A thorough internal analysis is essential for developing an effective competitive strategy. This process, which includes both qualitative and quantitative analysis, aims to identify how a company’s current strategy responds to environmental, industry, and competitive challenges, thus ensuring the long-term sustainability of its competitive advantage. According to Esteban R. Brenes, Franco Gianneschi, and Elisa Retana, internal analysis focuses on several critical areas within the company.

Financial Analysis

Financial analysis is crucial to understanding a company’s strategy and performance. A superficial analysis is not enough; it is necessary to dig deeper to identify the real sources of value. This process includes examining financial statements such as the income statement, balance sheet, and cash flow, and tracking key accounts like revenues, EBITDA, profits, dividends, assets, and liabilities. A thorough approach allows for understanding how the company generates money and whether it is creating value for both shareholders and customers.

Business-Specific Indicators

In addition to financial analysis, it’s essential to consider specific business indicators. These provide insight into efficiency, historical performance, and industry best practice comparisons. Indicators such as inventory turnover, margins, leverage, and other industry-specific measures (for example, sales per square meter in retail) are critical to evaluating the company’s performance.

Operational Performance

The analysis of operational performance should cover all the company’s functional areas. Identifying and analyzing areas that contribute directly to competitive advantage is crucial. This may include:

• Human Resources: Evaluating the team’s capacity and organizational structure to meet business demands.
• Sales and Marketing: Analyzing the efficiency of the sales and marketing areas, including the profitability of products and services, market share, and brand perception.
• Operations: Examining logistics, infrastructure, service and material costs, supplier relationships, and flexibility to adapt to market challenges.
• Accounting and Finance: Evaluating the efficiency of the financial area and its ability to support strategic plans like acquisitions.

Resource Analysis

It is critical to analyze both tangible and intangible company resources. This includes:

• Know-how: A set of essential technical and administrative knowledge for the business.
• Technological Level: Assessing whether the company has adequate technology to maintain a competitive advantage.
• Innovation Capacity: Analyzing whether the company has the culture and resources needed to innovate and develop new products and services.
• Tangible Assets: Considering the importance of physical assets such as geographic location, mining concessions, or access to ports.

SWOT Analysis

The SWOT analysis should be carried out at the end of the internal analysis process to synthesize the understanding of the environment, industry, competition, and the company’s position. It is essential to identify a limited number of truly relevant strengths, weaknesses, opportunities, and threats for the business strategy.

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