Week 4 DT Internal Environment, Power Weakness, and Decision Models

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INTERNAL ENVIRONMENT 1 Week 4 Discussion Thread: Internal Environment, Power / Weakness, and Decision Models Dexter Tyrone Cassell School of Business, Liberty University BUSI 770 – Strategy Formulation and Strategic Thinking Dr. Mize June 5, 2022 Author Note Dexter Tyrone Cassell I have no known conflict of interest to disclose. Correspondence concerning this article should be addressed to Dexter Tyrone Cassell Email: dcassell9@liberty.edu

INTERNAL ENVIRONMENT 2 Essentials of Strategic Management: The Quest for Competitive Advantage Introduction Evaluating a form’s internal environment is a critical component in developing the company’s strategy. It is vital to consider and understand the primary source of power or weakness existing in the firm. In addition, the decision model can have a substantial impact on strategy development and requires continuous evaluation. A successful business should have a process to evaluate the internal environment, strategic thinking, and decision model to remain sustainably competitive in the respective industries (Cassell, 2022). Process of Evaluating the Internal Environment The internal analysis evaluates a firm’s internal environment to determine its resources, assets, competencies, and capabilities and their contribution to achieving a competitive advantage. The objective is for the organization to have a clear picture of its strengths and exploit them, threats to mitigate, or weaknesses to compensate. According to Gamble et al. (2019), the process of evaluating the internal environment begins by listing all the company’s resources and competitive assets it owns or controls. They include tangible resources such as physical resources (plants and equipment), financial resources (cash and cash equivalents, and credit rating), technological assets, and organizational resources such as information and communication systems). They also include intangible resources such as human assets and intellectual capital, brand image and recognition, relationships with businesses, alliances and joint ventures, and company culture. Next, the firm should determine its capability to the extent it can convert the assets into a competitive advantage. The process uses various tools for assessing the value of each resource, such as the VRIN and SWOT frameworks. For instance, the VRIN framework rates resources based on value, rarity, inimitability, and non-substitutability.

INTERNAL ENVIRONMENT 3 The first two measure the extent to which the resource or capability contributes to competitiveness, and the last two the importance the firm can sustain competitive advantage (Cassell, 2022). Strategic Thinking: Discussion of a Key Source of Power / Weakness The primary source of an organization’s power is assessing its internal resources and capabilities and improving them to gain a sustainable competitive advantage. Gamble et al. (2019) recommend senior management should support and facilitate the process of assessing internal strengths and weaknesses, including all the procedures contained in the firm’s value chain. Several models, including VRIN and SWOT, exist that managers can utilize to strengthen strategic thinking in the organization. In addition, Ketata et al. (2015) posit that managers can use best practices and industry standards to assess their strategic decisions or as a benchmark to implement their decisions. Such activities can assist an organization in improving cost- effectiveness. Next, a firm can identify and eliminate or compensate for internal activities that increase the cost of production, especially in an organization with high processing costs. Eliminating or re-assigning cost-ineffective activities translate into lower production costs and higher profit margins and competitiveness. For instance, outsourcing high-cost activities such as customer service to third parties can allow a company to focus on its core business and avoid the overhead associated with the costly service. Finally, evaluating strengths and weaknesses in a firm identifies many processes and decisions that increase the cost of production and develops strategies to eliminate or re-assign them to improve internal efficiencies. However, the success of internal assessment requires management that listens to employees and involves their opinions in the decisions (Cassell, 2022).

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INTERNAL ENVIRONMENT 4 Decision Model Several decision models exist to assist organizations in making strategic decisions. They include VRIN, SWOT, dynamic capabilities, value chain analysis, benchmarking, and competitive strength assessments (Gamble et al., 2019). For example, the VRIN framework is a powerful tool that allows an organization to identify its resources and capabilities and determine the competitiveness of its assets. According to Kuratko, Hornsby, and Covin (2014), resources and capabilities that satisfy all the four aspects of the VRIN framework indicate they provide a sustainable competitive advantage with far more excellent profit potential. However, suppose management determines that the current resources and capabilities do not independently satisfy all four tests with high marks. In that case, they should develop a bundle of resources that can pass the tests, although Nike does not have a single resource that meets all the VRIN aspects. However, it has bundled its resources – expertise, marketing research skills, professional endorsements, brand name, and managerial – as one resource that achieves the VRIN framework and has been successful for more than two decades (Cassell, 2022). Conclusion Assessing a firm’s internal environment is an integral part of maintaining a competitive edge within an industry, understanding its tangible and intangible resources and capabilities, and evaluating their value, rarity, inimitability, and non-substitutability. Therefore, for an organization to improve its competitive advantage, it should determine whether it has a single dominant resource that meets the VRIN concept or bundles the available resources to achieve the same. For a firm to be successful, it should ensure that its resources and capabilities meet all the four aspects to demonstrate a sustainable competitive advantage, which brings high profit to the firm (Cassell, 2022).

