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Internal analysis refers to the process of understanding a business in an in-depth manner. This mainly involves an analysis of the resources as well as the firm’s capabilities. The resource analysis is conducted on tangible resources, intangible resources and human resources (Pahl & Ritcher, 2009). The analysis reveals the strengths and weaknesses of a firm. Internal analysis is thus described as the systematic evaluation of the internal features of any business. Other than resources and capabilities evaluation, the configuration and coordination of the core activities of the organization are also analyzed in internal analysis. The culture and structure of the organization is also put into scrutiny during internal analysis. Finally, the organizational activity is also analyzed (Pahl & Ritcher, 2009).
The core competencies in a firm are analyzed by considering such values as the complexity and the authentication of the resources. The durability, which refers to how long the competency can take before being replaced, is also analyzed. The superiority of the competency is also analyzed alongside the adaptability of it. The customer’s orientation namely his respond to the product is included into analysis (Pahl & Ritcher, 2009). This aids in giving the firm a competitive advantage over its competitors.
The global value chain analysis is also completed in this process. The value added is investigated by subtracting the costs from the sales revenue. The configuration and coordination of the business activities are investigated. The portfolio analysis is also conducted as a means of understanding the balance that is produced by the company’s range of products. When the internal analysis is not conducted accurately and honestly, then it is likely to indicate the wrong reflection of the business (Hussey, 2001). This in turn means that the business does not respond accurately to the immediate market demands. It may eventually lead to the downfall of the business and the firm may be held liable for giving a deceptive reflection to the public. Proper analysis however gives a competitive advantage to the firm, as it is able to capitalize on its strengths and to work on its weaknesses (Pahl & Ritcher, 2009).