Strategic analysis of an organization is a key factor when it comes to developing a plan for more productive company performance. Strategic analysis refers to the process of examining an organization—it’s a working framework for building strategy.
What Is Strategic Analysis?
As mentioned above, strategic planning helps a company achieve its goals and objectives.
Improvement is the only constant in any company. You must continuously work on your strategy, your plan, and the interaction among team members. That’s why regular strategic analysis is essential—it helps your organization anticipate and identify areas needing improvement.
Conducting a strategic analysis also requires a deep understanding of your competitors. This enables you to define a strategy that will help your business stand out and remain competitive.
One of the most important functions of strategic analysis is forecasting future events and developing alternative approaches in case a specific strategy fails.
There are several types of strategic analysis worth exploring.
Internal Strategic Analysis
Internal analysis helps you understand how your company operates. It assesses strengths and weaknesses and establishes strategies to improve brand positioning.
It begins with an evaluation of company performance, future potential, and growth capacity.
Strengths and weaknesses should be assessed based on the market situation and customer response. A strength only matters if it delivers real value to the business—e.g., satisfying customer needs or providing high-quality service. Alongside strengths, your strategy should also recognize and address weaknesses.
External Strategic Analysis
Once internal analysis is complete, you can move on to external review. Many external factors can hinder growth.
To conduct external analysis, you need to understand how the market works and what consumers demand. Measure customer satisfaction with your product and your competitors’ offerings to get a clearer picture of how the market functions.
Strategic Analysis Process
Every strategic analysis process consists of five steps:
Step 1: Define Goals
Establish both long-term and short-term goals before doing anything else. They should be detailed, realistic, and aligned with your company’s purpose.
Step 2: Gather and Analyze Information
Collect as much relevant data as possible that aligns with your business needs.
Step 3: Build a Strategy
Strategy development is a step-by-step procedure:
- Review data gathered during the analysis phase.
- Identify current business resources that can help achieve goals.
- Identify areas where external support is needed.
- If the overall strategy doesn’t work, prepare a backup plan.
Step 4: Implement the Strategy
Once a structured approach is ready, it’s time to act. This is the execution phase. If the main strategy fails, adopt a completely new approach.
All team members must clearly understand their roles and responsibilities to give the strategy a chance to succeed.
Step 5: Evaluate and Control
This involves measuring performance, consistently reviewing internal and external issues, and applying corrective actions. Evaluation covers both external and internal strategic planning.
Strategic Analysis Tools
SWOT Analysis
SWOT (Strengths, Weaknesses, Opportunities, and Threats) is a methodology used to assess a company’s competitive position and guide strategic planning.
It evaluates internal and external factors as well as the present and future potential of your organization. Let’s explore each element:
- Strengths
What does your organization do well? What’s your unique selling proposition? Advantages may include strong brand reputation, a loyal client base, a unique product, or excellent customer service.
Develop a method to use these strengths in marketing and attracting investors. - Weaknesses
These are factors that hinder full operational efficiency—debt, weak market presence, or limited budget. - Opportunities
External trends or factors that could give your company a competitive edge. - Threats
External risks that could harm your business or prevent goal achievement.
PEST Analysis
This tool identifies Political, Economic, Social, and Technological factors in the external environment that might impact the company.
Porter’s Five Forces Analysis
Developed by Michael Porter in 1979, this model helps determine business strategy through five forces:
- Competitive Rivalry
Assess how many competitors exist, who they are, how their products compare, and how much they spend on marketing. - Supplier Power
Evaluate the impact of suppliers on your operations. Explore alternative suppliers to mitigate risks in case partnerships end. - Buyer Power
Understand how much influence buyers have over product pricing in your niche. - Threat of Substitutes
Analyze the likelihood of customers switching to alternative products or services. - Threat of New Entrants
Assess how easy it is for new players to enter your market and how to mitigate this.
Scenario Planning
As the name suggests, scenario planning helps envision possible outcomes if the company follows different strategic paths.
You can integrate scenario planning into strategy development and combine it with SWOT and PEST analyses to forecast the effects of strategic decisions.
Value Chain Analysis
This method helps a company identify primary and support activities that add value to its product or service. The aim is to analyze these activities to either reduce costs or enhance differentiation.
Conclusion
This concludes the overview of strategic analysis and its methods. Every company should have a strategic plan tailored to help it grow, remain competitive, and achieve its objectives.
