Internal Analysis and your Value Proposition

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.

Another example:
    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

    Read more on Resources for your Internal Analysis

    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

     

    Rating

    Resources

    -3

    -2

    -1

    0

    1

    2

    3

    Tangible resources

     

     

     

     

     

     

     

    Products

     

     

     

     

     

     

     

    Financial position (available cash)

     

     

     

     

     

     

     

    Equipment

     

     

     

     

     

     

     

    Intangible Resources

     

     

     

     

     

     

     

    Cost per unit production

     

     

     

     

     

     

     

    Employee goodwill

     

     

     

     

     

     

     

    Customer goodwill

     

     

     

     

     

     

     

    Reputation

     

     

     

     

     

     

     

    Brand

     

     

     

     

     

     

     

    Strategic alliances

     

     

     

     

     

     

     

    Technical knowledge

     

     

     

     

     

     

     

    Process Flexibility

     

     

     

     

     

     

     

    Culture

     

     

     

     

     

     

     

    Leadership

     

     

     

     

     

     

     

    Innovation

     

     

     

     

     

     

     

    Flexibility

     

     

     

     

     

     

     

    Customer focus

     

     

     

     

     

     

     

    Quality focus

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Strengths

    Weaknesses

    • Process flexibility
    • Technical knowledge
    • Cultural flexibility
    • Financial position

     

    • Equipment

     

    • Cost per unit throughput

     

     

     

     

     

     

     

     

    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.).

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what makes a good leader - site links


Management by Walking Around

what makes a good leader - Download Center

Strategic Planning Tempate - Macro Environment Analysis

Strategic Planning Tempate - Industry Environment Analysis