strategy research & analysis

What is Strategic Analysis? 8 Best Strategic Analysis Tools + Examples

A huge part of developing a strategic plan is a reliable, in-depth strategic analysis. An organization is separated into internal and external environments. Both components should be scrutinized to identify factors influencing organizations and guiding decision-making.

In this article, we'll cover:

What Is Strategic Analysis?

Types of strategic analysis, benefits of strategic analysis for strategy formulation, strategic analysis example - walmart, how to do a strategic analysis: key components, strategic analysis tools, how to choose the right strategic analysis tool, the next step: from analysis to action with cascade 🚀.

⚠️ Remember, insights aren't enough! Understanding your internal & external environment is vital, but true strategy comes from action. Cascade Strategy Execution Platform bridges the gap between analysis and execution. Talk to our strategy experts to turn your strategic analysis into a winning roadmap with clear goals and measurable results.

Strategic analysis is the process of researching and analyzing an organization along with the business environment in which it operates to formulate an effective strategy. This process of strategy analysis usually includes defining the internal and external environments, evaluating identified data, and utilizing strategic analysis tools.

By conducting strategic analysis, companies can gain valuable insights into what's working well and what areas need improvement. These valuable insights become key inputs for the strategic planning process , helping businesses make well-informed decisions to thrive and grow.

When it comes to strategic analysis, businesses employ different approaches to gain insights into their inner workings and the external factors influencing their operations.

Let's explore two key types of strategic analysis:

Internal strategic analysis

The focus of internal strategic analysis is on diving deep into the organization's core. It involves a careful examination of the company's strengths, weaknesses, resources, and competencies. By conducting a thorough assessment of these aspects, businesses can pinpoint areas of competitive advantage, identify potential bottlenecks, and uncover opportunities for improvement.

This introspective analysis acts as a mirror , reflecting the organization's current standing, and provides valuable insights to shape the path that will ultimately lead to achieving its mission statement.

External strategic analysis

On the other hand, external strategic analysis zooms out to consider the broader business environment. This entails conducting market analysis, trend research, and understanding customer behaviors, regulatory changes, technological advancements, and competitive forces. By understanding these external dynamics, organizations can anticipate potential threats and uncover opportunities that can significantly impact their strategic decision-making.

The external strategic analysis acts as a window , offering a view of the ever-changing business landscape.

The analysis phase sets “the stage” for your strategy formulation.

The strategic analysis informs the activities you undertake in strategic formulation and allows you to make informed decisions. This phase not only sets the stage for the development of effective business planning but also plays a crucial role in accurately framing the challenges to be addressed.

These are some benefits of strategic analysis for strategy formulation:

• Holistic View : Gain a comprehensive understanding of internal capabilities, the external landscape, and potential opportunities and threats.
• Accurate Challenge Framing : Identify and define core challenges accurately, shaping the strategy development process. ‍
• Proactive Adaptation : Anticipate potential bottlenecks and areas for improvement, fostering proactive adaptability. ‍
• Leveraging Strengths : Develop strategies that maximize organizational strengths for a competitive advantage.

At the very least, the right framing can improve your understanding of your competitors and, at its best, revolutionize an industry. For example, everybody thought that the early success of Walmart was due to Sam Walton breaking the conventional wisdom:

“A full-line discount store needs a population base of at least 100,000.”

But that’s not true.

Sam Walton didn’t break that rule, he redefined the idea of the “store,” replacing it with that of a “network of stores.” That led to reframing conventional wisdom, developing a coherent strategy, and revolutionizing an industry.

📚 Check out our #StrategyStudy: How Walmart Became The Retailer Of The People

Strategy is not a linear process.

Strategy is an iterative process where strategic planning and execution interact with each other constantly.

First, you plan your strategy, and then you implement it and constantly monitor it. Tracking the progress of your initiatives and KPIs (key performance indicators) allows you to identify what's working and what needs to change. This feedback loop guides you to reassess and readjust your strategic plan before proceeding to implementation again. This iterative approach ensures adaptability and enhances the strategy's effectiveness in achieving your goals.

Strategic planning includes the strategic analysis process.

The content of your strategic analysis varies, depending on the strategy level at which you're completing the strategic analysis.

For example, a team involved in undertaking a strategic analysis for a corporation with multiple businesses will focus on different things compared to a team within a department of an organization.

But no matter the team or organization's nature, whether it's a supply chain company aiming to enhance its operations or a marketing team at a retail company fine-tuning its marketing strategy, conducting a strategic analysis built on key components establishes a strong foundation for well-informed and effective decision-making.

The key components of strategic analysis are:

Define the strategy level for the analysis

• Complete an internal analysis
• Complete an external analysis

Unify perspectives & communicate insights

Strategy comes in different levels depending on where you are in an organization and your organization's size.

You may be creating a strategy to guide the direction of an entire organization with multiple businesses, or you may be creating a strategy for your marketing team. As such, the process will differ for each level as there are different objectives and needs.

The three strategy levels are:

• Corporate Strategy
• Business Strategy
• Functional Strategy

👉🏻If you're not sure which strategy level you're completing your strategy analysis for, read this article explaining each of the strategy levels .

Conduct an internal analysis

As we mentioned earlier, an internal analysis looks inwards at the organization and assesses the elements that make up the internal environment. Performing an internal analysis allows you to identify the strengths and weaknesses of your organization.

Let's take a look at the steps involved in completing an internal analysis:

1. Assessment of tools to use

First, you need to decide what tool or framework you will use to conduct the analysis.

You can use many tools to assist you during an internal analysis. We delve into that a bit later in the article, but to give you an idea, for now, Gap Analysis , Strategy Evaluation , McKinsey 7S Model , and VRIO are all great analysis techniques that can be used to gain a clear picture of your internal environment.

2. Research and collect information

Now it’s time to move into research . Once you've selected the tool (or tools) you will use, you will start researching and collecting data.

The framework you use should give you some structure around what information and data you should look at and how to draw conclusions.

3. Analyze information

The third step is to process the collected information. After the data research and collection stage, you'll need to start analyzing the data and information you've gathered.

How will the data and information you've gathered have an impact on your business or a potential impact on your business? Looking at different scenarios will help you pull out possible impacts.

4. Communicate key findings

The final step of an internal analysis is sharing your conclusions . What is the value of your analysis’ conclusions if nobody knows about them?

You should be communicating your findings to the rest of the team involved in the analysis and go even further. Share relevant information with the rest of your people to demonstrate that you trust them and offer context to your decisions.

Once the internal analysis is complete , the organization should have a clear idea of where they're excelling, where they're doing OK, and where current deficits and gaps lie.

The analysis provides your leadership team with valuable insights to capitalize on strengths and opportunities effectively. It also empowers them to devise strategies that address potential threats and counteract identified weaknesses.

Beginning strategy formulation after this analysis will ensure your strategic plan has been crafted to take advantage of strengths and opportunities and offset or improve weaknesses & threats. This way, the strategic management process remains focused on the identified priorities, enabling a well-informed and proactive approach to achieving your organizational goals.

You can then be confident that you're funneling your resources, time, and focus effectively and efficiently.

Conduct an external analysis

As we stated before, the other type of strategic analysis is the external analysis which looks at an organization's environment and how those environmental factors currently impact or could impact the organization.

A key difference between the external and the internal factors lies in the organization's level of control.

Internally, the organization wields complete control and can actively influence these factors. On the other hand, external components lie beyond the organization's direct control, and the focus is on scanning and reacting to the environment rather than influencing it.

External factors of the organization include the industry the organization competes in, the political and legal landscape the organization operates in, and the communities they operate in.

The steps for conducting an external analysis are much the same as an internal analysis:

• Assessment of tools to use
• Research and collect information
• Analyze information
• Communicate key findings

You'll want to use a tool such as SWOT analysis , PESTLE analysis , or Porter's Five Forces to help you add some structure to your analysis. We’ll dive into the tools in more detail further down this article!

Chances are, you didn't tackle the entire analysis alone. Different team members likely took responsibility for specific parts, such as the internal gap analysis or external environmental scan. Each member contributed valuable insights, forming a mosaic of information.

To ensure a comprehensive understanding, gather feedback from all team members involved. Collate all the data and share the complete picture with relevant stakeholders across your organization.

Much like strategy, this information is useless if not shared with everyone.

Remember : There is no such thing as overcommunication.

If you have to keep only one rule of communication, it’s that one. Acting on the insights and discoveries distilled from the analysis is what gives them value. Communicating those findings with your employees and all relevant (internal and external) stakeholders enables acting on them.

Setting up a central location where everyone can access the data should be your first step, but it shouldn't end there. Organize a meeting to go through all the key findings and ensure everyone is on the same page regarding the organization's environment.

There are a number of strategic analysis tools at your disposal. We'll show you 8 of the best strategic analysis tools out there.

The 8 best strategic analysis tools:

Gap analysis, vrio analysis, four corners analysis, value chain analysis.

• SWOT Analysis

Strategy Evaluation

Porter's five forces, pestel analysis.

Note: Analytical tools rely on historical data and prior situations to infer future assumptions. With this in mind, caution should always be used when making assumptions based on your strategic analysis findings.

The Gap Analysis is a great internal analysis tool that helps you identify the gaps in your organization, impeding your progress towards your objectives and vision.

The analysis gives you a process for comparing your organization's current state to its desired future state to draw out the current gaps, which you can then create a series of actions that will bridge the identified gap.

The gap analysis approach to strategic planning is one of the best ways to start thinking about your goals in a structured and meaningful way and focuses on improving a specific process.

👉 Grab your free Gap Analysis template to streamline the process!

The VRIO Analysis is an internal analysis tool for evaluating your resources.

It identifies organizational resources that may potentially create sustainable competitive advantages for the organization. This analysis framework gives you a process for categorizing the resources in your organization based on whether they hold certain traits: Valuable, Rare, Inimitable, and Organized.

The framework then encourages you to begin thinking about moving those resources to the “next step'' to ultimately develop those resources into competitive advantages.

👉 Grab your free VRIO strategy template that will help you to develop and execute a strategy based on your VRIO analysis.

The Four Corners Analysis framework is another internal analysis tool that focuses on your organization's core competencies.

However, what differentiates this tool from the others is its long-term focus. To clarify, most of the other tools evaluate the current state of an entity, but the Four Corners Analysis assesses the company’s future strategy, which is more precise because it makes the corporation one step ahead of its competitors.

By using the Four Corners, you will know your competitors’ motivation and their current strategies powered by their capabilities. This analysis will aid you in formulating the company’s trend or predictive course of action.

Similar to VRIO, the Value Chain Analysis is a great tool to identify and help establish a competitive advantage for your organization.

The Value Chain framework achieves this by examining the range of activities in the business to understand the value each brings to the final product or service.

The concept of this strategy tool is that each activity should directly or indirectly add value to the final product or service. If you are operating efficiently, you should be able to charge more than the total cost of adding that value.

A SWOT analysis is a simple yet ridiculously effective way of conducting a strategic analysis.

It covers both the internal and external perspectives of a business.

When using SWOT, one thing to keep in mind is the importance of using specific and verifiable statements. Otherwise, you won’t be able to use that information to inform strategic decisions.

👉 Grab your free SWOT Analysis template to streamline the process!

Generally, every company will have a previous strategy that needs to be taken into consideration during a strategic analysis.

Unless you're a brand new start-up, there will be some form of strategy in the company, whether explicit or implicit. This is where a strategy evaluation comes into play.

The previous strategy shouldn't be disregarded or abandoned, even if you feel like it wasn't the right direction or course of action. Analyzing why a certain direction or course of action was decided upon will inform your choice of direction.

A Strategic Evaluation looks into the strategy previously or currently implemented throughout the organization and identifies what went well, what didn't go so well, what should not have been there, and what could be improved upon.

👉To learn more about this analysis technique, read our detailed guide on how to conduct a comprehensive Strategy Evaluation .

Complementing an internal analysis should always be an analysis of the external environment, and Porter's Five Forces is a great tool to help you achieve this.

Porter's Five Forces framework performs an external scan and helps you get a picture of the current market your organization is playing in by answering questions such as:

• Why does my industry look the way it does today?
• What forces beyond competition shape my industry?
• How can I find a position among my competitors that ensures profitability?
• What strategies can I implement to make this position challenging for them to replicate?

With the answer to the above questions, you'll be able to start drafting a strategy to ensure your organization can find a profitable position in the industry.

👉 Grab your free Porter’s 5 Forces template to implement this framework!

We might sound repetitive, but external analysis tools are critical to your strategic analysis.

The environment your organization operates in will heavily impact your organization's success. PESTEL analysis is one of the best external analysis tools you can use due to its broad nature.

The name PESTEL is an acronym for the elements that make up the framework:

• Technological
• Environmental

Basically, the premise of the analysis is to scan each of the elements above to understand the current status and how they can potentially impact your industry and, thus, your organization.

PESTEL gives you extra focus on certain elements that may have a wide-ranging impact, and a birds-eye view of the macro-environmental factors.

There are as many ways to do strategy as there are organizations. So not every tool is appropriate for every organization.

These 8 tools are our top picks for giving you a helping hand through your strategic analysis. They're by no means the whole spectrum. There are many other frameworks and tools out there that could be useful and provide value to your process.

Choose the tools that fit best with your approach to doing strategy. Don’t limit yourself to one tool if it doesn’t make sense, don’t be afraid to combine them, mix and match! And, be faithful to each framework but always as long as it fits your organization’s needs.

Completing the strategic analysis phase is a crucial milestone, but it's only the beginning of a successful journey. Now comes the vital task of formulating a plan and ensuring its effective execution. This is where Cascade comes into play, offering a powerful solution to drive your strategy forward.

Cascade is your ultimate partner in strategy execution. With its user-friendly interface and robust features, it empowers you to translate the strategic insights distilled from your strategic analysis into actionable plans.

Some key features include:

• Planner : Seamlessly build out your objectives, initiatives, and key performance indicators (KPIs) while aligning them with the organization's goals. Break down the complexity from high-level initiative to executable outcomes. ‍
• Alignment Map : Visualize how different organizational plans work together and how your corporate strategy breaks down into operational and functional plans.

• ‍ Metrics & Measures : Connect your business data directly to your core initiatives in Cascade for clear data-driven alignment. ‍

• Integrations : Consolidate your business systems underneath a unified roof. Import context in real-time by leveraging Cascade’s native, third-party connector (Zapier/PA), and custom integrations. ‍
• Dashboards & Reports : Stay informed about your strategy's performance at every stage with Cascade's real-time tracking and progress monitoring, and share it with your stakeholders, suppliers, and contractors.

Experience the power of Cascade today! Sign up today for a free forever plan or book a guided 1:1 tour with one of our Cascade in-house strategy execution experts.

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Strategic Analysis

A process of performing research on an organization's external and internal environment to formulate a strategy.

