What is Strategic Analysis?

Strategic analysis refers to the process of conducting research

on a company and its operating 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
What is Strategy?
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.
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:
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.
1. Perform an environmental analysis of current strategies:-
Starting from the beginning, a company needs to complete an
environmental analysis of its current strategies. Internal
environment considerations include issues such as operational
inefficiencies, employee morale, and constraints from
financial issues. External environment considerations include
political trends, economic shifts, and changes in consumer
tastes.
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. Strategists must ask themselves
questions such as: Is our strategy failing or succeeding? Will
we meet our stated goals? Does our strategy align with our
vision, mission, and values?
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.
Strategists may propose ways to keep costs low and
operations leaner. Potential strategic alternatives include
changes in capital structure, changes in supply chain
management, or any other alternative to a business process.
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. After producing a
recommendation, we iteratively repeat the entire process.
Strategies must be implemented, assessed, and re-assessed.
They must change because business environments are not
static.
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 all-
encompassing 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.
Strategic Choice:-
Strategic choice refers to the decision which determines the
future strategy of a firm. It addresses the question “Where
shall we go”.
A SWOT analysis is conducted to examine the strengths and
weaknesses of the firm and opportunities that can be
exploited are also determined.
Based on the analysis the firm selects a path among various
other alternatives that will successfully achieve the firm`s
objectives. Strategic choice is, therefore, the decision to
select from among the grand strategies considered, the
strategy which will best meet the enterprise objectives. The
decision involves the following four steps – focusing on a few
alternatives, considering the selection factors, evaluating the
alternatives
against these criteria and making the actual choice.
Factors Affecting Strategic Choice :-
Environmental constraints
Internal organizations and management power
relationships
Values and preferences
Management`s attitude towards risk
Impact of past strategy
Time constraints- time pressure, frame horizon, the timing
of the decision
Information constraints
Competitors reaction
Process of Strategic choice:-
1. Focusing on alternatives – The aim of this step is to narrow
down the choice to a manageable number of feasible
strategies. It can be done by
visualizing a future state and working backward from it.
Managers generally use GAP analysis for this purpose. By
reverting to a business definition it helps the managers to
think in a structured manner along any one or more
dimensions of the business.
At the Corporate level, strategic alternatives are -Expansion,
Stability, Retrenchment, Combination
At the Business level, strategic alternatives are – Cost
leadership, Differentiation or Focused business strategy.
2. Analyzing the strategic alternatives- The alternatives have
to be subjected to a thorough analysis that relies on certain
factors known as:
selection factors:-These selection factors determine the
criteria on the basis of which the evaluation will take place.
They are:

Objective factors :-These are based on analytical techniques

and are hard facts used to facilitate strategic choice.

Subjective factors :- These are based on one`s personal

judgment, collective or descriptive factors.
3. Evaluation of strategies – Each factor is evaluated for its
capability to help the organization to achieve its objectives.
This step involves bringing together analysis carried out on
the basis of subjective and objective factors. Successive
iterative steps of analyzing different alternatives lie at the
heart of such evaluation.

4. Making a strategic choice– A strategic choice must lead to

a clear assessment of alternatives which is the most suitable
alternative under the
existing conditions. A blueprint has to be made that will
describe the strategies and conditions under which it
operates. Contingency strategies
must be also devised
Business-level strategy :-Business-level strategy refers to
companies' deliberate and purposeful actions to achieve
competitive advantage within their specific market segments.
It involves making critical choices about how to allocate
resources, differentiate offerings, and create unique value for
customers. By effectively implementing a well-defined
business-level strategy, companies can carve out a distinct
position in the market, attract customers, and drive
sustainable growth.

