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Importance of Internal Analysis in Strategic Management Report (Assessment)

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Updated: Aug 12th, 2019

An internal analysis is vital as it assists an entity’s stakeholders realize the shortcomings and strengths of an entity. It entails undertaking an evaluation of the numerous aspects of an entity. Therefore, an internal analysis is a critical tool in matters such as strategic planning. Strategic planning denotes what an entity wants to accomplish over a considerable duration of time.

Therefore, managers must have clear knowledge of an entity’s strengths and weaknesses prior to the enactment of a strategic plan. This is so since an internal analysis generates vital information which managers cannot assume.

In undertaking an internal analysis there are various aspects of an organization that should be evaluated. First, the entity should evaluate the entity’s capital or resources. If the entity has massive resources (funds), then its approach should be geared towards dominance. Dominant entities determine trends in an industry since they have the funds to invest in research and product development. Furthermore, they lack strategic, managerial and operational flexibility.

Conversely, organizations that have reduced resources should adopt a cautious approach and adapt to precedents set by larger entities since they are flexible with regard to planning and operations. Modern management theory has named human resource as the most critical aspect of production.

Subsequently, an internal analysis should evaluate the relevance and efficiency of the workforce. An inefficient workforce denotes wastage of resources which businesses cannot afford to maintain if they want to realize better results. Organizations should hire motivated and competent employees who will add value to the organization.

One of the most vital sections of the workforce is the management personnel. The managerial staffs have the core responsibility of providing the entity with a vision and a plan to accomplish it (Saloner, Andrea and Joel 145).

The entity should also analyze its products and its ability to meet the clients’ needs. In its analysis of the products, it should consider substitute goods. Substitute goods are commodities which may serve the same needs. These goods compete with an entity’s products. If the company raises its prices, then it may lose a considerable market segment.

Hence, entities which have such products should attempt to increase the value transmitted to the client by the product by making it unique. Products also require different modes of advertising. As such, an internal analysis should outline the implications of the product on advertising, which is an expense in entities.

An internal analysis should also outline the capability of the entity to meet its clients’ needs. This will pertain to the entity’s production and research departments. These departments are solely responsible for product development and output. An internal analysis should evaluate their ability to meet the customers’ demands.

If the above departments fail miserably, then an entity will lose clients. Meeting clients’ needs is paramount since it ensures that the organization retains and grows its market segment. They are various means of enhancing customer satisfaction such as establishing a quality assurance department (Hill and Gareth 75). This department ensures all goods meet certain established standards.

In light of the above, an internal analysis can reveal many aspect of an entity. The details revealed by this tool would be vital in formulating a strategic plan. Once the managers unearth the weaknesses and strengths of the entity, they should focus on the ways to improve its performance. This will entail addressing its weaknesses to reduce losses and increase efficiency while at the same time building on its strengths (Grensing-Pophal 50).

Works Cited

Grensing-Pophal, Lin. The Complete Idiot’s Guide to Strategic Planning. New York: Alpha, 2011. Print.

Hill, Charles and Gareth Jones. Theory of Strategic Management with Cases. S.L.: South-Western Cengage learning, 2009. Print.

Saloner, Garth, Andrea Shepard, and Joel Podolny. Strategic Management. New York: John Wiley, 2001. Print.

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