ANALYZING

THE
INTERNAL
ENVIRONME
NT OF THE
FIRM

PRESENTED BY: ALIAH M.

MAGUMPARA
Components of
Internal Analysis
Leading to
Competitive
Advantage and
Strategic
Competitiveness
 • What Is VRIN/VRIO Strategy
Framework?
Four Criteria
of VRIN framework and VRIO analysis are 
strategic planning tools used to help
Sustainable companies identify certain resources
Advantages and capabilities that can provide them
with a sustained competitive advantage.
To understand how these tools work, it’s
necessary to first understand what the
company’s resources imply.
 • Valuable - Only a resource that brings value to the business
or enables the firm to develop and conduct strategies to
improve efficiency and effectiveness, can deliver a
competitive advantage.
• Rare - A resource can’t bring a significant competitive
advantage unless it’s rare among the company’s current and
VRIN potential competitors.
• Imperfectly Imitable - Ideally, competing businesses that
Strategy don’t possess a certain resource shouldn’t be able to obtain
it.
Framework • Ability to obtain a resource due to too specific and
unique consequences
• Casually ambiguous connection between resource and
competitive advantage
• The resource that delivers competitive advantage is
socially complex
• Non-substitutable - there’s no other resource that is the
strategic equivalent of the one company possesses
 • Value - The first thing a resource is evaluated for is where it adds
value for customers and enables the company to exploit
opportunities and neutralize threats in its environment.
• Rarity - In this step, the analysis should discover whether the
company is in possession of rare or scarce resources.
• Imitability - Assessing a resource for imitability implies

VRIO determining whether it’s replicable.

• Organization - This stage of the VRIO analysis involves
Strategy determining whether the company has the organization in place
that can support the resources and capabilities and help them
Framework deliver value. This refers to the management and information
systems, logistics, budgeting, documenting, planning, and other
parts of the company’s internal organizational structure.

A resource or capability that meets all four requirements can bring

sustained competitive advantage for the company.
 VRIO
Strategy
Framework

Adopted from Rothaermel’s (2013) ‘Strategic Management’, p.91

 1. It reveals the internal strengths and weaknesses of the
What Are business
2. It identifies competitive advantages that may not have
The Benefits been previously recognized.

Of VRIN 3. The framework is very broad and allows for analysis of

any resource of capability at the company’s disposal.
Framework/ 4. The insight provided by VRIN/VRIO Framework helps the
company devise a better strategy, efficiently allocate
VRIO valuable resources, and identify potential opportunities
and threats.
Analysis? 5. The process is highly repeatable, so it can be revisited for
additional adjustments.
What Are The 1. The business environment is constantly changing,
Limitations making it difficult (but not impossible) to have a
sustainable competitive advantage for the long term;
Of VRIN three to five years is more realistic.
2. New and small businesses may find it more difficult to
Framework/ apply the VRIO framework simply because they haven’t
yet fully developed their resources or capabilities to
VRIO establish a sustained competitive advantage.

Analysis? 3. VRIO is solely an internal analysis, so you will need other

frameworks (like the SWOT analysis) to fill in the gaps.

https://www.clearpointstrategy.com/vrio-framework/#sect1
CASE
EXAMPLE: V Human Capital Management data to hire and retain innovative
productive employees

R management so extensively.
No other companies are using data-based employee

GOOGLE
I difficult to imitate, at least for the near future. Companies have
Data-based human capital management is both costly and

to build the software and invest in training their HR staff on the

new technology and strategy.

O It is organized to capture value from this capability. The IT

department has the skills to collect and maintain the data, while
HR and team leaders are trained on how to use the data to hire,
promote, manage, and improve performance of employees.
VALUE CHAIN
ANALYSIS
 • Definition
• Porter’s Value Chain Model
• Primary and Support Activities
Contents • What is a Value Chain Analysis
• Competitive Advantages Types
• How to Conduct a Value Chain Analysis
• Case Examples (Amazon & Starbucks)
 • Value chain refers to the various business
activities and processes involved in creating
a product or performing a service. A value
Definition chain can consist of multiple stages of a
product or service’s lifecycle, including
research and development, sales, and
everything in between. 
Porter’s
Value Chain
Model
 1. Inbound logistics: Activities related to receiving,
warehousing, and inventory management of source
materials and components
2. Operations: Activities related to turning raw
materials and components into a finished product
PRIMARY 3. Outbound logistics: Activities related to
distribution, including packaging, sorting, and
ACTIVITIE shipping

