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Evaluating the Internal Environment
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Introduction
Internal environment analysis is critical to strategic planning and management. The
analysis helps identify internal strengths and weaknesses, informing strategy formulation
(Gamble et al., 2019). An organization has to follow an effective internal environment analysis
process to identify all critical factors relating to its internal environment. Strategic thinking is
also critical to success in internal environment analysis. Planners have to evaluate internal factors
with a strategic mindset. The SWOT decision model is among the most popular tools used to
evaluate organizations’ internal environment. The “strengths” and “weaknesses” elements of the
model relate to the internal environment.
Process: Evaluating the Internal Environment
To conduct an internal environment analysis effectively, a business can follow several
crucial steps. Step one in the process is the setting of the internal evaluation's objectives. The
objectives specify the goals to be achieved by the evaluation. Step two is selecting one or several
internal evaluation frameworks to use in the analysis (Gamble et al., 2019). Frameworks
popularly used in such evaluations include SWOT analysis, VRIO analysis, and gap analysis.
Step three in the analysis is collecting data and information necessary to understand the internal
environment (Gamble et al., 2019). Step five is analyzing the data and information and
articulating the findings of the internal evaluation.
An internal environment is conducted for a variety of reasons. One reason is to help a
business identify its strengths (Kuratko et al., 2014). The business can leverage its strengths to
gain a competitive advantage over its rivals. Another reason for conducting such an analysis is
identifying businesses' weaknesses (Kuratko et al., 2014). The weaknesses are identified for
appropriate actions to be taken to overcome or mitigate the same. Another reason for conducting
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an internal environment evaluation is to judge a business’s marketplace viability (Kuratko et al.,
2014). Other reasons for conducting such an analysis include identifying possible opportunities
and threats. Businesses need to follow an effective process in the internal environment evaluation
to achieve the best results.
Strategic Thinking: Discussion of a Key source of Power/Weakness
Rumelt (2011) observes that effective leaders do not chase arbitrary goals. An analysis of
an organization’s internal and external environments is critical to identifying the right goals to
pursue. The author further argues that the failure to face a problem results in businesses adopting
bad strategy (Rumelt, 2011). Internal environment analysis is a critical process in facing a
business's problems and avoiding bad strategy.
A key source of internal power or weakness in a business is the firm’s products and/or
services portfolio. The products and/or services that a firm offers its customers are critical to
success (Osterwalder et al., 2014). If a business sells innovative and superior quality products
and/or services that satisfy customer needs effectively, it is highly likely to attract many
customers and gain a greater market share (Osterwalder et al., 2014). However, unoriginal and
low-quality products and/or services that do not satisfy customer needs are sources of weakness
to a business. Customers are less likely to demand such products, and the business will likely
lose to its competitors. Businesses invest many resources and efforts to develop superior quality
and innovative products and/or services that satisfy customer needs because they realize that
such products and services are a critical source of power. An internal business environment
evaluation should focus on a business’s products and/or services, among other things.
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Decision Model
My decision model of choice is the SWOT analysis model. The SWOT model can be of
significant aid in a business internal environment evaluation. The model is among the most
popular frameworks applied by businesses and other organizations in evaluating a business’s
environment. The two elements of the model that are critical to the internal analysis are
“strengths” and “weaknesses” (Krogerus & Tschäppeler, 2018). Businesses evaluate their
internal strengths and weaknesses when using the SWOT model for environmental analysis. The
opportunities and threats components of the model focus on the external environment. The
SWOT model is simple to understand and use. Hence, its suitability in the internal environment
analysis.
Conclusion
Internal environment analysis aids businesses to adopt goals and strategies that are
beneficial to the businesses. The steps of effective internal environment analysis are setting
evaluation objectives, selecting evaluation frameworks, data and information collection, data and
information analysis, and articulating findings. Effective strategic thinking is critical to success
in the process. The SWO model is one of the frameworks that are useful in internal environment
analysis.
