Firms operate in an environment where external opportunities always prevail as a striking option and considerably be lucrative for firms to adopt such strategies coping with the requirements to reap the fruits from the prospects around. Moreover, each company has its internal resources and capabilities to exploit and deal with its exteriors and usually endeavors to adopt the strategies most suitably are in accordance with the prerequisites of potential externalities. This matching of inner possessions and aptitudes to the outer opportunities is termed as strategic fit.
To be strategically fit not only the understanding of external milieu in which the company is actually functioning is indispensable but a clear and critic view of internal resources and capabilities is also essential to execute and support the strategy. The philosophy of strategic fit can be used to analyze the strategic position of a firm or division in the sense that either the firm or division is using its strength to exploit the superficial opportunities or is capable of doing so.
[linkunit]The strategic fit theory also supports the postulation of Resource Based View of the firm and suggests utilizing the exceptional characteristics of its internal strengths, resources, and capabilities portfolio. Eventually a sustainable competitive advantage can be developed through an unanimated combination of the firm’s internal strengths and resources. Generally the resources and capabilities are spoken as common lexis for internal strengths but a distinction between them would be helpful in creating further insight into the subject. Resources are referred to as inputs the company owns and use them in producing the goods and services whereas capabilities are real knowledge base of the company learned over its life. More broadly, resources can be grouped into tangibles such as financial resources and physical resources and intangibles such as technology, human resource, goodwill, organizational culture etc.
For the internal analysis of resources and capabilities numerous strategic management tools can be used such as SWOT Matrix and Porter’s value chain model. Furthermore, benchmarking techniques are extensively used to determine the relevant strengths of internal capabilities and resources in comparison with the rivals.
A high degree of strategic fit entails a company with the benefits of extensive profitability and potential yields. This analysis can rightfully be a vital influential factor over the decision making and strategy selection process of a firm. In the evaluation of specific opportunities strategic fit analysis would help in determining and understanding the potential benefits expected to be generated through gamming on such opportunities. The analysis further enables a company to evaluate the real strength of its resources and capabilities and their utter significance towards achieving the sustainable competitive advantage. The company, than can work on improvement in and development of its tangible and intangible assets hence making them more profitable, reliable, and durable for its current revenue base and expected prospects. Further it enables a firm to fairly determine the relevant external ventures the company is cable to cope with to realize its planes of expansion, growth, and future investments.