This article will analyze various aspects of business-level

strategies and explore how they enable companies to thrive in
today's highly competitive environment.
Strategy Levels:-
To effectively discuss business-level strategies, it is important
to understand the broader context in which they operate.
Organizational strategies can be categorized into three distinct
levels:
1. Corporate-level strategy
2. Business-level strategy
3. Functional-level strategy

These levels address varying aspects of the organization's

operations and each one is vital in accomplishing overall
objectives. Let's take a closer look at these levels.
The Importance of Business-Level Strategy:-
The significance of business strategies lies in their ability to
provide a clear roadmap for organizations to achieve
competitive advantage in their specific markets. Here is why a
properly defined strategy is important and what benefits it
brings to companies.
1. Differentiation and Unique Value Proposition
A crucial aspect of business-level strategy is differentiation. It
enables companies to distinguish themselves from
competitors by offering unique value to customers.
Companies can tailor their products, services, and
experiences to stand out in the marketplace by understanding
customer needs and preferences.
2. Effective Resource Allocation:-
Business-level strategies play a vital role in guiding resource
distribution decisions. They ensure that resources are
effectively managed, optimizing their utilization and
maximizing returns. Whether it is investing in research and
development, marketing campaigns, or operational
improvements, a focused business-level strategy helps
allocate resources to initiatives that align with the company's
competitive positioning.
3. Building Sustainable Competitive Advantage:-
Business-level strategies contribute to long-term sustainability
by creating barriers to entry for potential competitors. By
building a strong market position, reputation, and customer
loyalty, companies can withstand competitive pressures and
maintain profitability over time. This sustainability is achieved
through a combination of differentiation, customer-centric
strategies, and continuous innovation.
Business-Level Strategy Types
Porter's generic strategies outline the methods through which
companies strive to position themselves within their selected
market domain. The first high-level decision to make is how
you want to attract customers:
with a lower price of your product
with your product being different from the competition
If you choose to offer your product at a lower price than your
competition, then you have chosen a cost leadership strategy.
In case you decide to make products different from those the
competition offers, then we are talking about a differentiation
strategy.
Developing your business strategy further, you should choose
a competitive scope and whether you want to focus on:

•Broad market - offering your products to a diverse market

•Narrow market - offering your products to a niche market

Combining these two approaches can further refine the

business strategy into a focused cost leadership strategy and a
focused differentiation strategy.
Cost Leadership Strategy
This business strategy relies on offering products at a low cost thus
becoming the least expensive producer or provider of goods and
services in a particular industry. To achieve this, companies need to cut
costs across the entire value chain, so they can offer their products or
services at lower prices than rivals. By being cost leaders, businesses can
draw in customers who are looking for affordable products, expand their
market share, and possibly increase their profits.
Benefits:-
•Increased Market Share
•Higher Profit Margins
Risks:-
•Price Erosion
•Imitation by Competitors
•Technological Changes
Example
McDonald's utilizes this strategy in the fast-food industry, optimizing its
processes, streamlining operations, and delivering standardized
Differentiation Strategy
Differentiation strategy focuses on offering products or services
perceived as superior or distinct from competitors. Companies pursuing
differentiation aim to provide unique value, features, quality, innovation,
customer service, or brand image that set them apart in the eyes of
customers.
Benefits:-
•Customer Loyalty
•Premium Pricing
•Barriers to Competitors' Entry
Risks:-
•Imitation by Competitors
•Cost Structure
Example:-
Apple differentiates itself in the technology industry through its focus on
sleek design, intuitive user interfaces, seamless integration of hardware
and software, and premium quality, creating a distinct and loyal
customer base.
Focused Cost Leadership Strategy:-
Companies using this business strategy gain an advantage in cost within
a particular and specific market segment. They concentrate on serving a
specific group of customers with affordable products. This allows them
to optimize their operations, processes, and products to create cost-
efficient solutions that meet the specific needs of their customers.
Benefits:-
•Targeted Customer Base
•Cost Efficiency
Risks:-
•Limited Market Size
•Market Changes
Example:-
Southwest Airlines (with a focus on regional routes) adopts this strategy
by offering low-cost flights on regional routes. By operating with a
streamlined business model, high aircraft utilization, and efficient
operations, Southwest Airlines provides cost-effective air travel options
to customers in specific markets.
Focused Differentiation Strategy:-
A focused differentiation strategy concentrates on delivering unique
and specialized products or services to a specific market segment.
Companies try to differentiate themselves in the targeted niche
through superior quality, innovation, customization, customer
experience, or unique features.
Benefits:-
•Enhanced Customer Loyalty
•Premium Pricing
Risks:-
•Narrow Market Size
•Evolving Customer Preferences
Example:-
Tesla (with a focus on electric vehicles) has differentiated itself in the
automotive industry by offering high-performance electric vehicles
with advanced technology, sustainability, and sleek design. By targeting
customers seeking environmentally friendly and cutting-edge
transportation solutions, Tesla has established a leadership position in
Integrated Strategy:-
Also known as a hybrid strategy or integrated cost
leadership/differentiation strategy, it combines elements of both cost
leadership and differentiation strategies. Companies implementing this
strategy simultaneously deliver superior value to customers through
unique and differentiated offerings while maintaining cost efficiency and
operational effectiveness.
Benefits:-
•Flexibility and Adaptability
•Increased Customer Satisfaction
Risks:-
•Complexity
•Trade-offs
Example:-
Toyota has adopted an integrated strategy by offering a range of high-
quality vehicles with advanced technology, reliability, and innovative
features, while also focusing on cost efficiency in its manufacturing
processes.
How to Choose and Implement the Right Business-Level Strategy
Choosing the right business-level strategy is crucial for a company's
success. Here is how to do it.
1.Conduct Market Analysis:-
Assess the competitive landscape, customer needs, and market trends
to identify potential opportunities.

