Part II: Analyze Organizational Performance and a Firm’s External and Internal Environments
In Part I, we introduced strategic management and case analysis. Part II continues to follow the AFI framework, expanding on the case analysis process as you learn how to analyze a firm’s organizational performance and its external and internal environments.
In Chapter 3, you consider a company’s organizational performance, which provides critical information about a firm’s external and internal environments. You learn what mission, purpose, vision, and values mean to a company, why they are important, and how to analyze them. This chapter also discusses the difference between performance measures and benchmark measures and the importance of considering a range of measures to ensure a thorough and robust analysis. Therefore, you learn multiple approaches to analyze a company’s organizational performance, focusing on and analyzing a firm’s financial position, market position, and other relevant quantitative measures. You also learn a model for measuring organizational performance, the balanced scorecard, and how to analyze it to provide a more comprehensive view of a firm’s organizational performance. Finally, you learn what a competitive advantage is and why it is central to strategic management.
In Chapter 4, you learn the strategic management concepts, and analytical tools that support strategically analyzing a firm’s external environment. A firm’s external environment provides a critical outside-in perspective and helps companies to determine attractive markets in which to operate. A firm’s external environment includes those factors, forces, and competitive industry groups outside the firm’s direct control. Part of understanding a firm’s external environment is being familiar with the structure of its external environment. The chapter teaches you how to analyze the general environment, the industry environment, and the competitive environment. You also learn the role of external analysis in case analysis. The chapter concludes by having you use the PESTEL analysis instrument to analyze a firm’s general environment, the Porter’s Five Forces analysis instrument to analyze a firm’s industry environment, and the strategic group analysis instrument to analyze a firm’s strategic group.
In Chapter 5, you consider a company’s internal environment, which provides a critical inside-out perspective of the firm. A company has direct control over its internal environment. You learn what resources, capabilities, and core competencies are and how these relate to creating and maintaining a competitive advantage. Next you learn what a resource-based view of a firm is and why it is important to organizations. The next topic, the VRIO framework, is derived from such a research-based view. You also learn how isolating mechanisms, including intellectual property, social complexity, and path dependence, serve as a value-added resource for organizations. After learning what a firm’s value chain is and how it is used to identify strengths and weaknesses of an organization, you will be prepared to analyze the internal environment of a firm using a VRIO analysis instrument and a value chain analysis instrument. Analyzing both the external and internal environments of an organization provides a balanced and 360-degree analysis for the firm.