Mr. Arora is an experienced private equity investment professional, with experience working across multiple markets. Rohan has a focus in particular on consumer and business services transactions and operational growth. Rohan has also worked at Evercore, where he also spent time in private equity advisory.

Rohan holds a BA (Hons., Scholar) in Economics and Management from Oxford University.

• What Is Strategic Analysis?

Strategic Analysis Process

• Types Of Strategic Analysis
• Components Of Strategic Analysis

Strategic Analysis Advantages and Disadvantages

• Four Corners Analysis In Strategic Analysis

What Is Strategic Analysis?

Strategic analysis is a process of performing research on the business's external and internal environment in which an organization operates to formulate a strategy.

Strategic analysis is required to develop strategic plans for decision-making and the smooth operation of an organization. The organization’s objectives or goals can be met with the help of strategic planning .

When a company has specific goals and a vision it wants to realize, strategic analysis becomes crucial. Successful organizations have undergone extensive strategic planning over the years, resulting in well-known successes.

Strategic planning is a long-term task involving continuous and systematic planning and resource investment.

Organizations must conduct it to determine what areas need improvement and which areas are already performing well. It is critical to consider how improvements can be implemented for an organization to function.

Organizations must conduct strategic analysis to understand their competitors and define a strategy that will help them become unbeatable players in that market. 

One of the most important functions of strategic planning is predicting future events and developing alternative strategies if a particular plan does not work out as anticipated. 

Key Takeaways

• Strategic analysis is the process of examining an organization's internal capabilities, resources, and competencies, as well as its external environment, market dynamics, and industry trends
• Strategic analysis provides the foundation for strategy formulation by identifying the organization's strategic position, competitive advantages, and areas for improvement.
• Strategic analysis helps identify risks and uncertainties that may impact the organization's performance and viability by assessing internal and external factors.
• Strategic analysis facilitates informed decision-making by providing management with valuable insights into the organization's internal capabilities, market dynamics, and competitive landscape.

As seen in the accompanying infographic, the strategy analysis process involves several essential steps:

1. Perform an Environmental Analysis of Existing strategies:

• To start, a business must carefully evaluate its current plans in light of both its internal and external settings.
• Internally, this entails assessing operational effectiveness, worker satisfaction, and financial limitations.
• External elements such as political fads, economic changes, and changing customer tastes must be considered.

2. Assess the Effectiveness of Current Strategies:

• The primary objective of strategic analysis is to evaluate the efficacy of current strategies in the context of the present business environment.
• Is our plan succeeding in reaching its goals?
• Can we reach the objectives we've set?
• Do our goals, purpose, and values line up with our overall strategy?

3. Develop Action Plans:

• When the evaluation shows that present strategies are failing or unknown, it is time to move on to the planning step.
• The firm then develops strategic alternatives at this time.
• This might entail optimizing cost structures, simplifying operations, or suggesting changes to corporate procedures.

4. Recommend and Implement the Best Strategy:

• Following a thorough review and proposal of alternatives, a recommendation is given.
• For execution, the most practicable and quantitatively favorable option is chosen.
• It is important to note that this procedure is iterative.
• Recognizing that the business environment is dynamic and ever-changing, strategies must be implemented, regularly examined, and updated as appropriate.

types of strategic analysis

There is no single strategy for evaluating an organization's work environment, but numerous methods can help acquire the essential data to support strategic development.

SWOT and PESTLE are two frequently used analysis tools in this area. Each provides unique views useful for strategy creation. While SWOT follows a more internal strategic analysis process, PESTLE is more oriented toward external strategic analysis.

In the section below, we will look at both approaches.

Internal Strategic Analysis

As the name implies, internal strategic analysis comprises an introspective assessment within the organization to discover its strengths and flaws and improve its market image. This form of analysis is largely concerned with determining the organization's ability to fulfill its goals.

SWOT analysis, which stands for Strengths, Weaknesses, Opportunities, and Threats, is a well-known and widely utilized approach for internal strategic analysis. SWOT analysis entails the following steps:

• Strengths: These are the in-house qualities that fuel an organization's steady expansion. It is vital to protect and capitalize on these areas during any changes.
• Weaknesses: Together with strengths, weaknesses are areas of the organization that need to be fixed and present a chance for competitive advantage .
• Threats: Predictable outside variables that might influence the organization but could be reduced with good risk control.
• Opportunities: Finding potential sources of external development that the firm may use to advance.

External Strategic Analysis

Examining external elements that may be able to obstruct an organization's growth is crucial when an internal analysis is finished and the internal environment has been strengthened.

A thorough knowledge of market dynamics and the effects of different marketing tactics, goods, and services on customers is essential for reliable external analysis.

PESTLE analysis, which includes Political, Economic, Social, Legal, and Environmental issues, is a widely used approach for external analysis. The PESTLE analysis helps with:

• Recognizing outside influences that are beyond your control, such as political or environmental developments.
• Figuring out how each aspect could affect the expansion of the organization.
• Understanding possible difficulties the organization may face.
• Determining the possibility that these difficulties may arise.

components of strategic analysis

Strategic Analysis includes the following components:

Understand the strategy level for which the analysis is being performed.

Carry out an internal analysis.

Carry out an External Analysis .

Share Significant Findings. 

Strategy level

The strategy has different levels depending on where you are in an organization and the size of your organization.

You could be developing a strategy for an entire organization with multiple businesses, or you could be developing a strategy for your marketing team. 

As a result, because each level has different objectives and needs, the process will differ. The three levels of strategy are as follows:

Corporate strategy :  Defines the overall direction of the organization as well as high-level ideas for how to get there. These plans are typically developed by a select strategy group, including the CEO and top management.

Business strategy:  The  strategy hierarchy's  second tier. The business strategy, which is part of the corporate strategy, is a means of achieving the goals of a specific business unit within the organization.

Functional strategy:  This is the level of an organization's operations.

Employee decisions are frequently referred to as tactical decisions at the functional level of strategy. They are concerned with how an organization's various functions contribute to the other strategy levels.

Marketing, finance, manufacturing, human resources, and other functions may be included.

Internal Strategy

An internal growth strategy refers to the growth within the organization by using internal resources. 

Internal growth strategies focus on developing new products, increasing efficiency, hiring the right people, better marketing, etc. An internal growth strategy can take place either through expansion,  diversification , or modernization.

The steps for completing an internal analysis are:

The first step  is deciding on the tool or framework you will use to conduct the analysis.

The second step  is you start researching and collecting data.

The third step  is following the data research and collection stage, and you must begin analyzing the data and information you have gathered.

The fourth step  is sharing your conclusions.

After the internal analysis is completed, the organization should clearly understand where it excels, where it is doing well, and where its current deficits and gaps are.

The analysis will provide management with the information they need to capitalize on their strengths and opportunities. It also enables management to devise strategies to counteract potential threats and compensate for identified weaknesses.

Starting the strategy formulation process, This analysis will ensure that your strategic plan has been developed to capitalize on strengths and opportunities while mitigating or improving weaknesses and threats.

External Strategy

An external analysis examines an organization's environment and how those factors influence or could influence the organization.

The organization has little to no control over external components, which is a key distinction between external and internal factors.

On the one hand, the organization has complete control and influence over internal factors. On the other hand, they simply scan and react to their surroundings, rarely influencing them.

External factors of the organization include the industry in which it competes, the political and legal landscape in which it operates and the rules it must follow, and the communities in which it operates.

Types of the external strategy analysis:

First  is integration because it involves bringing two or more businesses together to some extent. Mergers, acquisitions, and takeovers are all examples of company amalgamations that necessitate a permanent change in ownership.

Second , external growth can take the form of  Joint Ventures  (JV) and  Strategic Alliances  (SA), which are more equivalent to business partnerships with other firms and do not necessitate a permanent change of ownership.

Strategy Analysis is a continual and iterative process that does not end with the execution of plans. After analyzing the elements impacting the company and developing plans, the cycle continues with execution, assessment, and future planning.

This cyclical strategy provides adaptation and constant development as dynamics change.

Strategic Analysis entails various merits that contribute to a firm's growth and expansion, whereas it also comprises certain demerits that might hinder a company's performance.

Some of the Advantages are: 

• Internal Strength Identification: It aids in the identification of an organization's internal strengths that actively contribute to its growth.
• Consistent Growth: Emphasizes the need to safeguard and preserve internal qualities in order to achieve long-term success.
• Holistic Strength and Weakness Assessment: This assessment identifies internal and external strengths and weaknesses that affect the growth of the organization.
• Competitive advantage : Allows for the discovery of internal factors that drive company improvements, resulting in a competitive edge over competitors.

Some of the Disadvantages  are: 

• Choice Overload: It creates a large number of innovative ideas but does not provide clear direction on which one to choose, potentially resulting in choice overload.
• Time-consuming: The process might take a long time, taking resources away from other vital breakthroughs like product or service development.

Four Corners Analysis in Strategic Analysis

Michael Porter's  Four Corners Analysis is a model that can help company strategists assess a competitor's intent and objectives and the strengths they are using to achieve them. 

It is a useful technique for evaluating competitors, generating insights about likely competitor strategy changes, and determining competitor reactions to environmental changes and industry shifts. 

The FCA assists analysts in answering four key questions by examining a competitor's current strategy, future goals, market assumptions, and core capabilities.

Financial goals and external constraints.

Corporate culture and business principles.

Organizational structure.

Leadership team background.

b) Current strategy

How business creates value.

Where the business is choosing to invest.

Relationships and networks the business has developed.

c) Capabilities

Marketing skills.

Ability to service channels.

Skills and training of the workforce.

Patents  and  copyrights .

Financial strength.

Leadership qualities of CEO

d) Management assumptions

Company's perceptions of its strengths and weaknesses.

Cultural traits.

Organizational value.

Perceived industry forces.

Belief about competitor's goals.

Strategic analysis is an indispensable tool for organizations aiming to thrive in a dynamic business environment. Understanding internal and external factors provides a clear picture of a company's current standing and potential pathways for growth. 

While tools like SWOT and PESTLE offer insights into internal capabilities and external threats, other models, such as Michael Porter's Four Corners Analysis, provide information about a competitor's intent and strategies. 

A well-executed strategic analysis identifies strengths and opportunities and equips organizations with the foresight to adapt to potential threats and weaknesses. 

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Complete Guide to Strategic Analysis | Meaning, Steps, Types & Examples

What is strategic analysis.

The strategic analysis can be defined as a process for the research of the business environment of an organization within which the enterprise performs. Strategic analysis is required to formulate decision making strategic planning and smooth operation of the organization. With proper strategic planning, the goals or aims of the company can be fulfilled. Due to the constant endeavour to be successful in this competitive world, business organizations periodically conduct strategic analysis to determine which segments need improvement and which areas are doing exceptionally well and also try to keep a track of external factors. For an enterprise to function effectively, it is vital to know the ways through which the positive changes that need to be implemented, how to better manage the value chain and to identify its strengths and weaknesses.

If an organization has a particular set of goals and missions, then the strategic analysis is very much significant for them and it serves as an analytical tool. All the successful organizations that have big achievements, have years of strategic analysis and planning that are implemented at various stages of operations. Strategic analysis is a long term resource investment involving systematic and continuous planning. During the conduct of the strategic analysis, organizations should also perform competitor analysis and consider external factors. This will help them to remain as an unbeatable player in the market and get competitive advantage. One of the most important aspects of strategic analysis is the prediction of the future events and deduction of substitute strategies if plan A does not work out as anticipated. Such strategic decisions for a part of internal analysis and provide any organisation with a clear picture.

In other words, Strategic Analysis is a process of researching an organization and its working environment to formulate an operating strategy. The strategic analysis takes advantage of the path that is less difficult to achieve the goal. The process includes some common factors which are:

• Evaluation and identification of the data that will be relevant to the business strategy
• Defining the external as well as internal environments of a company
• Implementation of some famous analytic methods like SWOT Analysis , SOAR Analysis , and PESTLE analysis .

Strategy formulation and analysis is critical for success of any organization. The organizations can get real strategic analyses that are designed to allow managers to make more informed decisions for efficient management of their business operations. It helps the stakeholder in strengthening and regaining competitive position while providing strategic alternatives.

Applications of Strategic Analysis

Market Sizing Analysis – Market sizing is critical for any company that wishes to either enter a market, launch a new product or service. Your team needs to specialize in analysing market size and market dynamics. A multi approach market sizing methodology helps to accurately analyze a market. Our experience of suggests that small markets are less likely to be able to support a high volume of goods and large markets could bring in more competition.

Product Portfolio Analysis – Every product firms realizes that a product has to go through a series of changes throughout its life cycle from introductory to maturity and eventually decline. This is where Product Portfolio Analysis becomes very critical for an organization to assess where their products stands in terms of competition, consumer perception, market share, SWOT analysis, future consumer behaviour etc to identify star products that can sustain growth over a longer period of time.

Forecasting Analysis – Organizations realize that foreseeing future is important to measure current businesses growth over a period of time and it is also critical for assessing potential business opportunities and re-evaluate previous strategy. A business requires team which specializes in building forecasting models using forecasting techniques like Time Series Analysis, Simple Moving Averages, Weighted Moving Averages, Regression, Econometrics and Drivers & Inhibitors model. We can apply these forecasting techniques for assessing Consumer Spending Behaviour Analysis (Credit card firm) Market Size Forecasting and Product Price Fluctuation etc for clients. If appropriate data can be collected and identified, then it can provide you with better performance measurements and perform in depth analysis.

Brand Perception – branding and consumer perception of a brand has became key to success of any product/service in any market. Teams need to understand, place, perceive and analyze brand from the point of view of consumers. Conduct brand perception studies for media houses and educational institutes.

Market Assessment – In today’s cut-throat environment, where complete market assessment and product positioning are the most important factors for a company to differentiate its products from those of competitors. Companies should identify market segments, industry trends, consumer preferences and position their products accordingly.

Business Partner Analysis – With companies going global or trying to cut down on costs, it is becoming increasingly important for the sales & marketing, talent acquisition, sourcing, supply chain & logistics division of companies to identify the right business partners and potential vendors. Various firms have built a strong partner identification analysis framework that studies complete dynamics of potential business partner. They study the partnering strategies of top players, best practices, potential partner’s impact and revenue generation capabilities.

Market Player Analysis – With the help of the business research division, create detailed profiles of key players/competitors that may include management profiles, product information, market share, key infrastructure initiatives, partnerships, M&A activities, research focus, etc.

Competitive Analysis – In today’s competitive business environment, it is becoming mandatory for companies to know what their competitors are doing, what are the research activities being undertaken, what the image the company has, etc. A business prepared to deal with external threat, strategic issues, internal weaknesses and derive benefit of external opportunities, excels in business world.

