Answer to Question #262624 in Management for Paia

Question

1.      Which approach to strategy formulation is more likely to generate economic profits: (a) evaluating environmental opportunities and threats and then developing resources and capabilities to exploit these opportunities and neutralize these threats; or (b) evaluating internal resources and capabilities and then searching for industries in which they can be exploited? Why?

Answer 1

b) evaluating internal resources and capabilities and then searching for industries where they can be exploited It is wiser to first evaluate the internal resources and capabilities and then identify the industries where they can exploit the resources. It is not capital intensive method and the firm can generate more economic profits without having to invest funds and thus benefit from returns. Evaluating environmental opportunities and threats and then developing resources and capabilities to exploit these opportunities and neutralize these threats could stand to be a very expensive project and seems to be corporate responsibility more than it can generate economic profits.