Internal Analysis | Summary and Q&A

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September 14, 2018
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GreggU
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Internal Analysis

TL;DR

This course discusses the techniques of evaluating a company's internal situation, including its resources and capabilities, cost structure, and customer value proposition, to determine its competitive strengths and potential strategic issues.

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Questions & Answers

Q: How can a company determine if its strategy is working?

A company can assess the success of its strategy by examining its financial gains, competitive strength, sales and earnings growth, customer retention rate, and image and reputation with customers. If there are persistent shortfalls and weak performance relative to rivals, it indicates a poor strategy.

Q: How can resources and capabilities contribute to a company's competitive advantage?

Resources and capabilities, such as tangible and intangible assets, contribute to a company's competitive advantage by providing valuable, rare, imitatable, and non-substitutable advantages. The more difficult and expensive they are to imitate, the greater the sustainable competitive advantage.

Q: Why is continuous development of resources and capabilities important for a company?

Continuous development and strengthening of resources and capabilities are necessary to sustain a company's competitive power. Stale resources and capabilities can impair competitiveness, therefore they need to be refreshed, modified, or even replaced to adapt to ongoing market changes.

Q: What is the significance of a company's value chain in creating customer value?

A company's value chain consists of primary activities (supply chain management, operations, distribution, sales, and service) and support activities (product development, human resource management, and general administration). These activities collectively create customer value and drive costs for the company.

Q: How can benchmarking help improve a company's internal activities?

Benchmarking involves comparing a company's performance in various value chain activities with that of other companies, aiming to identify best practices and improve the cost and effectiveness of internal activities. Access to benchmarking information can be obtained through consulting organizations and benchmarking data sources.

Q: How can a company assess its competitive strengths against rivals?

A competitive strength assessment involves listing industry key success factors, assigning weights to each measure, calculating weighted strength ratings for each company, and summing up the overall measure of competitive strength. This assessment helps identify areas of strength and weakness, as well as determine the company's net competitive advantage or disadvantage.

Q: How does management identify strategic issues that require attention?

Strategic issues are determined by analyzing industry and competitive challenges and evaluating the company's internal weaknesses. By creating a management worry list of problems and issues, management can prioritize actions to improve the company's performance and strategy.

Summary & Key Takeaways

  • A company's strategy can be evaluated based on its financial gains, competitive strength, sales and earnings growth, customer retention rate, and image and reputation with customers.

  • Resources and capabilities determine a company's competitive advantage, and their competitive power is measured by the "VRIN" tests (valuable, rare, imitatable, non-substitutable).

  • Continuous development and strengthening of resources and capabilities are necessary to maintain competitive power, and management must also focus on developing new capabilities and adapting to market changes.

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