BUSI770 DB4 Isvi

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DB4: Internal Environment, Power/Weakness and Decision Models School of Business, Liberty University Author Note I have no known conflict of interest to disclose. Correspondence concerning this article should be addressed to

Discussion Thread: Internal Environment, Power / Weakness, and Decision Models Internal Environment, Power / Weakness, and Decision Models The task of determining the overall quality of a firm's internal environment is a critical element of the strategic formulation process. As such, managers have several tools available to properly monitor the internal factors that contribute to fulfilling a firm's strategic purpose. Assessments such as mapping the firm's resources and capabilities, identifying the firm's value chain, and evaluating the competitiveness of a firm's strength measures are a few examples of what can be done to gain a sense of the state of the firm's internal environment. This paper explores these assessments to conclude that, although they may seem complete, the resources approach, in particular, lacks specificity and pragmatism. Process: Evaluating the Internal Environment In order to effectively gauge a firm's internal environment, the main assessments managers should make involve determining the strength of the firm's resources and capabilities, assessing the attractiveness of the customer value proposition, ensuring that the cost structure is competitive, and comparing the firm's strength measures with a comprehensive evaluation against its rivals. Even though the aforementioned assessments may seem to overlap, each framework provides different nuances, which ultimately add value to the overall assessment. Analyzing the firm's resources and capabilities is crucial to verify if they can propel the firm to competitive success (Gamble et al., 2021). The resources should be addressed by looking at the firm's tangible and intangible assets (Gamble et al., 2021). The capabilities reveal how effectively the firm can execute its processes (Gamble et al., 2021; Teece, 2018). Once those are mapped, it is necessary to determine whether they can achieve a sustainable competitive advantage (Gamble et al., 2021). This can be done using the VRIN test (Gamble et al., 2021).

Even though the VRIN test already addresses the value aspect, it focuses on the assessment of the resource or capability, whereas the customer value proposition is interested in the value added to the customer (Gamble et al., 2021). As such, by monitoring a company's value chain, one may gauge not only the firm's customer value proposition but also identify its cost structure (Gamble et al., 2021). In addition, to have a more complete view, a firm must also monitor the value chain of suppliers and buyers (Gamble et al., 2021). Lastly, by performing a comprehensive competitive strength assessment, the firm may get a better understanding of its strength relative to rivals, allowing it to make moves having in mind their rivals’ strengths and shortcomings (Gamble et al., 2021). Strategic Thinking: Discussion of a Key source of Weakness According to Rumelt (2011), firms must be mindful of displaying inertia by proxy, which may be detrimental to the business. Even though Gamble et al. (2021) mentioned that the main signs revealing that a firm's strategy is on the right path are posting a healthy financial performance and a progressing market position, it is imperative that firms remain open to change. Inertia by proxy implies that businesses willfully decide to ignore any disruptions in the market to avoid abandoning a key source of profit (Rumelt, 2011). Nevertheless, Gamble et al. (2021) also implied that firms should avoid finding themselves stalled and not reacting to changes in the marketplace. Moreover, Teece (2018) stated that a key issue with the resource-based view is that it does not address how and what needs to be done to adapt to change. The notion of having dynamic capabilities precisely focuses on the need to adapt to new opportunities (Gamble et al., 2021), but it does not offer a pragmatic solution that firms can adopt (Teece, 2018). Perhaps what is needed is a framework that focuses on showing firms how to assess and adapt continuously. In fact,

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besides the VRIN criteria, the resources approach lacks specificity about the requirements necessary for success (Teece, 2018). Decision Model Several decision models are available to assist firms in gaining critical insights related to internal capabilities and resources. For instance, the gap in the market model is a known technique that firms can use to depict market opportunities (Krogerus & Tschäppeler, 2017), but it may also serve as a reference to identify the firm's rivals. Knowing one's market competition is key, as it can be useful to perform cost structure comparisons and evaluate rivals' customer value propositions (Gamble et al., 2021). The importance of the value chain model is clear. It allows firms to map the various categories of activities that are necessary to generate profits and create value for the firm's buyers (Gamble et al., 2021). In addition, it serves as a guide to monitor the costs associated directly with a product or service, as well as the costs incurred by the support activities (Gamble et al., 2021). As such, the value chain model enables a firm to compare its cost structure with its rival's models, even if they seem similar (Kohnová & Salajová, 2023). Plainly, the differences between the cost structures show where the competitive advantage can be found (Kohnová & Salajová, 2023). Conclusion Managers have several types of assessments at their disposal that can be used to gain proper knowledge of the firm's internal environment. Analyzing internal resources and capabilities, mapping the firm's value chain to gauge the customer value proposition, and performing an overall competitive strength assessment are some of the methods available that should get the job done. However, the resources approach does not provide many options to determine the competitiveness of one's internal resources and capabilities (Teece, 2018). As a consequence,

more pragmatic approaches are needed to offer firms a guide that (Teece, 2018) can be used on a continuous basis.

