Analysing The

Internal
Environment Of
The Firm

LALU SANDIKA
FADILLAH MANUHUTU
ENRILE VICTOR
 CONTENT
1. DEFINITION
2. ASSASMENT
3. Essential for internal
analysis 
4. Uses of SWOT analysis
A SWOT

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1. DEFINITION
An internal analysis provides the means
to identify the strengths to build on and
the weaknesses to overcome when
formulating strategies. The internal
analysis process considers the firm's
resources; the business the firm is in; its
objectives, policies, and plans; and how
well they were achieved.

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2. How do you assess the internal
environment of a business?
Internal environment analysis techniques The analysis of
the organizational resources is the most used
instrument for the internal environment analysis. The
following figure (Figure 2) presents the role that the
resources of the organization hold as a starting point
in the drawing up of the organizational marketing
strategy. Also, one can note the way in which the
organizational resources and capabilities may
constitute the basis for developing the competitive
advantage.

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Source: Adapted from Grant Robert Michael. The resource based theory of competitive advantage: implications for strategy
formulation. California Management Review 3(1991):45-71; The stages of this method are the following: defining the company
resources that generate the organizational strengths and weaknesses; identifying the optimum method to combine the resources
and generated capabilities; identifying the extent to which the combined resources and capabilities are generating sustainable
competitive advantages; selecting strategies to best exploit the resources and capabilities of the organization in relation to the
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market opportunities; analysing the main characteristics of the resources and capabilities in terms of sustainability, transferability and
repeatability as basic elements in sustaining competitive advantage and identifying the resource gaps.
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3.  Essential for Internal Analysis 
The four areas that are essential for internal analysis are:
• An organization’s resources and capabilities
• The configuration and co-ordination of an organization
• Organizational structure and characteristics of its culture
• Finally the performance of the organization in terms of the strength of its products

• Resources are the tangible or intangible assets of an organization essential for its activities and
processes. They can either be outsourced or internally generated.
• Capabilities are the industry-specific skills, organizational knowledge or the relationships which are
usually intangible in nature and can be generated through internal activities. Some competencies are
unique to a specific organization in which they excel and these are called as their core competencies
and are responsible for their competitive advantage.
• The resources generate the capabilities which in turn generate the core competencies which in turn
give the value addition to the consumer market.

• The configuration of the organization is associated with the places where the organization’s
activities in the value chain are performed while coordination is associated with the management of
these activities. The configuration can either be a concentration meaning activities limited to a
specific geography or dispersion meaning that the activities are spread across a large number of
locations. Co-ordination can be either internal or external in nature. Internal coordination refers to
the value-adding activities while external coordination refers to the suppliers-channels-customers
linkages.

• The organizational structure must be so designed that the business must accomplish its objectives 07
effectively and efficiently while the culture determines the magnitude of this accomplishment.
• Finally the performance of the organization is analyzed using a portfolio analysis which gives the
evaluation on the organization’s range of products.
 4. Uses of SWOT analysis
Internal Factor
(strengths, weaknesses, opportunities
and threats) analysis looks at internal
and external factors that can affect your
business. Internal factors are your
strengths and weaknesses.
Building on strengths
A SWOT analysis will help you identify areas of your
business that are performing well. These areas are your
critical success factors and they give your business its  SWOT analysis can help you identify these
competitive advantage.
Identifying these strengths can help you make sure you
maintain them so you don't lose your competitive
advantage. Growing your business involves finding ways
of using and building on these strengths.
External Factor
External factors are the threats and
opportunities. If an issue or situation
would exist even if your business didn't
(such as changes in technology or a
major flood), it is an external issue.
Minimising weaknesses
Weaknesses are the characteristics that put your
business at a disadvantage to others. Conducting a
characteristics and minimise or improve them before
they become a problem. When conducting a SWOT
analysis, it is important to be realistic about the
weaknesses in your business so you can deal with
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adequately.
Addressing individual issues
You can conduct a SWOT analysis to address individual issues, such as:
staffing issues :
business culture and image
new product development
organisational structure
advertising
financial resources
operational efficiency.
When you're conducting an individual SWOT analysis, keep in mind that a strength for one issue might be a
weakness for another. You might also identify a weakness, such as a gap in the market that you're not covering,
that could be an opportunity for your business.
Also consider.
Find out more ways to grow your business.
Read about how to benchmark your business so you can identify where your business
currently stands. 9
 4. Uses of SWOT analysis
The strength of employees is also an essential internal business
factor. Check if employees are motivated, hard-working and talented.
They will produce better results compared to an unmotivated and
less talented workforce. The processes and relationships between and
within departments can also improve effectiveness and efficiency.
STRENGHT In a high performing workplace, the workers not only have talent, but
they also work better together. The employees and departments
collaborate on ideas and resolutions.
The internal factors basically include the inner strengths and
weaknesses.  Internal factors can affect how a company meets its
objectives. Strengths have a favorable impact on a business.
managing the strengths of internal Weaknesses have a harmful effect on the firm.
operations is the key to business success. Some examples of areas which are typically considered in internal
The role of company leadership is an factors are:
essential internal factor. Your leadership Financial resources like funding, investment opportunities and
style and other management style impact sources of income.
organizational culture. Often, firms provide Physical resources like company’s location, equipment, and facilities
a formal structure with its mission and
vision statements. Some cultural Human resources like employees, target audiences, and volunteers
implications which result from leadership Access to natural resources, patents, copyrights, and trademarks
approaches are: Current processes like employee programs, software systems, and
Value of employees department hierarchies
The positive or negative nature Companies must also consider softer elements like company culture
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Effectiveness of communication level of and image, the role of key staff, operational efficiency and
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potential.
family-friendliness Below, I have mentioned the most common internal factors. These
might affect your business in various ways.
Organizational and operational
These are a part of the operational and administrative procedures. This includes disorganized or inaccurate record keeping.  Interruptions to your supply chain and outdated or
faulty IT systems are also factors you should evaluate. If you do not overcome these, your customers might see you as unreliable. You can also lose all your data.
Strategic risks
These affect your firm’s ability to reach the goals in the business plan. They could be due to the impacts of changes in technological evolutions or customer demand. These factors
could pose as threats as they can alter how customers perceive your product. Based on these, customers might think a product is overpriced, dull and outdated.
Innovation

Your business needs innovation in order to keep up with competitors. It is essential to get one step ahead. Innovation could come in the form of marketing. It could also be
through promotional initiatives in the marketing plan, staff training, and welfare.  Embracing new technology is the best way to keep up with technological advancements.
A lack of innovation can pose a serious risk to a growing business. No innovation will cause a company to remain boring. The company will become dull, stagnant and irrelevant.

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Financial
The financial risks depend on the financial structure of your business. It is also dependent on your business transactions and the financial systems. For
example, changes in interest rates or being overly reliant on one customer could affect business.
Employee risks
Employees are vital to business success. But, there are risks associated with them. For an industry, strike action could lead to a lot of problems.

Internals Factors in SWOT

The internal factors of a business are often studied in a SWOT analysis. The SWOT matrix is a structured planning method. You can use SWOT analysis
to analyze your company and its environment. It assesses the strengths, weaknesses, opportunities, and threats.  The strengths and weaknesses of a
project or business are internal factors. Opportunities and threats are external elements.
Strengths
Strengths are the features of your business which allow you to work more effectively than competitors. Your specialist technical knowledge 12 could be
your strength. You will have to consider your strengths from own point of view. You should also give importance to customers’ and clients’ view.
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