MNG 3701 MANUAL
1ST SEMESTER 2018
LECTURER: Lynne Addison
UNIT 4
STRATEGIC ANALYSIS: ANALYSING THE
INTERNAL ENVIRONMENT.
1
,LEARNING UNIT 4
STRATEGIC ANALYSIS: ANALYSING THE INTERNAL
ENVIRONMENT.
4.3 INTRODUCTION (SG 101)
Once you have completed this learning unit, you should understand the need
for and be able to execute the internal analysis of an organisation and identify
its sources of sustainable competitive advantage that constitute important
information for strategic planning and ultimately for the selection of
appropriate competitive business level strategies.
4.4 IMPORTANCE OF THE INTERNAL ANALYSIS OF THE
ORGANISATION (STUDY GUIDE PAGE 103)
The study guide points out that fundamentally, strategic management is all
about strategies that will enable organisations to outperform their rivals in
dynamic and increasingly competitive markets. They go on to say that the
primary objective of strategy therefore, is to gain a sustainable competitive
advantage in satisfying one’s customers’ needs better than one’s rivals, which
should result in superior profitability and growth.
According to Jones and Hill (2013:83), cited I the study guide page 103, an
organisation has a competitive advantage over its rivals when its profitability
is greater than the average of all the organisations in its industry. Note it has a
sustainable competitive advantage when it is able to maintain this above-
average profitability over a number of years. It should be noted that internal
analysis therefore aims at identifying the sources of an organisation's
competitive advantage that should enable it to build a sustainable competitive
advantage.
The result of internal analysis combined with those of the external analysis is
based on the organisation's vision, mission and long-term objectives and will
provide managers with the information they need to devise and select the
competitive business level strategies that will enable them to attain a
sustainable competitive advantage in pursuing their long-term objectives.
The study guide further states that notwithstanding some differences in the
approach to internal analysis, this typically requires the following three steps
(Jones & Hill, 2013:83-84):
(1) Managers need to understand the process by which organisations create
value for customers and profit for the organisation, and the role of
resources, capabilities and competencies in this regard.
(2) Managers need to understand the importance of superior effectiveness,
efficiency, innovation, quality and customer responsiveness in the
process of creating value and generating above-average profitability.
(3) Managers must be able to identify and analyse their organisation's
sources of competitive advantage to know what drives the profitability
of the organisation and where opportunities for further improvement
might lie.
2
, 4.5 IDENTIFYING RESOURCES, CAPABILITIES, AND CORE
COMPETENCIES
4.5.1 INTRODUCTION
It must be understood that the resources, capabilities and
competencies of an organisation are linked, and need to be fully
understood in the context of internal analysis.
In this section the study guide explains these concepts as sources
of competitive and sustainable competitive advantage.
According to Jones and Hill (2013:84-85), a competitive
advantage is based on core competencies which they describe as
follows: “Firm-specific strengths that allow a company to
differentiate its products from those offered by rivals, and/or
achieve substantially lower costs than its rivals”.
According to these authors, core competencies arise from two
complementary sources: the resources and capabilities
of an organisation. In the sections that follow we discuss resources,
capabilities and core competencies in more detail.
4,5,2 IDENTIFYING RESOURCES.
4.5.2.1. (7.2.1 PAGE 117 IN TEXT BOOK) RESOURCES
Resources are the productive assets owned by an organisation and
can be grouped into the following five categories:
(1) Financial capital resources: This is the ability for the
organisation to generate funds.
(2) Physical capital resources: Operational and manufacturing
ant equipment, location and access to raw materials.
(3) Human capital resources: Knowledge, management and
employee insight, intellect, relationships, training, experience
and judgement
(4) Organisational capital resources: Reporting structure and
management, including planning, coordinating, controlling
and networks.
(5) Technological capital resources: ICT systems.
Not all organisations possess similar endowments of the above
types of resources, and all aspects of an organisation's resources are
not strategically relevant.
