Strategic analysis methods

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Strategic analysis methods
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In its core business and in the company's functional areas, managers use a variety of methods described in the literature and disseminated by scientific-research centers and other institutions. These methods were developed by practitioners and theorists in various fields of management. For the purposes of the presentation following methods were extracted:

Attention should be paid to the importance of company's principal activity for strategic management. The objective of the Management Board, the mission and strategic objectives, are translated into on the daily "operational" activities of all employees. Strategic management can not be "separated" for the purposes of research analysis and evaluation of operational management.

Fig.1. Strategic analysis methods groups

Fig.1. Strategic analysis methods groups

List of methods

Summary of the specific methods and techniques used within the groups listed above is shown in the following table. It should be noted that the method does not only relate to strategic management. Only two groups of methods may be classified as methods of strategic management par excellence (these are: methods of strategic analysis and competitive analysis). However, despite the loose connection with strategic management, these methods may be also applied in this area significantly expanding the scope of the analysis and the complexity of the results.

Group Description Specific methods and techniques
Methods of economic analysis

They concern fundamental analysis of economic values, such as revenues, costs, profits, expressed in monetary units, as well as their transformations in the form of indicators, measurement of dynamic, methods of forecasting and evaluation of investment projects. A common characteristic of these methods is to manipulate the data that is relatively easily available within the company.

  • Cost analysis:
  • The break even point (BEP):
    • quantitative threshold of profitability,
    • qualitative threshold of profitability,
    • as a percentage of capacity utilization,
    • the maximum unit selling price level
    • the border level unit cost variables,
    • safety margins.
  • Economic Lever:
    • the degree of operating leverage
    • the point of indifference,
    • the degree of leverage.
  • Liquidity indicators:
    • current index
    • fast rate.
  • The profitability indicators:
    • the profitability of sales,
    • ROA: return on assets
    • ROE: return on equity.
  • Debt indicators:
    • the overall level of debt,
  • long-term debt,
    • cover of credit
    • fixed assets cover by equity,
    • financial assets cover by equity,
  • Performance indicators:
    • the cycle of debts,
    • the cycle of commitments,
    • inventory cycle.
  • Dynamic methods of investment appraisal:
    • net present value (NPV)
    • discounted rate of return (NPVR)
    • internal rate of return (IRR),
    • annuity methods,
    • MIRR method
    • budgeting,
    • target cost analysis.
Forecasting methods They rely on the determination of the accuracy of specific economic variable used in the framework of strategic intelligence at the time.
  • Time series analysis
  • Method of barometers
  • Econometric models
  • Intuitive methods
Methods for assessing the risk of projects Within this group we can specify the methods used in assessing the level of risk of an investment in the company
Methods for the analysis of competitive advantages of the company These methods constitute an important tool for determination of lines of action and decision making.
Strategic analysis methods

These are the methods of strategic analysis par-excellence. They include a wide set of methods for the analysis of sector and portfolio of company and its environment.

Methods for the analysis of the quality of products Methods for the analysis of the quality of products are closely related to operating activities, because from there they derive the data, and their results are used directly in the production. Some of these methods are not only diagnostic, but also has the forecast element
Methods for the analysis of logistics system Methods are used in analysis of enterprise logistics system, their goal is to improve it.
  • ABC analysis method
  • SWOT analysis
  • value chain analysis method
  • analysis of distribution of objects
IT methods and systems Associated with the use of information technology and tools for data processing.
  • Material requirements planning MRP
  • MRP II manufacturing resource planning
  • Enterprise resource planning ERP
  • Customer relationship management CRM
  • Management of workflow
  • Knowledge Management Systems
  • Analytical systems:
    • OLAP,
    • data warehousing,
    • expert systems,
    • neural networks.
    • integrated systems
Integrated measurement systems A group of methods which aim is to provide a comprehensive look at the issues of the company in all the key areas of its activities.
  • Balanced Scorecard,
  • Management Dashboard,
  • Tableau de Bord
  • Performance Pyramid (SMART)
  • Matrix of results and determinants
  • EF2M
  • EFQM Model (European quality award)
  • Maisel model

Source: own elaboration


Author: Krzysztof Wozniak