Module 1 Fundamental Concepts of Strategic Business Analysis
Session 1 Components of Business Analysis
OBJECTIVES:
1. Define strategy and strategic business analysis.
2. Familiarize with the concepts and components of Strategic Business Analysis.
3. Understand the importance of Vision & Mission in developing business strategies.
4. Learn the strategic analysis process and levels of strategy.
LET’S REFLECT:
https://medium.com/@rudenkofff/business-analysis-how-a-ba-brings-value-for-your-project-fbf64ab0d7ee
https://www.thesmallbusinesssite.co.za/2018/09/10/strategic-thinking-small-business/
Basing from the given drawing/ illustration, write a brief idea about what is the
purpose of strategic and business analysis.
LET’S STUDY:
Business principally comprises of products and services which offer to the ultimate
customer. Success or Failure purely depends an individual talent, performance, willing
to learn new things, adaptability and compete at critical constraints and solve it as
simple. Self- employee always sells the products ad services, it is the first priority and
produce goods and services at low cost; it is the second priority and third priority is
strategic analysis of business.
1. Definition of Strategy and Strategic Business Analysis
1.1 Strategy
Strategy can be defined in a number of different ways. We should be aware that
every definition is likely to be engrained within the different outlooks adopted by its
authors. For this reason, a definition of strategy, which is accepted by everyone, is not
as straightforward as might first appear. As individuals we all formulate strategies to help
us achieve certain goals or objectives.
A strategy is a plan of actions taken by managers to achieve the company’s
overall goal and other subsidiary goals. It often 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 that lead to business success.
According to Peter Drucker, a strategy is a pattern of activities that seek to
achieve the objectives of the organization and adapt its scope, resources and
operations to environmental changes in the long term. Drucker recognized that any
company’s strategy had to incorporate the answers to four questions.
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What opportunities it wants to pursue and what risks it is willing and able to
accept.
The scope and structure of its strategy, including the right balance among such
aspect’s specialization, diversification, and integration.
Acceptable trade- offs between time and money and between in- house
execution versus using a merger, acquisition, or joint venture or some external
means to reach its objectives and attain its goals.
The organizational structure appropriate to its economic realities, the
opportunities, and it performance expectations.
A recognition that the strategy had to be based on these four questions led to a
methodology which Drucker adopted which was more inferred than spelled out as
a “by the numbers” process.
Elements of Strategy:
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A strategy consist of organized activities.
The purpose of these activities (strategy) is to achieve an objective.
Strategy is long- term.
The strategic choices that an enterprise makes are strongly influenced by the
environment in which the enterprise exists.
The environment is continually changing, which means that strategies cannot be
rigid and unchanging.
Strategies involve an enterprise in doing different things with different resources
over time, as it is forced to adapt to changes in its environment.
1.2 Strategic Business Analysis
Strategic Business Analysis are those actions and decisions made by
management while trying to understand the impact of strategic events like:
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Introduction or development of new product line
Setting up a factory in a new location
Employing key staff
Selecting organizational structure
Investing in new technology
Managing risks
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Complying with relevant laws and regulations
Implementing changes, etc.
Strategic Business Analysis refers to the process of researching an organization and
its working environment to formulate a strategy. The definition of strategic analysis may
differ from an academic or business perspective, but the process involves several
common factors:
1. Identifying and evaluating data relevant to the company’s strategy
2. Defining the internal and external environments to be analyzed
3. Using several analytic methods such as Porter’s five forces analysis, SWOT
analysis, and value chain analysis
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:
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Vision – What it wants to achieve in the future (5-10 years)
Mission Statement – What business a company is in and how it 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.
Strategic Analysis Process
The following infographic demonstrates the 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.
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.
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.
4. Recommend and implement the most viable strategy. Lastly, after assessing strategies
and proposing alternatives, we reach a recommendation. After assessing all possible
strategic alternatives, we choose to implement the most viable and quantitatively
profitable strategy.
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 allencompassing of a company.
2. Business-level. At the median level of strategy are business-level decisions. The
business-level strategy focuses on market position 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. These strategies are focused on particular functions and groups.
Characteristics of Strategic Business Analysis:
a. Long term in nature. For any business analysis to be strategic in nature, it must
have a long term view.
b. Focus on external events and activities. Senior managers spend about 60% of
their time gathering and interpreting information from outside source which will
significantly improve decision making process.
c. Place more emphasis on qualitative matters. In as much as financial indicators
play vital role in shaping the fortune a business entity, attention should be given
to those qualitative factors that an establishment cannot afford to ignore, else
business failure will imminent.
Issues to Consider for Strategic Analyses:
Strategy evolves over a period of time and it considers major issues that will be
relevant to strategic analysis outlined. Different forces which are driven and
constrain in the company and that must be balanced in strategic decisions will be
made by strategic managers.
It is to be considering the possible implications of routine decisions in a company
environment. It is the results of a series of small decisions are taken over an extended
period of time in an organization.
An organization manager effort to increase the growth momentum which
happens apart from the changing strategy.
A. Balance
The process of strategy formulation is often explained as one of the matching the
internal core potential of the company with the utilization of opportunities.
Strategic analysis is to involve a workable balance between diversity and
conflicting considerations in organizing. A strategic manager in an organization has
responsibilities to make decisions that are balancing the opportunities, influences,
threats, and constraints.
B. Risk
Maintaining balance is very important to an organization. The complexities and
intermingling of variables in the environment which reduces the strategic balances
in the organization. It will be a major risk to strategic managers. Risk is uncertain and
the business is of no exception.
Strategic analysis is to identify the potential imbalances or risks and assess their
consequences.
Let’s Think About It:
A business strategy is intended to help you reach your business objectives. With a
vision for the direction of the business, you can create clear instructions in the business
strategy for what needs to be done and who is responsible for completing each step.
As future business strategist you need to have a well-defined understanding of
what it is and what it represents.
For your activity, conduct a search on the Internet and find/ identify five (5)
companies’ vision and mission statements, and evaluate/ analyze the documents.
Write your understanding about each vision & mission statement.
(Format: Font size is 12, font style is Century Gothic)
References
Dr. Hiriyappa .B. (n.d.). Strategic Analysis of Business.
Hathaway, A. &. (2012, August 7). Strategic Business Analysis is Done at the Business
Planning Level. Retrieved from BA Experts:
https://businessanalysisexperts.com/strategic-business-analysis/
Strategic Analysis. (n.d.). Retrieved from CFI:
https://corporatefinanceinstitute.com/resources/knowledge/strategy/strategicanalysis/
The ultimate guide to strategic analysis. (2021, May 7). Retrieved from Smart Insights :
https://www.smartinsights.com/marketplace-analysis/swot-analysis/ultimateguide-to-strategic-analysis/
What is Strategic Analysis? (n.d.). Retrieved from Question Pro:
https://www.questionpro.com/blog/strategic-analysis/