Final answer:
Understanding internal capabilities is essential to creating sustainable competitive advantage and ensuring business survival.
Step-by-step explanation:
The understanding of internal capabilities is essential to creating sustainable competitive advantage in business. Internal capabilities refer to a company's unique resources, skills, and competencies that enable it to outperform competitors. By leveraging its internal capabilities effectively, a company can provide above-average performance and ensure its survival in the market. For example, if a company has advanced technology, a strong supply chain, or highly skilled employees, it can differentiate its products or services from competitors and attract customers. This understanding of internal capabilities helps the business identify its competitive strengths and weaknesses, develop strategies that align with its capabilities, and make informed decisions to stay ahead of the competition.