PRELIM REVIEWER: STRATEGIC BUSINESS ANALYSIS organization and are to be changed or affected

in some way.
Strategic Business Analysis - While external factors include positive
 This involves outcome focused thinking, (opportunities) or negative (threats) factors that
simultaneously understanding business exist outside of the subject you are evaluating
context, business challenges, and the and cannot necessarily be changed or affected
complexities of the internal and external by you or your organization in a way.
environment to frame the scope of the - Performing SWOT analysis will help you create a
transformation, articulate the business strong and long-term vision through strategic
need/outcome, and shape the agenda for planning for your organization.
transformation. - Through SWOT analysis companies will be able
 This requires a focus on all aspects of the to prevent a number of problems that can arise
organization. It leverages business analysis, if there is no systematic analysis.
change leadership, and program and
project management. Strategic business Strength- characteristics of a business which give it
analysis focuses on “what and why”, not advantages over its competitors
the “how” of solution implementation. Weaknesses- characteristics of a business which make it
disadvantageous relative to competitors.
Opportunities- elements in a company’s external
BENEFITS & PURPOSES environment that allow it to formulate and implement
1. Competitive advantage- gives businesses on strategies to increase profitability.
advantage over competitors meaning, your Threats- elements in the external environment that
company will always be aware of the changing could endanger the integrity and profitability of the
market. business.
2. Achieving goals- helps keep goals achievable by
using a clear and dynamic process for PESTLE ANALYSIS
formulating steps and implementation. - Describes a framework of macro-environmental
3. Sustainable growth- this has been shown to factors used in the environmental scanning
lead to more efficient organizational component of external strategic analysis.
performance, which leads to manageable - The model has been extended by adding ethics
growth. and demographic factors. It is a part of the
4. Cohesive organization- the necessitates external analysis when conducting a strategic
communication and goal implementation analysis or doing market research and gives an
company-wide. overview of the different macroenvironmental
5. Increased managerial awareness- looking factors that the organization has to take into
toward the company’s future. If managers do consideration.
this consistently, they will be more aware of By using PESTLE analysis one can:
industry trends and challenges. By - Find out the key issues beyond the
implementing strategic planning and thinking, organization’s control, like changes in political
they will be better prepared to face future scenario changing rules that can be
challenges. implemented at any point in time.
- Identify the impact of each issue.
TYPES OF STRATEGIC ANALYSIS - See how important these issues are to
1. SWOT Analysis organization .
2. PESTLE Analysis - Rate the likelihood of its occurrence.
3. Porter’s Five Forces - Briefly consider the implications if the issue did
occur.
SWOT ANAYSIS
- This analysis allows you to investigate internal
and external factors. International factors  Political
include positive (strengths) or negative  Economic
(weaknesses) factors that exist within your  Social
 Technological
  Legal - Weather
 Environmental - Climate
- Environmental policies
- Climate change
Political - Pressure from NGO’s
- These political determine the extent to which a Environmental
government may influence the economy or a - These factors include all those that influence or
certain industry. are determined by the surrounding
- Government policy environment. This aspect of the PESTLE is
- Political stability crucial for certain industries particularly.
- Corruption - Discrimination laws
- Tax policy - Antitrust laws
- Trade restrictions - Employment laws
Economic - Consumer protection laws
- These factors are determinants of an economy’s - Copyright and patent laws
performance that directly impacts a company - Health and society laws
and have resonating long terms
- Economic growth FORTER’S FIVE FORCES ANALYSIS
- Exchange rate - This was first appeared in a Harvard Business
- Interest rate School professor Michael E. Porter published in
- Inflation rates Harvard Business Review in 1979.
- Disposable income - This model brings together a large number of
- Unemployment different factors in a simple model to analyze
Social the basic competitive landscape of an industry.
- These factors scrutinize the social environment - Is a strategic tool designed to give a global
of the market, and gauge determinants like overview, rather than a detailed business
cultural trends, demographic, population analysis technique. It helps review the strengths
analytics, etc. of a market position, based on five key forces.
- Population growth rate Thus, five forces works best when looking at an
- Age distribution entire market sector, rather than your own
- Career attitudes business and few competitors.
- Safety emphasis
- Health consciousness 1. Bargaining power of suppliers
- Lifestyle attitudes 2. Bargaining power of buyers
- Cultural barriers. 3. Threats of new entrants
Technological 4. Threats of substitutes
- These pertains to innovations in technology that 5. Competition of existing competitors in the
may affect the operations of the industry and industries.
the market favorably or unfavorably.
- This refers to automation, research and
development awareness that a market Bargaining power of suppliers- when the input elements
possesses. provided by the supplier constitute a large proportion of
- Technology incentives the total cost of the product to the buyer, the potential
- Level of innovation bargaining power of the supplier is greatly increased.
- Automation  The supply-side industry is for some
- R&D activities companies that have a relatively stable
- Technological awareness market position and are plagued by fierce
Legal competition in the market.
- These factors have both external and internal  Supplier-side products have certain
sides, these are certain laws that affect the characteristics, buyer are difficult to
business environment in a certain country while convert, or conversion costs are too high.
there are certain policies that companies
maintain for themselves.
  The supplier facilitates forward integration, Technical obstacles- includes patended technology,
or otherwise impose an additional cost to proprietary technology, and learning curve.
the production process.
Control of sales channels- the company’s self-built
Bargaining power of buyers- they mainly influence the distribution channels, and good partnerships, and
profitability of existing companies in the industry reputation, brands, etc.
through their ability to lower prices and requirements
to provide higher product or service quality. Political and law- national policies protect certain
 The total number of buyers is small, and industries, such as financial industry.
each buyer purchases a large amount and
accounts for a large percentage of the Threats of substitute- two companies in different
seller’s sales. industries may generate competing products because of
 The sellers industry consists of a large the product they produce are alternative products.
number of relatively small companies.  Increased selling price and profitability of
 The purchaser purchases a standardized existing products will be limited due to the
product, and its economically feasible to existence of alternatives that can be easily
purchase the product from multiple accepted by users.
vendors at the same time.  Due to the intrusion of alternatives,
 Suppliers facilitate forward integration, existing companies must improve product
while buyers find it difficult to combine or quality or reduce costs.
integrate backward.  They intensity of competition from
produces of alternative products is
Threats of new entrants- new entrants, while bringing affected by the cost of the conversion of
new production capacity and new resources to the product buyers.
industry, hope to win a place in the market that has
already been divided by existing companies. This may Competition among existing competitors in the industry
cause competition with existing companies in raw - Enteprises in most industries are closely linked
materials and market shares, resulting in the existing to each other’s interests. As part of their overall
industry. The level of corporate profits is reduced, even strategy, their goal is to make own companies
threatening survival. more competitive than their competitors. There
are conflicts and confrontatins, often
manifested in prices, advertising, product
The severity of competitive entry threats depends on introduction, and after-sales services.
two factors:
1. The size of the barriers to entry into raw areas THREE LEVELS OF STRATEGY
2. The expected response of existing businesses to
entrants. Strategy- is at the foundation of every decision that has
to every decision that has to be made within an
Economic of scale- with the expansion of business scale, organization. If the strategy is poorly chosen and
the industrial characteristics of the decline in unit formulated by top management, it has a major impacts
production costs, the higher the industry’s lowest on the effectiveness of employees in pretty much every
effective scale, the greater the barriers to entry. department within the organization.

