally generated (organization-specific).
They can be specific and non-specific:
Specific resources can only be used for highly specialized purposes and are very important to the organization in adding value to goods and services.
Assets that are less specific are less important in adding value, but are more flexible.

6. Resources fall within several categories:
Human
Financial
Physical
Technological
Informational
A resource audit would include an evaluation of resources in terms of availability, quantity and quality, extent of employment, sources, control systems and performance.

7. General Competences/capabilities
They are assets like industry-specific skills, relationships and organizational knowledge which are largely intangible and invisible assets.
Competences and capabilities will often be internally generated, but may be obtained by collaboration with other organizations.
Certain competences are likely to be common to competing businesses within a global industry or strategic group.

8. Core Competences/Distinctive Capabilities
Core competences or distinctive capabilities are combinations of resources and capabilities which are unique to a specific organization and which are responsible for generating its competitive advantage.
Kay (1993) identified four potential sources of Core competences:
Reputation
Architecture (i.e., internal and external relationship)
Innovation
Strategic assets

9. Criteria to evaluate Core Competences
Complexity: How elaborate is the bundle of resources and capabilities which comprise the core competence?
Identifiability: How difficult is it to identify?
Imitability: How difficult is it to imitate?
Durability: How long does it to be replaced by an alternative competence?
Superiority: Is it clearly superior to the competences of other organizations?
Adaptability: How easily can the competence be leveraged or adapted?
Customer orientation: How is the competence perceived by customers and how far is it linked to their needs?

10. The relationships between resources, capabilities and core competence
Resources: human, financial, physical, technological, legal, informational Tangible and visible assets
Capabilities: Industry-specific skills, relationships, organizational knowledge Intangible and invisible assets
Core competence Distinctive and superior skills, technology relationships, knowledge and reputation of the firm Unique, and difficult to copy
Perceived customer benefits/value added + =
Inputs to the firm’s processes
Integration of resources into value-adding activities
Denotes feedback loop denotes core competence development
Not all capabilities are core competences – only those that add greater value than those of competitors
The relationships between resources, capabilities and core competence

11. Global Value Chain Analysis
Competitive advantage depends on the ability of the organization to organize its resources and value- adding activities in a way that is superior to its competitors.
Value chain analysis is a technique developed by Porter (1985) for understanding an organization’s value-adding activities and relationship between them.

12. Value can be added in two ways:
By producing products at a lower cost than competitors
By producing products of greater perceived value than those of competitors.
Porter extended value chain analysis to the value system, analysis of the relationship between the organization, its suppliers, distribution channels and customers.

13. The Value Chain
The value chain is the chain of activities which results in the final value of a business’s products.
Value added, or margin is indicated by sales revenue minus costs.
Porter divided internal parts of organization into primary and support activities

14. Primary activities are those that directly contribute to production of good or services and organization’s provision to customer.
Support activities are those that aid primary activities, but do not themselves add value.

15. The Firm as a Value Chain
Support Activities
Company Infrastructure
Information Systems
Human Resources
Materials Management
R & D
Production
Marketing & Sales
Service
Primary Activities

16. Certain activities or combinations of activities are likely to relate closely to the organization’s core competences, termed core activities. They:
Add the greatest value.
Add more value than the same activities in competitors’ value chains.
Relate to and reinforce core competences.
Other value chain activities relate to capabilities, but do not add greater value than competitors and therefore do not relate to core competence.

17. The Value System
The value chain of an individual organization provide an incomplete picture of its ability to add value.
Many value-adding activities are shared between organizations often in the form of a collaborative network.
As organizations identify and concentrate on their core competences and core activities, they increasingly outsource activities to other business for whom such activities are core.

18. The value system is the chain of activities from supply of resources through to final consumption of a product.
The total value system, in addition to the organization’s own value chain, can consists of upstream linkages with suppliers and downstream linkages with distributions and customers.
The value system is a similar concept to that of the supply chain and illustrates the interactions between an organization, its suppliers, distribution channels and customers.

19. The Value System Competitor Supplier Distribution channel Customers
Organization
The Value System

20. The “Global” Value Chain
The configuration of an organization’s activities relates to where and in how many nations each activities in the value chain is performed.
Co-ordination is concerned with the management of dispersed international activities and the linkages between them.
Managers must examine the current configuration of value-adding activities and the extent and methods of co-ordination as part of their strategic analysis, which may determine possibilities for reconfiguration or improving co-ordination.

21. A global business has two broad choices of 1. configuration:
Concentration of the activity in a limited number of locations to take advantage of benefits offered by those locations.
Dispersion of the activity to a large number of locations.
Change in the business environment (e.g., technological change) may well lead to changes over time in the configuration that gives greatest competitive advantage.

22. 2. CO-ORDINATION:
Co-ordination is essentially about overseeing the complexity of the organization’s configuration such that all value-adding parts of the business act in concert with each other to facilitate an effective overall synergy.
Those business that overcome the potential difficulties of co- ordination are those that sustain the greatest competitive advantage.
Analysis of configuration and methods of co-ordination assists in the process of understanding current competences and identifying the potential for strengthening and adding to them.

23. Internal co-ordination External co-ordination
Core competences
Core activities
Value chain
Configuration
Concentration
Dispersion
Internal activities
External activities
Co-ordination
Internal co-ordination
Internal linkages
Value-adding activities
External co-ordination
External linkages
Suppliers
Channels
Customers
Value system
Managing the value system