Formulating Strategies--Performing an Internal Audit

The external environment is literally filled with a variety of opportunities waiting to be exploited. A key qualifier in our ability to find these opportunities and gain maximum benefit from them lies in an assessment of the internal strengths and weaknesses of our firm. For example, while we may perceive an opportunity with great commercial promise for the first firm to get their product to market, such rapid innovation may be impossible for our company because we operate with a significant internal weakness whereby we are slow to innovate. In other words, external opportunities and threats must be evaluated through the lens of the operating strengths and weaknesses of the company. Is one of our strengths financial resources? We can then make larger-scale investments than competitors in plant and equipment. Are we innovative and quick to market? Clearly, we need to exploit the opportunities available for "first-mover" products. The internal audit, coupled with an external assessment, forms the basis for what is commonly referred to as SWOT analysis. SWOT analysis derives its name from the interplay of the terms Strengths, Weaknesses, Opportunities, and Threats that are all key elements in strategic evaluation.