Annotated Bibliography Teece, D. J. (2018). Dynamic capabilities as (workable) management systems theory. Journal of Management & Organization, 24(3), 359-368. https://doi.org/10.1017/jmo.2017.75 Links to an external site. In this paper, the author aims to explore how the dynamic capabilities framework is deemed a more evolved model that provides improved principles pertaining to resource and capability management, specifically when compared to one of its predecessors, namely systems theory. Summary of Key Points The value that systems theory provided to management research is a multidisciplinary approach that basically refers to how interconnected elements are and how certain outcomes are expected due to their resulting interactions. As such, it can be applied to various disciplines. However, the author states that one of its main limitations is that it implies a partial-system view, which can lead to incorrect inferences. For instance, focusing only on cost reduction when there is a decrease in customer demand is a one-dimensional view of the underlying potential opportunity to make a strategic shift. Having said that, the dynamic capabilities framework differentiates itself from systems theory as it focuses on addressing permanent changes that may require a firm to transform itself. That is, the dynamic capabilities framework assists managers by prompting them to consider the vast amount of information they receive in order to create a competitive advantage. Evaluation of the Quality of the Publication The topic addressed adds value as it shows managers that they should not neglect any signs of change in the market. The author claimed that the intent of the dynamic capabilities framework is essentially to map new opportunities that may require adjustment of internal capabilities while

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staying coherent with the overall strategy. According to the author, these changes may eventually lead to minor or significant changes in a firm's business model. Evaluation of the Quality of the Author(s) Even though the author was successful in demonstrating how the dynamic capabilities framework properly addresses forces that may instigate changes in a firm, it failed to provide a practical set of guidelines that firms can implement to assist them in making this requirement a managerial process. In fact, the author made a similar claim towards the end of the article. Additionally, the author's point of view concerning the dynamic capabilities framework is that it is more of an auxiliary process that firms can use to achieve an overall strategy, rather than an assessment that nurtures strategic development. Where this Fits Into the Discussion The bottom line is that the paper, despite having a few shortcomings, adds value to the discussion as it sheds light on the overall topic of resources and capabilities management, by specifying how the dynamic capabilities framework fits into the topic of assessing a firm's internal environment. Kohnová, L., & Salajová, N. (2023). Impact of industry 4.0 on companies: Value chain model analysis. Administrative Sciences, 13(2), 35. https://doi.org/10.3390/admsci13020035 Links to an external site. In this paper, the authors addressed the impact of Industry 4.0 on firms, particularly with respect to how it affects firms' value chains. In order to evaluate this impact, the authors gathered responses from Central European firms that recorded their answers via an electronic questionnaire. Industry 4.0 essentially refers to the concept involving the internet, digital technology, and their interactions with physical objects and individuals.

Summary of Key Points The authors' justification for conducting this research is that, due to recent technological developments, businesses are under pressure to not only reconfigure their business models but also provide innovative solutions to the market. As such, Industry 4.0 is expected to impact the underlying activities embedded in a firm's value chain. The study's findings revealed that the support activity of technology development was considered to have the highest expected impact of Industry 4.0, while the lowest impact was observed in primary activities such as operations. Furthermore, the primary activity of marketing showed a high correlation with idea generation and brand image. Evaluation of the Quality of the Publication In this study, although it provided a comprehensive introduction and literature review concerning value chain analysis and Industry 4.0, it failed to provide the hypotheses prior to analyzing and presenting the results. The authors should have formulated their hypotheses based on their expectations, which are derived from academic theory and prior studies. The authors merely presented various results but did not address them properly as no hypotheses were formulated. As such, the study's results were presented in a descriptive manner without adding value to the research. Additionally, although the quantitative methods used appear to be coherent for analyzing the gathered data, they failed to provide evidence for validity. There should have been evidence provided for validity, as a questionnaire was applied, either based on content evidence or internal structure. It is worth noting that while a study would typically need to present evidence for reliability, in this case, single questions were used to address specific areas, and thus evidence for internal consistency is not required, as no summated scale was involved. Evaluation of the Quality of the Author(s)

The authors were successful in compiling a study that is relevant to most for-profit firms nowadays. Additionally, as one of the main challenges that firms have to deal with involving strategic management is how to cope with change, the impact of Industry 4.0 is certainly a topic that several companies will have to decide what is the best approach to take. Where this Fits Into the Discussion This study provides value descriptions involving value chains and how they interplay with change, which can ultimately affect a firm. The effects of Industry 4.0 are a clear example of a challenge. Because the discussion focuses on ensuring that a firm's internal environment remains competitive, this study has several teachings that can be used.

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References Gamble, J., Peteraf, M., & Thompson, A. (2021). Essentials of strategic management . McGraw- Hill. Kohnová, L., & Salajová, N. (2023). Impact of industry 4.0 on companies: Value chain model analysis. Administrative Sciences, 13 (2), 35. https://doi.org/10.3390/admsci13020035 Links to an external site. Krogerus, M., & Tschäppeler, R. (2017). The decision book: 50 models for strategic thinking . W.W. Norton & Co. Rumelt, R. (2011). Good strategy/bad strategy: The difference and why it matters . Crown Business. Teece, D. J. (2018). Dynamic capabilities as (workable) management systems theory. Journal of Management & Organization, 24 (3), 359-368. https://doi.org/10.1017/jmo.2017.75

BUSI770 DB4 Isvi

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