Strategic fit

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Strategic fit expresses the degree to which an

divestitures of organizational divisions. Strategic fit is related to the resource-based view of the firm which suggests that the key to profitability is not only through positioning and industry selection but rather through an internal focus which seeks to utilize the unique characteristics of the company's portfolio of resources and capabilities.[1] A unique combination of resources and capabilities can eventually be developed into a competitive advantage
which the company can profit from. However, it is important to differentiate between resources and capabilities. Resources relate to the inputs to production owned by the company, whereas capabilities describe the accumulation of learning the company possesses.

Class

Resources can be classified both as tangible and intangible:

Tangible:

  • Financial (cash,
    securities
    )
  • Physical (Location, plant, machinery)

Intangible:

Several tools have been developed one can use in order to analyze the resources and capabilities of a company. These include SWOT, value chain analysis, cash flow analysis and more. Benchmarking with relevant peers is a tool to assess the relative strengths of the resources and capabilities of the company compared to its competitors.

Strategic fit can also be used to evaluate specific opportunities like M&A opportunities. The strategic fit would, in this case, refer to how well the potential

merger, an efficient organization, synergy effects or cost reductions
. It is a vital term and it should be taken into consideration when evaluating a company's strategy and opportunities.

References

  1. OCLC 38120557
    .
  2. ^ Ivey Management Services (1995) "A note on mergers and acquisitions and valuation", Ivey
  3. ^ Harris, Elizabeth (1 January 1997). "CEO Survey: Mergers & Acquisitions – the 1997 Business Week Symposium of CEOs". www.bain.com.
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