Also Read: Strategy Mapping

What are the steps to Perform a Strategic Analysis?

The strategic analysis can be performed in an enterprise in the following different ways.

• Analysis of the environment of the current strategies: From the very first, an organization needs to finish up the environmental analysis of the ongoing strategies. Operational affectivities and inefficiencies, financial constraints, the morale of the employee, etc are included in the internal environment analysis. Political trends, changes in consumer opinions and economic shifts are some of the factors to consider while analyzing the external environment.
• Determination of the efficiencies of the Current Strategies: The main motive of strategic analysis is to determine the efficiency of the existing strategies that an organization is following in its prevailing environment of the business. The strategic analysis helps to find all the answers for difficult questions like Is these strategies good or failing? Can the company meet the set goals? Or does the strategy the organization is going to implement will align with the values, vision, and mission of the company?
• Formulating the Plans: If the answer to any of the above questions is still unknown or unsure, then the company undergoes a planning stage where the strategic analysts propose different alternatives. Lower production costs, leaner operations, changes in the structure of the capital and management of the supply chains are some of the potential alternatives that an organization can choose from.
• Recommendation and Implementation of the most Feasible plan: Lastly, after all the assessment of the available strategies, the analysts recommend the most quantitatively profitable and viable strategy to the enterprise. After the recommendation and implementation of the plan, it should be repeatedly re-assessed.

Related Articles: What is PEST Analysis? , What is STEEP Analysis?

Advantages of Strategic Analysis

There are a few of the benefits of strategic advantages which are discussed as follows:

• The strategic analysis offers clarity of the positive attributes within an organization that are totally under control.
• It assists in identifying both external as well as internal factors that help a business to take a lead over its competitors
• It gives a clear idea about all the components that add competitive advantage and value to the business.

Disadvantages of Strategic Analysis

However, along with numerous benefits, strategic analysis has some weaknesses also. They are as follows.

• Strategic analysis detects all the factors or creates different ideas, but does not clarify which aspect needs more attention or which idea is the best.
• Sometimes a large amount of time is spent on problem-solving, which left us with no or little time for the discovery of new products affecting the level of the service of a business.

Different Types of Strategic Analysis

Two types of Strategic Analysis are embraced by different organizations for future planning. They are:

A. Internal Strategic Analysis

Through internal strategic analysis, organizations look inside the enterprise for the negative and positive elements and launch a resource set that is used to enhance the image of the company in the market. The internal strategic analysis begins with the evaluation of the potentiality, growth, value chain analysis and performance of an organization. The analysis of the strength of the company should be market and client-oriented. The strength will only make any sense if the company can understand the needs of the clients and manages the entire process well. The weaknesses and limitations of the organization should also be known to the strategic analysts that a company is facing or will face in the future. To reduce the impact of weaknesses, corrective measure should be taken in timely manner.

One of the most popular techniques for internal strategic analysis is the SWOT (Strength, Weakness, Opportunities, and threats) analysis . Performing an analysis through the SWOT Matrix will create a foundation of strong long term vision through strategic planning of an enterprise. SWOT-analysis helps to understand external factor and make strategic choice. It helps in adopting a better corporate strategy and one of the critical success factor. A SWOT analysis evaluates the environment in which the organization operates and acts according to the situation. SWOT analysis prevents different problems that can generate if there is no presence of systematic analysis within an organization.

The SWOT Matrix is a strategic planning tool designed to evaluate the Strengths, Weaknesses, Opportunities, and Threats associated with a project. The SWOT framework makes it easier for you to clearly identify your objectives, and then to consider the factors that might help or hinder your progress toward those objectives. This can help you to identify the most important areas to concentrate on for your plan. In order to make sure your SWOT Matrix is complete, you should include all of the factors that might have an effect on your project. For each one of these factors, assign a rating of high, medium, or low.

B. External Strategic Analysis

Once there is a thorough examination of all the negative internal factors through internal strategic analysis, a business needs to know the causes that can be a reason for hindrance to the growth of the company. Knowing how the market of that particular industry functions, the reaction of the customer to the services and products, and measurement of customer satisfaction are some of the methods of external strategic analysis. Like SWOT, PESTLE (Political, Economic, Social, Technological, Legal and Environmental) analysis is one of the most extensively used techniques in the external strategic analysis.

PESTLE is a framework of factors for the macro-environmental scanning components. The model can sometimes include Demographic and ethical factors. PESTLE also gives an overview of the elements that an organization has to overcome through market research and strategic analysis. By the application of the PESTLE analysis, an organization can know:

• The key issues that are beyond the control of an organization like the change of the ruling party in the political scenario that can modify the rules at any point of time
• Identification of the impact of every negative factor
• Rating of the occurrence likelihood
• How important these factors are and how can they affect the growth of the company
• Considering all the consequences on the business, if the issues did happen in the future

There are three steps for the PESTLE analysis which are:

• Identification of the changes in the big picture by the application of mnemonic analysis
• Identification of the threats or opportunities due to the changes
• Inclusion of the strategies to lessen the chances of threats and take full benefits of the opportunities.

During PESTLE analysis, the following questions need to be asked for each of the external elements.

• How is the stability of the government?
• Is the election due in the recent months?
• Who are the contenders for the political positions?
• Are there any changes in the legislation or taxes?
• Is there any probability of any political factors that can cause a big change?

Socio-Cultural

• What is the age profile of the growing population?
• What is the pattern of employment?
• Is there any shift in the generational attitude?
• Can religious and lifestyle choices impact the selling of the product?
• Are there any major international changes in the law?
• Is the consumer protection law changed or is it about to change?
• Is there any specific regulatory law for the industry?
• Is the economy of the country growing, declining or stagnant mode?
• Are the exchange rates of any particular currency volatile?
• Is there any rise or fall in disposable income?
• What is the current employment rate of the country?

Technological

• Is there any introduction of the new technology that the competitors have access to?
• Is any technological change causing the social changes?
• Is there any communication system available?

Environmental

• Can environmental issues impact the products?
• Can waste management and pollution impact the organization?
• Do any global factors need immediate attention?
• Are the employees morally low or down?

Different Levels of Strategic Analysis

There are three different levels of strategic analysis based on scopes. They are:

• Functional Level of Strategic Analysis:  Functional level strategic analysis is the lowest level of decision making. This analysis focuses on the activities within the different segments and aims for the overall improvement of the organization. The plans are meant for particular groups or functions.
• Business level Strategic Analysis:  In the middle is the business level of strategic analysis. This business-level decision mainly focuses on the positions of the market to help the organization to gain a competitive advantage in its field.
• Corporate Level of Strategic Analysis:  This is the highest level of decision making in strategic analysis. Corporate level strategic analysis is based on the entire function of an organization and thus affects the profitability of the company in future times.

Different Types of Strategic Analysis Tools

There are different techniques to determine the strategic analysis of an organization. We have already discussed the SWOT and the PESTLE analysis in the different types of strategic analysis section. Now let us have a sneak peek into the other techniques as well.

Gap Analysis

When starting a strategic analysis process, it would be very wrong to throw away the old strategies in which a lot of people have already invested their effort and time into communicating, formulating and implementing a plan. The missing items in the old strategy should be detected and validated. This process of identification is known as Gap Analysis. It is an analysis of existing strategies to find any gap that needs to be immediately addressed.

To make sure that any item is not left behind, the strategic analysts employ a benchmark to compare to the items of the competitors or to follow a previously tried, established and tested general list. The Gap analysis ensures that the entire strategic activities are covered to offer a good reference throughout the analyzing process. It also helps to determine which analysis technique should be used among the numerous ones.

Porter’s Five Forces

Porter’s Five Forces Analysis is based on microenvironmental factors. These factors are closely related to the company that can affect the capacity to serve the customers to make a profit. The Five Forces are:

• Buyers: Buyers always want to buy more and pay less for a product. The price competition is very high in the mobile industry. Buyers simply want the best smartphone with all the updated features and that too at the lowest price.
• Suppliers: Suppliers want to be paid more and deliver less. They always insist on high price value or for the terms that are more favorable for them. The demand increases in he/she are the only supplier in the vicinity.
• New Entrants: New entrants in the industry often cause tension to different organizations. Most of the time a new company provides all the same services or products but at a much lower cost. This enforces the existing enterprises in the business to expand more money to keep up the old customer base.
• Substitutes: This can be a cause of concern for an organization when someone else comes with a substituting option for the same product or services.
• Existing competitors: Existing competitors are still a big threat to an organization that can reduce profitability in the long run.

Boston Matrix

Boston Matrix is the other name of service and product portfolio. This tool for strategic analysis needs to analyze the product or service of an organization and determine if it is a sick dog, a cash cow, or a flying star. After proper consideration through market share and growth, the review of a particular product or service can be determined by implementing this technique.

How are Strategic Analysis and Market Research related?

Information on various market scenarios and recommended strategies to gain more leads, both of them can be achieved through methodical market research. There are two types of market research according to the nature of the conduct. They are quantitative research and qualitative research . Market research can help a company to know the decree of brand recognition among the customers and plan an advertising campaign accordingly.

Organizations can also know about the reaction of the introduction of a new product via market research and attract the attention of the customers through various innovative ideas. Strategic analysis through market research can include a survey with a questionnaire to know the feedback of the customers. This will help the business to know the factors that need to change and have exponential growth in their revenue.

The strategic analysis gives the owner of an organization a clear view of the business operations, goals, objectives and how to achieve their set targets. All the techniques like SWOT, PESTLE, Gap, Porter’s Five forces and Boston Matrix of strategic analysis assists in measuring the level of failure or success of the plans that are and will be implemented in the organization.

About The Author

Priyanki Baruah

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What is Strategic Analysis?

Content Index

Types of strategic analysis, strategic analysis and market research, strengths of strategic analysis, weaknesses of strategic analysis.

Strategic analysis is a process that involves researching an organization’s business environment analysis within which it operates. Strategic analysis is essential to formulate strategic planning for decision making and smooth working of that organization. With the help of strategic planning, the objective or goals that are set by the organization can be fulfilled.

In a constant strive to improve, organizations must periodically conduct a strategic analysis which will, in turn, help them determine what areas need improvement and areas that are already doing well. For an organization to function efficiently, it is important to think about how positive changes need to be implemented.

Strategic analysis is essential if a company has a goal and a mission for themselves. All leading organization who are well known for their achievements have years of strategic planning being implemented at various stages. Strategic planning is a long-term task involving continuous and systematic planning and resource investment.

The main question that a company should consider when performing a strategic analysis is: How is the market constituted? How are the active clients in this sector? While conducting strategic analysis, organizations must know their competitors and thus be able to define a strategy that will help them an unbeatable player in that market. One of the most important functions of strategic planning is to predict future events and deduce alternative strategies if a certain plan doesn’t work out as expected.

LEARN ABOUT: Effective Customer Success Plan

Internal strategic analysis:  As the name suggests, through this analysis organizations look inwards or within the organization and identify the positive and negative points, and establish the set of resources that can be used to improve the company’s image within the market. Internal analysis starts from evaluating the performance of the organization. This includes evaluating the potential of an organization and its capacity to grow.

The analysis of the strengths of the company should be oriented to the market, focusing on the client . The strengths only make sense when they help the company to fulfill client’s needs. When doing an internal strategic analysis one should also know the weaknesses and limitations that a company faces existentially or in the future.

SWOT analysis is one of the most reputed techniques for internal strategic analysis. There is no better way to benefit from a strategically performed analysis than to use it to detect the strengths, opportunities, weaknesses, and threats that your project may suffer.

Performing SWOT analysis will help you create a strong and long term vision through strategic planning for your organization. The important thing is to constantly evaluate the environment in which the company operates, and act accordingly. It is essential for an organization to take into account the SWOT principle in order to be able to plan efficiently. Through a thorough SWOT analysis companies will be able to prevent a number of problems that can arise if there is no systematic analysis .

Let us further break down these attributes and understand how an organization can conduct a complete strategic analysis to be able to plan and perform better with each passing year.

• Strengths of a company: There are several attributes within the company that are positive, that you can control in order to obtain better results, they are your strengths , which makes you stand out from others. Surely there are certain resources or strategies that have led to your organization’s process year on year. Knowing these resources or strategies are also considered as strengths. Knowing this type of information is very important because these are the elements that give you an advantage over your competition.
• Business weakness: It is practically impossible for an organization or a company to have only strengths and not have weaknesses. Therefore, there are certain characteristics of an organization that they need to be improved in order to be able to perform better and compete in the market. These are called business weaknesses. Most of the factors are foreseeable and an organization needs to identify them well in advance and approach the problems with a corrective measure.
• Threats to an organization: There are going to negative factors that will affect the growth of the organization and these factors can be analyzed too. These factors need to detected and a risk management strategy needs to be put in place so that threats like stronger brand value of the competitors, better relationship of competitors with retailers etc. don’t have an adverse effect on the company’s growth. Also, threats like multiple players in the market with the same products, downturn in economy, better advertising of the same product by competitors are some threats that have to be dealt with carefully so that competitors don’t take advantage of the situation.
• Opportunities for the company: Detect the opportunities you have to grow. Knowing the path organizations must follow is a great step towards success. Take advantage of all those external factors that are positive for the organization. Identify all the opportunities and take advantage of them.

Learn more: Trend analysis as a strategic analysis technique  & Trend Analysis

External strategic analysis:  Once the organization has successfully completed its internal analysis, the organization needs to know about external factors that can be a hindrance in their growth. To do so, they need to know how the market functions and how consumers react or behave to certain products or services. Measuring customer satisfaction is a common external analysis method. PESTEL analysis is one of the most widely used external analysis techniques. The process one is most likely to adopt when using a PESTLE technique is relatively a simple one.

PESTLE analysis (Political, Economic, Social, Legal and Environmental) describes a framework of macro-environmental factors used in the environmental scanning component of external strategic analysis. The model has been extended by adding Ethics and Demographic factors. It is a part of the external analysis when conducting a strategic analysis or doing market research and gives an overview of the different macroenvironmental factors that the organization has to take into consideration. By using PESTLE analysis one can:

• Find out the key issues beyond the organization’s control, like changes in political scenario changing rules that can be implemented at any point in time.
• Identify the impact of each issue.
• See how important these issues are to the organization.
• Rate the likelihood of its occurrence.
• Briefly consider the implications if the issue did occur.

Learn more: Demographic Survey Questions Template

Market research can provide you with the necessary information to know the different market scenarios and suggest strategies to achieve more sales. Market research is either qualitative or quantitative in nature of conduct. Market research can provide you with the necessary information to know the different market scenarios and propose strategies to achieve more sales. For example, through market research, an organization can know the degree of recognition that the brand has and plan marketing campaign correctly.

