Internal and External Business Analysis Essay

In this sample, we will discuss the types of business analysis, Internal and External business analysis.

Business analysis is an analysis of identifying business needs, managing business changes, and determining solutions to business problems. It is used to identifying and articulate the needs for change in the working of organizations.

It is categorized into two types:

• External Analysis: It analyzes the business problems and needs from external and wider factors.
• Internal Analysis: It examines the internal or within the business problems and competency.

 

External Business Analysis

External analysis refers to monitoring the business environment of an organization, considering factors like competitive structure, aggressive position, history, and Dynamics. On a macro level, the external analysis includes social, global, macroeconomic, technological, demographic, and political analysis. The prime objective of the external analysis is to discover the threats and possibilities in an enterprise or a section that drives volatility, growth, and profitability.

Key Terms used in applying external analysis

Discussion on key terms is the beginning of the external analysis. The following are the key terms used in the external analysis:

Supply Chain

The business must analyze its supply chain to conduct a precise external analysis. A business supply chain is a practice required to transform a service or product from natural matters into complete products and delivering goods from the manufacturer to the customer.

All logistical matters and actions are elements of the supply chain.

E-commerce Supply Chain

An e-commerce supply chain is different from a traditional supply chain. Here, first of all, customers choose the product according to their needs and desire. Then they make payments using the third-party payment service. The product then moves to the warehouse to ready to dispatch.

Then the product is shipped to the customer. This cycle continues for each customer or every time a customer order something on an e-commerce platform. The main advantage of the e-commerce supply chain over the traditional supply chain is that the customer can track every activity mentioned here.

Strategic Groups

These are the factors to identify strategic groups in an industry:

• Market segments
• Product quality levels
• Distribution channels choices
• The vertical integration degree
• Pricing policy
• Technological leadership

Competitive Analysis

The competitive atmosphere and market composition are two defining factors of business success. The factors to define the competitive analysis are discussed below:

• Industry rivalry intensity: It determines the concentration level of competitors. Circumstances to define the strength of company rivalry incorporate brand loyalty, customer switching expenses, and product homogeneity.
• Entry Barriers: It calculates the roadblocks for new businesses to enter the industry. There are factors to measure the entry barriers are government regulation, brand loyalty, and excess production capacity.
• Buyers’ bargaining power: This determines the power customers have to decide the regular rate in a market. It is powerful when consumers are deep and intense, and buyers’ cost sensitivity is crucial if many business substitutes and competitors exist.
• Suppliers’ bargaining power: This determines the capacity of suppliers to restrict the business strategy of the company. This is high if suppliers are concentrated and large. If the substitute or alternate suppliers are less, the customer’s price is highly inelastic.

 

 

PESTLE Analysis

A company must conduct a PESTLE analysis to round off external business analysis. It helps to analyze the foremost external shots and roadblocks in the market:

PESTLE analysis has the following aspects to follow:

• Political: It shapes business contracts among countries 
• Economic: It determines factors like consumer confidence, exchange rates, and interest rates.
• Social: It measures factors of the aging community and lifestyles and shifting attitudes.
• Technological: It analyzes factors like the expanding usage of the internet and new materials 
• Legal: Factors like existing and new legislation.
• Environmental: It covers circumstances like impact on the environment and environmental law.

Internal Business Analysis

An internal analysis measures an enterprise’s internal situation to evaluate its competencies, resources, and competitive positions. Presenting an internal analysis enables a company to recognize the weaknesses and strengths of the business. This information later supports the strategic decisions of management while carrying the execution process and strategy formulation. An internal analysis is nothing but the SWOT analysis, discussed as follow:

Key terms of Internal analysis

The key terms of internal analysis are the attributes of SWOT analysis:

Strength 

An essential aspect of an internal analysis is to measure your company’s strength level and competency. The powerful organization utilizes advanced technology operations and facilities to finish its work. 

Weaknesses of Organization

The weaknesses of an organization comprised of using outdated technology, working with inadequate assets, and lacking expertise.

An internal analysis highlights the weaknesses of an organization to provide the areas of improvement and unrealized objectives.

Opportunities

Opportunities for the market extension include enterprise funds partnerships, acquisition of struggling companies, and relationship probabilities in international markets. Thus, An internal analysis reveals preparation to get the advantage of business extension opportunities.

Threats

Attempting to put a business at the peak of an industry is a continuous job. New businesses are joining the industry with unique innovations and the capability to excel and surpass the existing companies. It’s crucial to be aware of developments in your business, the marketplace, technology, and the movements of competitive corporations that can put your existence in the industry in danger. The internal analysis yields valuable information to help you develop strengths, equip for actual market threats and retain your enterprise growth.

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