Internal Analysis and Strategic Capability

Internal Analysis

• Internal analysis is a crucial part of strategic analysis.
• It examines the internal organization, considering factors like competitive environment and choices for development before considering organizational implementations and performances.
• The analysis identifies the organization's resources and competencies.

Strategic Capability

• Strategic capability is an organization's ability to integrate resources and competencies.
• It differentiates successful firms in a sector from their less successful competitors.
• Firms that are successful are usually able to integrate their resources and competencies better than others.
• An organization's capability can be valuable by increasing customer value or by creating an advantage over competitors.

Resources

• Resources are the assets a company uses to operate.
• Resources can be tangible (e.g., financial, physical, human, buildings) or intangible (e.g., technologies, brand, corporate culture).
• These assets enable a company to develop its activities.

Competencies

• Competencies describe how an organization uses its resources to achieve its aims.
• Unique combinations of competencies lead to strategic capabilities, creating value for the organization.
• Examples of activities where competencies are used include project management, innovation management, and just-in-time strategies.

Typology of Resources and Competencies

• A framework distinguishes resources and competencies based on whether they're similar to, or better than, those of competitors (copyable):
  • RESOURCES:
    • Basic: Identical to those of competitors, or easy to copy.
    • Unique: Better than competitors, hard to copy.
  • COMPETENCIES:
    • Threshold: Basic competencies found in most competitors.
    • Core: Unique to the organization, differentiate from competitors and hard to copy.

VRIN Model

• The VRIN model is a framework to identify resources and competencies that drive a competitive advantage.
• The model identifies factors crucial for a competitive advantage:
  • Valuable (Value for the Customer): Resource or competency adds value to the customer's needs.
  • Rare: Resource or competency possessed by a small number or no rivals.
  • Inimitable: Resource or competency that is hard to copy.
  • Non-Substitutable: There is no viable alternative to the resource or competency.
• Following the VRIN method gives a firm a competitive advantage.

Four Criteria Defining Strategic Capability

• Valuable: Resources or competencies creating value for customers.
• Rare: Possessed by only a few (or no) competitors.
• Inimitable: Difficult for others to develop. This could be due to complexity, causal ambiguity or unique historical conditions.
• Non-Substitutable: No viable alternative exists.

VRIN Analysis

• A table used to systematically evaluate resources and competencies considering if they're valuable, rare, inimitable, and non-substitutable.
• The analysis determines whether the organization has a competitive advantage (sustainable or temporary) or a disadvantage (parity or below).

Value Chain

• A framework used to identify resources and competencies that create value in an organization.
• The value chain segments the organization into distinct activities, which are then examined to identify the resources and competencies driving value creation.

Examples

• The suggested examples for VRIN analysis include well-known organizations such as STIB, UCL St Louis - Brussels, Ben & Jerry's, LVMH, McDonald's, Apple, Adidas, Tesla, and Patagonia.