Internal Analysis Framework calls for correctly identifying, developing, deploying and exploiting company resources, capabilities and identifying core competencies required by managers to make difficult decisions. Partially, these challenges are a result of characteristics of both the internal and external environments of the company. This challenge is multiplied because of three conditions that characterize important strategic decisions under the Internal Analysis Framework .
Internal Analysis Framework depicts the conditions or decision characteristics affecting managerial decisions about Resources, Capabilities and Core Competencies basically fall under three heads:
- Uncertainty regarding the assessment of the general and industry environments, assessment and predictability of competitive actions and customer preferences. Uncertainty is present because of the inherent difficulty in identifying, assessing, and predicting changes and trends in characteristics of the external environment. Among these characteristics are correctly predicting the extent, direction and timing of changes in the general environment, such as societal values, political and economic conditions, customer preferences and emerging technologies from other industries.
- Complexity regarding the nature of any inter relatedness of the causes of change in the environment and how the environments are perceived, especially regarding decisions as to which of the company’s resources and capabilities might serve as the foundation for competitive advantage. Complexity is increased because of the uncertain nature of interrelationships among the characteristics of the external environment and the related challenge regarding how to assess the effects of changes in them. The issue becomes more complex when managers must relate the complex external environment to their assessment of the company’s internal environment. The assessment affects the decisions regarding the company’s resources, capabilities, and core competencies and their relationship to opportunities in the external environment that can be exploited successfully to achieve competitive advantage thorough Internal Analysis Framework.
- Intra-organizational conflicts among managers making decisions about which core competencies are to be nurtured and about how the nurturing should take place. Intra-organizational conflicts often develop as a result of uncertainty and complexity. When managers make decisions regarding the identification of the company’s capabilities and choose to nurture them (with resources) to develop core competencies that can be exploited to achieve a competitive advantage, they must make these important decisions with absolute certainty that the decision is correct. Such decisions may result in changes or shifts in power and interrelationships among individuals and groups within the company. When this occurs, there may be conflict as those who are affected adversely or perceive that they will be so affected, may resist these changes. In some cases, managers faced with decisions that may have unpleasant consequences or are uncomfortable often experience denial, an unconscious coping mechanism used to block out and not initiate major changes that may have some pain associated with them.
Thus, managers that must make decisions under conditions of uncertainty, complexity, and intra-organizational conflict must exercise judgment, a capacity for making a successful decision in a timely manner when no correct model is available or when relevant data are unreliable or incomplete.