Know All About Strategic Analysis Tool and Various Types of It

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When conducting a strategic analysis, the main issue that an entity must assess is: How is the market structured? The manner in which active clients in this industry have? Organizations must perform strategic analysis in order to understand their rivals and design a strategy that will help them become an unmatched contender in that sector. One of the most essential tasks of strategic analysis is predicting future events and developing alternate plans if a certain plan does not pan out as planned.

Strategic analysis is required if a corporation has a goal and a mission. Years of strategic planning have been implemented at various phases in all significant firms that are highly known for their successes.

Experts at allassignmenthelp will help future professionals to better understand how strategic analysis works and how strategic analysis tool works for finding the issues and reducing those to make sure that the organization runs successfully.

What is Strategic Analysis?

Strategic analysis is a method that entails analyzing and researching an organization’s business environment in which it functions. Strategic analysis is required to develop strategic plans for decision-making and the efficient functioning of an organization. The organization’s objectives or goals can be met with the assistance of strategic planning.

Organizations must undertake a strategic analysis on a regular basis in order to evaluate what areas require improvement and which ones are already performing well. It is critical to consider how good changes can be made in order for a company to work efficiently.

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Various Strategic Analysis Tools Used in Organizations

Strategic analysis is performed on a regular basis in all firms in order to identify areas for development and places where the organization can gain a competitive edge. All of the world’s most successful companies have conducted years of constant and extensive strategic study.

The goal of such analytic tools is to assist a company and, more crucially, its personnel in selecting an industry, defining its competitive viewpoint, and developing a business plan.

Strategic Analysis Tool & Different Types Of It

Let us take a look at the most used strategic analysis tools below:

PEST/ PESTEL Analysis

The PEST analysis assesses an organization’s external macro-environment. It is a useful tool for understanding the political, economic, socio-cultural, and technological backdrop of an organization. Environmental and legal factors are also considered in the PESTEL analysis. It can be used to evaluate market growth and decline, as well as a company’s position, potential, and direction.

The PESTEL study considers the following variables:

Government policy, political stability, corruption, foreign trade policy, tax policy, labor law, trade restrictions, and so on are examples of political elements.
Economic factors such as economic growth, exchange rates, interest rates, inflation rates, disposable income, unemployment rates, and so on.
Social factors such as population growth rate, age distribution, career attitudes, emphasis on safety, health consciousness, lifestyle attitudes, cultural obstacles, and so on.
Technical factors include technical goals, level of creativity, automation, R&D efforts, changes in technological awareness, and so on.
Environmental influences include weather, climate, environmental policies, climate change, NGOs’ pressure, and so on.
Legal aspects include laws such as antitrust laws, employment laws, consumer protection laws, copyright and patent laws, health and safety regulations, and so on.

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SWOT Analysis

SWOT Analysis is a popular tool for determining the strengths, weaknesses, opportunities, and threats associated with any business action. It is a straightforward yet powerful analyzing technique.

It starts with defining the project or company objective and then identifying the internal and external factors required to achieve that objective. The strengths and weaknesses of a company are usually internal, whereas the opportunities and threats are external.

Strengths: Strengths take into account the following categories of factors:

What distinguishes your organization from others?
What are your distinguishing features?
What are your competitors’ and customers’ perceptions of your market’s strengths?
What is your company’s competitive advantage?

Weaknesses: Weaknesses consider the following categories of factors:

How do other organizations outperform you?
What aspects of your company contribute little or no value?
What do your competitors and customers see as your market’s weakness?

Opportunities: Opportunities consider the following categories of factors:

What political, economic, social-cultural, or technological (PEST) changes are occurring that may benefit you?
Where are there currently market gaps or unfulfilled demand?
What fresh invention may your company bring to market?

Threats: Threats take into account the following categories of factors:

What political, economic, social-cultural, and technological (PEST) changes are occurring that may be negative to you?
What limitations do you have?
What are your competitors’ activities that can impact you negatively?

