Key Learning Essay #2
MAN 6721 March 16, 2010

It is known that a company’s strategy is very important to their success. We have addressed how a company’s strategy must fit properly with the environment in which they are operating. We refer to this as their external fit and utilize Porter’s five forces to evaluate it. While external fit is important, it is also necessary to have a proper internal fit. I will first discuss more about internal fit is. Next, I want to address the importance of links to internal fit. Finally, I will look at some examples of companies and the strengths or weakness in their internal fit. The term internal fit may seem to be an oxymoron, but many companies are more worried about external factors before really addressing their core values. Many companies fail to realize that competitive advantage comes from internal fit. A competitive advantage comes from creating value to your customers that they would not have otherwise. Not only value creation but also value capture is a part of creating an advantage over competitors. Capturing value comes from organizational design. Making sure the processes inside your company are all reinforcing is essential to making sure the fit is right. To make sure activities inside the company are reinforcing one another we must create links between the different departments. All of the operations, such as human resources, production, marketing, and distribution must be on the same page. Companies must look for inconsistencies within different departments. We must also address the link between leadership and the company culture. Sam Walton serves a perfect example of this. His drive to always be the cheapest is what made Wal-Mart what it is today. Not only a company leaders’ beliefs about the company, but also their actions have a huge impact on the company culture. Sam Walton alone is not responsible for the great internal fit with Wal-Mart. There are so many aspects of Wal-Mart that really show how great they are at what they do. They have been able to not only create a competitive advantage, but also sustain it. Every link between their operations goes towards promoting their low cost strategy. With operations they coordinated processes with IT and distribution to allow them to not have excess inventory. Wal-Mart made sure they were perfectly positioned around distributions centers to cut cost as well to. In stores, they did not let one square foot go to waste, they dedicated all of them to sales. In human resources they convinced employees to take on more responsibility by making them believe they were being “empowered”. Another competitive advantage came from technology, which drives the ability to have low price. Passion For Learning teaches us more about internal fit because of the challenges they faced with being a new business and the uncertainty that came with that. Their problem started at the core because their mission statement did not match their product line. What Passion For Learning needed to do to create value was take a look at what competitors are not providing and offer that to customers. They needed to offer some of the 80% of the “not hot” products that consumers weren’t able to find on store shelves. Not only providing these to customers, but suppliers would help and give them more negotiating power. Another consideration they can make since they are a young company is offering customers an arm in the R&D department. This would allow Passion For Learning to attain some competitive advantage. Airborne Express taught us more about what a niche company could do. They created a distinct position in highly competitive industry. The consumer mailing industry was dominated by FedEx and UPS so Airborne Express targeted businesses only. By doing this they eliminated the need for excess marketing and creating a recognizable brand for average consumers. Instead they had a sales force to promote directly and create relationships with their business clients. They were also able to enhance their distribution by owning and operating their own planes. In the end, Airborne wasn’t stretching themselves too thin and that allowed them to fulfill their objectives. In summary, finding internal fit is essential to enforcing a company’s strategy. Identifying what internal fit is for each company is the first step. As business managers we cannot just assess the outside market. We all to often focus on what our competitors are doing before we make sure our operations are in line. We realized we must create links between service, finance, human resources, and all other departments under our umbrella. We finally looked at both examples of different company’s successes and struggles to see the power that internal fit has. Just as in most things in life, a successful business is more than what appears on the outside, but how it internally operates.