An internal analysis is an exploration of your organization’s competency, cost position and competitive viability in the marketplace. Conducting an internal analysis often incorporates measures that provide useful information about your organization’s strengths, weakness, opportunities and threats – a SWOT analysis. The data generated by an internal analysis is important because you can use it to develop strategic planning objectives to sustain and grow your business.
Strength and Competency
An important measure in an internal analysis is to determine your organization’s level of strength and competency. A strong organization uses updated technology systems and equipment to accomplish its work. Its financial goals are being met and strategic planning objectives are being accomplished. An organization with strong competency also has a solid brand identity built upon expertise, capabilities and resources within the organization.
Organizational Weaknesses
A weak organization is one that uses outdated technology, is lacking in expertise or working with deficient assets. A well-orchestrated internal analysis should bring to light any such organizational weaknesses that exist – areas in need of improvement and objectives that are not being realized. Once your analysis has revealed your deficiencies, you can revise your strategic plan to address and overcome failed objectives and improve or eliminate weaknesses.
Cost Position and Opportunity
An internal analysis should determine the cost position of your organization in your industry market and your potential to attract and engage new business opportunities. Cost position involves your business’s ability to acquire and manage resources and deliver exceptional value to your customers in a way that is unmatched by rival businesses.
Opportunities for business growth can include venture capital partnerships, relationship prospects in foreign markets and acquisition of competing businesses. An internal analysis can reveal your preparedness to take advantage of business growth opportunities.
Looming Threats
Striving to position your business at the top of your industry is an ongoing task. New companies are always entering the marketplace with novel innovations and potential to surpass you. It’s important to remain aware of changes in your market, the economy, technology and activities of rival companies that can threaten your viability in the marketplace. Internal analysis provides important information that can help you build on your strengths, prepare for threats and keep your business growing.
Competitive Viability
Internal analysis can help you determine how competitive you are in your industry. A competitively viable business challenges its rivals to match the service or product it offers, especially if it's using cutting edge proprietary technology, and has strongly enforced quality control standards.
A competitive business has high intellect human capital – the best and brightest employees contributing their expertise and innovations to daily operations. The most viable companies have consistently climbing sales revenues and use efficient supply chains. An internal analysis will examine the effectiveness of your supplier network, customer loyalty and sales, providing important metrics you can use to amend your business strategies and become a stronger competitor in your industry.
A SWOT analysis tool is one of the most effective business and decision-making tools. SWOT analysis can help you identify the internal and external factors affecting your business.
A SWOT analysis helps you:
- build on strengths (S)
- minimise weakness (W)
- seize opportunities (O)
- counteract threats (T).
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The results generated by a SWOT analysis makes up part of your business planning. It can also help you to:
- better understand your business
- identify areas of the business that need improving
- decide if you should introduce a new product or service
- understand your market and competitors
- predict changes you will need to deal with to ensure your business is successful.
Using SWOT analysis in your business
You should consider doing a SWOT analysis to give you a framework for understanding the state of your business and where you have opportunities for growth or fixing any faults in your operation.
To conduct a SWOT analysis, you must look at both the internally and externally focused activities of your business.
Internally focused activities are matters generally under the business's control, including:
- internal operations
- marketing and sales
- financial management
- staffing and human resources
- customer service
- quality assurance.
You can use the SWOT analysis tool (see below) to identify current strengths and weaknesses in your internally focused activities.
To assist your analysis, consider:
- conducting quarterly internal reviews
- brainstorming with your team
- checking business processes
- tracking business performance and metrics.
Externally focused activities are the activities that affect your business but are generally outside its control, including:
- supplier operations
- tenders and grants
- competitors
- politics
- the social and natural environment
- global trade
- financial markets.
You can use the SWOT analysis tool (see below) to identify opportunities and threats for externally focused activities.
To assist your analysis, you might also consider:
- researching trends, reports and industry data
- reading newspapers and journals
- working with mentors and advisers
- attending business events and conferences
- meeting with suppliers and government
- attending research tours of other states and countries.
Reasons for using a SWOT
You can use a SWOT analysis to help you review your entire business, but you can conduct an analysis focussing on 1 or 2 specific issues.
SWOT analysis can:
- help you create or update your business plan
- help you decide whether to introduce a new product or service to the market
- be part of your regular strategic planning review (quarterly, half-yearly or yearly).
A SWOT analysis should generate a brief list of issues relevant to the 4 categories—strengths, weaknesses, opportunities and threats.
The analysis of these issues helps the business make meaningful changes. For example, if the SWOT analysis has indicated a staffing weakness, a more detailed human resourcing plan may be required.
Limitations of the SWOT
A SWOT analysis is not a perfect tool—it has some limitations.
A SWOT analysis:
- will not prioritise issues—it must be reviewed to produce meaningful results
- will not provide solutions or offer alternative decisions—you must look at the issues noted and work to generate solutions
- can generate too many ideas but will not help you choose which one is best—when this occurs, try to limit the scope of the analysis to only a few solutions
- can produce a lot of information, but it may not all be useful—you must review the data generated to determine what is relevant.