Organizations can also bet effectively the introduction of a new product into the market, or innovate through the new ideas of customers. Ask the right questions to customers and get their feedback . The data provided by the investigation will help you to plan correctly what you have to do, for example, in case your competitors lower their prices, or are there changes in the behavior of your consumers ?

LEARN ABOUT: Data Management Framework

• Strategic analysis allows you to have clarity of the internal positive attributes of the organization that are under control. By knowing these positive attributes an organization can focus on the factors that lead to positive performance and can replicate the strategy wherever applicable.
• It helps identify strength of both internal as well as external resources, such that it leads to an increasing competitive advantage.
• It offers you the internal components that add value or offer a competitive advantage to your business. When you have a reasonable competitive advantage over you competitors half the game plan is clear. The only aspect that would need clarity is what is not going the company’s way.

LEARN ABOUT: 5 Ways Market Research

• Strategic analysis can generate too many ideas, but doesn’t help to choose which one is the best.
• Sometimes too much time is spent on existential problem solving, such that there is little or no time left for innovating new products or making service level changes at the organizational level.

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Utilizing the Various Strategic Analysis Tools

Strategic Analysis is a core step in the Strategic Learning Cycle. Every strategist should have a toolset of analytical models at his or her disposal. However, there are many techniques and tools available for strategy analysis. If you google around the web, you will find a long list of options available. The challenge is to acquire the right techniques and tools for a given business problem. This article give you a brief introduction for you to jumpstart the strategic analysis learning process.

What is Strategic Analysis?

First comes first, what is strategic analysis? Strategic analysis helps you explore your growth options, addresses challenges within your industry, and makes better corporate decisions. Strategy analysis is an approach to facilitating, researching, analyzing, and mapping an organization's abilities to achieve a future envisioned state based on present reality and often with consideration of the organization's processes, technologies, business development and people's capabilities.

You need to look outside of our organization to identify the changes out there and to look forward and think about the opportunities in future. Strategic analysis is not just about understanding changes. It is about turning this into concrete actions through generating options and choices, making decisions and integrating this into your organization's planning process.

Selected Strategic Analysis Tools

Just as having the right tools won't necessarily make you a good mechanic, having the right strategy analysis tools won't automatically make you a good strategist - but they will help you get jobs done more effectively. Here is a list of essential tools for strategy analysis:

SWOT Analysis

SWOT analysis is a technique developed at Stanford in the 1970s, frequently used in strategic planning . SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats and is a structured planning method that evaluates those four elements of an organization, project or business venture. A SWOT analysis is a simple, but powerful, framework for leveraging the organization's strengths, improving weaknesses, minimizing threats, and taking the greatest possible advantage of opportunities.

SWOT analysis is a process where the management team identifies the internal and external factors that will affect the company's future performance. It helps us to identify of what is happening internally and externally, so that you can plan and manage your business in the most effective and efficient manner.

PEST Analysis

The PEST analysis is a useful tool for understanding market growth or decline, and as such the position, potential and direction for a business. PEST is an acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business or organizational unit. Sometimes it's expanded to include legal and environmental factors and called a PESTLE analysis.

A PEST analysis guides us to identify effective strategies for setting priority, allocating resources, planning for time and development roadmap and formulating control mechanisms. With this analysis, you can identify potential opportunities and threats associated with your strategy and figure out ways to take advantage of them and avoid them.

Value Chain Analysis

Value chain analysis is a way to visually analyze a company's business activities to see how the company can create a competitive advantage for itself. Value chain analysis helps a company understands how it adds value to something and subsequently how it can sell its product or service for more than the cost of adding the value, thereby generating a profit margin. In other words, if they are run efficiently the value obtained should exceed the costs of running them i.e. customers should return to the organization and transact freely and willingly.

Originated in the 1980s by Michael Porter , value chain analysis is the conceptual notion of value-added in the form of a value chain. He suggested that an organization is split into 'primary activities' and 'support activities'. The figure below divides activities into primary and support activities as suggested by Porter's Value Chain Analysis model.

Five Forces Analysis

Michael Porter developed the Five Forces Model in 1980. Michael Porter's Five Forces is a powerful competitive analysis tool to determine the principal competitive influence in a market. It is a broadly used model in business that refers to the five important factors that drive a firm's competitive position within an industry. By thinking through how each force affects you, and by identifying the strength and direction of each force, you can quickly assess the strength of the position and your ability to make a sustained profit in the industry. Thus Five Forces analysis helps you stay competitive by:

Four Corners Analysis

The Four Corners Analysis, developed Michael Porter, is a model well designed to help company strategists assess a competitor's intent and objectives, and the strengths it is using to achieve them. It is a useful technique to evaluate competitors and generate insights concerning likely competitor strategy changes and determine competitor reaction to environmental changes and industry shifts. By examining a competitor's current strategy, future goals, assumptions about the market, and core capabilities, the Four Corners Model helps analysts address four core questions:

• Motivation - What drives the competitor? Look for drivers at various levels and dimensions so you can gain insights into future goals.
• Current Strategy - What is the competitor doing and what is the competitor capable of doing?
• Capabilities - What are the strengths and weaknesses of the competitor?
• Management Assumptions - What assumptions are made by the competitor's management team?

Business Motivation Model (BMM)

If an enterprise prescribes a certain approach for its business activity, it ought to be able to say why and what result(s) is the approach meant to achieve. The Business Motivation Model (BMM) is an OMG modeling notation for support of business decisions about how to react to a changing world. An enterprise would use it by acquiring a BMM modeling tool and then creating its own BMM - populating the model with business information specific to the enterprise. There are two broad purposes:

• To capture decisions about reaction to change and the rationale for making them, with the intent of making them shareable, increasing clarity and improving decision-making by learning from experience.
• To reference the outcomes of the decisions to their effect on the operational business (e.g. changes made to business processes and organization responsibilities), providing traceability from influencer to operational change.

The BMM provides support in four areas, as illustrated in the diagram below:

The scope of an enterprise BMM may be the entire enterprise, or an organization unit within it. Higher-level organization units may appear to lower level units as influencing organizations, outside the 'enterprise' boundary, and their directives may have the status of regulations. An enterprise BMM does not have to represent the entire enterprise. A stakeholder can create a BMM of a partial view, referencing only those parts of the business that are relevant to his/her responsibilities and decision-making authority.

Ends define what an enterprise wants to be - the states it desires to be in. There are three levels:

Means define what an enterprise has decided it needs to do to achieve its ends. There are three kinds:

Influencers

An influencer is something that an enterprise decides might affect it. There are two broad types:

Assessments

When an influencer causes a significant change, the enterprise makes an assessment of its impact, identifying risks and potential rewards. There may be multiple assessments, perhaps from different stakeholders.

Strategic Planning In-Action with BMM

The OMG Business Motivation Model (BMM) provides an excellent framework for developing, communicating and managing strategic plans. This framework reflects widely accepted strategic planning techniques, helping you identify strategic drivers and strategic goals in strategic planning.

A Guided Process for Strategic Planning with BMM

The learning curve of performing BMM could be somehow steep for beginner. The interconnection among elements are hard to maintain and visualize and that's why the Guide-Through Process for BMM come about.

BMM Guide-Through features a generic process that assists you in developing a Business Motivation Model. By following the process step-by-step, the core components of strategic planning will be identified. The resulting information will be archived in document form automatically.

Benefits of the BMM Guide-through Process:

• Structure into activities and steps, and embedded with instructions, and samples
• Progress Indicator that shows you where you are and the status of completion for activities and steps
• Query and visualize complex elements structure and information in ArchiMate diagrams
• Perform work and generate deliverable and report automatically
• Automatically transcribe data from one step to another for further actions or perform different forms of analysis to ensure the consistency among elements.

Related Links

• What is SWOT?
• What is PEST Analysis?
• What is Value Chain Analysis?
• What is Five Forces Analysis?
• What is Four Corners Analysis?
• Software tools for creating SWOT and other strategic analysis models

* SWOT, PEST, Value Chain, Five Forces Analysis are powered by Visual Paradigm's web technology. You can create it in both Visual Paradigm Desktop and Visual Paradigm Online .

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Understanding Strategic Analysis: A Key Tool for Effective Decision Making

Table of Contents

Strategic analysis is a crucial component of the strategic management process. It involves the assessment of an organization’s strengths, weaknesses, opportunities, and threats (SWOT analysis) to identify strategic options that align with the organization’s goals and objectives. In this blog, we will explore the concept of strategic analysis and how it can be used to make informed decisions that drive business success.

What is Strategic Analysis?

Strategic analysis is the process of gathering, analyzing, and interpreting information that is relevant to an organization’s internal and external environment. This information is used to identify the organization’s current position and develop strategic options that can help the organization achieve its goals and objectives.

There are several tools and frameworks that can be used for strategic analysis, including PESTLE analysis, Porter’s Five Forces analysis, SWOT analysis, and the value chain analysis. Each of these tools provides a unique perspective on the organization’s internal and external environment and can be used to identify opportunities, threats, and areas of competitive advantage.

The Importance of Strategic Analysis

Strategic analysis is critical for organizations because it helps them to make informed decisions that are aligned with their goals and objectives. By understanding their internal and external environment, organizations can develop strategies that take advantage of their strengths, mitigate their weaknesses, and capitalize on opportunities while minimizing risks.

In addition, strategic analysis provides a basis for monitoring and evaluating the effectiveness of an organization’s strategies. It allows organizations to identify early warning signs of potential problems and take corrective action before they become significant issues.

The Process of Strategic Analysis

The strategic analysis process involves several steps that are typically carried out in the following order:

• Defining the scope of the analysis: The first step in strategic analysis is to define the scope of the analysis. This involves identifying the organization’s goals and objectives and the factors that are relevant to achieving them.
• Gathering data: Once the scope of the analysis has been defined, the next step is to gather relevant data. This can include both internal and external data sources, such as financial reports, customer feedback, market research, and industry trends.
• Analyzing data: After the data has been collected, it is analyzed to identify patterns, trends, and relationships. This helps to identify the organization’s strengths, weaknesses, opportunities, and threats.
• Developing strategic options: Based on the results of the analysis, strategic options are developed that align with the organization’s goals and objectives.
• Selecting a strategy: Once the strategic options have been developed, they are evaluated, and the most appropriate strategy is selected.

Strategic analysis is a critical tool for effective decision making. It helps organizations to understand their internal and external environment and develop strategies that are aligned with their goals and objectives. By following a structured process, organizations can identify their strengths, weaknesses, opportunities, and threats and develop strategies that take advantage of their strengths, mitigate their weaknesses, and capitalize on opportunities. With strategic analysis, organizations can make informed decisions that drive business success.

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Strategic Management

1 Concept of Strategy

• Meaning of Strategy
• Features of Strategy
• Strategic Management: Concept
• Strategy vs. Policy
• Strategy vs. Tactics
• Levels of Strategy
• Importance of Strategy

2 Strategic Framework

• Strategic Intent
• Strategic Analysis
• Strategy Formulation
• Choice of Strategy
• Strategic Implementation
• Strategic Evaluation and Control

3 Strategy in Global Context

• Need for Internationalization
• Global Business Environment
• Environmental analysis in global context
• Environmental Analysis process
• PESTLE analysis
• Global strategic alternatives
• Entry to global markets
• EPRG Framework
• Global Supply Chains and Competitiveness

4 External Environment

• General Environment and Strategy
• Process for analyzing the External Environment
• External Environment
• Industrial Organization Model
• PESTLE Framework
• External Factor Evaluation Matrix

5 Competitive Analysis

• Competitive forces
• Porter’s five forces framework
• Strategic Groups
• Scenario Planning
• Social media competitive analysis
• Competitive Profile Matrix

6 Internal Analysis

• Resource Based View
• The Critical Success Factor
• The Value Chain Framework
• Comparison Standards
• SWOT Analysis
• Internal factor evaluation Matrix

7 Business Level Strategies

• Role of Cost in Business Growth
• Overall Cost Leadership
• Differentiation
• Types of Differentiation
• Cost of Differentiation
• Advantages and Disadvantages of Differentiation

8 Competitive Strategy

• Formulation of Competitive Strategy Framework for Competitor Analysis
• Competitive Moves
• Dimensions of Competitive Strategy
• Fragmented industries and Competitive Strategy
• Emerging industries and Competitive Strategy
• Declining industries and Competitive Strategy

9 Corporate Level Strategy

• Nature and Scope of Corporate Strategies
• Types of Corporate Strategies
• Stability Strategy
• Expansion Strategies
• Diversification
• Alternative Routes to Diversification
• Retrenchment Strategies

10 Implementation-Behavioural Dimensions

• Strategic Change
• Matching Organization Structure to Strategy
• Functions of Leadership
• Leadership Styles
• Corporate Culture
• Ethics and Values

11 Corporate Governance

• Evolution of corporate governance
• Business Ethics
• Pillars of corporate governance
• Models of corporate governance
• Corporate governance and Strategy
• Challenges of corporate governance
• Functional Strategies
• Strategic Control Process
• Operational Controls
• Performance Standards
• Analysis and Follow-up Action for Control
• Problems of Control Systems
• Types of Strategic Controls
• Difference between Operational and Strategic Control

13 Evaluation

• Process of Evaluation
• Business Portfolio Analysis
• Qualitative Factors
• Balanced Score Card (BSC)
• Structure of Evaluation
• Evaluation System in a Multi-business Organization
• Characteristics of an Effective Evaluation Strategy

More Like this

Internal & external analysis, what is an internal and external analysis.

An internal and external strategic analysis refers to reviewing your organization’s current state from an internal and external perspective. The output of completing an internal and external analysis – also known as a strategic analysis – is to have a clear picture of your organization’s current state.

How does a strategic analysis fit into strategic planning?

Before any organization jumps into the core of strategic planning process, it’s vital to clearly understand where your organization is today . Without clearly defining where you are today (your current state), you can’t define your bold destination of the future (vision) or create the roadmap to get there (your annual strategic plan).

Completing an internal and external analysis lays the groundwork and foundation for the bones of your strategic plan, influencing everything from your competitive advantages, growth strategy, and major themes that influence your entire strategic plan’s framework.It also helps you better understand the gaps you need to overcome to reach your future goals.

Pro Tip: DO NOT SKIP THIS STEP IN PLANNING! It may seem tempting to skip things like your SWOT, completive analysis, and strategic market analysis, but don’t do it! Build a plan that helps you go from where you are today to a bold place in the future.

What is the output of an internal and external analysis?

The result or output from this work should be a fully fleshed-out current state analysis for your organization’s growth. This should include:

• What you’re best at, and what you need to improve upon.
• Your clearly defined competitive advantages.
• Areas of market opportunity or growth opportunity to pursue.
• A clear understanding of your competitors and what they’re best at.
• Strategic themes to use as the framework for your plan.

Analyzing Your Internal Factors

What is an internal analysis.

