Internal and External Analysis | OnStrategy Resources (2023)

SWOT Analysis

SWOT is an acronym used to describe the specific strengths, weaknesses, opportunities and threats that are strategic factors for a given company. A SWOT should present an organization's core competencies while highlighting opportunities that it is currently unable to exploit in its favor due to resource gaps.

The SWOT analysis framework has gained wide acceptance in strategy development due to its simplicity and power. Like any planning tool, a SWOT analysis is only as good as the information it contains. Accurate research and data are essential to identify key issues in an organization's environment.

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Get the SWOT guide here

For an even deeper look into the topic, you can watch our video atHow to conduct a SWOT analysis.

Assess your market:

  • What is happening externally and internally that affects our company?
  • Who are our customers?
  • What are the strengths and weaknesses of each competitor?(think competitive advantages)
  • What are the driving forces behind sales trends?
  • What are the important and potentially important markets?
  • What is happening in the world that could impact our business?
  • What does it take to succeed in this market? (List the strengths all companies need to succeed in this market.)

Rate your business:

  • What are we best at?
  • What are our company's resources - assets, intellectual property and employees?
  • What are the capabilities (functions) of our company?

Assess your competition:

  • How do we differentiate ourselves from the competition?
  • What are the general market conditions of our business?
  • What are the needs of our products and services?
  • What are the customer's market technology opportunities?
  • What issues and complaints does the customer have with current industry products and services?
  • What "If only..." statements does a customer make?

Opportunity is an “area of ​​need” in which a business can profitably operate.

threat

A challenge from an unfavorable trend or development that (in the absence of a defensive marketing effort) would lead to a deterioration in profits/sales.

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An assessment should be carried out to draw conclusions about how opportunities and threats could affect the business.

EXTERNAL: MACRO- Demographic/Economic, Technological, Social/Cultural, Political/Legal / MICRO- Customers, Competitors, Channels, Suppliers, Public
INTERNAL RESOURCES: to company

Competitive analysis is a critical aspect of this step.

  • Identify actual competitors as well as substitutes.
  • Assess competitors' objectives, strategies, strengths and weaknesses, and response patterns.
  • Choose which competitors you want to attack or avoid.

Internal strengths and weaknesses analysis focuses on the internal factors that provide an organization with specific advantages and disadvantages in meeting the needs of its target market. Strengths relate to core competencies that give the company an edge in meeting the needs of its target markets. Any analysis of a company's strengths must be market/customer-centric, as strengths are only meaningful when they help the company meet customer needs. Weaknesses refer to any limitations a company faces in developing or executing a strategy. Vulnerabilities must also be examined from the customer's point of view, because customers often see vulnerabilities that an enterprise cannot see. Being market-oriented when analyzing strengths and weaknesses does not mean that non-market-oriented strengths and weaknesses should be overlooked. Instead, it suggests that all companies should link their strengths and weaknesses to customer needs. Only strengths related to satisfying a customer need should be considered true core competencies.

With the following area analyses, all the internal influence factors of a company are considered:

  • Resources: profitability, sales, product quality, brand associations, overall existing brand, relative cost of this new product, employee capability, product portfolio analysis
  • Capabilities: Purpose: Identify strengths, weaknesses, problems, limitations and internal strategic uncertainties

External analysis analyzes the opportunities and threats that exist in your organization's environment. Both opportunities and risks are independent of the organization. Distinguishing between strengths/weaknesses and opportunities/threats means asking this fundamental question: Would this be a problem if the organization did not exist? If so, the problem is external to the organization. Opportunities are favorable conditions in an organization's environment that can bring benefits if well taken advantage of. Opportunities must be seized if the organization wants to benefit from them. Threats are obstacles to an organization that prevent it from achieving its desired goals.

The following area analyzes analyze all external factors that affect a company:

  • Customer analysis: segments, motivations, unmet needs
  • Competitive Analysis: Fully identify, place in strategic groups, evaluate performance, image, your goals, strategies, culture, cost structure, strengths, weaknesses
  • Market analysis: overall size, projected growth, profitability, barriers to entry, cost structure, distribution system, trends, key success factors
  • Environment Analysis: Technological, Governmental, Economic, Cultural, Demographic, Scenarios, Areas of Information Need Objective: Identify external opportunities, threats, trends and strategic uncertainties

The SWOT matrix helps to visualize the analysis. It is also important to understand how these elements work together when performing this analysis. When an organization balances internal strengths with external opportunities, it builds core competencies to meet its customers' needs. Furthermore, an organization must act to turn internal weaknesses into strengths and external threats into opportunities.

