Reason 1: Your resources and capabilities underpin your firm
The first reason why internal firm analysis is important is that the resources and capabilities of the company underpin its success. Your ability to compete in a particular market is dependent on being able to fulfill market expectations based on the capabilities of the organization. While a market orientation is important to identify new opportunities, an awareness of the internal capabilities of the organization is important in actually being able to fulfill those expectations.
Reason 2: Need for alignment between the resources
The net reason why internal firm analysis is important is that it is important that the resources within an organization are aligned with one another. The different parts of the firm should support one another – each pulling in the same direction. This requires awareness of the capabilities of the firm – with conscious effort required to coordinate the resources and achieve alignment between the different parts of the firm.
Reason 3: Leading requires continual investments
A final reason why internal resources analysis is important is that a focus on internal resources and capabilities is important to ensure continual investments. Becoming a true leader in a particular market requires superior internal capabilities. Achieving this requires sustained investments to achieve leadership. Without an awareness of internal resources it is a lot less likely that the firm will make the necessary sustained investments to attain a leadership position.