Chapter

Internal Analysis
Learning Outcomes
 appreciate the role a firm’s resources and
capabilities play in formulating strategy;
 identify and appraise the resources and
capabilities of a firm;
 evaluate the potential for a firm’s resources
and capabilities to confer sustainable
competitive advantage;
 use the results of resource and capability
analysis to formulate strategies that exploit
internal strengths while defending against
internal weaknesses. 2
Analysing resources and capabilities: The interface
between strategy and the firm.

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4
3. Internal Environment
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3.1.1 Value Chain Analysis
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Source: Based on the discussion in Michael E. Porter, Competitive Advantage (New York: Free Press, 1985), pp. 37–43.
Source: Based on the discussion in Michael E. Porter, Competitive Advantage (New York: Free Press, 1985), pp. 37–43.
3.1.2 Strategic Capability
The Resource-Based View of Strategy (RBV)
 “...The resource-based view emphasizes the
internal capabilities of the organisation in
formulating strategy to achieve a sustainable
competitive advantage.” A Henry, pp. 126
 Strategic capability is based on the resources
available to the organisation and the competencies
it develops in order to make use of the resources
(Chief Advocates: Hamel & Prahalad(1990);
Rumelt(1991); Barney(1991); Grant(1991)).
Definition of Resources and Capability
 Resource
 Is a productive input or competitive asset that is
owned or controlled by a company (e.g., a fleet of
oil tankers).
 Capability
 Is the capacity of a firm to perform some activity
proficiently (e.g., superior skills in marketing). It is a
“firm’s capacity to deploy resources for a desired
end result”.
Resources
The
Competency
framework
Resources
 THRESHOLD RESOURCES – “needed to play”
Those resources that an organisation needs to
have in order to meet the minimum requirements
of its customers
 For example, an airline needs more than a fleet
of planes, it will also need all the supporting
structure, including landing and fly-over rights
 DISTINCTIVE RESOURCES – “needed to win”
“...those resources that criPcally underpin
competitive advantage and that others cannot
easily imitate or obtain.”
 For example, a strong brand name or 17
reputation
Competencies
 THRESHOLD COMPETENCIES – “needed to play”
Those minimum competences an organisation
requires in order to ensure that resources are
deployed efficiently enough to meet minimum
customer requirements
 For example, an airline will need to ensure its
operations conform to minimum safety
standards
 DISTINCTIVE (CORE) COMPETENCIES - “needed
to win”
“...the linked set of skills, activities and resources
that, together, deliver customer value, differentiate 18
a business from its competitors and, potentially,
 3.2 Developing strategy implications

The framework for appraising resources and capabilities.

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Discussion
Grant & Jordan (2015), Foundations of
Strategy: Closing Case Wal‐Mart Stores,
Inc. Page 114-117

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