Barny Paper

Gabriel Segrest

Internal Analysis of Competitive Advantage

Dr. Barney wrote this article because Porter’s “Five Forces Model” focused only on the external factors that affect a company or industry. To include internal factors into Porter’s model Barney uses the SWOT framework which stands for strength, weakness, opportunities, and threats. This framework helps fill in the gaps that the “Five Forces Model” did not cover. Although analyzing the internal environment was not one of Porter’s Five Forces he did discuss it in his article but he labeled it a factor of competitive advantage not a force.

The first step in Barney’s model is to evaluate the company’s internal components. These components consist of financial information consisting of the company’s stocks, debt, and other financial reports. Gathering accurate information on physical resource helps calculate the value of the specific resources and the overall value of the company. The human and organizational resource is the backbone of a company and they are closely related. The human resource mainly involves knowledge, experience, and ethics people bring to the job. The organizational resource derives directly from the employees and how well they work together. When employees can trust each other and the company it makes for a more efficient and comfortable working environment.

When using the SWOT framework to analyze and fill in the gaps there are four major questions a manager must address. The first question the manager needs to focus on is the question of value. “Do a firm’s resources and capabilities add value by enabling it to exploit opportunities and/or neutralize threats?” To be a successful manager you need to be constantly examining the company’s resources and capabilities so you can keep adding value. It is a difficult job to keep adding value to a company because everything is going eventually change at some point. By answering the question of value managers link the analysis of internal...