Analyzing the Internal Organization Paper Example

Introduction

Examining the internal organization of a firm is key to attaining a superior product-market position. By efficiently utilizing resources and capabilities, organizations reach value through the creation of core competencies. By combining core competencies and endless opportunities existing in a particular market organization achieve a strategic competitive advantage over their competitors.

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Resources and Capabilities as the Key to Competitive Advantage

Review of Subject

The internal organization entails the firm's capabilities and portfolio of resources. The utilization of a resource of a firm in a unique way gives rise to core competencies. Firms and resources must be managed in a way that that is not dependent on a single mindset, culture or context. Using the Global mindset in maintaining the internal structure of an organization increases the potential of outperforming competitors (Hitt, Ireland & Hoskisson, 2013). However, having a competitive edge over rivals is not an everlasting experience as organizations utilize resources in different ways to try and dominate the market. There are also various interrelations forming the firm, uncertainty and internal conflicts present a considerable challenge impeding efforts to identify the resources of a firm, developing them and the overall decision-making process. To create a sustainable advantage firm can either focus on valuable, rare, non-substitutable or costly to imitate capabilities (Hitt, Ireland & Hoskisson, 2013). The combination of core competencies as informed by sustainable advantages and value chain analysis creates completive advantages which in the long run helps a firm in attaining strategic competitiveness.

Discussion

A firm must create an operating environment that allows people to integrate their knowledge with that of others to create a significant value creation mechanism. Additionally, both tangible in intangible resources of an organization must be different or applicable in a unique manner to be ahead of competitors. However, intangible resources have the edge over tangible resources in creating a sustainable competitive advantage as they are not easy to replicate by the competitors. For example, a positive reputation can be vital to having a competitive advantage and may not be easy to be copied. A combination of tangible and intangible resources over time also creates core competencies. Core competencies form value to a firms products giving the organization a competitive advantage over their rivals who offer inferior products(Hitt, Ireland & Hoskisson, 2013). For example, utilizing financial resources (tangible) and Innovative Designers (Intangible) in the long run creates interactive and consumer-friendly stores (core competency). However, the firm has to understand the characteristics of the industry with which it is oriented to form a superior product- market position by offering products that are unique and valuable according to the consumers (Hitt, Ireland & Hoskisson, 2013). Environmental uncertainty increases the range of issues that must be analyzed in an internal organization and their complexity.

Therefore firms must focus on creating capabilities that are challenging to imitate by competitors. The entails deciding whether to exploit opportunities and efficiently neutralize threats, exploit rare capabilities, costly ones or non-substitutable. For example, the unique culture of southwest airlines enables the company to charge low costs for flights. Such culture is expensive to imitate by competitors (Hitt, Ireland & Hoskisson, 2013). Most organizations implement more than one limiting factor to create a competitive advantage.

To create an effective competitive advantage, the knowledge of a firm's human capital is vital. Strategic decision makers in an organization must also be able to understand their cognitive biases to take intelligent risks. Value chain analysis informs such judgments. Value chain analysis entails resource investments in distribution, supply chain, marketing, follow-up activities and general company operations in a manner that would boost production of knowledge and access to resources that a firm may not have at its disposal (Hitt, Ireland & Hoskisson, 2013).

The value chain of an organization also has to be analyzed for the firm to determine its strengths and weaknesses regarding resources, core competencies and capabilities by keenly analyzing a company's weaknesses and strengths to determine the course of action that would result in attaining sustainable competitive advantage. For example, a firm can then outsource resources where it is weak to create optimum value. The core competencies of a firm also have the potential of becoming its rigidity in the dynamic business world (Hitt, Ireland & Hoskisson, 2013). For example bookstores such as Noble attained a competitive advantage by creating stores that were wide enough for customers to feel pleasant when making their purchases. However, Amazon has changed the face of markets through their online platform resulting in immense costs for the brick-and-mortar companies. Therefore the core competencies must be able to allow the firm to create value through exploitation of the opportunities in the external environment. Amazon discovered that limited bookstores were offering online access and preview, and it turned the rigid structure of Noble into a chance to create value.

Conclusion

In the current dynamic and competitive business environment, it is vital that the analysis of an internal organization identifies and balances the resources, capabilities and core competencies with the opportunities in the external business environment. The efficient utilization of resources and capabilities is what creates core competencies. The uncertain market conditions, conflicts, and various interrelations within a firm determine impacts the judgment made regarding the best way to attain strategic competitive advantage. Strategic decision makers have therefore to take intelligent risks as informed by the data from the supply chain, distribution, general company operations, marketing and follow up activities. Also, due to the temporary nature of competitive advantage, firms have to keep modifying their products and position in the market in a manner that they cannot be easily imitated be their competitors. By analyzing their strengths and weaknesses regarding resources, capabilities and core competencies, organizations can either choose to maximize on arising opportunities, minimize challenges, exploit rare capabilities, and create costly or non-substitutable ones. However, care should be taken such that the core competence of an organization does not become its core rigidity in the dynamic operational environment.

References

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management cases: competitiveness and globalization. Cengage Learning.