Question

How to explain this strategic analysis? I have no idea how.

Financial Targets: •Revenue •EBITA•Dividend

Sustainability: •Zero injuries •Decrease Carbon Emission •Decrease Plastic Volume

Cash Ecosystem: •Add adjacent services•Mergers & Acquisitions•Create new services

Answer 1

Strategic analysis

Strategic analysis is a process that involves researching an organization’s business environment within which it operates. Strategic analysis is essential to formulate strategic planning for decision making and smooth working of that organization. With the help of strategic planning, the objective or goals that are set by the organization can be fulfilled.

In a constant strive to improve, organizations must periodically conduct a strategic analysis which will, in turn, help them determine what areas need improvement and areas that are already doing well. For an organization to function efficiently, it is important to think about how positive changes need to be implemented.

Strategic analysis is essential if a company has a goal and a mission for themselves. All leading organization who are well known for their achievements have years of strategic planning being implemented at various stages. Strategic planning is a long-term task involving continuous and systematic planning and resource investment. The main question that a company should consider when performing a strategic analysis is: How is the market constituted? How are the active clients in this sector? While conducting strategic analysis, organizations must know their competitors and thus be able to define a strategy that will help them an unbeatable player in that market. One of the most important functions of strategic planning is to predict future events and deduce alternative strategies if a certain plan doesn’t work out as expected.

Understanding the term strategy

A strategy is a plan of actions taken by managers to achieve the company’s overall goal and other subsidiary goals. It determines the success of a company. In strategy, a company is essentially asking itself, “Where do you want to play and how are you going to win?” The following guide gives a high-level overview of business strategy, its implementation, and the processes to lead to business success.

Vision, Mission, and Values

To develop a business strategy, a company needs a very well-defined understanding of what it is and what it represents. Strategists need to look at the following:

• Vision – What it wants to achieve in the future (5-10 years)
• Mission Statement – What business a company is in and rallies people
• Values – The fundamental beliefs of an organization reflecting its commitments and ethics

After gaining a deep understanding of the company’s vision, mission, and values, strategists can help the business undergo a strategic analysis. The purpose of a strategic analysis is to analyze an organization’s external and internal environment, assess current strategies, and generate and evaluate the most successful strategic alternatives.

Levels of Strategy

Strategic plans involve three levels in terms of scope:

1. Corporate-level (Portfolio)

At the highest level, corporate strategy involves high-level strategic decisions that will help a company sustain a competitive advantage and remain profitable in the foreseeable future. Corporate-level decisions are all-encompassing of a company.

2. Business-level

At the median level of strategy are business-level decisions. The business-level strategy focuses on market positions to help the company gain a competitive advantage in its own industry or other industries.

3. Functional-level

At the lowest level are functional-level decisions. They focus on activities within and between different functions aimed at improving the efficiency of the overall business. The strategies are focused on particular functions and groups.

Types of Strategic Analysis

Internal strategic analysis

As the name suggests, through this analysis organizations look inwards or within the organization and identify the positive and negative points, and establish the set of resources that can be used to improve the company’s image within the market. Internal analysis starts from evaluating the performance of the organization. This includes evaluating the potential of an organization and its capacity to grow.

The analysis of the strengths of the company should be oriented to the market, focusing on the client. The strengths only make sense when they help the company to fulfill client’s needs. When doing an internal strategic analysis one should also know the weaknesses and limitations that a company faces existentially or in the future.

SWOT analysis is one of the most reputed techniques for internal strategic analysis. There is no better way to benefit from a strategically performed analysis than to use it to detect the strengths, opportunities, weaknesses, and threats that your project may suffer.

Performing SWOT analysis will help you create a strong and long term vision through strategic planning for your organization. The important thing is to constantly evaluate the environment in which the company operates, and act accordingly. It is essential for an organization to take into account the SWOT principle in order to be able to plan efficiently. Through a thorough SWOT analysis companies will be able to prevent a number of problems that can arise if there is no systematic analysis.

Let us further break down these attributes and understand how an organization can conduct a complete strategic analysis to be able to plan and perform better with each passing year.

1. Strengths of a company: There are several attributes within the company that are positive, that you can control in order to obtain better results, they are your strengths, which makes you stand out from others. Surely there are certain resources or strategies that have led to your organization’s process year on year. Knowing these resources or strategies are also considered as strengths. Knowing this type of information is very important because these are the elements that give you an advantage over your competition.
2. Business weakness: It is practically impossible for an organization or a company to have only strengths and not have weaknesses. Therefore, there are certain characteristics of an organization that they need to be improved in order to be able to perform better and compete in the market. These are called business weaknesses. Most of the factors are foreseeable and an organization needs to identify them well in advance and approach the problems with a corrective measure.
3. Threats to an organization: There are going to negative factors that will affect the growth of the organization and these factors can be analyzed too. These factors need to detected and a risk management strategy needs to be put in place so that threats like stronger brand value of the competitors, better relationship of competitors with retailers etc. don’t have an adverse effect on the company’s growth. Also, threats like multiple players in the market with the same products, downturn in economy, better advertising of the same product by competitors are some threats that have to be dealt with carefully so that competitors don’t take advantage of the situation.
4. Opportunities for the company: Detect the opportunities you have to grow. Knowing the path organizations must follow is a great step towards success. Take advantage of all those external factors that are positive for the organization. Identify all the opportunities and take advantage of them.

