Internal Analysis: What Is It? (With Examples)

You can’t move your business forward if you don’t know where it is now, so it’s important to regularly complete an internal analysis to get a handle on its overall health.

In this article, you’ll learn about what an internal analysis is, why it’s important, and how to conduct one.

Key Takeaways

• Companies perform internal analyses to determine their assets, opportunities, and threats.

• There are a variety of internal analysis frameworks companies use, but the SWOT framework is one of the most common and overarching.

• An internal analysis gives you an accurate view of your company’s health so you can remedy its weak spots and capitalize on its strong points.

What Is an Internal Analysis?

An internal analysis is a method for determining a company’s assets, opportunities, and threats. It’s useful for identifying what has worked well and what could be modified to create a better result in the future.

There are varying structures that businesses can take on in conducting internal analysis to reach a useful conclusion. One of the most popular frameworks for conducting an internal analysis is a SWOT analysis.

SWOT stands for:

• Strengths

• Weaknesses

• Opportunities

• Threats

It is an overarching examination of how a company functions as a whole and the skills of the employees within it. This kind of analysis is useful for getting a comprehensive picture of your organization’s performance that can be used as a jumping-off point for evaluating more in-depth details.

This is the internal analysis framework that we’ll be focusing on in this article, but other frameworks that you could use include:

• GAP Analysis

• Strategy Evaluation

• VRIO Analysis

• OCAT

• McKinsey 7S Framework

• Core Competencies Analysis

Why an Internal Analysis Is Important

The internal analysis acts as a check-up for your company’s health. It gives key insights into the areas you are excelling in and tells you where there might be problems. Without conducting an internal analysis, you’re left in the dark, and that could make your company suffer dearly in the future.

You need details on your organization’s competency because it outlines opportunities for improvement and makes you aware of possible threats in advance. Your team can use this information to develop strategies for success and growth.

In addition to determining company cost and opportunity statistics, internal analysis establishes a baseline for individual employee competencies. This is important for evaluating their performance for strengths and weaknesses.

11 Steps for How to Conduct an Internal Analysis

Once you’ve decided to use a process of internal analysis to gain into your organization’s abilities and potential threats, you next need to figure out what framework you’d like to use. If you have no prior standard for how your team is performing, it’s probably best to start with a SWOT analysis. This technique will gauge your overall strengths, weaknesses, opportunities, and threats.

Consider the following steps for implementing a successful SWOT analysis.

1. Outline an analysis strategy for each component. A SWOT analysis is broken down into four elements (strengths, weaknesses, opportunities, and threats). To comprehensively check all of these boxes, you’ll need to approach each component of the process individually. You’ll need a different mindset to assess strengths than weaknesses.

   Each step of the SWOT process is based on considering these aspects from an objective lens.

2. Determine an objective. Every analysis needs a question that’s looking to be answered. Before proceeding with a SWOT analysis, you need to think about what your team’s objective is.

   Perhaps you’re interested in learning more about where your company is falling short in productivity so you can figure out a strategy for combating this issue in the future. Or, you want to consider opportunities for improving employee’s hard skills.

   Hone in on your objective and run with it.

3. Conduct research. Research is a crucial part of conducting a successful internal analysis. You need to gather credible information about the industry standards before you can consider your business in relation to your competitors.

   Conducting useful research for company evaluation can be done in a few ways. Using the old school method of search engines and local statistics can help get basic information on trends in the field. The news can also be helpful in a similar capacity.

   You can take the research a step further by organizing market research. This can be a little more time and budget consuming, but it’ll give you much more detailed information about your position in the market and customer preference. In this same regard, you can utilize your team’s experience and opinions to gain insight.

4. Elect a facilitator. Electing a facilitator for your SWOT analysis is an optional step in the process. The benefit of putting a facilitator in charge of the proceedings is that they can provide an objective organization to the proceedings.

   A person in a supervisory position will often be very invested in the organization, making for a biased opinion of strengths and weaknesses.

5. Brainstorm your company’s strengths. Once you’ve accomplished all the preliminary steps to completing a SWOT internal analysis, you can begin analyzing your team for each component of the process. The first element to start with is thinking about your company’s strengths based on your knowledge from research.

   This stage of the process doesn’t have to be conclusive. Brainstorming a general list of what you believe your organization is doing well will be sufficient.

   Strengths can refer to several things within your company. Individual employee’s impressive performance can be concluded as a strength. Having your business be in a location that sees lots of daily traffic is a broader company strength.

   Some other examples of company strengths could include:

   • Leading in innovation

   • Efficiency

   • Financial resources

   • Location

   • Product quality

   • Outstanding marketing

6. Discuss company weaknesses. While it may be a less pleasant subject matter than your organization’s strengths, it’s just as essential to discuss weaknesses during an internal analysis. Weaknesses are things that allow your competitors to get ahead of you and limit positive growth.

