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Khondokar Shah Md Shohidullah

Senior Lecturer
Dania University College
INTERNAL ANALYSIS
Three ingredients are critical to the success of a strategy:
First, the strategy must be consistent with conditions in the competitive
environment. Specifically it must take advantage of existing or projected
opportunities and minimize the impact of major threats.
Second, the strategy must place realistic requirements on the firms' internal
capabilities. In other words, the firms pursuit of market opportunities must
be based not only on the existence of such opportunities but also on the
firms key internal strengths.
Finally, the strategy must be carefully executed.
Techniques of Internal Analysis
Managers have historically relied on two approaches to structure their analysis of
internal capabilities so that they introduce greater objectivity into their firms
strategic decision-making process:
Value Chain Analysis
SOWT Analysis
Value Chain Analysis
Value chain analysis is based on the assumption that a businesss basic
purpose is to create value for users of its products or services.
In value chain analysis, mangers divide the activities of their firm into sets of
separate activities that add value.
Each of these activities can add value and each can be a source of
competitive advantage.
By identifying and examining these activities, mangers often acquire an indepth understanding of their firms capabilities, its cost structure, and how
these create competitive advantage or disadvantage.
Value chain analysis divides a firms activities into two major categories,
primary activities and support activities.
Primary activities are those involved in the physical creation of the product,
marketing and transfer to the buyer, and after-sales support.

Khondokar Shah Md Shohidullah


Senior Lecturer
Dania University College
Support activities assist the primary activities by providing infrastructure or
inputs that allow them to take place on an ongoing basis. The value chain
includes a profit margin since a markup above the cost of providing a firms
value-adding activities is normally part of the price paid by buyer creating
value that exceeds cost so as to generate a return for the effort.

Khondokar Shah Md Shohidullah


Senior Lecturer
Dania University College
The most important application of Value Chain Analysis is to expose how a
particular companys cost position compares with the cost positions of its
rivals. What are needed are competitor-versus-competitor estimates for
supplying a product /service to a well-defined customer group or market
segment.
A companys cost competitiveness depends not only on the costs of internally
performed activities (own value chain) but also on cost in the value chains of
its supplies and forward channel allies.
A companys relative cost position and overall competitiveness is linked with
the entire industry value chain system.
Conducting a Value Chain Analysis
The initial step in value chain analysis is to divide a companys operations into
specific activities or business processes, usually grouping them similarly to the
primary and support activities category.
Within each category, a firm typically performs a number of discrete activities that
may represent key strengths or weaknesses. Service activities for example, may
include such discrete activities as installation, repair, parts distribution, and
upgrading any of which could be a major source of competitive advantage or
disadvantage.
The next step is to attempt to attach costs to each discrete activity.
Value chain analysis requires managers to assign costs and assets to each
activity, thereby providing the basis to estimate costs of each activity. The
result provides mangers with a very different way of viewing costs than
traditional cost accounting procedures would produce. Many mangers find the
value activity cost more useful in drawing conclusions about and managing
internal strengths and weakness.
Once the company's value chain has been documented and costs
determined, mangers need to identify the activities that are critical to buyer
satisfaction and market success. It is those that are deserving major scrutiny
in an internal analysis.
Three conditions are essential at this stage in the value chain analysis.
First, the companys basic mission needs to influence mangers choice of activities
they examine in detail. If the company is focused on being a low-cost provider, then
management attention to lower costs should be very visible.

Khondokar Shah Md Shohidullah


Senior Lecturer
Dania University College
Second, the nature of value chains and the relative importance of the activities
within them vary by industry.
Third, the relative importance of value activities can vary by a companys position in
a broader value system that includes the value chains of its upstream suppliers and
downstream customers or partners involved in providing products or services to end
users.
SWOT Analysis
SWOT is an acronym for the internal Strengths and Weaknesses of a firm and
the environmental Opportunities and Threats facing that firm.
Strength is a resource, skill, or other advantage relative to competitors and
the needs of the markets a firm serves or expects to serve.
Weakness is a limitation or deficiency in resource, skills or capabilities that
seriously impedes a firms effective performance.
An opportunity is something that a company may grab for growth and
profitability.
A threat is something a company may be exposed to in the external
environment that may cause suffering in growth or profitability.
SWOT analysis is a useful tool for analyzing an organizations overall
situation.
This approach attempts to balance the internal strengths and weaknesses of
the organization with the external opportunities and threats.
It helps to draw conclusions about (a) how strategy can be matched to both
its resources and market opportunities; and (b) how weaknesses can be
corrected and threats can be guarded against.

Khondokar Shah Md Shohidullah


Senior Lecturer
Dania University College

Steps in SWOT Analysis


While undertaking SWOT analysis of your company you can follow the following four
major steps:
Identification of opportunities and threats posed by external environment.
Identification of opportunities and threats posed by competitors.
Identification of the internal strengths and weaknesses of the organization.
Assessing the attractiveness of the organizations situations and draw conclusions
regarding the need for strategic action.
External Environmental Analysis
Identify the key political, economic, social-cultural, demographic, natural/ecological
and technological forces that are most likely to affect the organization.
Monitor information on the environmental forces.
Select the method to be used in forecasting these forces.
Forecast the trends in these forces.
Identify the market opportunities on the basis of the forecasts of these forces.
Identifying the threats to a companys future profitability.

Khondokar Shah Md Shohidullah


Senior Lecturer
Dania University College
Competitive Analysis
Analyze the industry structure.
Analyze the nature of competition.
Identify and analyze individual competitors.
Identify key strengths and weaknesses of the company as compared to those of
competitors.
Identifying companys market opportunities
Identify threats and opportunities based on industry competitiveness.
Internal Environmental Analysis
Identify the areas for analysis (such as financial position, product position, etc.)
Analyze each of the selected areas.
Identifying companys internal strengths and resource capabilities.
Identifying companys internal weaknesses and resource deficiencies.
Evaluate the strengths and weaknesses for their strategy-making implications.

Concluding SWOT Analysis

Khondokar Shah Md Shohidullah


Senior Lecturer
Dania University College
Assess the attractiveness of organizations situation on the basis of identified
strengths, weaknesses, opportunities and threats.
Draw conclusions regarding the need for strategic action.
Managers need to (a) undertake actions to protect/improve the companys
strengths, (b) initiate efforts to overcome the weaknesses, (c) pursue market
opportunities well-suited to the companys resource capabilities, and (d) take
actions to defend against external threats to the companys business.