INTERNAL ENVIRONMENT ANALYSIS
CHRISTINE NYANDAT
27 Dec, 2013
Definition: Internal environmental factors are events that occur within an organization. Generally
speaking, internal environmental factors are easier to control than external environmental factors. Some
examples of internal environmental factors are as follows:
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Management changes
Employee morale
Culture changes
Financial changes and/or issues
In other words: The conditions, entities, events, and factors within an organization that influence its
activities and choices, particularly the behavior of the employees. Factors that are frequently considered
part of the internal environment include the organization's mission statement, leadership styles, and its
organizational culture.
Why is it important ? A tool that identifies the strengths, weaknesses, opportunities and threats of an
organization. Specifically, SWOT is a basic, straightforward model that assesses what an organization can
and cannot do as well as its potential opportunities and threats. The method of SWOT analysis is to take
the information from an environmental analysis and separate it into internal (strengths and weaknesses)
and external issues (opportunities and threats).
Lecture notes
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Each firm possesses core competence (internal resources) that is unique to it.
A firm should identify what resources, capabilities, and knowledge it has that may be used to exploit
market opportunities and avoid potential threats.
Resource-based view.
Resource Types: Tangible Resources
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Assets that can be quantified and observed.
Include financial resources, physical assets, and workers.
Strategic assessment of tangible resources should enable a firm to use fewer tangible resources to
support the same level of business or to use the same resources to expand the volume of business.
Intangible Resources
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Difficult to quantify.
Often provide the firm with strong competitive advantage.
Competitors find it difficult to purchase or imitate these resources.
Most strategically important intangibles:
a. Reputation
b. Technology
c. Human Capital
Analyzing the firm’s capabilities:
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Functional analysis
Value chain analysis
Benchmarking
Analyzing Capabilities by Functional Areas
Business Administration > Strategic Management > Internal Environment Analysis
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INTERNAL ENVIRONMENT ANALYSIS
Business Administration > Strategic Management > Internal Environment Analysis
CHRISTINE NYANDAT
27 Dec, 2013
Page 2 of 4
INTERNAL ENVIRONMENT ANALYSIS
CHRISTINE NYANDAT
27 Dec, 2013
Value chain analysis
Benchmarking involves four stages:
1. Identifying activities or functions that are weak and need improvement.
2. Identifying firms that are known to be at the leading edge of these activities or functions.
3. Studying the leading-edge firms by visiting them, talking to managers and employees, and reading
trade publications.
4. Using the information gathered to redefine goals, modify processes, and acquire new resources to
improve the firm’s functions.
Strategic Intent and Mission
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Based on analysis of the external and internal environment.
Strategic intent is internally focused, defining how the firm intends to use its resources, capabilities, and
core competencies to win competitive battles.
Strategic mission is externally focused, defining what the firm plans to produce and market, utilizing its
internal core competence.
Strategy Formulation
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The design of an approach to achieve the firm’s mission.
Takes place at:
a. Corporate-Level
b. Business-Level
Corporate-Level Strategy
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The corporation’s overall plan concerning the:
a. Number of businesses the corporation holds
b. Variety of markets or industries it serves
c. Distribution of resources among those businesses
Diversification strategy
a. Type of diversification
b. Process of diversification
Type of Diversification
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Concentration strategy
Vertical integration strategy
Concentric diversification strategy
Conglomerate diversification
Process of Diversification
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Acquisition and restructuring strategies
a. Acquisition
b. Merger
International strategy
Business-Level Strategy
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How the firm will compete in each business area or market segment.
Business Administration > Strategic Management > Internal Environment Analysis
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INTERNAL ENVIRONMENT ANALYSIS
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CHRISTINE NYANDAT
27 Dec, 2013
Firms have two basic choices:
a. Cost leadership strategy
b. Differentiation strategy
Business Administration > Strategic Management > Internal Environment Analysis
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