Unit 3 - The Internal Audit / Assessment
Internal Audit
Definition & Scope:
Systematic review of internal operations and performance
Covers all key areas:
o Management
o Marketing
o Finance & Accounting
o Production/Operations
o R&D
o MIS (Management Information Systems)
Purpose:
Understand the firm’s internal environment
Support strategic planning and decision-making
Identify strengths, weaknesses, and inefficiencies
Benefits:
Improves interdepartmental coordination and communication
Aligns internal capabilities with strategic goals
Drives performance improvement and problem-solving
Resource-Based View (RBV)
Core Idea:
Competitive advantage comes from internal resources, not just external factors.
Key Points:
Focuses on unique, valuable internal assets (e.g., skills, tech, brand, culture)
Resources must be:
o Valuable
o Rare
o Inimitable
o Non-substitutable (VRIN)
Purpose:
Sustain long-term success
, Outperform competitors by leveraging internal strengths
RBV focuses on the following key aspects:
Internal Resources are assets that the firm owns or controls, which can be tangible or
intangible.
Tangible Resources include physical assets such as plant and equipment, technology,
location, raw materials, machinery, and human resources like employees.
Intangible Resources encompass non-physical assets such as firm structure, planning
processes, information systems, trademarks, patents, copyrights, databases, employee
knowledge, skills, experience, and organizational culture.
To serve as a source of sustained competitive advantage, resources must possess the following
characteristics:
Valuable: They enable the firm to implement strategies that improve efficiency or
effectiveness.
Rare: They are not widely possessed by competitors.
Hard to Imitate: They cannot be easily replicated or substituted.
Non-Substitutable: No equivalent resources can replace them to achieve similar benefits.
By focusing on developing and protecting such resources, firms can establish barriers to imitation,
maintain market differentiation, and achieve long-term success.
Resources
What the firm has
Examples:
o Physical assets (buildings, equipment)
o Human capital (skills, knowledge)
o Organizational systems (processes, IT)
Capabilities
What the firm can do
Ability to use resources effectively
Often called:
o Core competencies
o Distinctive competencies
Provide competitive advantage if hard to imitate
Distinctive Competencies:
These are unique strengths or skills that provide a competitive edge.
Internal Audit
Definition & Scope:
Systematic review of internal operations and performance
Covers all key areas:
o Management
o Marketing
o Finance & Accounting
o Production/Operations
o R&D
o MIS (Management Information Systems)
Purpose:
Understand the firm’s internal environment
Support strategic planning and decision-making
Identify strengths, weaknesses, and inefficiencies
Benefits:
Improves interdepartmental coordination and communication
Aligns internal capabilities with strategic goals
Drives performance improvement and problem-solving
Resource-Based View (RBV)
Core Idea:
Competitive advantage comes from internal resources, not just external factors.
Key Points:
Focuses on unique, valuable internal assets (e.g., skills, tech, brand, culture)
Resources must be:
o Valuable
o Rare
o Inimitable
o Non-substitutable (VRIN)
Purpose:
Sustain long-term success
, Outperform competitors by leveraging internal strengths
RBV focuses on the following key aspects:
Internal Resources are assets that the firm owns or controls, which can be tangible or
intangible.
Tangible Resources include physical assets such as plant and equipment, technology,
location, raw materials, machinery, and human resources like employees.
Intangible Resources encompass non-physical assets such as firm structure, planning
processes, information systems, trademarks, patents, copyrights, databases, employee
knowledge, skills, experience, and organizational culture.
To serve as a source of sustained competitive advantage, resources must possess the following
characteristics:
Valuable: They enable the firm to implement strategies that improve efficiency or
effectiveness.
Rare: They are not widely possessed by competitors.
Hard to Imitate: They cannot be easily replicated or substituted.
Non-Substitutable: No equivalent resources can replace them to achieve similar benefits.
By focusing on developing and protecting such resources, firms can establish barriers to imitation,
maintain market differentiation, and achieve long-term success.
Resources
What the firm has
Examples:
o Physical assets (buildings, equipment)
o Human capital (skills, knowledge)
o Organizational systems (processes, IT)
Capabilities
What the firm can do
Ability to use resources effectively
Often called:
o Core competencies
o Distinctive competencies
Provide competitive advantage if hard to imitate
Distinctive Competencies:
These are unique strengths or skills that provide a competitive edge.