S 4. Marketing and sales: Activities related to the

marketing and sale of a product or service, including
promotion, advertising, and pricing strategy
5. After-sales services: Activities that take place after
a sale has been finalized, including installation,
training, quality assurance, repair, and customer
service

https://online.hbs.edu/blog/post/what-is-value-chain-analysis
 1. Procurement: Activities related to the sourcing of
raw materials, components, equipment, and
services
SECONDA 2. Technological development: Activities related to
research and development, including product
RY/ design, market research, and process development

SUPPORT 3. Human resources management: Activities

related to the recruitment, hiring, training,
ACTIVITIE development, retention, and compensation of
employees
S 4. Infrastructure: Activities related to the
company’s overhead and management, including
financing and planning

https://online.hbs.edu/blog/post/what-is-value-chain-analysis
 Value chain analysis is a means of evaluating each of
WHAT IS A the activities in a company’s value chain to understand
where opportunities for improvement lie.
VALUE
CHAIN • Cost reduction
ANALYSIS • Product Differentiation

https://online.hbs.edu/blog/post/what-is-value-chain-analysis
COMPETIT
IVE
ADVANTAG
ES TYPES

https://strategicmanagementinsight.com/tools/value-chain-analysis/
HOW TO
1. Identify Value Chain Activities Technological
CONDUCT development
A VALUE 2. Determine the Cost and Value of Activities

CHAIN 3. Identify Opportunities for Competitive

Advantage
ANALYSIS
Case Example:
AMAZON

FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

Ma
TECHNOLOGY DEVELOPMENT

rgin
Personalized Customer recommendations engine
Web hosting

PROCUREMENT
High Negotiating Power

Inbound Outbound Marketing

Operations And Service

rgin
Logistics Logistics
Sales
- Vertically

Ma
- Rapid order - Distribution - Amazon Prime
Integrated
dispatch Network - Easy Returns
Suppliers
- AWS - Affiliate
relations

https://www.edrawmax.com/article/amazon-value-chain-analysis.html
 Case Example:
STARBUCKS
FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

Key attribute in the company’s success

Ma
TECHNOLOGY DEVELOPMENT

rgin
PROCUREMENT
The Company handles all of the procurement.

Inbound Outbound Marketing

Operations And Service

rgin
Logistics Logistics
Sales

Ma
Proprietary Direct company- Storage and Superior quality Customer
roasting and owned stores or distribution products Loyalty
packaging licensed stores High Level
Customer Service

https://www.investopedia.com/articles/investing/103114/starbucks-example-value-chain-model.asp
OUTSOURCING
 • Strategic outsourced services represent a set of operations that are
delegated by a company for management to a third-party service
provider. Most commonly, this process is associated with small
companies that do not have enough resources to manage all tasks
themselves. Outsourcing is also widely used among mid-sized
companies and large enterprises. With the help of strategic
outsourcing, companies across various industries can leverage a
partner’s expertise gained through years of practice and research.
STRATEGIC As a result, a company can improve its business state in several
areas.
OUTSOURCI • The primary purpose of strategic outsourcing is to use external
NG resources in the best way by leveraging the latest technologies and
industry trends, along with a high level of expertise to improve the
efficiency and competitiveness of the company.

• The ultimate result of the successfully outsourced project or team is

the development of a value chain, where all stages of internal
business processes are delivered at the highest quality and accuracy
with minimal cost.

Strategic Outsourcing: How It Solves Key Business Challenges (omi.co)

 According to Michael Porter, the strategic
approach to outsource and project is by
implementing the five important principles of
STRATEGIC strategic positioning.
• Company image;
OUTSOURCI • Competitiveness of goods and services;
NG • Sales opportunities;
• Technical characteristics of the company;
• Financial condition of the company.

Strategic Outsourcing: How It Solves Key Business Challenges (omi.co)

 1. Business Process Outsourcing - also known as
professional outsourcing, is one of the most popular
types of outsourcing, that allows companies to save a
huge amount of cost of maintaining an in-house team of
experts and tools.
2. IT Outsourcing - one of the most common strategic
Types of outsourcing today, that involves subcontracting activities
to fulfill your business’s IT needs. IT Outsourcing
Strategic includes services that range from development to
maintenance and support.
Outsourcing 3. Manufacturer Outsourcing - also known as production
outsourcing services, are usually quite industry-specific.
For example, an automobile manufacturer might
outsource certain components or parts of a vehicle such
as making and installing windows. These types of
outsourcing contracts help the company to reduce
production cost and improve assembling time.

