A firm’s internal environment includes the people, investors, and assets within or connected to the firm. Managers analyze this environment to understand what the organization can use to pursue initiatives, innovate, and plan for future success.
Internal analysis examines a firm’s members and assets, including employees, managers, investors, facilities, and financial resources. It is not simply a matter of counting employees or listing equipment. Managers need to identify which resources and capabilities are useful, how they work together, and whether they can support the firm’s plans.
All flashcards
What is a firm’s internal environment?
The people, investors, assets, resources, and capabilities within or connected to the firm.
Why do managers conduct internal analysis?
To identify which resources and capabilities can support the firm’s plans, initiatives, innovation, and competitive position.
How do resources differ from capabilities?
Resources are things a firm has; capabilities are things it can do by using those resources.
What is a value chain?
The progression of activities through which a firm creates and delivers an offering customers will pay for.
What does VRIO assess?
Whether a resource or capability is valuable, rare, difficult to imitate, and supported by the firm’s organization.
Quiz questions
Which set of questions does VRIO use to assess a firm’s resources and capabilities?Answer: Are they valuable, rare, difficult to imitate, and supported by the organization?
Why may a valuable resource that is common among competitors fail to provide a competitive advantage?Answer: Competitors may offer similar benefits using comparable resources.
In VRIO, what does the organization dimension assess?Answer: Whether the firm is arranged to use the resource and capture its value.
What is one strategic trade-off between developing a capability internally and using a partnership?Answer: Internal development can build and control expertise but requires investment; partnerships provide outside expertise but require coordination.
When can a firm earn a profit from its value-chain activities, according to the value-chain concept?Answer: When the value created exceeds the costs incurred.
Based on Principles of Management by David S. Bright, Anastasia H. Cortes, Eva Hartmann, K. Praveen Parboteeah, Jon L. Pierce, Monique Reece, Amit Shah, Siri Terjesen, Joseph Weiss, Margaret A. White, Donald G. Gardner, Jason Lambert et al. (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.