2.Evaluate Internal Capabilities:-

Examine the company's internal resources, capabilities, and core
competencies to determine its strengths and areas where it can excel.

3.Define Company Goals:-

Clearly define the company's objectives, both short-term and long-term,
to guide the strategy selection process.

4.Assess Risk Tolerance and Financial Constraints:-

Evaluate the company's risk appetite and financial limitations to
understand the feasibility of different strategies.
5.Analyze Strategy Options:-
Consider various business-level strategies, such as cost leadership,
differentiation, focused strategies, or an integrated approach. Assess the
benefits, risks, and requirements of each strategy.

6.Align Strategy with Strengths:-

Select a strategy that leverages the company's strengths and resources,
enabling it to create a competitive advantage in the market.

7.Consider Customer Alignment:-

Evaluate how well the chosen strategy aligns with the needs,
preferences, and expectations of the target customer segment.

8.Analyse Long-Term Sustainability:-

Assess the potential for the long-term sustainability of the chosen
strategy, considering factors such as market dynamics, changing
customer preferences, and technological advancements.
Regularly Review Strategy
Continuously review and adapt the strategy to ensure it remains
relevant and effective in response to evolving market conditions.
Execute and Monitor
Develop a detailed plan for implementing the chosen strategy, and
closely monitor its progress and impact on key performance indicators.
 MULTI BUSINESS STRATEGY:-
The process by which corporate executives routinely “remap” their
businesses to match rapidly changing market opportunities – adding,
splitting, transferring, exiting, or combining chunks of businesses.
Many companies adopt one or more modern business strategies to help
them achieve their organization's unique goals. Depending on the type,
a business strategy may help you retain customers, grow your market
share, reduce operational costs, make internal processes more efficient
or increase profits. Before you decide on a company strategy, it's
important to understand the various benefits and approaches of these
different strategy types. In this article, we discuss why knowing about
different business strategies matters, explore 12 different types and
offer advice on how you can effectively manage a business's strategies.
Why is understanding strategy types important?
Understanding the various business strategy types can
provide your organization with a range of benefits, including:

•Unify staff members and departments: If you know about

different types of strategies, then you can more effectively
pick a strategy that helps your company's various employees
and departments. This may help foster more collaborative and
positive relationships between staff members.

