1. Identify and classify the firm’s resources in terms of strengths and weaknesses.
2. Combine the firm’s strengths into specific capabilities and core competencies.
3. Appraise the profit potential of these capabilities and competencies in terms of their po-
tential for sustainable competitive advantage and the ability to harvest the profits result-
ing from their use. Are there any distinctive competencies?
4. Select the strategy that best exploits the firm’s capabilities and competencies relative to
external opportunities.
5. Identify resource gaps and invest in upgrading weaknesses.10