Methods of Analyzing the

Internal Environment
Prepared by:
Name
 Internal environment is a
component of the business
environment, which is
composed of various
What is Internal elements present inside the
Environment? organization, that
affect or can be affected
can

with, the choices, activities

and decisions of the
organization.
Internal environment analysis
or internal analysis is an What is Internal
attempt to the identification of Environment
organizational capabilities
which can be done through Analysis?
various methods/tools/ or
techniques.
 01. Value Chain Analysis
Methods of 02. Functional Approach
03. Resource To
Analyzing Competitive
Internal Advantage Pyramid
04. Resource Based View
Environment 05. Benchmarking
06. Strategic Advantage
Profile (SAP)
 1. Value Chain Analysis
● It is a process whereby a firm determines the cost
associated with organizational activities from
purchasing raw materials to manufacturing products to
marketing those products.

● Activities in the value chain include primary and

secondary activities.
Porter’s Value Chain
 2. Functional Approach
● analyzes the different business functions of the
organization.

● DIFFERENT BUSINESS FUNCTIONS OF AN ORGANIZATION:

01. Production and Operation Function:

- The production/operation functions of a business are
related to those activities that transform inputs into goods
and services.
02. Marketing Functions: 04. Human Resource
- The aim of marketing is to Functions:
establish a long-term - Human functions are the most
relationship with customers important organizational
by satisfying them through functions to create a
quality products. competitive advantage for an
organization.
03. Financial Functions:
- Deals with the aquisition of 05. R&D Functions:
capital, the control of cash, the - These are vital for
management of debtors and implementing technological
creditors and the strategy in connection with
administration of interaction the corporate objective.
with financial institutions
 3. Resource to Competitive
Advantage
● Under this method, the resources are considered the most
important to create a competitive advantage.

1. Company Resources
2. Competitive Capabilities
3. Core and Distinctive Competencies
4. Strategic Assets
5. Competitive Advantage
 4. Resource Based View
● Resource-based view states that organizations’ internal
resources are more critical to achieving competitive advantage.

● It states that there are 3 important resources:

1. Physical Resources
2. Human resources
3. Organizational resources
1. Physical 2. Human 3. Organizational
Resources Resources Resources

● Buildings and ● Training ● Firm structure

Facilities ● Experience ● Planning
● Raw materials ● Skills processes,
● Equipments ● Abilities ● Information
● Machineries ● Other work systems
● etc. related ● Patents
characteristics ● Trademarks
of people ● Copyrights
associated ● etc.
with the
organization
 5. Benchmarking
● Internal benchmarking involves looking inwards which
simply means that company attempts to learn from
their own structure.

● They compare similar operations within the

organisation which could be defined and measured.
 6. Strategic Advantage Profile
(SAP)
● SAP summarizes the internal factors of an organization using a
form. It is prepared after the analysis of the internal environment
and identification of the factors crucial to a particular firm.

● The VRIO (Value, Rareness, Imitability, & Organization) is used to

assess the importance of each factor that might be considered a
strength.
 References:
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