What is an internal analysis?
An internal analysis is the thorough examination of a company’s internal components, both tangible and intangible, such as resources, assets and processes. An internal analysis helps the company decision-makers accurately identify areas for growth or revision to form a practical business strategy or business plan. Often, those creating the company’s business strategy pair an internal analysis with an external analysis to create a full picture of how the company functions both as an individual entity and as a part of the larger competitive industry.
Companies can choose from a variety of frameworks for conducting an internal analysis. Each uses slightly different tools, strategies and objectives to identify key information about the internal processes, resources and structures of the business. 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.
- Strategy evaluation: A strategy evaluation is an ongoing internal assessment tool used at regular intervals to establish if a company is meeting its objectives as outlined in a business strategy or plan.
- SWOT analysis: A SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis helps to give companies a broad overview of all internal functions. SWOT analyses are ideal for evaluating the full range of a company’s abilities.
- VRIO analysis: A VRIO (Valuable, Rare, Inimitable and Organized) analysis helps organize business resources. It is ideal for assessing and categorizing a company’s resources.
- OCAT: An OCAT (Organizational Capacity Assessment Tool) assesses internal performance in a variety of specific dimensions. Companies can use the OCAT to establish specific areas of strength or growth.
- McKinsey 7S framework: The seven S’s are strategy, structure, systems, shared values, skills, style and staff. The McKinsey 7S framework ensures that businesses align these seven elements for maximum success.
- Core competencies analysis: The core competencies analysis identifies the unique combination of qualities that separates the business from competitors. It’s best used when determining ways to improve business operations over a direct competitor.
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