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References
Gamble, J., Peteraf, M., & Thompson, A. (2019), Essentials of Strategic Management, McGraw
- Hill Higher Education (6th ed.), New York, NY.
Krogerus, M., & Tschäppeler, R. (2018), The decision book: 50 models for strategic
thinking., W. Norton & Company, Inc., New York, NY.
Kuratko, D. F., Hornsby, J. S., & Covin, J. G. (2014). Diagnosing a firm's internal environment
for corporate entrepreneurship. Business Horizons, 57(1), 37-47.
https://doi.org/10.1016/j.bushor.2013.08.009
Osterwalder, A., Pigneur, Y., Bernarda, G., & Smith, A. (2014). Value proposition design: How
to create products and services customers want. John Wiley & Sons.
Rumelt, R. (2011), Good strategy/bad strategy: The difference and why it matters., Crown
Business, New York, NY.
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Annotated Bibliography
Kuratko, D. F., Hornsby, J. S., & Covin, J. G. (2014). Diagnosing a firm's internal environment
for corporate entrepreneurship. Business Horizons, 57(1), 37-47.
https://doi.org/10.1016/j.bushor.2013.08.009
Summary of Key Points
One key point made in the article is the importance of internal analysis to the
success of businesses. Kuratko et al. (2014) observe that businesses like Apple, 3M,
Procter & Gamble, and Google are well aware of the critical importance of supportive
internal environments and take actions like internal environment analysis to ensure the
same. The article also discusses the reasons why firms conduct internal environment
evaluation. Another key point made in the publication is that there are five critical
dimensions to creating a conducive internal environment.
Quality of the Publication
The publication is a peer-reviewed research paper. Therefore, the article is of
superior quality. Other experts evaluate Peer-reviewed research articles in the field to
ensure that they make claims supported by the evidence. Hence, the superiority in the
quality of the article. Another reason why the article is of great quality is that it is
published in a reputable business journal. Business Horizons.
Quality of the Author(s)
The article was written and published by Donald F. Kuratkoa, Jeffrey S. Hornsby,
and Jeffrey G. Covin. The publication is authored by great quality researchers and
authors. The researchers are of great quality as they are business scholars who are highly
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educated and experienced in research. They have published other superior quality peer-
reviewed scholarly articles.
Where the Article Fits in the Discussion
The article fits in the discussion of the reasons for conducting a business internal
environment evaluation. The publication addresses the vital importance of conducting
such an analysis and its advantages to a business organization.
Osterwalder, A., Pigneur, Y., Bernarda, G., & Smith, A. (2014). Value proposition design: How
to create products and services customers want. John Wiley & Sons.
Summary of Key Points
One key point made in the book is that holding other factors constant, customers
prefer products and services that add the most value to their lives. Another key point
made in the publication is that to create products and services that customers want,
businesses must thoroughly research customer needs, tastes, and preferences. The failure
to take customer needs seriously, tastes, and preferences in the design and development
of products or services will likely results in products or services that customers do not
desire. The authors advise businesses to begin with understanding customer wants when
designing new products or services.
Quality of the Publication
The publication is of good quality. The publication is of good quality because it
was researched and written by business experts. The authors of the book are
knowledgeable about the subject discussed in the book. Another reason the publication is
of good quality is that a reputable publishing company publishes it. The book is
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published by the John Wiley & Sons publishing company, reputable in academic
publishing.
Quality of the Author(s)
The book is written by four authors. The authors are Alexander Osterwalder, Yves
Pigneur, Gregory Bernarda, and Alan Smith. The four are good quality authors. They are
experts in business strategy, and they provide consultancy services to businesses on the
subject.
Where the Article Fits in the Discussion
The book fits in the discussion regarding the key source of power or weakness in
a business’s internal environment. Osterwalder et al. (2014) discuss the vital importance
of products and services to business success. The book supports the claim that products
or services are a key source of power or weakness.
