Page 35 - Strategic Management

Strategic Management 7 Internal Analysis

7 Internal Analysis

7.1 Introduction and Definition of The Value Chain

Internal organisation can affect the cost and even the feasibility of some strategies. There must be a ‘fit’ between a strategy
and the elements of an organisation. If the strategy does not fit well, it might be expensive, or even impossible, to make
it work. This related to the Resource-Based view of the firm supported by Grant 1995.

7.1.1 The value chain can be defined as ‘a framework to differentiate the value-adding activities in an
organisation’. Ii comprises primary and support activities.

7.1.2 Below this section is a suggested audit of human resources and cultural aspects which are often
hidden.

7.2 Explanation

Each of the activities can be considered as adding value to an organisation’s products. For example, the activity of
operations in a car assembly plant. While the separate components do have a value in that they can be sold and bought
as individual items, as engines, wheels, etc., but when they are assembled into a complete vehicle then they have added
value to customers far in excess of the individual parts.

The value chain can best be described by use of a diagram as follows:

Figure 7.1 The value chain
Source: based on Porter (1985) p122 Fig 4-1

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