Question

Describe the tools within both the External and Internal Analysis of a business. Please describe the purpose of each.

Answer 1

Ans) Internal and external analysis of the business is very important for the long term growth of the business.

The tools that are used within the internal and external analysis of a business are given below

Internal analysis -

GAP analysis -It is an analysis technique that focuses on comparing the current result or the state, to the desired result or state. It identifies the deficiencies and makes sure the actions are generated, and these are developed into small term goals that are supposed to be achieved. The purpose of this analysis is to identify the exact issue and keep the focus on solving that so that the desired results are achieved. This is an internal analysis tool as this tells about the deficiency in the organization.

SWOT analysis- It is a type of internal analysis that focuses on four factors - Strength, weakness, opportunity, and threats. This is an improvement over gap analysis, as this also focuses on other factors that can be utilized to gain a competitive advantage. This acts as an overall analysis of the organization and actions are generated at all aspects of the organization. The purpose of this analysis is to get the overall status of the organization in terms of SWOT and focus on each one of them so that rapid development can happen internally.
External analysis-

PESTEL analysis- It stands for Political, Economic, Social, technological, environmental, and legal aspects, these are external factors that affect the operations of the organization. The purpose of this is to study how each factor affects the organization and how the organization should deal with it. These also act as an input for internal analysis as internal aspects are affected by the nature of external factors.

Porter's 5 force model-The 5 external forces that affect the business as per the porter’s model are
Bargaining power of suppliers
Existing competition in the market
Alternatives to the company’s business (product or service)
Bargaining power of the buyers
Risk of new competition
Analysis of these factors is very important as these affect the longevity of the organization in the market. The purpose of this analysis is to study the impact of these forces on the current business model and do required adjustments so that the business always has the market hold.

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