External strategic analysis

Once the organization has successfully completed its internal analysis, the organization needs to know about external factors that can be a hindrance in their growth. To do so, they need to know how the market functions and how consumers react or behave to certain products or services. Measuring customer satisfaction is a common external analysis method. PESTLE analysis is one of the most widely used external analysis techniques. The process one is most likely to adopt when using a PESTLE technique is relatively a simple one.

PESTLE analysis (Political, Economic, Social, Legal and Environmental) describes a framework of macro-environmental factors used in the environmental scanning component of external strategic analysis. The model has been extended by adding Ethics and Demographic factors. It is a part of the external analysis when conducting a strategic analysis or doing market research and gives an overview of the different macroenvironmental factors that the organization has to take into consideration. By using PESTLE analysis one can:

1. Find out the key issues beyond the organization’s control, like changes in political scenario changing rules that can be implemented at any point in time.
2. Identify the impact of each issue.
3. See how important these issues are to the organization.
4. Rate the likelihood of its occurrence.
5. Briefly consider the implications if the issue did occur.

Strategic Analysis Process

1. Perform an environmental analysis of current strategies

Starting from the beginning, a company needs to complete an environmental analysis of its current strategies. Internal environment considerations include issues such as operational inefficiencies, employee morale, and constraints from financial issues. External environment considerations include political trends, economic shifts, and changes in consumer tastes.

2. Determine the effectiveness of existing strategies

A key purpose of a strategic analysis is to determine the effectiveness of the current strategy amid the prevailing business environment. Strategists must ask themselves questions such as: Is our strategy failing or succeeding? Will we meet our stated goals? Does our strategy align with our vision, mission, and values?

3. Formulate plans

If the answer to the questions posed in the assessment stage is “No” or “Unsure,” we undergo a planning stage where the company proposes strategic alternatives. Strategists may propose ways to keep costs low and operations leaner. Potential strategic alternatives include changes in capital structure, changes in supply chain management, or any other alternative to a business process.

4. Recommend and implement the most viable strategy

Lastly, after assessing strategies and proposing alternatives, we reach the recommendation. After assessing all possible strategic alternatives, we choose to implement the most viable and quantitatively profitable strategy. After producing a recommendation, we iteratively repeat the entire process. Strategies must be implemented, assessed, and re-assessed. They must change because business environments are not static.

Strategic Analysis and Market Research

Market research can provide you with the necessary information to know the different market scenarios and suggest strategies to achieve more sales. Market research is either qualitative or quantitative in nature of conduct.Market research can provide you with the necessary information to know the different market scenarios and propose strategies to achieve more sales. For example, through market research, an organization can know the degree of recognition that the brand has and plan marketing campaign correctly.

Organizations can also bet effectively the introduction of a new product into the market, or innovate through the new ideas of customers. Ask the right questions to customers and get their feedback.The data provided by the investigation will help you to plan correctly what you have to do, for example, in case your competitors lower their prices, or are there changes in the behavior of your consumers?

Strengths of Strategic Analysis

1. Strategic analysis allows you to have clarity of the internal positive attributes of the organization that are under control. By knowing these positive attributes an organization can focus on the factors that lead to positive performance and can replicate the strategy wherever applicable.
2. It helps identify strength of both internal as well as external resources, such that it leads to an increasing competitive advantage.
3. It offers you the internal components that add value or offer a competitive advantage to your business. When you have a reasonable competitive advantage over you competitors half the game plan is clear. The only aspect that would need clarity is what is not going the company’s way.

Weaknesses of Strategic Analysis

1. Strategic analysis can generate too many ideas, but doesn’t help to choose which one is the best.
2. Sometimes too much time is spent on existential problem solving, such that there is little or no time left for innovating new products or making service level changes at the organizational level.

Final Thoughts

Given the pace of change in the business world, I strongly believe you need strategy at the center of your management process to ensure you're achieving your goals.

That’s not to say you should ignore operational or customer data—data that aids internal analysis in strategic management meetings is critical to your success, but it won’t determine how your business should be run. Strategy management and analysis should be the big gear that drives all the smaller gears doing operations, data analytics, and more. You likely need different tools to manage all your data, but platforms like ClearPoint can connect all the pieces to tell the entire story and help you drive your organization with strategy, not data points.