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Internal and External Analysis | OnStrategy Resources (3)

Focus on your strengths. Embrace your weaknesses. Use your chances. Acknowledge your threats.

Identify

  • Who are we against?
  • Who are our most intense competitors? Less intense?
  • Manufacturer of aftermarket products?
  • Can these competitors be segmented into strategic groups based on assets, competencies or strategy?
  • Who are potential competitors? What are your barriers to entry?

Evaluate

  • What are your goals and strategies?
  • What is your cost structure? Do they have a cost advantage or disadvantage?
  • What is your image and positioning strategy?
  • Who are the most successful/unsuccessful competitors over time? Because?
  • What are the strengths and weaknesses of each competitor?
  • Evaluate competitors by their assets and capabilities.

Size and growth:What are the important and potentially important markets? What are its size and growth characteristics? Which markets are in decline? What are the driving forces behind sales trends?

Profitability:For each major market, consider the following: Is this a business where the average company will make money? How intense is competition among existing firms? Assess the threats posed by potential new entrants and substitute products. What about the bargaining power of suppliers and customers? How attractive/profitable is the market now and in the future?

Cost structure:What are the main components of cost and value for different types of competitors?

Distribution systems:What alternative sales channels are there? How are they changing?

(Video) External Analysis Overview

Market tendencies:What are the market trends?

Key factors for success:What are the key success factors, assets, and competencies needed to successfully compete? How will this change in the future?

Environmental analysis:An environmental review is the fourth dimension of external review. Interest is in environmental trends and events that have the potential to influence strategy. This analysis should identify such trends and events and estimate their likelihood and impact. When performing this type of analysis, it's easy to get bogged down in an extensive summary of broad-based trends. It is necessary to limit the analysis to those areas that are relevant enough to have a significant impact on the strategy.

This analysis is divided into five areas: economic, technological, political-legal, socio-cultural and future.

Economically:What economic trends might impact business operations? (Interest rates, inflation, unemployment numbers, energy availability, disposable income, etc.)

Technician:To what extent are existing technologies maturing? What technological developments or trends influence or could influence our industry?

Government:What regulatory changes are possible? What impact will they have on our industry? What taxes or other incentives are being developed that could impact strategy development? Are there political or state stability risks?

Cultural partner:What are current or emerging trends in lifestyle, fashion and other components of culture? What are its effects? What demographic trends will influence the industry's market size? (eg growth rate, income, population changes) Are these trends an opportunity or a threat?

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Future:What are the main trends and upcoming events? What are the main areas of uncertainty related to trends or events that have the potential to affect the strategy?

Internal Analysis:Understanding a company in depth is the goal of internal analysis. This analysis is based on the company's resources and capabilities.

Resources:A good starting point for identifying corporate resources is to look at tangible, intangible and human resources.

Tangible resources are the easiest to identify and value: Financial resources and physical assets are identified and valued in the company's financial statements.

Intangible assets are virtually invisible, but over time they become more important to the business than tangible assets as they can be an important source of competitive advantage. These intangible resources include reputational assets (brands, image, etc.) and technological assets (proprietary technology and know-how).

Human resources or human capital are the productive services that people provide to the company in terms of their skills, knowledge, reasoning and decision-making capacity.

RESOURCEMAIN FEATURESKEY INDICATORS
Tangible
FinanciallyThe company's debt capacity and generation of internal resources determine its ability to withstand fluctuations in demand and work overtime.
  • gear
  • Ratio of net cash to capital expenditures
  • credit rating
PhysicallyThe physical resources related to the plan, equipment, assets, technology and raw materials.
  • resale value of assets
  • It was two capital bens
  • PPE flexibility
Intangible
technologicalTechnology inventory in the form of protected technology (copyrights, patents, trade secrets) and know-how in applying the technology (know-how).
rufReputation with customers through brand ownership, relationships established with customers, reputation of the company's products and services. company's reputation with suppliers, employees, etc.
  • brand perception
  • Price premium over competing brands
  • percentage of repeat purchases
  • Level and consistency of company performance
human ResourcesThe training and specialized knowledge of employees determine the skills available to the company. Employee adaptability determines key aspects of the firm's strategic flexibility. Employee engagement and loyalty determine a company's ability to achieve and maintain a competitive advantage.
  • Educational, technical and professional qualification of employees
  • Sector-Related Compensation
  • Registration of labor disputes
  • employee turnover

