Chapter 3

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

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3.3 Internal Environment
3.1.1 Value Chain Analysis
3.1.2 Strategic Capability
The Resource-Based View of Strategy (RBV)
ü “...The resource-based view emphasizes the
internal capabilities of the organisation in
formulating strategy to achieve a sustainable
competitive advantage.” A Henry, pp. 126
ü 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
v Resource
ü Is a productive input or competitive asset that is
owned or controlled by a company (e.g., a fleet of
oil tankers).
v Capability
ü 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
v THRESHOLD RESOURCES – “needed to play”
Those resources that an organisation needs to have in order
to meet the minimum requirements of its customers
ü 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
v DISTINCTIVE RESOURCES – “needed to win”
“...those resources that criPcally underpin competitive
advantage and that others cannot easily imitate or obtain.”
ü For example, a strong brand name or reputation

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Competencies
v 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
ü For example, an airline will need to ensure its operations
conform to minimum safety standards
v DISTINCTIVE (CORE) COMPETENCIES - “needed to win”
“...the linked set of skills, activities and resources that,
together, deliver customer value, differentiate a business
from its competitors and, potentially, can be extended or
developed .”
ü For example, a high level of marketing expertise 12
 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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