We examined two key tools for understanding a firm's internal situation. We first discussed the need for consistency among a firm's vision, mission, and strategic objectives. A firm's vision should evoke powerful and compelling mental images that motivate employees to do these best. However, company visions are not very specific. Strategic objectives, or the other hand, one much more specific and are vital to ensuring that the firm is string toward fulfilling its vision and mission.
Second, in conducting a value-chain analysis, we divide the firm into a series of value-creating activities. These include primary activities such as inbound logistics, operations, and service as well as support activities such as procurement and human resources management. Then we analyze how each activity adds value as well as how interrelationships among value activities in the firm and among the firm and its customers and suppliers add value. Thus, instead of merely determining a firm's strengths and weaknesses per se, you analyze them in the overall context of the firm and its relationships with customers and suppliers—the value system.
An internal analysis of the firm would not be complete unless you evaluate its performance and make the appropriate comparisons. Determining a firm's performance requires an analysis of its financial situation as well as a review of how well it is satisfying a broad range of stakeholders, including customers, employees, and stockholders. We discussed the concept of the balanced scorecard, in which four perspectives must be addressed: customer, internal business, innovation and learning, and financial. Central to this concept is the idea that the interests of various stakeholders can be interrelated. We provided examples of how indicators of employee satisfaction lead to higher levels of customer satisfaction, which in turn lead to higher levels of financial performance. Thus, improving a firm's performance does not need to involve making trade-offs among different stakeholders. Assessing the firm's performance is also more useful in terms of how it changes over time, compares with industry norms, and compares with key competitors.
