MGMT 680 Ch. 5 - Internal & External Analyses in Strategic Management

What is internal analysis?

Analysis that focuses on evaluating the firm’s internal capabilities, resources, and competencies inside the organization

What questions does internal analysis answer?

• What’s going on inside the company?

• What are we dealing with internally?

• How well do we know ourselves?

• How will an awareness and cognizance of our internal situation push us towards achieving our version of success?

What are the key components of internal analysis?

1. Resource-based view (RBV)

2. Core competencies

3. Value chain analysis

4. SWOT analysis

Explain the Resource-based View (RBV) component of Internal Analysis

A strategic management framework that states a firm’s competitive advantage comes from its unique bundle of resources and capabilities; focuses on internal resources

What is the Core Competencies component of Internal Analysis?

Unique strengths and capabilities that distinguish an organization from its competitors and enable it to create value for customers

What is the Value Chain Analysis component of Internal Analysis?

Involves evaluating the sequence of activities required to create and deliver a product or service to customers

Explain SWOT Analysis component of Internal Analysis

Used for assessing an organization's strengths, weaknesses, opportunities, and threats

What company exemplifies SWOT analysis?

Shopify

Explain external analysis

• Analysis focused on evaluating the external environment in which an organization operates

• Helps organizations adapt to changes, identify emerging trends, and position itself for short and long-term success

What are the key components of external analysis?

1. PESTEL analysis

2. Porter’s Fiver Forces

3. Competitor analysis

4. Market analysis

Explain the PESTEL Analysis component of External Analysis

• A framework to assess the macro-environmental forces impacting a firm's operations and strategic decisions

• PESTEL: Political, Economic, Social, Technological, Environmental, and Legal forces

What does PESTEL stand for?

An acronym of 6 macro-environmental forces that affect firms:

• Political

• Economic

• Social

• Technological

• Environmental

• Legal

What company exemplifies PESTEL analysis?

TikTok

Explain the Porter’s Five Forces component of External Analysis

A framework designed to analyze the competitive intensity and attractiveness of an industry by examining five key forces:

1. Threat of new entrants

2. Threat of substitutes

3. Bargaining power of buyers

4. Bargaining power of suppliers

5. Competitive rivalry

What are the five forces in Porter’s Five Forces framework?

1. Threat of new entrants

2. Threat of substitutes

3. Bargaining power of buyers

4. Bargaining power of suppliers

5. Competitive rivalry

Explain the Competitor Analysis component of External Analysis

Assessment of the strengths, weaknesses, strategies, and capabilities of competitors operating in the same industry or market

What are the key steps of a competitor analysis?

1. Identify competitors

2. Gather information (on competitors)

3. Analyze competitive strategies (of competitors)

4. Evaluate strengths and weaknesses (compare theirs to your firm’s)

5. Assess market positioning (of competitors)

6. Identify strategic implications (on your firm)

Explain the Market Analysis component of External Analysis

Analysis that involves evaluating the size, trends, competition, and customer demographics within a selected market

What are the key steps of market analysis?

1. Define the market

2. Gather market data

3. Analyze market trends

4. Identify market segments

5. Evaluate competitor positioning

6. Forecast market potential

Why is integrating internal and external analyses important?

• Integrating internal and external analyses is necessary for effective strategic management

• Helps develop a holistic strategy

• Helps identify the organization’s core competencies, operational efficiencies, and areas of improvement

What are the key considerations when integrating internal and external analyses?

1. Strategic fit

2. Risk management

3. Competitive positioning

4. Strategic innovation

Explain the Strategic Fit consideration when integrating internal and external analyses

• Considers the alignment between a firm's internal capabilities and its external opportunities and threats

• Considers whether the firm's resources and strengths match the market demands and the competitive conditions for a “fit”

What is meant by a strategic “fit”?

The atmosphere is ripe for the firm to realize optimal performance and competitive advantage

What are the steps of discovering a firm’s strategic fit?

1. Conduct an internal analysis

2. Conduct an external analysis

3. Identify any overlaps (match internal strengths w/external opportunities and internal weaknesses w/external threats)

4. Develop a list of strategic options

5. Implement and monitor (implement the strategy, continuously monitor and adjust)

Explain the Risk Management consideration when integrating internal and external analyses

• Involves identifying, assessing, and prioritizing the potential internal and external risks a company may face

• Then, developing strategies to mitigate or manage these risks to protect the organization's assets, ensure its stability, and support its strategic objectives

What are the steps of creating risk management strategies?

1. Conduct an internal analysis

2. Conduct an external analysis

3. Identify the firm’s risk exposure

4. Develop risk mitigation strategies

5. Implement and monitor

Explain the Competitive Positioning consideration when integrating internal and external analyses

• Involves strategically placing a company in the market by leveraging its internal strengths and the existing external opportunities

• Designed to distinguish the company from its competitors, and to align its offerings (products or services) with consumer needs to achieve a sustainable competitive advantage

What are the steps to strengthen a firm’s competitive positioning?

1. Conduct an internal analysis

2. Conduct an external analysis

3. Identify any strategic gaps

4. Formulate the positioning strategies (develop strategies that align internal strengths w/external opportunities to create a distinct market position)

5. Implement and monitor

Explain the Strategic Innovation consideration when integrating internal and external analyses

• Involves an organization creating new value by integrating their internal strengths and their market’s external opportunities, cultivating unique solutions and business models, and driving their competitive advantage

• It leverages insights gained from internal and external analyses to expertly anticipate market trends and customer needs, to ensure continual growth and excellence

What are the steps to foster strategic innovation?

1. Conduct an internal analysis

2. Conduct an external analysis

3. Align organizational capabilities with market opportunities (matching internal strengths w/external opportunities)

4. Develop innovation strategies (to take advantage of opportunities and strengths)

5. Implement and iterate (continuously monitor and improve)