An internal analysis examines your organization’s core competencies today that are influenced by internal factors – factors that are not driven by external market dynamics. This analysis would look at the organization’s strengths and weaknesses in meeting the needs of your customers or stakeholders

As you dive deeper into an internal analysis process, you will examine internal factors that give an organization advantages and disadvantages in meeting the needs of its market, customers, partners, and even employees. Any analysis of company strengths should be market-oriented/customer-focused because strengths are only meaningful when they assist the firm in meeting customer needs.

Internal Factors to Consider

An internal analysis can look at all internal factors affecting a company’s business performance. Here are the three most common factors to consider as you conduct your internal analysis:

Your Organization’s Resources

A good starting point to identify resources is to look at tangible and intangible resources available to your organization.

Tangible resources are the easiest to identify and evaluate financial resources, and physical assets are identified and valued in the firm’s financial statements.

Intangible resources are largely invisible, but over time become more important to the firm than tangible assets because they can be a main source of competitive advantage. Such intangible resources include reputational assets (brands, images, etc.) and technological assets (proprietary technology and know-how).

Your Organization’s Capabilities

Organizational capabilities are used to refer to a firm’s capacity for undertaking a particular productive activity. Our interest is not in capabilities per se but in capabilities relative to other firms. We will use the functional classification approach to identify the firm’s capabilities. A functional classification identifies the organizational capabilities of each of the principal functional areas.

Your Human Resources (Employees)

Technically, this could fall underneath your organization’s resources, but it’s worth separating human resources into its own category. After all, without your organization’s human capital, you wouldn’t exist!

Data to Use in an Internal Analysis

Before you conduct your internal analysis, we recommend collecting the following as references:

Employee Surveys

What do your employees say your organization does well, and where must you improve? Surveys need to be from within the previous 12 months!

Customer Surveys

What do customers love most about your organization, product, or service? How do you best meet their needs? Again, these surveys must be from within at least the previous 12 months.

Business Strategy of Record + Current Performance

Having your previous strategic plan and performance data to reference is always helpful as you complete your strategic internal analysis process.

List of Resources

Your tangible and intangible resources may directly influence your internal strategic strengths, weaknesses, problems, constraints, and uncertainties.

A List of Capabilities

Capabilities [or lack of capabilities] are helpful to reference and identify internal strategic strengths, weaknesses, problems, constraints, and uncertainties.

Questions to Consider for Your Internal Analysis

• What do you do best?
• What do we do best?
• What do our customers value most from our organization?
• How do we uniquely serve our customers?
• What are our company resources – assets, intellectual property, and people?
• How are we using our resources well?
• Where do we need to be more efficient?
• How do our employees or shareholders perceive us?
• How are we meeting our employees’ needs?
• What are our organization’s core capabilities?
• What do we need to improve upon?

Tools to Conduct Your Internal Analysis

Swot analysis.

Conducting a SWOT analysis is easily the most common approach to completing an internal analysis. SWOT stands for strengths, weaknesses, opportunities, and threats. The internal component of a SWOT analysis specifically looks at your organization’s core strengths (S) and weaknesses (W).

Pro Tip: A SWOT’s S and W portion is directly influenced by your organization’s internal factors – meaning factors you can directly influence. You can check out our full post on SWOT analysis here and download the free SWOT analysis guide here .

VRIO Framework

The VRIO framework is an internal analysis tool designed to help you identify your organization’s competitive advantages.

The VRIO analysis too helps you evaluate if a core strength, capability, or resource is a competitive advantage by assessing if that strength is valuable to your market, rare in competition, hard to copy, and organized to act upon.

Pro Tip: The VRIO framework evaluates internal strengths but needs external strategic analysis of your competition. So, it uses internal and external factors to help you identify your competitive advantages.

Download our Free VRIO Template and Examples!

What is the Output of an Internal Analysis?

There are a few important outputs from an internal analysis that help create the foundation of your business strategy formulation and direction:

• Output #1: A clear list of internal strengths and internal weaknesses of an organization.
• Output #2: Strategic issues to address (from an internal perspective).
• Output #3: A list of strengths to use as fodder for your competitive advantages (you’ll need to use these paired with a competitive analysis to identify competitive advantages).
• Output #4: Themes to use in your strategic framework and strategic planning objectives.

Analyzing Your External Factors

An external analysis examines the external factors and forces that impact your organization’s operating environment. External factors, by nature, exist beyond the walls of your organization and internal environment. They are forces and dynamics beyond your control, but still, impact your organization level and position in the marketplace.

Pro Tip: A helpful way to think about external forces is to ask, “would this be an issue or opportunity even if our organization did not exist?” If yes, it is an issue that is an external force.

The goal of these exercises is to identify external opportunities, threats, trends, and strategic uncertainties.

External Factors to Consider

An external analysis can be used to look at all external factors affecting a company. Here are the three most common factors to consider as you conduct your external analysis:

Market Trends

Market-level data, including overall size, projected growth, profitability, entry barriers, cost structure, distribution system, trends, and key success factors in your competitive market.

Industry Data and Trends

This data looks at what’s happening in your industry, including factors like vendors, suppliers, competitors, and buyers’ power.

Operating Environment Trends

This looks at global forces, demographic changes, political winds, ecological and natural issues, technological trends, economic factors, and social/cultural shifts. This is most often completed using a PESTLE analysis.

Data to Use in External Analysis

Industry and market reports.

What are important and potentially important markets? What are their size and growth characteristics? What markets are declining? What are the driving forces behind sales trends? Who competes in your market, and what is their market share?

Market Profitability Projections

For a holistic strategic analysis of your major market, consider the following factors: Is this a business where the average firm will make money? How intense is the competition among existing firms? Evaluate the threats from potential entrants and substitute products. What is the bargaining power of suppliers and customers? How attractive/profitable is the market now and in the future?

Cost Structure

What are the major cost and value-added components for various types of competitors?

Supplier and Distribution Data

What’s happening in your supply chain market? What are the alternative channels of distribution? How are they changing?

Operating Environment Factors

The interest is in environmental analysis and events that have the potential to affect strategy. This analysis should identify such trends and events and estimate their likelihood and impact. When conducting these types of strategic analysis, it is easy to get bogged down in an extensive, broad survey of trends. It is necessary to restrict the analysis to areas relevant enough to impact strategy significantly.

• Economic: What economic trends might have an impact on business activity? (Interest rates, inflation, unemployment levels, energy availability, disposable income, etc)
• Technological: To what extent are existing technologies maturing? What technological developments or trends are affecting or could affect our industry?
• Legal Forces: What changes in regulation are possible? What will their impact be on our industry? What tax or other incentives are being developed that might affect strategy development? Are there political or governmental stability risks?
• Sociocultural: What are the current or emerging lifestyle, fashion, and culture trends? What are their implications? What demographic trends will affect the market size of the industry? (i.e. growth rate, income, population shifts) Do these trends represent an opportunity or a threat?

Questions to Consider for Your External Analysis

Assessing Your Marketing (External Factors):

• What is happening externally and internally that will affect our company?
• Who are our customers?
• What are the strengths and weaknesses of each competitor?
• What are the driving forces behind sales trends?
• What are important and potentially important markets?
• What is happening in the world that might affect our company?

Assess Your Competition (External Factors):

• How are we different from the competition?
• How are our competitors winning?
• How are our competitors losing?
• What does our competition do better than us?
• How do we best serve our market/customers?
• What competitive moves can we make against our competitors?

Tools to Conduct Your External Analysis

Pestle analysis.

A PESTLE analysis is an external analysis tool that helps you determine how your business or organization stands up against external, macro-level external environment factors that could impact your business. It is an acronym for Political, Economic, Sociological, Technological, and Environmental factors. These are the core areas in the operating environment that could affect the success of an organization the most.

However, it is not enough to just name the external factors that could impact your organization. You must determine whether these factors will primarily pose an opportunity or a threat to your organization’s growth.

Download our Free PESTLE Template and Examples!

As we said earlier, a SWOT analysis is the most common approach to finishing your external analysis. To complete the external analysis portion of the SWOT, you’ll examine Opportunities (O) and Threats (T).

Pro Tip: A SWOT’s O and T portion is directly influenced by your organization’s external factors – meaning factors you can’t directly influence. You can check out our full post on SWOT analysis here and download the free SWOT analysis guide here .

Competitor Analysis-

Your competitor analysis will look at three different types of competitors:

• Direct competitors (those in your direct market space and always listed with you in a customer shortlist).
• Indirect competitors (those who aren’t quite in your same market sphere, but who you should still watch out for as indirect competitors could become direct).
• Substitutes or new entrants (those who may have alternative products or who are not quite at your level as to be considered direct competition).

Identify Competitors

• Against whom do we compete?
• Who are our most intense competitors? Less intense?
• Makers of substitute products?
• Can these competitors be grouped into strategic groups based on assets, competencies, or strategies?
• Who are potential competitive entrants?
• What are their barriers to entry?

Evaluate Your Competitors

• What are their objectives and strategies?
• What is their cost structure? Do they have a cost advantage or disadvantage?
• What is their image and positioning strategy?
• Which are the most successful/unsuccessful competitors over time? Why?

What is the Output of an External Analysis? Why is it Important in Strategic Planning?

Completing an external analysis helps your organization identify opportunities, headwinds, and tailwinds as you build your organization’s core strategy, approach to growth, and moves you can make against your competitors.

Here are the four common outputs from completing an external analysis.

• Output #1: Clear market opportunities to use as part of your growth strategy.
• Output #2: Identify areas of headwinds that will work against your organization.
• Output #3: Your competitive advantages.
• Output #4: Competitive moves you could make against your competition.

Strategic Analysis Process: Pulling Together Your Internal and External Analysis

After you finished analyzing your internal and external environments, it’s important to pull it all together as a final product for your strategic plan.

A complete strategic analysis looks like this:

• Synthesized internal strengths and weaknesses.
• Identified competitive advantages.
• Competitive moves you can make against your competition.
• Headwinds and tailwinds for your market.
• External forces that might impact your organization.
• A clear set of opportunities to use in your growth strategy.

Pulling together a Current State Summary

Once you’ve completed your internal and external analysis, pulling together a current state summary is helpful. This summary captures your current state of the organization and is usually about 3-4 sentences long.

It’s designed to create an objective summary of your organization – where you are today – to include external environment and internal forces impacting your performance.

Quality Check – How You Know You Got it Right

A complete strategic analysis should meet the following requirements:

• Are there clear key components or themes from the SWOT that capture where we are today?
• What are the key shifts we have seen over the past few years (internally or externally) that define our current state?
• What have we learned from the internal and external analysis that is critical to address in the strategic plan?

SWOT – The Most Common Internal and External Analysis Tool

We’ve already mentioned this, but completing a SWOT is the most common exercise to complete both an internal and external analysis. Check out the video, SWOT analysis post, and the free downloadable guide .

An internal analysis looks at the factors that are happening internally in your organization. They evaluate your company’s strengths and weaknesses, taking into account things like resource management and employee performance.

An external analysis would look at the things surrounding your macro- and micro-operating environment such as a competitor analysis and a PESTLE analysis.

You could use one or the other, but it won’t give you the full picture of what your organization is up against or the moves you need to make to ensure you’re shoring up your strengths and fixing your weaknesses. Doing both an internal and external analysis, even in the form of a SWOT matrix, will help you get a full picture of your position in your market. It is highly recommended you do both by utilizing at least one internal analysis tool and one external analysis tool.

Conducting an internal and external analysis is important to conduct and organize before you begin your strategy planning as it allows you to identify and assess your own strengths, weaknesses, and competitive advantages, as well as identify the external factors that may become obstacles in your strategic growth or opportunities for strategic growth.

16 Comments

good fabulous work. keep up.

it is helpful information for me ,i got a clear summary of what i want. thank you

Hello, your article is very helpful but will you please tell me the reference list of the references you quoted inside so it makes the work easy, thanks

Hi Erica Thank you very much your your article is very nice and helpful. keep doing to others.x

wow! all the information that i wanted i got. Thank you very much

Thank you very much with this article, because it helps me alot in my studies as i’m currently stduying Business Management…

Hello Erica,,,

Thank you so much for this article. I have some questions related to this topic; if you can help with

hi we got a deeplly explanation and understood clearly but it was better if it was written in specific explaination keepup it and try for best

Thank you so much . It helps me a lot

thnks alot @Onstrategy

Thanks a lot for the analysis, I really appreciate it and understood a lot of things thanks and Best Regards Mustapha

very insightful. nice article it helped me a lot.

the article is very helpful. Tanx Erica

Thank you very much, it helped a lot.

A well researched article which can be used anywhere in business

Well articulated with clear and coherent flow of tasks .Tenable to practical use

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Strategic Analysis: Definition, Types, and Benefits

• February 25, 2022

SHARE THE ARTICLE ON

When it comes to business planning, strategic analysis plays a crucial role to guide decision-making. Your organization operates in both internal and external environments and is influenced by both these environments. 

Analysis of the organization helps leaders and executives decide the business’s goals and priorities. The process provides a solid ground upon which leaders establish their business plan. 

In this article, we will explore the two types and the benefits of strategic market analysis. First, let’s start with the definition.

Exploratory Research Guide

Conducting exploratory research seems tricky but an effective guide can help.

What is strategic analysis?

Strategic analysis refers to an evaluation of an organization’s work environment. This work environment generally defines how the organization operates its business. It helps to determine the mood functioning of the organization and whether the goals and objectives set by the organization can be met.

Many experts advise conducting it in an organization from time to time.  It can help uncover the areas that need changes and enhancements. 

Why is strategic analysis important?

Most of the ever-growing organizations implemented strategic planning through various phases of their business. The analysis is a part of business planning that has a systematic strategy and appropriate resource investment and can help you reach your goal as an organization.

One of the main characteristics is that it makes you consider your competitors and helps you evaluate your business strategies to keep you on top of the race.

It is important because it highlights the internal and external factors that influence the organization. By evaluating the organization, you can formulate and implement strategies.  

The analysis is a part of strategic planning along with strategy formulation. The analysis sets the stage for you to formulate strategies and make decisions. 

What are the types of strategic analysis?

There is no defined method to evaluate the organization’s work environment. However, multiple methods can help you collect the data you need to analyze and prepare the stage for strategy formulation. 

We have discussed two of the most popular analysis method – SWOT & PESTLE. Each approach offers something unique and adds value to your strategy planning. Let’s take a look at two approaches. 

1. Internal strategic analysis

As the name suggests, internal analysis is conducted when an organization needs to look inside itself and define its positive and negative performances, which can be further improved with proper resource investments. Doing so will enhance the company’s image in the market. 

The internal analysis focuses mainly on the organization’s performance by evaluating the potential organization to reach its goals. 

