Identifying Resources and Capabilities for Value Creation: The Internal Analysis

Abstract

Considering a company as the vehicle for customer value creation we need to carefully analyze its strengths and weaknesses. This is what is normally referred to as the internal analysis. It concerns an appraisal of an organization’s resources and capabilities in the context of value creation opportunities and other external developments. Resources are the organization’s assets, knowledge and skills. Capabilities can be defined as the organization’s ability to effectively make use of its resources.1 In the past decade, the view that an organization’s resources and capabilities are the drivers of an organization’s strategic opportunities in the marketplace has received increasing support. This Resource-Based View of the firm argues that competitive advantage is to a large extent determined by the uniqueness of the organization’s resources and capabilities. Roads to future advantage can be found by identifying unique opportunities to exploit these resources in current and new markets. This is different from the more traditional, contingency-based view that argues that organizations have to adapt to their (changing) environment (strategic ‘fit’). Both views seem to complement each other, although dependent on the organization’s objectives and its situation one may be more relevant than the other. In the event that an organization fails to systematically evaluate and identify its unique resources and the opportunities to exploit them, little leverage will be obtained from its stronghold in the marketplace. Such an organization is less likely to be among those that make a unique and/or creative contribution in the market.

‘...the case for resource analysis rests not only upon the observation that contemporary developments in strategy have overemphasized external analysis... but also that resources are the fount from which the firm’s profits flow’

—Robert M. Grant