3
1ST SEMESTER 2018
LECTURER: Lynne Addison
UNIT 4
STRATEGIC ANALYSIS: ANALYSING THE
INTERNAL ENVIRONMENT.
1
,LEARNING UNIT 4
STRATEGIC ANALYSIS: ANALYSING THE INTERNAL
ENVIRONMENT.
4.3 INTRODUCTION (SG 101)
Once you have completed this learning unit, you should understand the need
for and be able to execute the internal analysis of an organisation and identify
its sources of sustainable competitive advantage that constitute important
information for strategic planning and ultimately for the selection of
appropriate competitive business level strategies.
4.4 IMPORTANCE OF THE INTERNAL ANALYSIS OF THE
ORGANISATION (STUDY GUIDE PAGE 103)
The study guide points out that fundamentally, strategic management is all
about strategies that will enable organisations to outperform their rivals in
dynamic and increasingly competitive markets. They go on to say that the
primary objective of strategy therefore, is to gain a sustainable competitive
advantage in satisfying one’s customers’ needs better than one’s rivals, which
should result in superior profitability and growth.
According to Jones and Hill (2013:83), cited I the study guide page 103, an
organisation has a competitive advantage over its rivals when its profitability
is greater than the average of all the organisations in its industry. Note it has a
sustainable competitive advantage when it is able to maintain this above-
average profitability over a number of years. It should be noted that internal
analysis therefore aims at identifying the sources of an organisation's
competitive advantage that should enable it to build a sustainable competitive
advantage.
The result of internal analysis combined with those of the external analysis is
based on the organisation's vision, mission and long-term objectives and will
provide managers with the information they need to devise and select the
competitive business level strategies that will enable them to attain a
sustainable competitive advantage in pursuing their long-term objectives.
The study guide further states that notwithstanding some differences in the
approach to internal analysis, this typically requires the following three steps
(Jones & Hill, 2013:83-84):
(1) Managers need to understand the process by which organisations create
value for customers and profit for the organisation, and the role of
resources, capabilities and competencies in this regard.
(2) Managers need to understand the importance of superior effectiveness,
efficiency, innovation, quality and customer responsiveness in the
process of creating value and generating above-average profitability.
(3) Managers must be able to identify and analyse their organisation's
sources of competitive advantage to know what drives the profitability
of the organisation and where opportunities for further improvement
might lie.
2
, 4.5 IDENTIFYING RESOURCES, CAPABILITIES, AND CORE
COMPETENCIES
4.5.1 INTRODUCTION
It must be understood that the resources, capabilities and
competencies of an organisation are linked, and need to be fully
understood in the context of internal analysis.
In this section the study guide explains these concepts as sources
of competitive and sustainable competitive advantage.
According to Jones and Hill (2013:84-85), a competitive
advantage is based on core competencies which they describe as
follows: “Firm-specific strengths that allow a company to
differentiate its products from those offered by rivals, and/or
achieve substantially lower costs than its rivals”.
According to these authors, core competencies arise from two
complementary sources: the resources and capabilities
of an organisation. In the sections that follow we discuss resources,
capabilities and core competencies in more detail.
4,5,2 IDENTIFYING RESOURCES.
4.5.2.1. (7.2.1 PAGE 117 IN TEXT BOOK) RESOURCES
Resources are the productive assets owned by an organisation and
can be grouped into the following five categories:
(1) Financial capital resources: This is the ability for the
organisation to generate funds.
(2) Physical capital resources: Operational and manufacturing
ant equipment, location and access to raw materials.
(3) Human capital resources: Knowledge, management and
employee insight, intellect, relationships, training, experience
and judgement
(4) Organisational capital resources: Reporting structure and
management, including planning, coordinating, controlling
and networks.
(5) Technological capital resources: ICT systems.
Not all organisations possess similar endowments of the above
types of resources, and all aspects of an organisation's resources are
not strategically relevant.
3