The most famous and commonly used internal strategic analysis technique is the SWOT analysis. SWOT stands for strengths, weaknesses, opportunities, and threats. This technique checks the full factors inside an organization or its projects and determines how things may suffer.

SWOT analysis:

• Strengths – strengths of an organization are the positive areas that help it to grow consistently. These areas in an organization need to be protected and carried forward through all the changes.
• Weaknesses – where there are strengths, there are also weaknesses. These are the areas of an organization that need to be fixed so that they can benefit the company while giving it a competitive edge over its competitors.
• Threats – there are various factors that affect an organization, but they are mostly predictable too. With a proper risk management strategy, threats like competitors’ better performance do not affect the organization’s performance.
• Opportunities – discover the opportunities an organization has to grow towards its success. Identify external opportunities and make sure you use them to the fullest.

2. External strategic analysis

Once the internal analysis is completed and the organization is foolproof from the inside, it is time to evaluate the external factors that might interrupt the organization’s growth. 

External analysis to be accurate, one needs to know how the market works and how customers are affected by certain marketing strategies, products, and services that the competitors present out there.

PESTLE analysis:

PESTLE analysis is the commonly used external analysis technique. It stands for political, economic, social, legal, and environmental analysis, which determines the factors that affect the environment based on external strategic analysis.

It is a model that helps you to:

• Point out these factors that an organization cannot control, like political changes or environmental changes.
• Determine how each issue can impact the organization’s growth.
• Identify the issues to the organization.
• Measure the probability of that issue happening.

Now that we have described the two types of analysis you can conduct, let’s examine the advantages and disadvantages of conducting analysis. 

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What are the advantages of strategic analysis?

Strategy planning is an iterative process. It does not end when you implement the plans you have devised. Once you analyze and scrutinize what’s influencing the organization and formulate strategies. You will need to implement them and go back to evaluating and planning. 

The process is ongoing, however, it contributes to the growth of the business and the health of the organization. 

We have listed some of the benefits of analysis:

• It helps you to determine the internal positive areas in an organization that actively helps set it to grow. 
• It also indicates that these positive areas should be protected and run consistently for the organization to be leading on the right part to success.
• Strategic analysis drives out internal and external strengths and weaknesses that affect the organization’s growth.
• It helps you identify the organization’s internal aspects that add to its business advancements and use them as competitive advantages over your competitors.

What are the disadvantages of strategic analysis?

As we have established that analysis is an ongoing process, it can be considered a benefit and a disadvantage. We have found two cons of strategic market analysis that you should learn about. 

• It helps you get too many creative ideas but does not tell you exactly which one to choose.
• It can sometimes be very time-consuming, affecting other efficient innovations like developing a new product or service at an organizational level.

Wrapping up;

This sums up the importance of strategic analysis in strategy planning for business growth. Analyzing the organization’s internal and external environment can ensure that your business is moving in the right direction and all the actions align with the goals.

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9.3 The Role of Strategic Analysis in Formulating a Strategy

• Why is strategic analysis important to strategy formulation?

In the previous chapter, you read about the various levels of analysis that a manager carries out in order to understand their firm’s competitive environment. A strategic analysis of a firm’s external environment (the world, competitors) and internal environment (firm capabilities and resources) gives its managers a clear picture of what they have to work with and also what needs to be addressed when developing a plan for the firm’s success. Analysis comes early in the strategic process because the information a manager gets from the analysis informs the decision-making that follows. The information is so critical that entrepreneurs writing business plans (before the business even exists) do this analysis to understand if their business idea is feasible, and to understand how to position their business relative to existing competitors or potential customers in order to maximize their odds of success. Exhibit 9.5 outlines just a few of the questions that strategic analysis tools can help answer.

As an example of how the strategic tools help inform decisions, look back at the Walt Disney mission and vision in Exhibit 9.4 . Imagine if you were Mr. Walt Disney today, and you wanted to start a company with a vision of making people happy in the 21st century. What products or services would you plan to offer? A PESTEL analysis would tell you that technology is an important part of entertainment and that sociocultural trends include people’s preference for on-demand entertainment, to be convenient and compatible with their busy schedules. Disney’s mission statement is broad enough about products and services to include a wide variety of offerings (they are thinking about the future too!), but if you were starting this company today, where would you start? Would you make movies for movie theaters, or develop a way to offer video entertainment online? Would you make console video games or phone apps? Who would your competition be, and what do they offer? How could you offer something better or cheaper?

Managers learn about the conditions that their business will have to operate in by doing strategic analysis, and understanding those conditions is required in order to develop the plans and actions that will lead to success.

Concept Check

• What strategic analysis tools from the previous chapter would a manager use when planning a strategy for an existing business? What tools would be most helpful for a start-up business?

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• Research Guides

Strategy Research & Industry Analysis: Introduction

• Introduction
• Industry Research
• Company Information
• SWOT, Five Forces & PEST Analysis
• Marketing and Market Research
• Citing and Sourcing

Industry Analysis

To fully understand an industry, you’ll want to see what information already exists, look at the opinions and ideas of experts, and reach your own conclusions based on facts and analysis. Examples of where this information is found include:

• Analyst reports
• Market research reports
• News articles
• Industry experts

Purchased & Licensed Library Resources

Did you know that all the information you need is not free on the Web? In fact, most information is hidden in databases, behind firewalls, and is available only by paying subscriptions or fees.

The Walker Management Library has purchased and licensed access to an extensive set of databases. In them you'll find published industry studies, analyst reports, news articles, company profiles, industry ratios, market research, financial, demographics, statistics and more. This is the kind of information you need to do a complete industry analysis.

Free Websites

Searching the internet is quick and easy, and a great source for so much information. However, caveat emptor: evaluate the resources you use. Use the CRAP test for more information on how to assess Internet resources, such as personal Web pages, blogs and Wikipedia:

• C urrency - Is the information current? Is it updated regularly?
• R eliability - Is the source reputable? Is it accurate?
• A uthority - Who created the information? Why?
• P urpose/ P oint of View - Is there a balance of perspectives? Is the information biased?

Primary Research (Your Personal Network)

Reach out to industry experts: journalists that cover your industry, financial analysts, industry associations and academics. If you don’t know insiders in your network, identify them through publications, industry associations, and trade meetings. To find these easily, see the Trade Associations section of this guide.

Additional Help

Not all databases are intuitive to use and it can be confusing when databases provide differing information or data. Look at the database page layout. If it is simple, keep your search simple. If it has complex search features, take advantage of them to get the best results. For more help stop by, contact us ,  or try our additional Research Guides .

Please note that access and use restrictions apply to some resources, and usage implies acceptance of the Copyright and Licensing Restrictions . Databases can be found in the following way:

• Databases (A-Z)

Walker Management Library

Additional Guides for Business Research

• Business Research 101 by Walker Management *Library Last Updated Dec 7, 2023 14 views this year
• Next: Industry Research >>
• Last Updated: Apr 15, 2024 12:03 PM
• URL: https://researchguides.library.vanderbilt.edu/strategy

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Business strategy and competitive analysis

Succeeding in business isn’t just about having a great product or service. Because of rivalry from companies offering the same value to customers, success has much to do with organizations creating plans that enable them to compete effectively. 1

When looking to advance a career in strategic business management, you may wonder how to develop an effective strategy and manage a company in a fiercely competitive environment. Read on to discover frameworks firms can use to conduct competitor research, create effective business competition strategies, and gain an advantage over their rivals.

The importance of strategic planning

A business strategy is a plan outlining how an enterprise intends to achieve its goals. It guides decision-making and resource allocation. When built correctly, it helps organizations gain an upper hand in the industry. 2

Competitive analysis, on the other hand, involves a company researching its direct competitors to understand their strengths and weaknesses. It can help an organization do the following:

• Understand the market landscape in order to make informed strategic decisions. 3, 4
• Identify gaps in its business intelligence and strategy that competitors address. 3, 4
• Benchmark its own results against competitors’ performance to find out areas of improvement. 3, 4
• Build marketing strategies that leverage a brand’s unique value proposition—that is, business value that sets the organization apart from direct and indirect competitors. 3, 4
• Stay on top of changes in the industry to improve a company’s competitive advantage. 3, 4

Frameworks for strategic planning and competitive analysis

Some of the most popular approaches for assessing a firm’s internal and external environments, and for evaluating the competitive dynamics in business in a given industry, follow here.

1. SWOT analysis

SWOT analysis in business is a review of Strengths, Weaknesses, Opportunities, and Threats.

Organizations use it to evaluate internal and external elements that influence their competitiveness in a particular industry.

The four segments are:

• Strengths are internal positives that an organization can control and that often provide a competitive advantage. Examples include high product quality, strong brand reputation, and access to a skilled (and experienced) workforce. 5
• Weaknesses are internal traits that negatively affect a company. Examples may include unsuitable business location, a low-quality product, knowledge gaps in an organization’s team, and insufficient resources to compete effectively in the market. 5
• Opportunities are external elements that are likely to contribute to business success. Examples include favorable laws, technological advancements in a particular industry, and the ability to provide value that competitors can’t. 5
• Threats are external factors that a company has no control over and that can hinder success in the industry. Examples include current and potential future competitors, negative technological changes, and unfavorable regulations. 5

2. PESTLE analysis

PESTLE analysis is a framework for strategic business management. It helps organizations understand external factors that can affect business strategy and decision-making.

PESTLE stands for Political, Economic, Social, Technological, Legal, and Environmental factors:

• Political factors include all ways a government intervenes in economies. They include tax policies, laws to protect local businesses from international competition, industry-specific regulations, and trade agreements between countries. They help firms gauge their ability to access a target market in different places. 6, 7
• Economic factors can directly influence an organization’s profits. Some examples are inflation, interest rates, and consumer spending. Analyzing these elements allows businesses to anticipate economic trends and adjust their strategies accordingly. 6, 7
• Social factors involve the demographics, beliefs, traditions, and attitudes of people in a specific region. Evaluating them helps an organization create a marketing strategy that resonates with the needs, preferences, and behaviors of its target audience. 6, 7
• Technological factors such as automation show how a company leverages digital tools in its daily operations. They also encompass customers’ preferences for using modern technology. For example, if customers prefer buying products online, a business may prioritize having an e-commerce store rather than a physical storefront. 6, 7
• Legal factors consist of laws in the jurisdiction in which an organization operates. They include health and safety requirements, labor regulations, advertising standards, and anti-discrimination laws. Considering them in strategic planning can help organizations stay on top of regulatory requirements. 6, 7
• Environmental factors focus on how a business’ operations affect the natural environment. They include pollution, climate change, and waste disposal. Analyzing them when building a business strategy can help companies brainstorm sustainable practices. 6, 7

3. Porter’s Five Forces

Porter’s Five Forces help businesses analyze the level of competition in an industry. They outline the five key forces for competitor analysis and how they influence profitability in a specific market segment:

• Competitive rivalry: This element focuses on how fierce the competition is among existing players in a particular industry. The more competitors in an industry, the more intense the rivalry. Likewise, competition is intense when products in a given market are closely similar because customers can easily switch from one brand to another. 8
• Threat of new entrants: This part of the competition analysis framework assesses how easy it is for new companies to enter an industry. Factors influencing how readily new players can step into a market include capital requirements and regulatory hurdles. Industries with high barriers to entry are less susceptible to new competition. Each organization in such sectors has a considerable market share. 8
• Bargaining power of suppliers: Here, organizations analyze how much control suppliers have over prices and terms. The fewer suppliers of materials there are in an industry, the greater their negotiating power. 8
• Bargaining power of buyers: This part of the framework evaluates buyers’ level of control over prices and terms. Customers’ negotiating power increases or decreases depending on the number of buyers, the volume of products each can purchase at once, and how well they know the market. 8
• Threat of substitutes: This force evaluates the likelihood of target customers finding alternatives to an industry's products or services. When substitutes are readily available at a cheaper price than commodities in a specific industry, that’s a huge threat to organizations in that sector. 8

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• Retrieved on April 8, 2024, from forbes.com/sites/serenitygibbons/2023/05/04/how-to-thrive-in-a-hyper-competitive-environment/?sh=6f7145f770a9
• Retrieved on April 8, 2024, from emeritus.org/in/learn/what-is-business-strategy/
• Retrieved on April 8, 2024, from in.indeed.com/career-advice/career-development/what-is-competitor-analysis
• Retrieved on April 8, 2024, from semrush.com/blog/competitive-analysis/
• Retrieved on April 8, 2024, from forbes.com/advisor/business/what-is-swot-analysis/
• Retrieved on April 8, 2024, from cipd.org/en/knowledge/factsheets/pestle-analysis-factsheet/
• Retrieved on April 8, 2024, from indeed.com/career-advice/career-development/what-is-the-pestle-analysis
• Retrieved on April 8, 2024, from investopedia.com/terms/p/porter.asp

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6 Research strategy

A research strategy introduces the main components of a research project such as the research topic area and focus, the research perspective (see Sections 1 and 2), the research design, and the research methods (these are discussed below). It refers to how you propose to answer the research questions set and how you will implement the methodology.

In the first part of this course, you started to identify your research topic, to develop your research statement and you thought about possible research question(s). While you might already have clear research questions or objectives, it is possible that, at this stage, you are uncertain about the most appropriate strategy to implement in order to address those questions. This section looks briefly at a few research strategies you are likely to adopt.

Figure 5 shows the four main types of research strategy: case study, qualitative interviews, quantitative survey and action-oriented research. It is likely that you will use one of the first three; you are less likely to use action-oriented research.

Here is what each of these strategies entails:

• Case Study : This focuses on an in-depth investigation of a single case (e.g. one organisation) or a small number of cases. In case study research generally, information is sought from different sources and through the use of different types of data such as observations, survey, interviews and analysis of documents. Data can be qualitative, quantitative or a mix of both. Case study research allows a composite and multifaceted investigation of the issue or problem.
• Qualitative interviews : There are different types of qualitative interviews (e.g. structured, semi-structured, unstructured) and this is the most widely used method for gathering data. Interviews allow access to rich information. They require extensive planning concerning the development of the structure, decisions about who to interview and how, whether to conduct individual or group interviews, and how to record and analyse them. Interviewees need a wide range of skills, including good social skills, listening skills and communication skills. Interviews are also time-consuming to conduct and they are prone to problems and biases that need to be minimised during the design stage.
• Quantitative survey : This is a widely used method in business research and allows access to significantly high numbers of participants. The availability of online sites enables the wide and cheap distribution of surveys and the organisation of the responses. Although the development of questions may appear easy, to develop a meaningful questionnaire that allows the answering of research questions is difficult. Questionnaires need to appeal to respondents, cannot be too long, too intrusive or too difficult to understand. They also need to measure accurately the issue under investigation. For these reasons it is also advisable, when possible, to use questionnaires that are available on the market and have already been thoroughly validated. This is highly recommended for projects such as the one you need to carry out for this course. When using questionnaires decisions have to be made about the size of the sample and whether and when this is representative of the whole population studied. Surveys can be administered to the whole population (census), for example to all employees of a specific organisation.
• Action-oriented research : This refers to practical business research which is directed towards a change or the production of recommendations for change. Action-oriented research is a participatory process which brings together theory and practice, action and reflection. The project is often carried out by insiders. This is because it is grounded in the need to actively involve participants in order for them to develop ownership of the project. After the project, participants will have to implement the change.

