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TOPIC 5 STRATEGIC ANALYSIS: INTERNAL & EXTERNAL ANALYSIS, B…
TOPIC 5
STRATEGIC ANALYSIS: INTERNAL & EXTERNAL ANALYSIS
The importance of the external and internal environment in shaping strategy
THE IMPORTANCE OF INTERNAL STRATEGIC ANALYSIS (Strengths and Weaknesses)
It serves to pinpoint the strengths and weaknesses of the organization such as resources, capabilities, distinctive competencies (a firm’s strengths that cannot be easily matched or imitated by competitors) and competitive advantage
Help organization to achieve superior efficiency, quality, innovation and responsiveness to its customers
By knowing the strengths, it can lead to superior performance in many aspects whereas by knowing organization weaknesses, it can improve the performance from inferior to superior performance.
THE IMPORTANCE OF EXTERNAL STRATEGIC ANALYSIS (Opportunities and Threats)
To identify strategic opportunities and threats in the organization’s operating environment that will affect how it pursues its mission (by providing vital information to the organization’s survival and prosperity).
Help organization to have an assessment of the competitive structure of the organization’s industry including competitive position of the specific organization and its major rivals (assessment will draw attention to issues and information, thus it will encourage critical thinking and discussion by the leaders);
-Help organization to see the organization as a whole in relation to its environment (to determine how macroeconomics, social, government, legal, international, and technological factors have an impacts towards organization). It also helps organization to assess the impact of globalization on competition within industry, country, region and continents.
Help make decision
Framework for identifying what to analyze
(Internal & external environment)
In public sector, internal and external assessment is very important in preparing strategic management. Moreover, the increases of political and economic instability has driven public sector to be more responsive and proactive to that environment.
Besides, the demand from various key stakeholders with limited resources have resulted for the internal and external assessment in public sectors. This is imperative to match the demand with the available resources and ability to stated strategy.
Internal analysis
Strength
Internal strengths are resources or capabilities that help an organization accomplish its mandates or mission. (Examples: professional staff, adequate resources, leadership, values, physical facilities, talents, linkages or networks, history, reputation and many others.
Weaknesses
Internal weaknesses are deficiencies in resources and capabilities that hinder an organization’s ability to accomplish its mandate or mission. (Examples: lack of effective communications, absence of clear vision or mission, flawed organizational structure, non-competitive pay structure, performance issues, high turnover, or lack of financial resources.)
EXAMPLE OF INTERNAL ANALYSIS
External analysis
Opportunities
External opportunities are outside factors or situations that can affect the organization in a favourable way. (Examples: new funding from a federal program, political support for a potential project, a chance to modify an outdated mandate, the global economy, changing customer demographics and preferences, technological changes, timing and other trends.)
Threats/ Challenges
External threats are outside factors or situations that can affect the organization in a negative way. (Examples: loss of state funding, increasing demand for a specific service, union/management conflicts, the global economy, competition, customer preferences, technological changes, political or social trends.)
EXAMPLE OF EXTERNAL ANALYSIS
Processes for analyzing the internal and external environment
The Process of Performing an Internal Audit
Requires gathering and assimilating information about the firm’s management, marketing, finance/accounting, production/operations, research and development (R&D), and management information systems operations.
Provides more opportunity for participants to understand how their jobs, departments, and divisions fit into the whole organization
The Process of Performing an External Audit
Gather competitive intelligence
Information should be assimilated and evaluated
A final list of the most important key external factors should be communicated
Key external factors
important to achieving long-term and annual objectives
Measurable
applicable to all competing firms, and
hierarchical in the sense that some will pertain to the overall company and others will be more narrowly focused on functional or divisional areas
Methods of assessing internal & external environment
METHODS OF ASSESSING INTERNAL STRENGTHS AND WEAKNESSES
A- The Resource-Based View (RBV) approach
COMPONENTS OF INTERNAL ANALYSIS LEADING TO COMPETITIVE ADVANTAGE AND STRATEGIC COMPETITIVENESS
Methods of assessing external opportunities and threats
The Industrial Organization (I/O) View
Economic Forces
Social, Cultural, Demographic, and Natural Environmental Forces
Key Social, Cultural, Demographic, and Natural Environment Variables
Political, Governmental, and Legal Forces
Technological Forces
Competitive Forces
Sources of External Information
Unpublished
Published
ORGANIZATIONAL TANGIBLE RESOURCES
Financial Resources
Organizational Resources
Physical Resources
Technological Resources
ORGANIZATIONAL INTANGIBLE RESOURCES
Human Resources
Innovation Resources
Reputational Resources
EXAMPLE OF INTERNAL AND EXTERNAL ANALYSIS IN PUBLIC SECTOR
Vision 2020
External analysis
Economy
Nem
GTP
1 Malaysia
Budget
Politics
Political Stability
Social
Internal analysis
Resources
Workforce
Leadership
Bottom-up top down approach
Good infrastructure
B-Integrating Strategy and Culture
C - MANAGEMENT
D-Marketing
E - FINANCE
F - RESEARCH AND DEVELOPMENT
G-Management Information Systems
H-Value Chain Analysis (VCA)