•Strive for shared goals: Having a unified company strategy

can help different departments design goals specific to their
field that better connect to the business' overall plans.
•Make processes more efficient: Most business strategies aim
to reduce organizational waste, such as by lowering operating
costs or processing times.

•Continually optimize: An important part of most business

strategies is continuously monitoring your organizational data
in relation to these strategies. This can help you determine
ways to further improve your strategy and its related
procedures.

•Increase profit: An effective business strategy can help your

organization reduce operational costs while selling goods or
services at a higher volume. Both activities may lead to an
increase in revenue.
12 strategy types
Following are 12 different strategy types that can help a
business reach its unique goals:
1. Structuralist:-
Organizations that use a structuralists strategy begin by
researching current market trends and economic conditions
related to their business. These organizations then determine
procedures and tactics that can help distinguish their
company within the industry. For example, if a company
notices that its top competitors offer primarily high-end
goods, that company might strive to lower its own production
costs and offer its products at a lower price point.
2. Differentiation
Businesses that pursue a differentiation strategy offer
products or services with special elements. Many companies
with a differentiation strategy charge more for their services
or goods than businesses with similar offerings. An
organization with a differentiation strategy can succeed with
these higher price points typically because they specialize in
products or services with unique features, customizable
options or of exceptional quality.
3. Price-skimming:-
Companies launching a brand new product or service sometimes use a
price-skimming strategy. When using this strategy, businesses charge a
high price for their services or goods when they're first released and
then lower those prices over time. A price-skimming strategy can help
companies receive more revenue from markets where their products or
services are in high demand. Price-skimming may also assist
organizations in quickly paying for the product's or service's initial
production or marketing costs.

4. Acquisition:-
Acquisition refers to when a business purchases another company. A
company might also take part in acquisition if they purchase the rights
of only a few of another organization's product lines or services. An
acquisition strategy can help an organization broaden its consumer base
or market reach with reduced starting costs.
5. Growth:-
Businesses adopt a growth strategy when they want to expand the
scope of their company. An organization might benefit from using a
growth strategy for many reasons, such as if they want to offer more
products or services, increase their market share, add new operations or
departments or build new worksite or retail premises. The exact goals
and processes of your growth strategy depend on factors like your
industry and business mission.

6. Focus:-
Companies use a focus strategy when they want to target a niche
market. A niche market might be a very specific type of consumers, such
as vegetarians or pet owners, or a certain geographical location. Focus
strategies include processes and tactics for creating, marketing and
selling products or services to this niche market.
7. Cross-selling:-
Cross-selling refers to the process of encouraging your existing
customers to purchase more products or services. Some businesses may
focus on cross-selling additional products or services that enhance the
products or services your customers have already purchased. For
example, a company that sells household appliances might offer its own
insurance or warranty policies for an extra charge. Other companies
might instead focus on cross-selling bundles of products or services to
customers at a discounted rate, such as a furniture company that cross-
sells desk chairs with sofas.
8. Operational
Operational strategies emphasize optimizing your company's internal
protocols and procedures. Businesses that adopt an operational strategy
may strive to accomplish one or more of the following:

•Acquiring new technology systems or optimizing the speed, reliability

or security of existing systems

•Making processes or workflows more efficient

•Getting new resources, such as personnel, relationships with vendors,

industrial equipment or office space

•Reallocating existing resources

•Planning or redesigning work space facilities and layouts

•Optimizing production or manufacturing procedures and machinery

9. Transformational:-
A transformational strategy involves businesses making radical changes
to their company. A transformational business strategy may drastically
affect a company's operations, industry, business plans or long-term
goals. For example, some companies may adopt a transformational
strategy if they want to replace their entire existing technological
network. As another example, a business might want to use a
transformational strategy to help them succeed in a new industry.

