Unit 32-LO2 Assess an organization’s internal environment and capabilities-BTEC-HND-Level 4 & 5

Course: Pearson BTEC Levels 4 and 5 Higher Nationals in Business

Business assignment helpers share a step-by-step guide to assessing an organization’s internal environment and capabilities. This includes steps for conducting interviews with employees, as well as the company’s leadership team, to better understand their strengths and weaknesses. The end goal is to provide recommendations on how organizations can improve in areas where they are lacking.

Create a list of all the factors that contribute to your business’s success. This includes employees, suppliers, customers, and anything else related to the organization. Determine which ones are most important for your company based on what is being done well or not so well as it relates to these different areas in order t optimize growth and development.

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Organizational internal environment:

What are strategic capabilities and what are the key components of strategic capabilities?

Strategic capabilities are the company’s capability to execute its strategy and generate superior outcomes in the marketplace. The concept of strategic capabilities is closely related to organizational learning, as well as other concepts such as innovation capability, customer skills, and customer decision skills.

There are many different ways to define strategic capabilities, but it is generally agreed that these components include:

  • Internal advantage – the possession of characteristics and resources accruing from being persistent in its operations.
  • External knowledge – proficiency with external information sources on these characteristics or competencies enabling a firm to exploit them for competitive purposes.
  • Structural lead- if technology market conditions provide different opportunities for a company to apply its internal ability with outside knowledge and structures, how can the company leverage them?
  • Relative cost advantage- by combining an internal advantage (competence) with knowledge (technology), how can the company provide this competence at lower production costs than competitors?
  • Risk minimization- even when a company can optimize the use of its competencies and knowledge, what strategies can it employ to ensure that this process does not come at a higher risk than competitors?

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Resource-based view strategy as a basis for competitive advantage and the McKinsey’s 7S model as a management tool

One of the primary advantages of the resource-based view strategy is one that in this day and age many don’t seem to appreciate anymore.

A planned portfolio strategy using resources as a basis for competitive advantage that embraces risk can often lead to higher gain – I think you’re right because an expanded resource base reduces reliance on any particular external supplier.

Moreover, when a company picks commodities wisely it should not be tied to an economy or region. Resource-based activities tend to fare better in such times; with sound diversification strategies and a resilient customer base, risks are minimized even during tough times.

McKinsey’s 7S model as a management tool

This is one of the primary tools used in grounded theory phenomenology. It’s a very useful heuristic framework that can be applied to understand any organization through careful observation and study.

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The 7S framework consists of seven factors; they are Strategy, Structure, Systems, Shared Values, Skills, Staffing, and Style. In order to understand why this is a great tool for grounded theory phenomenology, let’s break down some examples and see how they might work.

    • Strategy: This will look into the goals or motivators for the group which could be profit-related or other overarching ideals like social justice or environmentalism. The strategy helps provide an understanding of how each factor will relate with others in fulfilling these goals within the group.
    • Structure:  In structure, you are looking at how the group is structured and where the power lies. Systems look to see how these parts work together in accomplishing the goals or addressing the motivators of the group.
    • System:   This section deals with the structure, resources, or decision-making process and limitations within an organization in order to avoid over or underperforming this structure will be analyzed for efficiency.
    • Shared Values:   This will be an analysis of what members within a group believe or hold true for themselves. These values may appeal to a variety of stakeholders depending on their perspectives.
    • Skills: This will delve into the types of skills that are needed to fully function as a unit and achieve goals whether this would be research, writing, decision making, etc…

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  • Staffing:  This section deals with who fills all the roles and responsibilities necessary for fulfilling all goals and what type of person is best suited for each role within a group.
  • Style:  This is how a group works together towards fulfilling its mission. There are a few different styles of working but the most common is that of consensus.

Analysis of strategic capabilities using the VRIO/VRIN framework

Before we start a discussion of our analysis, let’s define these two important strategic concepts in the columns below.

VRIO stands for Value, Risk, and Innovation Opportunity.

VRIN stands for Value Added to the Company (employees), Interunit Relationships (vertical/horizontal integration), and Non-Segment Activities (risks).

We will take each point separately under three headings: Value Analysis, Risks Analysis, and Innovation Options.

Value analysis:

Strategic Value Analysis is an assessment of the power of a business unit and its worth to a company. Power refers not only to the financial strength but also the strength in terms of resources (e.g., technology, human skills) that is needed for a business unit to be effective.

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Worth means how much the company will gain from the operations of a particular business unit or project. Once we have identified our key strengths and weaknesses we can then identify strategies that need to be implemented by our new department in order to maximize values within our organization and ensure success.

Risks Analysis:

A risk is a negative potential event that can have an impact on the achievement of our business objectives. The risks analysis will help us to identify what those key risks might be and how we can minimize or avoid them by working with our stakeholders within our organization.

In order for us to complete this part of the unit specifications, I need to take into account all factors that are affecting my decision making, external and internal environment.

Innovation Options:

These are the opportunities that we need to identify within our organization’s internal capability and environment, which supports us to achieve our business objectives.

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Benchmarking strategic capabilities and value chain analysis

If a company wanted to know how their capabilities compared to the competition, they would do competitive benchmarking. This is a form of activity that forms part of the strategic planning process and may involve the production of an internal business review and/or external reviews.

Benchmarking strategic capabilities allows firms to identify gaps in their processes by comparing them against benchmarks provided by industry peers or competitors.

Sometimes it’s just not sufficient for a company to compare themselves against their previous practices or current competitors. There needs to be some baseline with which relative performance can be judged; this is where value chain analysis comes into play.

Value chain analysis breaks down all aspects of what goes on inside a business in order to examine supply chains, design, executive decision-making, manufacturing, and even customer service. This approach allows firms to look at their performance from the viewpoint of different stakeholders within a company and helps them identify areas for improvement that may have been previously overlooked by executives.

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Cost-benefit analysis

Many people don’t know what a cost-benefit analysis is, but they do it every day. A cost-benefit analysis is a process of comparing the costs and benefits of an investment or decision with the goal to find out which one will yield more profit. It’s important to do this because if you make a poor decision that doesn’t benefit your company, then you’ll waste time, money, and resources on something that won’t work. So why not take advantage of some free help?

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