ACCA Strategic Professional · Strategic Business Leader
The Internal Resources, Capabilities and Competences of an Organisation
Internal analysis asks what an organisation has (resources), what it can do with them (capabilities) and what it does better than rivals (core competences). To apply it in SBL, test each strength against VRIO, locate it in the value chain, compare it with a benchmark, then link it to the scenario's strategic choice.
What this chapter covers
This chapter looks inside the organisation. It separates resources (what you own or can use: people, plant, brands, cash, data) from capabilities (how well you combine them) and core competences (the capabilities that give an edge rivals struggle to copy). It then gives you tools to test those claims: VRIO, the value chain and value network, benchmarking, and dynamic capabilities.
The chapter is the internal half of strategic analysis. The external half (PESTEL, Porter's five forces, market and industry analysis) tells you what the environment demands. This chapter tells you whether the organisation can meet those demands. SBL expects you to bring both halves together in a SWOT-style judgement, not to treat them as separate lists.
It also feeds the rest of the paper. Strategic choice, such as diversification, outsourcing, acquisition or alliance, depends on capability. Strategy implementation, change, risk and performance measurement all rest on knowing what the organisation can actually do. In the case study, a weak or misused capability is often the reason a plan will fail.
SBL is a case-based exam with professional skills marks, and internal analysis is one of the most common frameworks a task asks you to apply. A requirement such as "evaluate the organisation's ability to pursue this strategy" is really a capability question. If you can name the right model, apply it to facts in the scenario and reach a reasoned conclusion, you earn technical marks and show the analysis and commercial acumen the professional skills marks reward. Students who only list strengths and weaknesses usually lose marks for lack of depth.
The internal resources, capabilities and competences of an organisation: topics in the order to study them
- 1Resources, Capabilities and CompetencesStart with the vocabulary, because every later tool depends on separating resources from capabilities.
- 2Core Competences and Competitive AdvantageNext, see which capabilities become core competences and how they support advantage over rivals.
- 3VRIO and Strategic Capability AnalysisThis gives you a structured test for whether a resource or competence really delivers sustainable advantage.
- 4Value Chain and Value Network AnalysisOnce you know what to test, locate where value is created across activities and across partners.
- 5Benchmarking and Assessing CapabilityThen learn how to judge performance against a standard, since claims of strength need evidence.
- 6Dynamic Capabilities and Organisational KnowledgeFinish with how capabilities are renewed over time, which ties the chapter to change and learning.
How to prepare The internal resources, capabilities and competences of an organisation
Aim to apply each model to a short scenario, not just recall it. Use the steps below in order.
- Write one-line definitions of resource, capability and core competence, each with an example from a business you know.
- For each model, note its purpose, its steps and one limitation, so you can use it and criticise it.
- Take a past SBL case or a news story and run VRIO on three claimed strengths. Write a one-sentence verdict for each.
- Map the same organisation's activities onto the value chain. Mark where cost or differentiation arises and where a partner in the value network adds value.
- Practise short answers of about 15 minutes: pick a model that fits the requirement, apply it with scenario facts, and end with a recommendation.
- Draft a few paragraphs linking capability to strategic choices such as outsourcing, acquisition or entering new markets.
- Review your answers for professional skills: clear structure, scepticism about management claims, and a conclusion the board can act on.
Common mistakes in The internal resources, capabilities and competences of an organisation
Listing resources and calling it capability analysis
Fix: For each resource, say what the organisation does with it, how well, and whether rivals can match it.
Using VRIO as a checklist with one-word answers
Fix: Justify every answer with a scenario fact and finish with a conclusion on the level of advantage.
Treating a strength as sustainable without testing it
Fix: Show scepticism. Ask whether the strength is rare, how easily it could be copied and what evidence supports it.
Ignoring the external environment
Fix: Relate each capability to customer needs and competitor moves, so the conclusion is about fit with the market.
Applying a model that does not fit the requirement
Fix: Underline the requirement first, then choose the tool that answers it, and use two models only if both add something.
Ending without a recommendation
Fix: Close each section with a clear view on what the organisation should do, such as build, buy, partner or outsource a capability.
Last-day revision: The internal resources, capabilities and competences of an organisation
- Resources are inputs the organisation owns or can access; capabilities are how well it uses and combines them.
- A core competence is a capability that is valuable to customers and hard for rivals to copy.
- Threshold capabilities are needed just to compete; they do not give advantage by themselves.
- VRIO asks four questions: Valuable, Rare, Inimitable, Organised to exploit.
- A resource that is valuable but not rare gives only competitive parity.
- Sustainable advantage needs all four VRIO tests to be met.
- The value chain splits activities into primary and support activities and looks for where margin and cost arise.
- A value network extends analysis to suppliers, distributors and partners outside the organisation.
- Benchmarking compares performance against internal, competitor, industry or best-practice standards.
- Dynamic capabilities are the ability to sense change, seize opportunities and reconfigure resources.
- Organisational knowledge, especially tacit knowledge, can be hard for rivals to copy.
- Always link an internal finding to the strategy under discussion and give a recommendation.
The internal resources, capabilities and competences of an organisation practice questions
- Verdana Foods has a unique supplier network that competitors cannot easily replicate and which delivers high-quality produce. However, Verda…
- Brightwell Retail has long relied on a core competence in managing physical store networks. Online competitors are changing customer behavio…
- Corvane Pharma has a patented drug formulation process, a skilled research team and strong brand recognition. A consultant says that, to be …
- Tessaro Motors can match rivals on safety certification, dealer coverage and warranty terms, which all car makers must offer to compete. Whi…
- Ostrava Components compares its machine downtime, defect rate and cost per unit across its four factories to identify which plant has the be…
- Brindle Telecom has invested heavily in a network of base stations, a customer database and a billing system. A strategy review finds that a…
- Tarn Components supplies brake parts to a vehicle maker. It finds that the maker's inbound logistics and Tarn's outbound logistics are dupli…
- Calder Foods has a patented fermentation process that is valuable, rare and costly for rivals to imitate. The company has a well-staffed R&D…
The internal resources, capabilities and competences of an organisation in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
The internal resources, capabilities and competences of an organisation: frequently asked questions
What is the difference between a resource and a capability?
A resource is something the organisation has, such as staff, machinery, a brand or cash. A capability is how effectively it uses and combines those resources. Two firms can hold the same resources and perform very differently because their capabilities differ.
Which model should I use for internal analysis in SBL?
It depends on the requirement. Use VRIO to test whether strengths give lasting advantage, the value chain to see where value is created, and benchmarking to judge performance. Read the task wording first and choose the tool that answers it.
Is this chapter only about strengths and weaknesses?
No. Strengths and weaknesses are the starting point, but SBL wants you to evaluate them and show what they mean for strategy. Good answers explain whether the organisation can deliver a proposed plan and what it must do to close any gap.
How do dynamic capabilities differ from core competences?
A core competence is a current strength that supports advantage. A dynamic capability is the ability to change the organisation's resource base as the environment shifts. A competence that never renews can become a weakness when conditions change.