Internal analysis

Internal analysis
See also

Internal analysis or analysis of the internal environment of the company is one of the most important strategic analysis method. It incorporates many management techniques developed in areas of process management, organizational development, knowledge management, information systems, and so on. Most common internal analysis methods are:

The main task of internal analysis is to examine the situation in the company, assess the strengths and weaknesses and the forecast the company's resources. In order for a company to survive in the market, it needs to grow and achieve it is goals. The basis for achieving this is a good organization, effective planning of activities for the nearest period and knowledge of the target market. This analysis is crucial in the management of a company.

Strengths and weaknesses of the company[edit]

For more effective results and in getting closer to the realization of goals, the knowledge of weaknesses and strengths of company will certainly help, which is also one of the elements of internal analysis. It is worth making such analysis periodically, because thanks to it, the company can improve its results and its good points. Lack of well qualified staff, poor organization at work or lack of resources are some of the factors which negatively influence the development of the company[1]. Through internal analysis, we are able to determinate what should be corrected, how to adjust funds to maintain liquidity. SWOT analysis is one of the elements of internal analysis, and speaks more precisely about it.

Internal analysis evaluates the situation in the scope of:

  1. Human resources - assessment of factors important for proper human management,
    • The employee's satisfaction is cursed by the work. If the management knows how to manage the staff and how to select creative employees and if it takes care of their needs and personal development, this will result in a better company performance. Again, the company gains a reputation and becomes a stronger competitor to other companies[2].
  2. Company / financial resources - assessment of financial liquidity,
    • The better the company has financial background, the more credible, competitive and can stay relatively longer on the market than companies with smaller capital.
  3. Technological resources - what capacity production a given company has.

Performing such researches allows, among other things or to outline the next goals of the company.

Difference between internal analysis and external analysis[edit]

Internal analysis therefore examines all phenomena that occur inside the company. It examines whether the company has a chance to stay on the market or the way of managing employees is effective, whether the available resources are sufficient for the development of the company and helps to maximize the advantage over competitors. However, external analysis allows to determinate what kind of threats and chances a given company has on the market, helps to define the phenomena that can affect a company, the economic, demographic or social situation is also important, because they have a strong impact on the company and are closely related to them.

References[edit]

Footnotes[edit]

  1. Michael E.Porter (1979). Forces governing competition in an industry. How Competitive Forces Shape Strategy, 134.
  2. Michael Armstrong (2006).Strategies for improving organizational effectiveness. Strategic Human Resource Management A Guide To Action, 103-105.

Author: Kamila Wronkowska