Strategic Outsourcing: How It Solves Key Business Challenges (omi.co)

 1. Reduced costs. One of the main reasons why companies use strategic outsourcing is the
desire to cut costs. You can fully rely on a partner’s knowledge and experience rather than
hiring specific personnel. Automation and optimization commonly go along with outsourcing,
thus allowing businesses to save on operational costs.
2. More time to focus on core business. Outsourcing helps companies get rid of an array of
routine and repetitive tasks, thus giving more time to manage their major specialization and
business challenges that require human interaction and judgment.
3. Better risk management. When trying to solve challenges yourself without the required
expertise, you are likely to make costly mistakes. Even attempts to acquire said expertise
could be in vain. You might hire the wrong person, or there is not enough consistent workload
to keep this person in house on a full-time job. However, when you outsource the work to

ADVANTAGE experts, you can better manage risks across the entire organization.
4. Improved resource utilization. Many companies employ out-of-box software and might not
take maximum advantage of its use. The reason for this is that these systems are not adjusted

S to the specific company’s needs and goals, and they can’t be. But outsourcing software
customization and integration to third party experts, helps you leverage its full potential.
5. Gain competitive advantage. The above-mentioned advantages bring us to the main benefit
delivered with the strategic outsourced services. Every business desires to be the best in its
market and own a competitive advantage over other players. Transformation across an array of
areas in your business will help you become more flexible, drive growth, manage costs and
stay on top of the competition.
6. Access to a global knowledge base. You can’t be an expert in everything. But you can easily
access a pool of resources and knowledge when partnering with various service providers.
Companies that specialize in outsourced services spend their time and money to provide you
with the best specialists in the market allowing you to benefit from their expertise. Because
just like you, they want to stay competitive and provide the best services at the best possible
price.

Strategic Outsourcing: How It Solves Key Business Challenges (omi.co)

 1. Loss of Control. Many companies are afraid of losing control
over the tasks that they’ve decided to outsource. However, a good
service provider will stay in touch with your team to provide you
with up-to-date information and allow you to maintain a healthy
level of control over the process.

2. Hidden Costs. Outsourcing costs vary between different activities.

You might pay for integration, only then to realize that you need
CHALLENGE someone to administer the new system. To avoid unexpected
spending, make sure to calculate every possible cost with your

S outsourced partner.

3. Low Quality. This is probably one of the biggest concerns many

companies have when it comes to outsourcing. While they might
not have enough in-house resources and knowledge to solve
existing problems, they still believe that most of the outsourcing
companies provide low-quality services. If you do your research
and delegate your tasks to a reliable service provider that owns
specific skills and enables continuous quality assurance, you are
likely to get better end results.

Strategic Outsourcing: How It Solves Key Business Challenges (omi.co)

 Case Example:
GENERAL MOTORS
• It reduced the number of primary suppliers for its
$15 billion worth of contracts from 18 to about six,
and made them responsible for hiring and managing
their own subcontractors
• Each primary supplier was awarded contracts on a
global basis -- so GM could rely on a single source for,
say, all of its HR management applications or
engineering workstations worldwide. More
important, GM created standardized work processes
in every region of the world.
• GM also standardized all the touchpoints for every
process, so all suppliers use a common interface for
reporting information back to GM.

“We are in the business of building cars and trucks,

We shouldn’t be spending tons of time trying to
manage tons of IT suppliers.” – Lisa Gage
 Case Example:
GENERAL MOTORS
TO SUMMARIZE:
The reasons GM prefers to outsource its business
functions include:
• To save costs:
• Focus on core business
• Improve quality
• To give the company a competitive edge
• Acquire operational expertise and
enhance Innovation

The company ranked second in 2010 global motor

industry having produced 8.5 million units. And for
the first half of 2011, it re-emerged as the world’s
number one automaker ahead of Japan’s Toyota
and Germany’s Volkswagen.
 COMPETENCIES,
STRENGTH,
WEAKNESSES AND
STRATEGIC DECISIONS
 • Firms must identify their strengths and weaknesses
• Appropriate resources and capabilities are needed to
develop desired strategy and create value for customers
and other stakeholders
• The “right” resources (as opposed to “many” resources)
are those with the potential to be formed into core
Competencies, competencies as the foundation for competitive advantage