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Value Chain Analysis

The phrase value chain refers to the multiple commercial operations and procedures that go into making a product or providing a service. Taking stock of the operations that comprise a firm’s value chain will provide the company with a better understanding of what goes into each transaction. As a result, by improving the value given at each step of the chain, it can share more value with customers while capturing a larger portion.

Value chain analysis allows a company to assess each activity in its value chain in order to identify chances for improvement. The first stage in conducting a value chain analysis is to divide a company’s operations into primary and secondary activities:

Primary Activities: The following are closely related to the primary activities:

Inbound transportation: Activities involving the receipt, storage, and inventory management of source goods and components.
Operations: Activities involving the transformation of raw materials and components into a final product.
Outbound transportation: Distribution-related activities such as packaging, sorting, and shipping
Sales and marketing: Activities connected to the promotion, advertising, and pricing strategy of a product or service.
Post-sales service: Activities that occur after a sale, such as installation, training, quality assurance, repair, and customer assistance.

Secondary activities: The following are closely related to secondary activities for any business:

Acquisition: Activities including the acquisition of raw materials, components, machinery, and services.
Technological development: Research and development activities such as product design, market research, and process development
HR management: Activities involving employee recruiting, hiring, training, development, retention, and compensation.
Facilities: Activities associated with the company’s overhead and management, such as funding and planning.

In most cases, improving one of the four secondary activities will enhance at least one of the primary activities.

Following the analysis of the primary and secondary activities involved in the creation of any product and/or service, the next steps are to determine the value that each activity adds to the process, as well as the costs involved, and to analyze the costs and value in order to achieve competitive advantage in either the cost reduction or differentiated product metrics.

Porter’s Five Force Analysis

The tool backs a company in determining who has the most influence in a business matter. This is useful for determining the strength of a company’s current competitive position as well as the strength of a position that the company might desire to pursue.

The five forces are as follows:

Buyers’ Bargaining Power: This includes an assessment of how easy it is for buyers to drive down prices. The quantity of buyers in the market, the importance of each individual buyer to the organization, and the cost to the buyer of switching from one supplier to another all influence this.
Suppliers’ Bargaining Power: This includes an assessment of how easy it is for suppliers to raise prices. The number of providers of each vital input, the distinctiveness of their product or service, the supplier’s comparative strength and scope, and the cost of switching from one source to another all influence this.
Rivalry Among Existing Companies: This comprises an assessment of the competitiveness of the numerous enterprises that exist in a given market. This is determined by the rate of industry growth, concentration and balance of competition, product differentiation by different firms, switching costs, economies of scale, fixed variable costs, exit obstacles, and so on.
New Entrant Threats: Profitable markets attract new entrants, diminishing profitability. Unless incumbents have strong and long-lasting barriers to entry, such as patents, economies of scale, capital needs, or government legislation, profitability will decline at a competitive rate.
Substitute Threats: When there are near substitute products in a market, customers are more likely to migrate to alternatives in reaction to price rises. This decrease both the strength of suppliers and the market’s attractiveness.

Porter’s Generic Strategies

These techniques are called generic because they can be used for products/services in any industry and for companies of any size.

Porter defined the three generic techniques as follows:

Cost managing: Concerned with reducing the cost of supplying products and services to the organization.
Distinction: The creation of distinctively desirable products and services.
Concentration: Concerned with the providing of a niche market with a one-of-a-kind product or service. Focus is further classified into two types: cost focus and differentiation focus.

In order to examine its competitive posture in a market, a company might employ either the cost leadership strategy, the differentiation strategy, or the focus strategy.

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Conclusion

Having the appropriate tools will not immediately make you a good mechanic, and having the correct strategy analysis tools will not automatically make you a brilliant strategist – but they will help you get projects done more successfully!

It is important for you to understand which tool is useful in which situation and what kind of company and most importantly if you have been given the opportunity as the strategist, which tool would you use to find out the gaps of the company you are working with? To do it effectively, a lot of reading needs to be done by you as well as others who are looking forward to joining organizations as strategists in the next four to 5 years.

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