Action-oriented research is not exactly action research, even though they are both grounded in the same assumptions (e.g. to produce change). Action research is a highly complex approach to research, reflection and change which is not always achievable in practice (Cameron and Price, 2009). Furthermore action researchers have to be highly skilled and it is unlikely that for this specific project you will be involved in action research. For these reasons this overview focuses on the less pure action-oriented research strategy. If you are interested in exploring this strategy and action research further, you might want to read Chapter 14 of Cameron and Price (2009).

It is possible for you to choose a strategy that includes the use of secondary data. Secondary data is data that has been collected by other people (e.g. employee surveys, market research data, census). Using secondary data for your research project needs to be justified in that it meets the requirements of the research questions. The use of secondary data has obvious benefits in terms of saving money and time. However, it is important to ascertain the quality of the data and how it was collected; for example, data collected by government agencies would be good quality but it may not necessary meet the needs of your project.

It is important to note that there should be consistency between the perspective (subjective or objective) and the methodology employed. This means that the type of strategy adopted needs to be coherent and that its various elements need to fit in with each other, whether the research is grounded on primary or secondary data.

Now watch this video clip in which Dr Rebecca Hewett, Prof Mark Saunders, Prof Gillian Symon and Prof David Guest discuss the importance of setting the right research question, what strategy they adopted to come up with specific research questions for their projects, and how they refined these initial research questions to focus their research.

Make notes on how you might apply some of these strategies to develop your own research question.

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What is a Competitive Analysis — and How Do You Conduct One?

Published: April 24, 2024

Every time I work with a new brand, my first order of business is to conduct a competitive analysis. 

A competitive analysis report helps me understand the brand’s position in the market, map competitors’ strengths/weaknesses, and discover growth opportunities. 

In this article, I’ll break down the exact steps I follow to conduct competitor analysis and identify ways to one-up top brands in the market. 

We’ll cover:

What is competitive analysis?

What is competitive market research, competitive analysis in marketing.

• How To Conduct Competitive Analysis in 5 Steps

How to Do a Competitive Analysis (the Extended Cut)

Competitive product analysis, competitive analysis example, competitive analysis templates.

• Competitive Analysis FAQs

Competitive analysis is the process of comparing your competitors against your brand to understand their core differentiators, strengths, and weaknesses. It’s an in-depth breakdown of each competitor’s market position, sales & marketing tactics, growth strategy, and other business-critical aspects to see what they’re doing right and find opportunities for your business.

Competitive analysis gives you a clearer picture of the market landscape to make informed decisions for your growth. 

That said, you have to remember that competitive analysis is an opportunity to learn from others. It isn’t:

• Copying successful competitors to the T.
• Trying to undercut others’ pricing.
• A one-and-done exercise.

Let’s look at how this exercise can help your business before breaking down my 5-step competitive analysis framework.

4 Reasons to Perform Competitive Analysis 

If you’re on the fence about investing time and effort in analyzing your competitors, know that it gives you a complete picture of the market and where you stand in it.

Here are four main reasons why I perform a competitive analysis exercise whenever working with a brand for the first time:

• Identify your differentiators. Think of competitor analysis as a chance to reflect on your own business and discover what sets you apart from the crowd. And if you’re only starting out, it helps you brainstorm the best opportunities to differentiate your business.
• Find competitors’ strengths. What are your competitors doing right to drive their growth? Analyzing the ins and outs of an industry leader will tell you what they did well to reach the top position in the market.
• Set benchmarks for success. A competitor analysis gives you a realistic idea of mapping your progress with success metrics. While every business has its own path to success, you can always look at a competitor’s trajectory to assess whether you’re on the right track.
• Get closer to your target audience. A good competitor analysis framework zooms in on your audience. It gives you a pulse of your customers by evaluating what they like, dislike, prefer, and complain about when reviewing competing brands.

The bottom line: Whether you’re starting a new business or revamping an existing one, a competitive analysis eliminates guesswork and gives you concrete information to build your business strategy.

10 Free Competitive Analysis Templates

Track and analyze your competitors with these ten free planning templates.

• SWOT Analysis
• Battle Cards
• Feature Comparison
• Strategic Overview

You're all set!

Click this link to access this resource at any time.

Competitive market research is a vital exercise that goes beyond merely comparing products or services. It involves an in-depth analysis of the market metrics that distinguish your offerings from those of your competitors.

A thorough market research doesn't just highlight these differences but leverages them, laying a solid foundation for a sales and marketing strategy that truly differentiates your business in a bustling market.

In the next section, we’ll explore the nuts and bolts of conducting a detailed competitive analysis tailored to your brand.

10 Competitive Analysis Templates

Fill out the form to access the templates., essential aspects to cover in competitive analysis research .

Before we walk through our step-by-step process for conducting competitor analysis, let’s look at the main aspects to include for every competitor:

• Overview. A summary of the company — where it’s located, target market, and target audience.
• Primary offering. A breakdown of what they sell and how they compare against your brand.
• Pricing strategy. A comparison of their pricing for different products with your pricing.
• Positioning.  An analysis of their core messaging to see how they position themselves. Customer feedback: A curation of what customers have to say about the brand.

Now, it’s time to learn how to conduct a competitive analysis with an example to contextualize each step. 

Every brand can benefit from regular competitor analysis. By performing a competitor analysis, you'll be able to:

• Identify gaps in the market.
• Develop new products and services.
• Uncover market trends.
• Market and sell more effectively.

As you can see, learning any of these four components will lead your brand down the path of achievement.

Next, let's dive into some steps you can take to conduct a comprehensive competitive analysis.

How to Conduct Competitive Analysis in 5 Quick Steps

As a content marketer, I’ve performed a competitive analysis for several brands to improve their messaging, plan their marketing strategy, and explore new channels. Here are the five steps I follow to analyze competitors.

1. Identify and categorize all competitors.

The first step is a simple yet strategic one. You have to identify all possible competitors in your industry, even the lesser-known ones. The goal here is to be aware of all the players in the market instead of arbitrarily choosing to ignore a few.

As you find more and more competitors, categorize them into these buckets:

• Direct competitors. These brands offer the same product/service as you to the same target audience. People will often compare you to these brands when making a buying decision. For example, Arcade and Storylane are direct competitors in the demo automation category.
• Indirect competitors. These businesses solve the same problem but with a different solution. They present opportunities for you to expand your offering. For example, Scribe and Whatfix solve the problem of documentation + internal training, but in different ways.
• Legacy competitors. These are established companies operating in your industry for several years. They have a solid reputation in the market and are a trusted name among customers. For example, Ahrefs is a legacy competitor in the SEO industry.
• Emerging competitors. These are new players in the market with an innovative business model and unique value propositions that pose a threat to existing brands. For example, ChatGPT came in as a disruptor in the conversational AI space and outperformed several brands. 

Here’s a competitive matrix classifying brands in the community and housing space:

Testing It Out

To help you understand each step clearly, we’ll use the example of Trello and create a competitor analysis report using these steps.

Here’s a table of the main competitors for Trello:

able of the main competitors for Trello:

2. Determine each competitor’s market position.

Once you know all your competitors, start analyzing their position in the market. This step will help you understand where you currently stand in terms of market share and customer satisfaction. It’ll also reveal the big guns in your industry — the leading competitors to prioritize in your analysis report.

Plus, visualizing the market landscape will tell you what’s missing in the current state. You can find gaps and opportunities for your brand to thrive even in a saturated market.

To map competitors’ market positions, create a graph with two factors: market presence (Y-axis) and customer satisfaction (X-axis). Then, place competitors in each of these quadrants:

• Niche. These are brands with a low market share but rank high on customer satisfaction. They’re likely targeting a specific segment of the audience and doing it well.
• Contenders. These brands rank low on customer satisfaction but have a good market presence. They might be new entrants with a strong sales and marketing strategy.
• Leaders. These brands own a big market share and have highly satisfied customers. They’re the dominant players with a solid reputation among your audience.
• High performers. These are another category of new entrants scoring high on customer satisfaction but with a low market share. They’re a good alternative for people not looking to buy from big brands.

This visualization will tell you exactly how crowded the market is. But it’ll also highlight ways to gain momentum and compete with existing brands.

Here’s a market landscape grid by G2 documenting all of Trello’s competitors in the project management space. For a leading brand like Trello, the goal would be to look at top brands in two quadrants: “Leaders” and “High Performers.” 

Image Source

3. Extensively benchmark key competitors.

Step 2 will narrow down your focus from dozens of competitors to the few most important ones to target. Now, it’s time to examine each competitor thoroughly and prepare a benchmarking report.

Remember that this exercise isn’t meant to find shortcomings in every competitor. You have to objectively determine both the good and bad aspects of each brand.

Here are the core factors to consider when benchmarking competitors:

• Quality. Assess the quality of products/services for each competitor. You can compare product features to see what’s giving them an edge over you. You can also evaluate customer reviews to understand what users have to say about the quality of their offering.
• Price. Document the price points for every competitor to understand their pricing tactics. You can also interview their customers to find the value for money from users’ perspectives.
• Customer service. Check how they deliver support — through chat, phone, email, knowledge base, and more. You can also find customer ratings on different third-party platforms.
• Brand reputation. You should also compare each competitor’s reputation in the market to understand how people perceive the brand. Look out for anything critical people say about specific competitors.  
• Financial health. If possible, look for performance indicators to assess a brand's financial progress. You can find data on metrics like revenue growth and profit margins. 

This benchmarking exercise will involve a combination of primary and secondary research. Invest enough time in this step to ensure that your competitive analysis is completely airtight.

Check out this example of a competitor benchmarking report for workforce intelligence tools:

Here’s how I benchmarked Asana based on these criteria using the information I could find:

4. Deep dive into their marketing strategy.

While the first few steps will tell you what you can improve in your core product or service, you also need to find how competitors market their products.

You need to deep-dive into their marketing strategies to learn how they approach buyers. I analyze every marketing channel, then note my observations on how they speak to their audience and highlight their brand personality.

Here are a few key marketing channels to explore:

• Website. Analyze the website structure and copy to understand their positioning and brand voice.
• Email. Subscribe to emails to learn their cadence, copywriting style, content covered, and other aspects.
• Paid ads. Use tools like Ahrefs and Semrush to find if any competitor is running paid ads on search engines.
• Thought leadership. Follow a brand’s thought leadership efforts with content assets like podcasts, webinars, courses, and more.
• Digital PR. Explore whether a brand is investing in digital PR to build buzz around its business and analyze its strategy.
• Social media. See how actively brands use different social channels and what kind of content is working best for them.
• Partnerships. Analyze high-value partnerships to see if brands work closely with any companies and mutually benefit each other.

You can create a detailed document capturing every detail of a competitor’s marketing strategy. This will give you the right direction to plan your marketing efforts. 

5. Perform a SWOT analysis.

The final step in a competitive analysis exercise is creating a SWOT analysis matrix for each company. This means you‘ll take note of your competitor’s strengths, weaknesses, opportunities, and threats. Think of it as the final step to consolidate all your research and answer these questions:

• What is your competitor doing well?
• Where do they have an advantage over your brand?
• What is the weakest area for your competitor?
• Where does your brand have the advantage over your competitor?
• In what areas would you consider this competitor a threat?
• Are there opportunities in the market that your competitor has identified?

You can use tools like Miro to visualize this data. Once you visually present this data, you’ll get a clearer idea of where you can outgrow each competitor. 

Here’s a SWOT analysis matrix I created for Asana as a competitor of Trello:

• Determine who your competitors are.
• Determine what products your competitors offer.
• Research your competitors' sales tactics and results.
• Take a look at your competitors' pricing, as well as any perks they offer.
• Ensure you're meeting competitive shipping costs.
• Analyze how your competitors market their products.
• Take note of your competition's content strategy.
• Learn what technology stack your competitors use.
• Analyze the level of engagement on your competitors' content.
• Observe how they promote marketing content.
• Look at their social media presence, strategies, and go-to platforms.
• Perform a SWOT Analysis to learn their strengths, weaknesses, opportunities, and threats.

To run a complete and effective competitive analysis, use these ten templates, which range in purpose from sales to marketing to product strategy.

Featured Resource: 10 Competitive Analysis Templates

1. Assess your current product pricing.

The first step in any product analysis is to assess current pricing.

Nintendo offers three models of its Switch console: The smaller lite version is priced at $199, the standard version is $299, and the new OLED version is $349.

Sony, meanwhile, offers two versions of its PlayStation 5 console: The standard edition costs $499, and the digital version, which doesn’t include a disc drive, is $399.

2. Compare key features.

Next is a comparison of key features. In the case of our console example, this means comparing features like processing power, memory, and hard drive space.

3. Pinpoint differentiators.

With basic features compared, it’s time to dive deeper with differentiators. While a glance at the chart above seems to indicate that the PS5 is outperforming its competition, this data only tells part of the story.

Here’s why: The big selling point of the standard and OLED Switch models is that they can be played as either handheld consoles or docked with a base station connected to a TV. What’s more, this “switching” happens seamlessly, allowing players to play whenever, wherever.

The Playstation offering, meanwhile, has leaned into market-exclusive games that are only available on its system to help differentiate them from their competitors.

4. Identify market gaps.

The last step in a competitive product analysis is looking for gaps in the market that could help your company get ahead.

When it comes to the console market, one potential opportunity gaining traction is the delivery of games via cloud-based services rather than physical hardware.

Companies like Nvidia and Google have already made inroads in this space, and if they can overcome issues with bandwidth and latency, it could change the market at scale.

How do you stack up against the competition? Where are you similar, and what sets you apart? This is the goal of competitive analysis.

By understanding where your brand and competitors overlap and diverge, you’re better positioned to make strategic decisions that can help grow your brand.

Of course, it’s one thing to understand the benefits of competitive analysis, and it’s another to actually carry out an analysis that yields actionable results. Don’t worry — we’ve got you covered with a quick example.

Sony vs. Nintendo: Not all fun and games.

Let’s take a look at popular gaming system companies Sony and Nintendo.

Sony’s newest offering — the Playstation 5 — recently hit the market but has been plagued by supply shortages.

Nintendo’s Switch console, meanwhile, has been around for several years but remains a consistent seller, especially among teens and children.

This scenario is familiar for many companies on both sides of the coin; some have introduced new products designed to compete with established market leaders, while others are looking to ensure that reliable sales don’t fall.