Strength, • Tools (e.g., outsourcing) can help a firm focus on core

Weaknesses competencies as the source for competitive advantage
• Core competencies have potential to become CORE
and Strategic RIGIDITIES
Decisions • Former core competencies that now generate inertia and
stifle innovation
• External environmental conditions and events impact a
firm’s core competencies

1. https://www.csus.edu/indiv/c/cairec/gm105/ppt/gm105chapter3_10e.pptx
Case Example:
NOKIA
• In October 1998, Nokia became the best-selling mobile phone
brand in the world
• In 2010 Nokia launched the “iPhone killer” but failed to match the
competition;
• The quality of Nokia’s high-end phones continues to decline;
• In just six years, the market value of Nokia declined by about 90%;
• Nokia’s decline accelerates by 2011 and is acquired by Microsoft in
2013.

• Top managers lacked technical competence which influenced how

they could assess technological limitations during goal setting; by
comparison, the top engineers at Apple were all engineers;

• Instead of allocating resources to the achievement of long-term

goals such as developing a new operating system, Nokia
management decided to develop new phone devices for short-
term market demands.
 Works Cited

“Amazon Value Chain Analysis | EdrawMax Online.” Edrawsoft, www.edrawmax.com/article/amazon-value-chain-analysis.html.

Bajpai, Prableen. “Starbucks as an Example of the Value Chain Model.” Investopedia, 14 Feb. 2022, www.investopedia.com/articles/investing/103114/starbucks-

example-value-chain-model.asp.

Banyas, Brad. “Strategic Outsourcing: How It Solves Key Business Challenges.” OMI, 19 June 2020,

www.omi.co/blog4/about-strategic-outsourcing/#:~:text=When%20handing%20over%20operations%20to%20an%20outsourced%20partner%2C.

Accessed 5 Oct. 2022.

CFI Team. “Outsourcing - Learn about the Advantages and Disadvantages.” Corporate Finance Institute, 2018,

corporatefinanceinstitute.com/resources/knowledge/strategy/outsourcing/.

EPM. “Porter’s Value Chain Explained.” YouTube, 17 Mar. 2021, www.youtube.com/watch?v=tT60_TofYf4.

Gedeon, Steven. “Steven Gedeon: Value Chain Management.” YouTube, 27 Feb. 2014, www.youtube.com/watch?v=WSsGihNYJYI.

Works cited
“General Motors - Outsourcing and Success Metrics | Free Essay Example.” StudyCorgi.com,

studycorgi.com/general-motors-outsourcing-and-success-metrics/#:~:text=The%20reasons%20GM%20prefers%20to%20outsource%20its

%20business. Accessed 5 Oct. 2022.

Goggin, Michael. “Explaining the VRIO Framework (with a Real-Life Example).” ClearPoint Strategy, 28 July 2021, www.clearpointstrategy.com/vrio-

framework/#sect1.

Jurevicius, Ovidijus. “Value Chain Analysis: The Ultimate Guide - SM Insight.” Strategic Management Insight, 7 Oct. 2021,

strategicmanagementinsight.com/tools/value-chain-analysis/.

---. “VRIO Framework Explained - SM Insight.” Strategic Management Insight, 7 Oct. 2021, strategicmanagementinsight.com/tools/vrio/.

Nicholas, Jerry. “Introduction to VRIN Framework | VRIO Analysis | BusinessAnalystMentor.com.” Businessanalystmentor.com, 7 Aug. 2022,

businessanalystmentor.com/vrin-framework-vrio-analysis/.

“Porters Generic Strategies.” YouTube, 12 Sept. 2016, www.youtube.com/watch?v=HiBRviA3lnI.

Stobierski, Tim. “What Is a Value Chain Analysis? 3 Steps.” Business Insights - Blog, 3 Dec. 2020, online.hbs.edu/blog/post/what-is-value-chain-analysis.

Tynan, Dan. “Case Study: For General Motors, Outsourcing Is a Way of Life.” InfoWorld, 28 Aug. 2006, www.infoworld.com/article/2659037/case-study--for-

general-motors--outsourcing-is-a-way-of-life.html.

White, Marta Szabo. “The Internal Environment: Resources, Capabilities and Core Competencies.” Csus.edu, 2022,
THANK
YOU