   You should keep track of the weaknesses you uncover to assess your improvement in these areas over time. When you later resolve an issue that you discovered during an internal analysis, it can motivate your team to continue their efforts.

   Examples of company weaknesses could include:

   • Poor customer service

   • Budgeting oversights

   • Lack of employee morale

   • Lack of consumer recognition

   • Bad quality products

   • Inefficiency

7. Consider opportunities for growth. The way a business grows is by considering the unique opportunities that its competitors haven’t utilized. They differ from strengths in that they suggest a course of action for attaining success, rather than qualities your team already possesses. Opportunities may be a little ambiguous and take some effort to foster success.

   For example, your company could consider implementing a tuition reimbursement program into the benefits package for your employees to encourage your team to seek additional education. This can act as an opportunity for growth because it improves your team’s skills and increases employee satisfaction by supplying extra benefits.

   Think about opportunities that are relevant to your industry that could potentially benefit your company.

   Examples of opportunities include:

   • Creating an updated line of products

   • Breaking into a new market

   • Expanding your brand

   • Investment opportunities

   • Improving pricing and lowering costs

8. Assess possible threats. Threats are the external factors that can damage or hinder your business’s capacity for success. It’s best practice to get ahead of problems by considering them in advance while they’re still at this early threat stage. Your research should come in handy when discussing possible threats that could affect your company.

   Examples of possible threats include:

   • A close, local competitor opening

   • Inability to recruit talent for vacant roles

   • Shortages of supplies

   • An innovative new product in your field hitting the market

   • New laws or regulations in your field

9. Decide on your priorities. Once you’ve formulated lists of your strengths, weaknesses, opportunities, and threats, you must prioritize the collection. Hopefully, you’ve been keeping a written record of each element’s subsidiaries because it’ll make it much easier to prioritize.

   It’s impossible to deal with every single idea you’ve come up with. It’ll probably burn out your team without any notable results if you try. That’s why prioritization is essential.

   When it comes to your team’s strengths and opportunities, decide which of these you’d like to focus more energy on continuing. On the other hand, when prioritizing your weaknesses and potential threats, think about which ones could cause more imminent damage.

   Create a new ordered list for which issues you’re going to tackle first and the opportunities you’re going to focus on. This will be your blueprint for enacting positive change and forming an effective strategy.

10. Institute a strategy. The final step to running an internal SWOT analysis on your company or a specific team is to develop and institute a strategy. This plan should be about tying together all the components you’ve previously discussed.

    Analyzing your organization’s pros and cons usually leads to a path of how to use one to combat the other. For example, identifying how your team demonstrates a particular strength can help deal with an impending threat.

    The strategy is personal to the assets your team has to work with and the specific challenges you’re facing. You need to have an open discussion, preferably with a facilitator on standby, about how to proceed with the new information you’ve gathered using internal analysis.

11. Follow-up. While investing in your company’s growth by conducting an internal analysis is an excellent start to improving your business, it is just that: a start.

    An internal SWOT analysis is the beginning of your organization’s journey towards improving itself in various areas. Simply stating your team’s statistics and formulating a strategy without ever taking action won’t help your company.

    It requires continuously following up to see where you’re at in addressing your top prioritizations. You need to rejoin your team after a reasonable amount of time to elicit change and determine how implementing your strategy worked out.

    If you find that issues have been checked off your list or that opportunities are coming to fruition, then it means that your improvement plans are working. If you aren’t having these results, it could be time to discuss a new course of action.

    Improving a business is a system of trial and error. Don’t be discouraged if you have to go back to the drawing board and develop an updated strategy.

Internal Analysis FAQ

1. What are internal analysis methods?

   Internal analysis methods include:

   • SWOT Analysis

   • GAP Analysis

   • Strategy Evaluation

   • VRIO Analysis

   • OCAT

   • McKinsey 7S Framework

   • Core Competencies Analysis

2. What is internal and external analysis?

   Internal analysis involves looking at a company and how it’s running while external analysis involves looking at the overall market or industry.

   Good internal analysis likely includes relating the company’s operations to the rest of its competitors and the overall market, but it’s mainly focused on the health of the company itself.

   External analysis, on the other hand, is focused on the health of and trends in the industry and market surrounding the company.

3. What are the components in internal analysis?

   The components in internal analysis include:

   • Assets

   • Liabilities

   • Opportunities

   • Threats

   Different internal analysis frameworks will add or subtract to these components, but these are the core issues an internal analysis should look at.

Author

Sky Ariella

Sky Ariella is a professional freelance writer, originally from New York. She has been featured on websites and online magazines covering topics in career, travel, and lifestyle. She received her BA in psychology from Hunter College.