INTERNAL ENVIRONMENT 5 References Cassell, D. (2022) Internal Environment, Power / Weakness, and Decision Models [Unpublished Discussion]. Liberty University. Gamble, J., Thompson Jr, A., & Peteraf, M. (2019). Essentials of strategic management: The quest for competitive advantage . Mc Graw Hill Education. Ketata, I., Sofka, W., & Grimpe, C. (2015). The role of internal capabilities and firms' environment for sustainable innovation: Evidence for Germany. R & D Management, 45 (1), 60-75. https://doi.org/10.1111/radm.12052 Kuratko, D. F., Hornsby, J. S., & Covin, J. G. (2014). Diagnosing a firm's internal environment for corporate entrepreneurship. Business Horizons, 57 (1), 37-47. https://doi.org/10.1016/j.bushor.2013.08.009

INTERNAL ENVIRONMENT 6 Annotated Bibliography Gamble, J., Thompson Jr, A., & Peteraf, M. (2019). Essentials of strategic management: The quest for competitive advantage . Mc Graw Hill Education. Ketata, I., Sofka, W., & Grimpe, C. (2015). The role of internal capabilities and firms' environment for sustainable innovation: Evidence for Germany. R & D Management, 45 (1), 60-75. https://doi.org/10.1111/radm.12052 The authors describe and associate a firm’s capabilities and suitability to innovation within the German context that has led to industrialization in Europe for several decades. The authors argue that many firms invest in Research and development but are not sufficiently innovative than entrepreneurial ventures. The authors analyze that many companies fail to achieve sustainable competitive advantages despite focusing on Research and development. However, they have not focused on intangible resources, especially employees’ intellectual capacities, who can quickly satisfy VRIN and provide the organization with sustainable innovation and competitiveness, which is rare, inimitable, and non-substitutable. The quality of the article is acceptable. However, published in Research and development management journal with an impact factor of three, which is relatively lower but still impactful for a business journal. The authors have affiliations with Georgia State University and Copenhagen Business School, Denmark, and are considered experts in their respective academic fields. The discussion in the article emphasizes investing in employees as the principal source of VRIN, which is consistent with the argument that

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INTERNAL ENVIRONMENT 7 organizations can use the VRIN framework to identify resources and capabilities that can provide sustainable and profitable competitive advantages. Kuratko, D. F., Hornsby, J. S., & Covin, J. G. (2014). Diagnosing a firm's internal environment for corporate entrepreneurship. Business Horizons, 57 (1), 37-47. https://doi.org/10.1016/j.bushor.2013.08.009 The author discusses the value of the internal environment in fueling innovation and competitive advantages. They argue that corporate entrepreneurship is critical for organizational survival in the modern-day business economy. In addition, they advise on five essential components to succeed in the internal environment – management support, work direction and autonomy, rewards and reinforcement, time, and organizational boundaries. The article concludes that the five aspects are vital for corporate activities that drive innovation and are a source of competitive advantage. The article has high quality because it is published in the Business Horizons with an impact factor of 3.44, demonstrating its high reputation among academia. In addition, the authors are affiliated with Indiana University and the University of Missouri, demonstrating their academic qualification and mastery of the subject topic under Research and discussion. Finally, the article is appropriate and supports the present debate on internal organization assessment and contribution to sustainable competitiveness. The article holds that organizations can be innovative and competitive by focusing on and improving the internal environment, levering on strength, and compensating for weaknesses.

Week 4 DT Internal Environment, Power Weakness, and Decision Models

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