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THE INTERNAL
ASSESSMENT

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Internal Strengths / weaknesses, coupled with external

opportunities/threats and clear statement of mission
provided the basis for establishing objectives and
strategies

Methods for Internal Assessment

1. Analyzing Key Internal Forces
2. Value Chain Analysis (VCA) (ABC)
3. Internal Factor Evaluation
4. Resource Based View Approach (VRIO analysis)
5. Mc Kinseys &7 ‘s

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Resource Based View Approach (VRIO analysis)

Barney and Hesterly (2006), describe the VRIO framework as a good tool to
examine the internal environment of a firm. They state that VRIO “stands for
four questions one must ask about a resource or capability to determine its
competitive potential:

The Question of Value: Does a resource enable a firm to exploit an

environmental opportunity, and/or neutralize an environmental threat?

The Question of Rarity: Is a resource currently controlled by only a small

number of competing firms? [are the resources used to make the
products/services or the products/services themselves rare?
.

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The Question of Imitability: do firms without a resource face a

cost disadvantage in obtaining or developing it.

The Question of Organization: Are a firm’s other policies and

procedures organized to support the exploitation of its valuable,
rare, and costly-to-imitate resources?”
.

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Is the
Is the value of the Resource or Is the Resource or
resources and Is the Capability capability Easy capability organized
capabilities High or or Resource or Difficult to (exploit for efficient
Low Rare Imitate use) Implications
(H/L) (Yes/No) (Easy/Difficult) (Yes/No)
No competitive advantage. Most competitors have the
resource and capabiliTY and those thast do not can
H N E Y develop it easily. All can sustain it.

No competitive advantage. All competitors have the

resource or capability which is easily developed.Reource
or Capabiity can not be sustained and represents a short
H N E N term advantage.

No competitive advantage.Many competitors have the

resource or capability. but is difficult to develop.
H N D Y Resource or capability should be well taken cared of

No competitive advantage.Many competitors have the

resource or capability. but is difficult to develop. Those
who possess the Resource or capability will not be able to
H N D N sustain. Only a short term advantage

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Is the value of the Is the Resource Is the Resource or

resources and Is the Capability or capability capability organized
capabilities High or or Resource Easy or Difficult (exploit for efficient
Low Rare to Imitate use) Implications
(H/L) (Yes/No) (Easy/Difficult) (Yes/No)

Not a source of long term competitive advantage.

H Y
H Y
H Y
Competitors have the tendency to imitate the
resource or capability . Strategies must not be based
E Y on this resource or capability
A source of short term advantage, Resource or
capabilities can be imitated easily and therefore can
not be sustained. Strategies may not be based on
E N these resources
A source of long term competitive advantage. It is
worth "betting the organization"with this resource or
D Y capability

Possible source of Long term competitive advantage

. But the resource or capability can not be sustained
H Y D N over the long run

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RESOURCES
Valuable Rare Imitability Organization Implications
(H/L) (Yes/No) (Easy/Difficult) (Yes/No)
Physical
Plant
Equipment
Assets
Technology
Raw materials
Technological
Proprietary technology (patents, copyrights
etc.)
Application of technology (know-how)
Human
Skills, expertise
Adaptability of employees
Commitment and loyalty of employees

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RESOURCES
Valuable Rare Imitability Organization Implications
(H/L) (Yes/No) (Easy/Difficult) (Yes/No)
Reputation
Brand ownership
Relationship with customers
Products/services
With community, authorities
With suppliers
With employees
CAPABILITIES
Management
Financial management
Strategic control
Coordination of business units
Resource management
Partnership management
Other

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RESOURCES
Valuable Rare Imitability Organization Implications
(H/L) (Yes/No) (Easy/Difficult) (Yes/No)
R&D
Basic research
Innovation in new products/services
Other
Marketing
Responsiveness to market trends
Promotion of quality
Brand management
Other
Sales
Quality of customer service
Effectiveness in executing sales
Other

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RESOURCES
Valuable Rare Imitability Organization Implications
(H/L) (Yes/No) (Easy/Difficult) (Yes/No)
Information management
Information system which is
comprehensive and
effective
Other

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The Seven
Elements of
Mc Kinsey

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The McKinsey 7-S model involves seven interdependent factors which

are categorized as either "hard" or "soft" elements:

Hard Elements Soft Elements

Shared Values
Strategy
Skills
Structure
Style
Systems
Staff

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"Hard" elements are easier to define or identify and

management can directly influence them: These are strategy
statements; organization charts and reporting lines; and formal
processes and IT systems.

"Soft" elements, on the other hand, can be more difficult to

describe, and are less tangible and more influenced by culture.
However, these soft elements are as important as the hard
elements if the organization is going to be successful.

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Strategy: the plan devised to maintain and build competitive advantage over
the competition.
Structure: the way the organization is structured and who reports to whom.
Systems: the daily activities and procedures that staff members engage in to
get the job done.
Shared Values: called "superordinate goals" when the model was first
developed, these are the core values of the company that are evidenced in
the corporate culture and the general work ethic.
Style: the style of leadership adopted.
Staff: the employees and their general capabilities.
Skills: the actual skills and competencies of the employees working for the
company.
Placing Shared Values in the middle of the model emphasizes that these
values are

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MC Kinseys 7'S MODEL
7'S Components weight Rating weighted score
strategy mission 0 0 0.000
vision 0 0 0.000
objectives 0 0 0.000
policies 0 0 0.000
0
structure' organizational chart 0 0 0.000
top management decision making 0 0 0.000
functional department 0 0 0.000
formalized procedures 0 0 0.000
adequate size of organization 0 0 0.000
0
systems control mechanism 0 0 0.000
managed record keeping 0 0 0.000
technology 0 0 0.000
written policies 0 0 0.000

style/culture coordinated employees 0 0 0.000

top management involvement 0 0 0.000
communication 0 0 0.000
0
skills management skill 0 0 0.000
employee competencies 0 0 0.000
commitment 0 0 0.000
performance evaluation 0 0 0.000

staff human resource management 0 0 0.000

training and education 0 0 0.000

shared values core values 0 0 0.000

attitudes 0 0.000
total weighted score 1

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1. Assign to each component a weight that ranges from 0.0 (not

important) to 1.0 (very important). The weight indicates the relative
importance of the component to being successful in the firm’s
industry.
The sum of all weights assigned to the factors must equal 1.0.

2. Assign a rating between 1 and 4 to each key component to

indicate how effectively the firm’s 7 S components are helping the
company, where 4 = the response is superior, 3 = the response is
above average, 2 = the response is average, and 1 = the response
is poor.

Total weighted score is 1.0. The average total weighted score is 2.5.
A total weighted score indicates that how valuable the components
are to the organization

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