Strategic Analysis

a form of strategic analysis that identifies and analyses the main internal strengths and weaknesses and external opportunities and threats that will influence the future direction and success of a business

S – STRENGTHS – Internal factors of a business, which can be a basis to develop their competitive advantage. Identified through internal audits
W – WEAKNESSES – Internal negative factors, such as poor training and motivation
O – OPPORTUNITIES – Potential areas of expansion for the business to make higher profits. Identified through external audits
T – THREATS – External factors about the business’s economic environment, market conditions which may negatively affect the business performance

- Helps managers assess the likely success of future strategies and their constrains
- Not necessary to pursue the most profitable option, rather focus on developing a USP by exploiting the strengths and opportunities
- Not sufficient to carry out only SWOT
- It is subjective
- No quantitative data
- Should be used as ONLY a guide

The strategic analysis of a firm’s macro environment including political, economic, social and technological factors

P – Political
E – Economical
S – Social
T – Technological
E – Environmental
L – Legal/Legislation

- Helps assess the chance of success of a business strategy
- PESTEL is complementary to SWOT, not an alternative
- Must be constantly updated – dynamic business environment

Mission statement is a statement of the business’s core purpose and focus, phrased in a way to motivate employees and to stimulate interest by outside groups

Vision statement is a statement of what the organisation would like to achieve or accomplish in the long term

Mission statement should answer –
What do we do?
For whom do we do it?
What is the benefit?
Vision and mission provide a sense of direction and focus and are the basis of developing strategies

It is a method of analysing the product portfolio of a business in terms of market share and market growth

- Well established product, mature market
- High positive cash flow, profits
- Low promotional and marketing costs
- Maintain cash cows for as long as possible

- Successful product, expanding market
- Maintain market position
- High marketing and promotion costs – product differentiation
- High revenue generation

- Consumes resources, generates very little return
- Heavy promotion expenditure to help become cash cow
- Uncertain future – quick decisions

- Offers very little – sales and cash flow
- Replaced/withdrawn from the market

Michael Porter identified 5 main forces that models an industry
It can be used to build a competitive edge and helps understand the business’s external environment

How easily can new competitors enter the market
Becomes a threat when:
Low EOS
Cheap technology needed
Easy to access distribution channels
No patents/legal restrictions
Low need for product differentiation

Power of customers on the industry
Higher power when:
Small, undifferentiated suppliers
Low cost of switching
Limited consumers

High cost of switching
High brand image
Little bargaining power for customers

Substitute products in other industries

Key, most important part
Determines the level of competition in an industry
Determined by the other 4 forces
High rivalry when:
Cheap and easy for new firms to enter
Threat from substitute products
High supplier power
High consumer power
Large number of firms with similar market share
High fixed costs
Slow market growth

Helps firms identify whether or not to enter the market – profitability, competition, whether or not to stay in the market
Develop strategies to improve competitive position
Product differentiation
Buying out rivals
Market segmentation
Communicate and collude with competitors
Rapidly changing markets, may not remain the same
Complex

Core competence is an important business capability that gives a firm competitive advantage

Develop core competencies to gain competitive advantage as they help develop core products
Core products are products based on a business’s core competences, but not necessarily for the final consumer
Being good at one product isn’t the same as their core competence
It depends on integrating multiple technologies and different product skills which already exist in the business
Doesn’t always require huge R&D expenditure