10. Sustainability:-
A sustainability strategy can help businesses find ways to make their
products, services or internal processes more environmentally friendly.
Some businesses, for example, may want to reduce their carbon
emissions produced during manufacturing procedures. Other companies
might strive to develop products created from materials that use
renewable sources.
11. Diversification:-
Diversification refers to a business strategy where companies increase
their number of potentially profitable activities. A business may want to
pursue a diversification strategy to reduce its vulnerability in the market
or expand its product or service offerings. For example, a technology
company that manufactures mobile devices may adopt a diversification
strategy to develop laptops and desktop computers.

12. Retention:-
Retention strategies focus on helping you keep your current customers.
Retaining existing customers can be a more cost-efficient tactic than
acquiring new ones. A business using a retention strategy may want to
increase customer loyalty or encourage customers to purchase upgrades
or new offerings.
How to manage strategies
Here's some advice on how to handle your business strategies:
1. Identify goals:-
Determine the company's unique goals, needs and strengths. As you
identify these aspects of the business, it may become more apparent to
you which aspects could benefit from improvement. A successful
business strategy aligns with both an organization's goals and strengths
while helping to optimize processes or overcome existing challenges.
2. Evaluate strategies:-
Consider the various strategy types in relation to a company's
objectives, strengths and areas of improvement. Each business strategy
can offer different potential advantages to an organization, but some
strategies may better suit its current needs or goals.
You might even consider combining more than one strategy and
customizing these combined techniques for a business. For example,
some companies may want to combine an operational strategy with a
sustainability one to make their internal processes both more cost-
efficient and environmentally friendly.
3. Figure out actionable steps:-
Once you've determined which type of strategy might most benefit an
organization, figure out what actions you can implement that relate to
the strategy. This may involve collaborating with company supervisors to
determine the actions or steps that each team or department can take.
For example, if you're adopting a growth strategy, your marketing
department might devise techniques and campaigns related to
identifying new prospective customers. A product development
department, meanwhile, may focus on creating a new product or adding
specialized features that appeal to a wider audience base.
4. Monitor continuously
Keep track of your business data that relates to your strategy. The exact
data that you keep track of can vary based on factors such as your
strategy type and business goals, but may include key performance
indicators (KPIs) or metrics such as:
Cost of goods sold
Sales by region
Average purchase value
Employee turnover rate
Cost of acquiring new customers
Number of customer support requests
Return of investment (ROI)
Customer retention
Net profit
Continually monitoring your business data can help you evaluate the
effectiveness of your current business strategy. If you're not reaching
your target KPIs or goals, you can then find ways to optimize your
existing business strategy or its actionable steps.
STRATEGY EVALUATION :-
strategy evaluation is the process by which the management assesses
how well a chosen strategy has been implemented and how successful
or otherwise the strategy is. To simply put, strategy evaluation entails
reviewing and appraising the strategy implementation process and
measuring organizational performance.

In the instance, the implementation of the strategy is not taking place as

planned, say due to the limitations in the strategy that are blocking the
achievement of organizational goals, necessary corrective actions should
be identified and applied.

At the end of the evaluation, you’ll have gathered insight to either

reformulate the strategy or to plan and develop new ones.
Evaluating the strategy helps improve it, distinguish between what
works and what doesn’t, and contribute to the ongoing development
and adaptation of the strategy to the changing conditions and
complexities in the industry.
Strategy evaluation operates at two levels; strategic and operational. At
the strategic level, the focus is given to the consistency of the strategy
with the environment, and at the operational level, how well the
organization is pursuing the strategy is assessed.

Through the process of strategy evaluation, strategists can make sure

that the,
•Premises made during strategy formulation are correct
•Strategy is guiding the organization towards accomplishing its
objectives.
•Managers are doing what they are supposed to be doing to effectively
implement the strategy.
•The organization is performing well, schedules are being followed, and
resources are being properly utilized .
•Whether there’s a need to reformulate or change the strategy.