Differentiation degree- differentiation refers to the 1. Corporate strategy

unique targeting of products and services to customer 2. Business strategy
needs. The higher the difference, the greater the barrier 3. Functional strategy
to entry.

Conversion cost- the conversion cost of a customer or Corporate-Level Strategy

buyer refers to the extra cost that the customer must - The first level of strategy in the business world
pay to change the supplier. is corporate strategy, which sits at the top of
the head.
 - Major investment and divestment decisions are - How functional goals will be met and
made at this level by top management. Merges monitored.
and acquision is also an important part of
corporate strategy.
- This is necessary when the company operates in
two or more business areas through different
business units with different business-level
strategies that need to be aligned to form an
internally consistent corporate-level strategy.
- It outlines general overall strategy
- Defines markets it will operate in
- Plans how these markets will be entered.

Business-Level Strategy
- It is best to think of this level of strategy as a
“step-down” from the corporate strategy level.
- In other words, the strategies that you outline
at this level are slightly more specific and they
usually relate to the smaller businesses within
the larger organization.
- This is what most people are familiar with and is
about the question “How do we compete, how
do we gain (a sustainable) competive advantage
over rivals?
- It aimed at gaining a competitive advantages by
offering true value for customers while being a
unique and hard-to-imitate player within the
competitive landscape.
- It uses corporate stragegy to:
 Define specific tactics for each market
 Relates how business unit will deliver
these planned tactics.

Functional-level strategy
- is considered with the question “how do we
support the business-level strategy within
functional departments, such as marketing, HR,
production and R&D. these strategies are often
aimed at improving the effectiveness of a
company’s operations within departments.
- The most important of all, as without a daily
plan you are going to be stuck in neutral while
your competition continuous to drive forward.
As you work on putting together your functional
strategies, remember to keep in mind your
higher level goals so that everything is
coordinated and working toward the same end.
- Day to day actions need to deliver corporate
and business strategies
- Relationships needed between business units,
departments and teams