Strategic analysis

Strategic analysis focuses on two main areas: environment analysis and internal analysis. Analysis of the environment includes following research issues: competitors, customers, suppliers and political environment, legal, environmental, social, etc. In contrast, internal analysis covers the following functional areas of business: finance, human resources, logistics, marketing, sales, production, etc.

Due to the complexity of the subject areas of analysis, an important task is to have integrated - general - look at the whole company, both in terms of its environment and internal situation.

Among other analyses used in business management, strategic analysis stands out because of the following features:

1. Combine two ways of looking at company and two sources of information: the simultaneous examination of the environment and the organization and confronting these results. It is a procedure with roots in the art of war strategy, while it is completely alien to traditional procedures of analysis of the company.
2. The interdisciplinary nature of strategic analysis, which use methods both quantitative and qualitative in the field of statistics, economics, finance, sociology, and psychology.

Advantages of strategic analysis

Strategic analysis is the process of evaluating an organization's internal and external environment in order to identify opportunities and threats, and to develop strategies that will enable the organization to achieve its goals and objectives. There are several advantages to conducting strategic analysis:

• Improved decision-making: Strategic analysis provides organizations with the information and insights they need to make better decisions, by identifying potential risks and opportunities, and by assessing the strengths and weaknesses of different options.
• Increased flexibility: Strategic analysis helps organizations to anticipate and adapt to changes in the environment, by identifying trends and patterns that may indicate future developments.
• Greater efficiency: By conducting strategic analysis, organizations can identify areas where they can improve their performance, and can make more effective use of their resources.
• Better alignment: Strategic analysis helps organizations to align their policies and practices with their overall goals and objectives, which can lead to improved performance and a more engaged workforce.
• Greater competitiveness: Strategic analysis helps organizations to identify new opportunities and to develop strategies that will enable them to compete more effectively in their marketplace.
• Improved stakeholder management: Strategic analysis helps organizations to understand the needs and expectations of their stakeholders, which can lead to improved stakeholder management and greater support for the organization.
• Better crisis management: Strategic analysis helps organizations to anticipate and plan for potential crises, which can help them to respond more effectively if a crisis occurs.

Examples of Strategic analysis

• Competitor Analysis: This analysis involves studying the current and potential competitors in the market, in order to understand their strengths and weaknesses, and to develop strategies to compete with them.
• SWOT Analysis: This is a strategic analysis tool that looks at the Strengths, Weaknesses, Opportunities and Threats of an organization. It is used to identify and evaluate the internal and external factors that are influencing the business and help to develop strategies.
• Porter’s Five Forces Analysis: This is an analysis tool developed by Michael Porter to assess the external environment of an organization. It looks at the bargaining power of suppliers and buyers, the threat of new entrants, the threat of substitutes, and the intensity of rivalry among competitors.
• Market Research: This is a method of gathering information about the market to gain better understanding of the customers, competitors, and the industry. It helps to identify opportunities, develop effective strategies and make better decisions.
• PEST Analysis: This is a framework used to assess the external environment of a business by looking at the Political, Economic, Social and Technological factors. It helps to identify the risks and opportunities that a business may face.
• Financial Analysis: This is a process of analyzing the financial statements of an organization to understand its past performance, current situation and future prospects. It helps to identify areas of improvement and develop strategies to maximize profits.

Limitations of Strategic analysis

• Strategic analysis is limited by the availability of data and information. Without accurate and reliable data, it is impossible to make informed decisions.
• Strategic analysis is limited by the ability of the analyst to interpret the data and draw meaningful conclusions. Without strong analytical skills and understanding of the industry and market, it is difficult to accurately assess a situation.
• Strategic analysis is limited by the amount of time available to conduct the analysis. If the analysis is not done in a timely manner, the opportunities identified may no longer be relevant.
• Strategic analysis is limited by the resources available to the analyst. Without sufficient resources for research and analysis, it is difficult to accurately assess the situation.
• Strategic analysis is limited by the organizational culture of the company. If the culture is not conducive to open and honest dialogue, then it is impossible to effectively analyze the situation.

Other approaches related to Strategic analysis

• SWOT Analysis - SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It is used to assess the internal and external environment of the organization and identify the internal and external factors that may affect the organization’s success.
• PESTLE Analysis - PESTLE stands for Political, Economic, Social, Technological, Legal and Environmental factors. It is used to analyze the external environment of an organization and identify the opportunities and threats that may affect the organization's performance.
• Porter's Five Forces Analysis - Porter's Five Forces Analysis is used to identify the key competitive forces that are driving the industry and the organization's competitive position.
• Value Chain Analysis - Value Chain Analysis is used to identify the activities that create value for an organization and identify how the organization can improve its operations to create more value.
• Competitive Advantage Analysis - Competitive Advantage Analysis is used to identify the competitive advantages that an organization has over its competitors and how the organization can leverage its competitive advantages to gain a competitive advantage in the market.
• Scenario Planning - Scenario Planning is used to identify the possible future scenarios that an organization may face and how the organization should respond to these scenarios.

In summary, Strategic analysis includes a variety of approaches such as SWOT Analysis, PESTLE Analysis, Porter's Five Forces Analysis, Value Chain Analysis, Competitive Advantage Analysis and Scenario Planning. These approaches help organizations to identify and understand the external and internal environment, assess the competitive forces, identify competitive advantages, and develop strategies to gain a competitive advantage in the market.

Strategic analysis — recommended articles

Company situation analysis — ASTRA analysis — Internal analysis — Importance of swot analysis — Strategic management tools — TOWS analysis — International business research — External analysis — Importance of strategic management

References

• Hall, R. (1992). The strategic analysis of intangible resources. Strategic management journal, 13(2), 135-144.

Author: Krzysztof Wozniak