The internal analysis is traditionally the third and final section of your strategic analysis and can be completed at corporate or tactical operational level. Typically prior to starting this analysis you will have completed a
Macro environment analysis, and
Industry environment analysis
The corporate level internal analysis is about identifying your businesses value proposition or core competencies. These are sometimes referred to as your core capabilities; strategic competitive advantages or competitive advantage these terms all represent essentially the same thing.
The reason for completing an internal analysis is to allow you to create an exclusive market position.
Core competencies or value propositions have three characteristics, they are the things your business does
Better than your competitors
That are hard to replicate
That are valued by your customer(s)
Examples or core capabilities:
If you review the insurance industry you will see that banks offer insurance to their customers – it would be hard for a non bank insurance provider to replicate the combination of offering loans and insurance together, also the local auto club may offer insurance, again a non auto club would not be able to replicate the combination of auto club and insurance.
(Add some from text book)
In the bank & insurance example the bank would find that they have an unique position over most of the insurance industry, which is great, but next they would need to look at what they do better than other banks that offer insurance.
I was appointed to the role of operations manager in a timber mill, in the first year the business was facing liquidation so there was a need for change, to engage the staff I actively promoted the quality of our input raw material to the employees, (we used 30 year old plantation timber where most of our competitors used 12 year old plantation timber), which helped build pride in the business and our products. Later when I started meeting customers I found that they really did not care that our timber was from older trees. This is a good example of a unique quality that is not valued by the customer. I eventually found our niche: Our machinery was older than our competitors and did not include automated packaging, we found that as we were packaging materials manually we were able to package the product in different size packs to suite difference customer requirements – this worked out to be an excellent niche.
Internal Analysis - Value Proposition - Resource Model
What makes a good leader Download Center – strategic planning template internal analysis.
To develop a value proposition using the resource model you will identify the resources that your firm has or that exist in your industry (with your competitors) then you compare your organizations competitive strength to that of your competitors. Essentially where you have the largest strength becomes your value proposition.
The types of resources that you will consider include
Tangible resources: which are assets that can be seen, touches and/or quantified
Intangible resources: are less visible and range from intellectual property rights to culture and reputation
The key to the success of your analysis is in the ability to identify the strategic value of the resource.
The steps for completing your internal analysis using the resource model are as follows
Brainstorm a list of resources for your industry that are specific to either you or your competitors
Rate how your business compares with your competitors on each of the identified characteristics using a simple scale, suggest -3 through +3. (Zero is equal to, positive is better than, negative is worse than).
Identify your strengths and weaknesses then update your SWOT analysis
Cost per unit
Summary: Due to our manual packaging
we are able to offer packs sized to customer specifications; where the larger
mills with automated packaging have to stick to one preset size. This is our
single strategic competitive advantage.
(NB: We became the largest supplier of high margin timber products by
leveraging this advantage.).