Tips for completing a successful SWOT analysis
A SWOT analysis helps you assess internal factors that might affect your business (strengths and weaknesses) and external factors (opportunities and threats).
You will need to review and act on the results from the SWOT analysis.
The following tips can help ensure your SWOT analysis is successful:
- Keep your SWOT analysis short and simple, but remember to include key details. For example, if you think your staff are a strength, have specific information about individual staff and their specific skills and experience, as well as why they are a strength and how they can help you meet your business goals.
- Get multiple perspectives on your business—ask for input from your employees, suppliers, customers and partners, and review online reviews and feedback.
- Make sure the focus of the SWOT analysis is not too narrow. While it can help to complete SWOT analyses on specific issues (e.g. a quarterly goal for growing your customer base), having an overall business SWOT analysis is always helpful.
- Ensure that you link the SWOT analysis back to your business plan—you should refer to the defined goals and objectives in the business plan when considering the issues identified.
- Make sure you capture and document the findings of your SWOT analysis in your business plan—use our business plan template.
Conducting a SWOT
Download the SWOT analysis template and conduct your own analysis of internal and external issues that might be affecting your business. Or you can read the example SWOT analysis below and replace the details with your own.
The SWOT analysis tool can be used to identify existing strengths and build on them.
Consider the following:
- What does the business do well?
- What is your competitive advantage? Could it be increased or transferred to more customer types?
- What internal strengths does your business have? Consider skills, knowledge, networks and reputation.
- What external strengths does your business have? Consider customers, technology, funding and capital.
- How can the business build on its strengths?
- What skills and training do you and your staff have? Are you making the best use of them?
- Are you making the best use of your digital technology? Could you upgrade or expand them to improve your business?
- How could you improve your financial management strengths?
- What other strengths can you identify and use more effectively?
Record and review your business strengths
Using the questions above, complete the strengths section of the SWOT tool template or example analysis below for your own business.
Make sure you also record this information in your business plan template.
The SWOT analysis tool should be used to identify and limit weaknesses in your business.
Consider the following:
- What are the weaknesses of your systems and processes?
- What processes, policies or procedures could be developed to minimise the effects of these weaknesses?
- Are there weaknesses in your business model? Could you change 1 or more components of your model to improve the business? Search online for business model mapping tools online to help you visualise and update your business model.
- Are there weaknesses with staff performance? Could you improve staff selection, job descriptions, performance and mentoring?
Record and review your business weaknesses
Using the questions above, complete the weaknesses section of the SWOT tool template or example analysis below for your own business.
Make sure you capture and document this information in your business plan template.
The SWOT analysis tool can be used to identify and explore opportunities. Opportunities are the external factors that, if used effectively, can help you build your competitive advantage.
Consider the following:
- What are the current industry trends (e.g. a new online channel to market products and services)? Can they be used to your advantage?
- Are there any upcoming changes that could positively affect your business? Consider, for example, consumers, regulation and technological advancements.
- Is the business eligible for any grants or tenders?
- Are there any opportunities to innovate that you could implement in the business?
- Are there new market opportunities that you could consider? Learn about the basics of exporting.
Record and review your business opportunities
Using the questions above, complete the opportunities section of the SWOT tool template or example analysis below for your own business.
Make sure you capture and document this information in your business plan template.
The SWOT analysis tool will help you to identify and counteract threats and build resilience. Threats include external factors that may be beyond your control.
Consider the following:
- What external factors could put the business at risk?
- What political, environmental, social, and technological factors might affect the business?
- What new competitors may enter your market? How could this affect your business?
- What risk-management strategies do you have in place and could they be improved?
- What tools do you have to build resilience to manage and mitigate risks?
Record and review your business threats
Using these questions, complete the threats section of the SWOT tool template or example analysis below for your own business.
Make sure you capture and document this information in your business plan template.
Example SWOT analysis
The following is an example of a SWOT analysis conducted by a business trying to decide if they should introduce a new product to their range.
To get the most out of a SWOT analysis, specific statements should be made in each category. For example, rather than simply list 'competitors' as a threat, specific details about how competitors are a threat have been included.
Once you have read through this example SWOT analysis, you can type your responses to build a SWOT analysis for your business.
Internal
Strengths
Weaknesses
External
Opportunities
Threats
What to do after completing a SWOT
After you've compiled your SWOT data, complete an analysis by:
- selecting a maximum of 3–5 issues from each quadrant in the SWOT tool
- prioritising the issues.
- creating an action plan to deal with each issue, including identifying
- the people responsible for solving the issue
- the necessary resources and budget
- the timeframes for completion and review.
Note that the same issues may appear in different quadrants—for example, some identified opportunities may help overcome a weakness or build on an identified strength within the business. Occasionally, a SWOT analysis may identify a threat that prompts a change in the business model.
You should regularly review the action plans you have in place to ensure that any connections between issues are handled and actions are coordinated across the business.
You must also consider the constantly changing external and internal business environments. Conduct regular SWOT analyses to ensure you are prepared for these changes and can build on your business's strengths for success.
Learn about deciding how to identify what SWOT actions to prioritise.
- Last reviewed: 8 Dec 2022
- Last updated: 8 Dec 2022
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