I define what is internal analysis, and what is external analysis. I also discuss why it is important to strategic management.
Internal analysis occurs when you take stock of all of the particular resources and assets that you possess as an organization. Generally, you're trying to find what is the unique competence that you are good at as an organization. There are many ways to do this type of analysis, such as the resource-based view, but the basic premise is to find out what you are good at.
External analysis occurs when you take stock of how you are positioned relative to everybody else in the marketplace. You want to position yourself such that you can excel given your strengths and weaknesses. There are tools and frameworks, like Porter’s 5 Forces that allow you to find how should position yourself.
Why are these different types of analysis (internal and external analysis) important to strategic management? In general, each of them are showing one piece of the puzzle, but they are incomplete on the ground. Moreover, neither of them are very good at describing the organization.
What they do do is make you think about new ways and new ideas and how to envision your organization. The goal is to systematically think through what you might do in the future and to anticipate the risks of what you choose to do going forward.
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David Maslach is a research professor of entrepreneurship, innovation, and business strategy, I discuss topics, such as behavioral science, strategy, innovation, and entrepreneurship, and apply these to my new peer proofreading and editing platform. Topics include the sharing economy, altruism, investing in technology, starting a business, and bounded rationality. My favorite videos pertain to incentives, goal setting, and learning from failure to drive behaviors such as weight loss, stopping telemarketers, creating novel technologies, and creating new movements.
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