capabilities

Resources alone are not productive. The most productive tasks require resources to work together in teams. The term organizational capacity is used to refer to the ability of an organization to carry out a specific productive activity. We are not interested in competences per se, but competences compared to other companies. To identify the company's capabilities, we use the functional classification approach. A functional classification identifies organizational capabilities related to each of the major functional areas.

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functional areaCapacity
company
  • financial management
  • Expertise in strategic management
  • Effectiveness in motivating and coordinating the business areas
  • partnership management
  • General corporate governance/resource management
information management
  • Comprehensive and effective information system that can be used for management decisions
Research and Development
  • Basic research skill
product design
  • design ability
Marketing
  • Brand management and promotion
  • Promotion and use of reputation for quality
  • Understanding and responsiveness to market trends
Sale and Fulfillment
  • Effectiveness in promoting and making sales
  • Efficiency and speed of service
  • Quality and effectiveness of customer service

FAQs

What is resources in internal analysis? ›

The four types of tangible resources are financial, organizational, physical, and technological. The three types of intangible resources are human, innovation, and reputational.

What is internal and external analysis? ›

An external analysis looks at the wider business environment that affects your business. An internal analysis looks at factors within your business such as your strengths and weaknesses.

What is an example of an internal analysis? ›

A few of the most common examples of internal analysis frameworks include: Gap analysis: A gap analysis identifies the gap between a business goal and the current state of operations. Companies use gap analyses when they need to identify weaknesses in the business.

What are the two internal analysis tools? ›

Some of the main internal analysis tools are as follows;
  • Gap Analysis. As the name implies, the gap analysis recognizes the difference between the company's existing operations and its goals. ...
  • Strategy Evaluation. ...
  • Swot Analysis. ...
  • VRIO Analysis. ...
  • OCAT. ...
  • McKinsey 7S Framework. ...
  • Core Competency Analysis. ...
  • Define your Objectives.

What are external resources? ›

External resources refer to any kind of resource that the team has to secure from outside their organization to complete their project or task. For example, if you need to bring in an independent professional to help you design a new website, they would be considered an external resource.

What are examples of internal resources? ›

Some of the most important factors could be mentioned are human resources, capital resources such as finance or premises, organizational structure, and innovation.

What is external analysis example? ›

Example: A gift shop conducts an external analysis of other local shops that sell the same skincare line. They identified the price points used by their competitors and set their own prices just below theirs to encourage profit.

What is internal and external example? ›

A tree is set to swing when a force is applied by the wind on it. Since the force exerted by the wind on the tree is from the outside, it is known as an external force. On the contrary, the force that helps the tree to stay in the position and prevents it from falling down is known as an internal force.

What are the types of internal analysis? ›

Internal analysis methods include:
  • SWOT Analysis.
  • GAP Analysis.
  • Strategy Evaluation.
  • VRIO Analysis.
  • OCAT.
  • McKinsey 7S Framework.
  • Core Competencies Analysis.
11 Jul 2022

What are meant by resources? ›

: a source of supply or support : an available means. usually used in plural. : a natural source of wealth or revenue. often used in plural. : a natural feature or phenomenon that enhances the quality of human life.

What do resources mean? ›

Resources are anything available in our environment that can be used to fulfil our desires is recognized as a resource, given that it is technically accessible, economically viable, and culturally appropriate.

Are resources internal or external? ›

Resources can be external possessions (e.g. money), social roles (e.g. being a chair person) and personal characteristics (e.g. intelligence)”. The concept of resources thus represents an umbrella term, including variables that are assumed to have positive effects on the individuals' goal pursuit and development.

What are resources and capabilities? ›

Resources are the organization's assets, knowledge and skills. Capabilities can be defined as the organization's ability to effectively make use of its resources.

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