Using some of the steps listed above, here’s a quick competitive analysis example.

In our example, it’s Sony vs Nintendo, but it’s also worth considering Microsoft’s Xbox, which occupies the same general market vertical.

This is critical for effective analysis; even if you’re focused on specific competitors and how they compare, it’s worth considering other similar market offerings.

PlayStation offers two PS5 versions, digital and standard, at different price points, while Nintendo offers three versions of its console.

Both companies also sell peripherals — for example, Sony sells virtual reality (VR) add-ons, while Nintendo sells gaming peripherals such as steering wheels, tennis rackets, and differing controller configurations.

When it comes to sales tactics and marketing, Sony and Nintendo have very different approaches.

In part thanks to the recent semiconductor shortage, Sony has driven up demand via scarcity — very low volumes of PS5 consoles remain available. Nintendo, meanwhile, has adopted a broader approach by targeting families as its primary customer base.

This effort is bolstered by the Switch Lite product line, which is smaller and less expensive, making it a popular choice for children.

The numbers tell the tale : Through September 2021, Nintendo sold 14.3 million consoles, while Sony sold 7.8 million.

Sony has the higher price point: Their standard PS5 sells for $499, while Nintendo’s most expensive offering comes in at $349. Both offer robust digital marketplaces and the ability to easily download new games or services.

Here, the key differentiators are flexibility and fidelity. The Switch is flexible — users can dock it with their television and play it like a standard console or pick it up and take it anywhere as a handheld gaming system.

The PS5, meanwhile, has superior graphics hardware and processing power for gamers who want the highest-fidelity experience.

5. Analyze how your competitors market their products.

If you compare the marketing efforts of Nintendo and Sony, the difference is immediately apparent: Sony’s ads feature realistic in-game footage and speak to the exclusive nature of their game titles.

The company has managed to secure deals with several high-profile game developers for exclusive access to new and existing IPs.

Nintendo, meanwhile, uses brightly lit ads showing happy families playing together or children using their smaller Switches while traveling.

6. Analyze the level of engagement on your competitor's content.

Engagement helps drive sales and encourage repeat purchases.

While there are several ways to measure engagement, social media is one of the most straightforward: In general, more followers equates to more engagement and greater market impact.

When it comes to our example, Sony enjoys a significant lead over Nintendo: While the official Playstation Facebook page has 38 million followers, Nintendo has just 5 million.

Competitive analysis is complex, especially when you’re assessing multiple companies and products simultaneously.

To help streamline the process, we’ve created 10 free templates that make it possible to see how you stack up against the competition — and what you can do to increase market share.

Let’s break down our SWOT analysis template. Here’s what it looks like:

Don't forget to share this post!

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The state of AI in early 2024: Gen AI adoption spikes and starts to generate value

If 2023 was the year the world discovered generative AI (gen AI) , 2024 is the year organizations truly began using—and deriving business value from—this new technology. In the latest McKinsey Global Survey  on AI, 65 percent of respondents report that their organizations are regularly using gen AI, nearly double the percentage from our previous survey just ten months ago. Respondents’ expectations for gen AI’s impact remain as high as they were last year , with three-quarters predicting that gen AI will lead to significant or disruptive change in their industries in the years ahead.

About the authors

This article is a collaborative effort by Alex Singla , Alexander Sukharevsky , Lareina Yee , and Michael Chui , with Bryce Hall , representing views from QuantumBlack, AI by McKinsey, and McKinsey Digital.

Organizations are already seeing material benefits from gen AI use, reporting both cost decreases and revenue jumps in the business units deploying the technology. The survey also provides insights into the kinds of risks presented by gen AI—most notably, inaccuracy—as well as the emerging practices of top performers to mitigate those challenges and capture value.

AI adoption surges

Interest in generative AI has also brightened the spotlight on a broader set of AI capabilities. For the past six years, AI adoption by respondents’ organizations has hovered at about 50 percent. This year, the survey finds that adoption has jumped to 72 percent (Exhibit 1). And the interest is truly global in scope. Our 2023 survey found that AI adoption did not reach 66 percent in any region; however, this year more than two-thirds of respondents in nearly every region say their organizations are using AI. 1 Organizations based in Central and South America are the exception, with 58 percent of respondents working for organizations based in Central and South America reporting AI adoption. Looking by industry, the biggest increase in adoption can be found in professional services. 2 Includes respondents working for organizations focused on human resources, legal services, management consulting, market research, R&D, tax preparation, and training.

Also, responses suggest that companies are now using AI in more parts of the business. Half of respondents say their organizations have adopted AI in two or more business functions, up from less than a third of respondents in 2023 (Exhibit 2).

Gen AI adoption is most common in the functions where it can create the most value

Most respondents now report that their organizations—and they as individuals—are using gen AI. Sixty-five percent of respondents say their organizations are regularly using gen AI in at least one business function, up from one-third last year. The average organization using gen AI is doing so in two functions, most often in marketing and sales and in product and service development—two functions in which previous research  determined that gen AI adoption could generate the most value 3 “ The economic potential of generative AI: The next productivity frontier ,” McKinsey, June 14, 2023. —as well as in IT (Exhibit 3). The biggest increase from 2023 is found in marketing and sales, where reported adoption has more than doubled. Yet across functions, only two use cases, both within marketing and sales, are reported by 15 percent or more of respondents.

Gen AI also is weaving its way into respondents’ personal lives. Compared with 2023, respondents are much more likely to be using gen AI at work and even more likely to be using gen AI both at work and in their personal lives (Exhibit 4). The survey finds upticks in gen AI use across all regions, with the largest increases in Asia–Pacific and Greater China. Respondents at the highest seniority levels, meanwhile, show larger jumps in the use of gen Al tools for work and outside of work compared with their midlevel-management peers. Looking at specific industries, respondents working in energy and materials and in professional services report the largest increase in gen AI use.

Investments in gen AI and analytical AI are beginning to create value

The latest survey also shows how different industries are budgeting for gen AI. Responses suggest that, in many industries, organizations are about equally as likely to be investing more than 5 percent of their digital budgets in gen AI as they are in nongenerative, analytical-AI solutions (Exhibit 5). Yet in most industries, larger shares of respondents report that their organizations spend more than 20 percent on analytical AI than on gen AI. Looking ahead, most respondents—67 percent—expect their organizations to invest more in AI over the next three years.

Where are those investments paying off? For the first time, our latest survey explored the value created by gen AI use by business function. The function in which the largest share of respondents report seeing cost decreases is human resources. Respondents most commonly report meaningful revenue increases (of more than 5 percent) in supply chain and inventory management (Exhibit 6). For analytical AI, respondents most often report seeing cost benefits in service operations—in line with what we found last year —as well as meaningful revenue increases from AI use in marketing and sales.

Inaccuracy: The most recognized and experienced risk of gen AI use

As businesses begin to see the benefits of gen AI, they’re also recognizing the diverse risks associated with the technology. These can range from data management risks such as data privacy, bias, or intellectual property (IP) infringement to model management risks, which tend to focus on inaccurate output or lack of explainability. A third big risk category is security and incorrect use.

Respondents to the latest survey are more likely than they were last year to say their organizations consider inaccuracy and IP infringement to be relevant to their use of gen AI, and about half continue to view cybersecurity as a risk (Exhibit 7).

Conversely, respondents are less likely than they were last year to say their organizations consider workforce and labor displacement to be relevant risks and are not increasing efforts to mitigate them.

In fact, inaccuracy— which can affect use cases across the gen AI value chain , ranging from customer journeys and summarization to coding and creative content—is the only risk that respondents are significantly more likely than last year to say their organizations are actively working to mitigate.

Some organizations have already experienced negative consequences from the use of gen AI, with 44 percent of respondents saying their organizations have experienced at least one consequence (Exhibit 8). Respondents most often report inaccuracy as a risk that has affected their organizations, followed by cybersecurity and explainability.

Our previous research has found that there are several elements of governance that can help in scaling gen AI use responsibly, yet few respondents report having these risk-related practices in place. 4 “ Implementing generative AI with speed and safety ,” McKinsey Quarterly , March 13, 2024. For example, just 18 percent say their organizations have an enterprise-wide council or board with the authority to make decisions involving responsible AI governance, and only one-third say gen AI risk awareness and risk mitigation controls are required skill sets for technical talent.

Bringing gen AI capabilities to bear

The latest survey also sought to understand how, and how quickly, organizations are deploying these new gen AI tools. We have found three archetypes for implementing gen AI solutions : takers use off-the-shelf, publicly available solutions; shapers customize those tools with proprietary data and systems; and makers develop their own foundation models from scratch. 5 “ Technology’s generational moment with generative AI: A CIO and CTO guide ,” McKinsey, July 11, 2023. Across most industries, the survey results suggest that organizations are finding off-the-shelf offerings applicable to their business needs—though many are pursuing opportunities to customize models or even develop their own (Exhibit 9). About half of reported gen AI uses within respondents’ business functions are utilizing off-the-shelf, publicly available models or tools, with little or no customization. Respondents in energy and materials, technology, and media and telecommunications are more likely to report significant customization or tuning of publicly available models or developing their own proprietary models to address specific business needs.

Respondents most often report that their organizations required one to four months from the start of a project to put gen AI into production, though the time it takes varies by business function (Exhibit 10). It also depends upon the approach for acquiring those capabilities. Not surprisingly, reported uses of highly customized or proprietary models are 1.5 times more likely than off-the-shelf, publicly available models to take five months or more to implement.

Gen AI high performers are excelling despite facing challenges

Gen AI is a new technology, and organizations are still early in the journey of pursuing its opportunities and scaling it across functions. So it’s little surprise that only a small subset of respondents (46 out of 876) report that a meaningful share of their organizations’ EBIT can be attributed to their deployment of gen AI. Still, these gen AI leaders are worth examining closely. These, after all, are the early movers, who already attribute more than 10 percent of their organizations’ EBIT to their use of gen AI. Forty-two percent of these high performers say more than 20 percent of their EBIT is attributable to their use of nongenerative, analytical AI, and they span industries and regions—though most are at organizations with less than $1 billion in annual revenue. The AI-related practices at these organizations can offer guidance to those looking to create value from gen AI adoption at their own organizations.

To start, gen AI high performers are using gen AI in more business functions—an average of three functions, while others average two. They, like other organizations, are most likely to use gen AI in marketing and sales and product or service development, but they’re much more likely than others to use gen AI solutions in risk, legal, and compliance; in strategy and corporate finance; and in supply chain and inventory management. They’re more than three times as likely as others to be using gen AI in activities ranging from processing of accounting documents and risk assessment to R&D testing and pricing and promotions. While, overall, about half of reported gen AI applications within business functions are utilizing publicly available models or tools, gen AI high performers are less likely to use those off-the-shelf options than to either implement significantly customized versions of those tools or to develop their own proprietary foundation models.

What else are these high performers doing differently? For one thing, they are paying more attention to gen-AI-related risks. Perhaps because they are further along on their journeys, they are more likely than others to say their organizations have experienced every negative consequence from gen AI we asked about, from cybersecurity and personal privacy to explainability and IP infringement. Given that, they are more likely than others to report that their organizations consider those risks, as well as regulatory compliance, environmental impacts, and political stability, to be relevant to their gen AI use, and they say they take steps to mitigate more risks than others do.

Gen AI high performers are also much more likely to say their organizations follow a set of risk-related best practices (Exhibit 11). For example, they are nearly twice as likely as others to involve the legal function and embed risk reviews early on in the development of gen AI solutions—that is, to “ shift left .” They’re also much more likely than others to employ a wide range of other best practices, from strategy-related practices to those related to scaling.

In addition to experiencing the risks of gen AI adoption, high performers have encountered other challenges that can serve as warnings to others (Exhibit 12). Seventy percent say they have experienced difficulties with data, including defining processes for data governance, developing the ability to quickly integrate data into AI models, and an insufficient amount of training data, highlighting the essential role that data play in capturing value. High performers are also more likely than others to report experiencing challenges with their operating models, such as implementing agile ways of working and effective sprint performance management.

About the research

The online survey was in the field from February 22 to March 5, 2024, and garnered responses from 1,363 participants representing the full range of regions, industries, company sizes, functional specialties, and tenures. Of those respondents, 981 said their organizations had adopted AI in at least one business function, and 878 said their organizations were regularly using gen AI in at least one function. To adjust for differences in response rates, the data are weighted by the contribution of each respondent’s nation to global GDP.

Alex Singla and Alexander Sukharevsky  are global coleaders of QuantumBlack, AI by McKinsey, and senior partners in McKinsey’s Chicago and London offices, respectively; Lareina Yee  is a senior partner in the Bay Area office, where Michael Chui , a McKinsey Global Institute partner, is a partner; and Bryce Hall  is an associate partner in the Washington, DC, office.

They wish to thank Kaitlin Noe, Larry Kanter, Mallika Jhamb, and Shinjini Srivastava for their contributions to this work.

This article was edited by Heather Hanselman, a senior editor in McKinsey’s Atlanta office.

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Assessing the Hydrological Impact Sensitivity to Climate Model Weighting Strategies

Abstract. Climate change impact studies rely on ensembles of General Circulation Model (GCM) simulations. Combining ensemble members is challenging due to uncertainties in how well each model performs. The concept of model democracy where equal weight is given to each model, is common but criticized for ignoring regional variations and dependencies between models. Various weighting schemes address these concerns, but their effectiveness in impact studies, which integrate GCM outputs with separate impact models, remains unclear.

This study evaluated the impact of six weighting strategies on future streamflow projections using a pseudo-reality approach, where each GCM is treated as “the true” climate. The analysis involved an ensemble of 22 CMIP6 climate simulations and used a hydrological model across 3,107 North American catchments. Since climate model outputs often undergo bias correction before being used in hydrological models, this study implemented two approaches: one with bias correction applied to precipitation and temperature inputs, and one without. Weighting schemes were evaluated based on biases relative to the pseudo-reality GCM for annual mean temperature, precipitation and streamflow.

Results show that unequal weighting schemes produce significantly better precipitation and temperature projections than equal weighting. For streamflow projections, unequal weighting offered minor improvement only when bias correction was not applied. However, with bias correction, both equal and unequal weighting delivered similar results. While bias correction has limitations, it remains essential for realistic streamflow projections in impact studies. A pragmatic strategy may be to combine model democracy with selective model exclusion based on robust performance metrics.

This study provides insights on how weighting affects hydrological assessments. It emphasizes the need for careful approaches and further research to manage uncertainties in climate change impact studies. These findings will help improve the accuracy of climate projections and improve the reliability of hydrological impact assessments in a changing climate.

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https://doi.org/10.5194/egusphere-2024-1183-supplement

Mehrad Rahimpour Asenjan

Francois brissette, richard arsenault, jean-luc martel.