CHAPTER 3

International Operational
Environment Of The
Business
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Analysis Of
Internal
Operation

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 The internal business
environment is defined
as the evaluation in
terms of respect,
awareness and
knowledge, and the
emotional and affective
reactions of the various
stakeholders.

Internal Business
Environment

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• Value System
• Vision, Mission, and
Objectives
• Organizational
Structure
• Human Resource
• Physical Resources
and Technological
Capabilities

Factors Influencing
Internal Environment

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 Creating
Customer’s
Value

5
The global standard for
product and services
creates customer values
that are measured by
product performance
characteristics and the
attributes for which
costumers are willing
to pay for.

Creating
Customer’s
Value

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 Customer value is
created when they
buy the product at a
reasonable price and
based on quality
standards and high
product
differentiations.

Customer Value

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 The
Challenge
Of Internal
Analysis

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 The firm’s success is not
rooted mainly in
identifying the problems,
developing alternative
strategies, and protecting
the corporate resources
but on how effective the
process of analysis and
cooperative thinking done
by all managers in
crafting the strategic
action.

The Challenge Of
Internal Analysis

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 Learning is the
process of reforms
and the
development of
new strategy.

The Challenge Of
Internal Analysis

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Management
Decision
Making

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 Managerial Decision
Making is affected by the
following:
1. Uncertainty —
Decisions are uncertain
about the conditions of
the general industry
environment as it keeps
changing overtime.
2. Complexity — The
universe of decision
making process is
complex as the
interrelated environment
is shaping so rapidly.

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 Managerial Decision
Making is affected by the
following:
3. Intra-Organizational
Conflict — The
structure of the
organization is so
designed that the
managers are task with
specific duties and
responsibilities.
Managers are working
closely with their
responsibilities and
would like to protect
their own identity in the
organization.

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 RESOURCES OF THE
INTERNAL
ENVIRONMENT
Resources are internal capabilities of
the firm which could in turn be the
source of corporate core
competencies.

Corporate resources could be tangible

and intangible as they are assets that
can be used for competitive
advantage.

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 TANGIBLE ASSET
COULD BE CLASSIFIED
AS:
a) Financial Resources — refers to the firm’s cash
flow that can be used in the operation of business.

b) Organizational Resources — refers to the

organizational structures that plans, organize,
directs, and control the operation of the business.

c) Physical Resources — these are physical assets

that are used in the operation of the business.

d) Technological Resources — refers to the

technology such as systems and procedures,
patents, corporate trademarks, copyrights, and
trade secrets.
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 INTANGIBLE
RESOURCES ARE
CLASSIFIED INTO:
a) Human Resources — refers to the skills
and knowledge base of the workers to see
and direct the corporate activities towards
the profit objective of the firm.

b) Innovation Resources — the capacity to

bring in new ideas and innovative strategies
that would be necessary in the change
process.

c) Reputational Resources — refers to the

reputation the firm has earned overtime with
its customers and other stakeholders.
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 THE FIRM’S INTERNAL
•
CAPABILITIES
Capabilities are the tangible and intangible resources that are purposely
integrated to achieve the desire results.
• The knowledge possessed by the human capital is the most significant
investment of the firm in its operation and maybe the root of all competitive
advantage.
• Involvement is the motivational process that will enhance the people’s talent
and skills. The firm’s challenge is to create an environment that allows
people to fit their individual pieces of knowledge in ways that will support its
effort to create value to all its stakeholders.
• Corporate strategies recommended the creation of training department that
will develop programs and developmental interventions that would develop
the knowledge and skills of people in the organization.

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INTERNAL CORE
COMPETENCIES
Core Competencies are internal and
external resources and capabilities that
serves as the source of competitive
advantage over rivals in the industry.
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CRITERIA FOR
SUSTAINABLE
ADVANTAGE
The firm achieves a sustained
competency when the competitor
failed to duplicate the products or
services that the firm produced or
failed in entering the firms
market niche.

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 4 Sustainable Criteria for
Competitive Advantage:
a) Valuable Capabilities- Refers to the state of how the firm can exploit
opportunities and neutralize threats in the external environment

b) Rare Capabilities- Competitive advantage results when firm develop and

exploit capabilities that differ from those shared with competitors.

c) Imitation Cost Capabilities- Cost capabilities are corporate competencies

that other firms cannot easy develop. Huge investment in capital base
could be one reason for other competitors to enter the venture if they are
not certain on their return of investment.

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 REASONS FOR FIRM TO COSTLY
IMITATE
1. Unique Historical Condition- Refers to the
ARE:
historical development of the firm that
comes at the right time and place in history.
2. The firm is casually ambiguous- It refers
to the condition when the competitors
cannot clearly understand how a firm uses
its capabilities as a foundation for
competitive advantage.
3. Social Complexity- Means that the firm’s
capabilities are the product of complex social
phenomenon.
4. Political Complexity and Government
Regulations
- Political connection in business operation is a
competitive advantage as the power to elect officials is
also dictated by business community.
- Government regulations are also factors in
competitive advantage as same industry are controlled
by the government for efficient and effective delivery of
service.
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 d) Non-substitutable
Capabilities

Refers to condition where there is no

strategic equivalent to the firm’s
existing capabilities.

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Thank You!

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