This is a description of the strategic capabilities of a firm or a business. In financial performance analysis, resource audit, effectiveness analysis and chain analysis form essential tools (Frigo, 2002). Overall performance of a firm may be assessed by answering the following questions:

  1. What is the change in the resources deployed in the firm over time? This translates to historical analysis.

ii. What is the relation between resources and the potential of a concern with others in the industry? This is industry norm analysis.

iii. What is the relation between resources and the potential of a firm and the best in that industry? This is known as benchmarking and lastly,

iv. What is the change in economic performance of a firm over time and how do such changes compare with main competitors and the entire industry? This is commonly known as ratio analysis.

II.Examination of the company’s resources

This kind of examination traces the resources accessible to a firm. Some resources may be possessed e.g. plant and machinery, retail outlets and trademarks. Other resources can be achieved through partnerships and joint ventures.

Company resources can be classified into various groups

a)   Physical Resources: This includes production, information and marketing facilities.

b)   Human Resources: They include staffs of a firm with the most skilled staff the better.

c)   Intangible Resources: These resources include goodwill, reputation, brands and intellectual property.

d)   Financial resources: This concern the capability of the firm to fund its chosen operations.

III. Examination of company’s external environment

External environment a firm offers a source for inputs and acts as the recipient of the firm’s output. External environment under which a firm operates can offer it opportunities to exploit, and risks which could destroy it. However, to take advantage of opportunities and react to risks, a firm must have the appropriate resources and required power in place.

IV. Examination of firm’s strategy

An analysis of the crucial capabilities of a firm to achieve competitive advantage in the industry is done. The first step in this analysis is to recognize that competition between firms is a race for competence mastery since it is for market position as well as market power. The objective here is for management to concentrate on competencies that largely influence competitive advantage (Mautz, 1961).

2. Presentation and evaluation of potential options

There is the need for the formulation and  evaluation of alternative courses of action and corrective action. Courses of action may take any of the three forms below:

1.Do nothing

2.Correction of the actual performance

3.Revision of the standard.

The various available courses of action should be assessed for suitability and the best of all selected. If performance essentially matches the set standards, the status quo should be maintained. If standards are not met, a careful assessment of the reasons behind should be conducted and corrective actions employed. Reasons for deviations must be traced prior to taking corrective action.

Final strategic recommendations and justification.

Security. Large firms need to have a formalized security council, constituted of delegates all firm’s segments, to keep a round the clock watch of firm’s security initiatives (Della-Piana, 2005).

Architecture. There should be a continued leveraging of cross-organizational crews to develop architectural standards essential for development of existing as well as new products.

Infrastructure. The firm should continue implementing infrastructure strategies for its network with it external environment. This initiative can be instrumental on how its marketing strategies will be effective. Feedback channels from final consumers will also be enhanced thereby giving it an opportunity to deliver the best products and services in line with the needs of the final consumers.

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