Strategic Analysis is the process of conducting research of the internal and external environment of the company to operate the business activities in the dynamic environment and formulate the strategies for effective and efficient performance. The strategic analysis of the company requires the performance of particular activities which are as follows:
- Identify and evaluate the data relevant to policy and strategy formulation.
- Define the scope and area of analyzing the internal and external environment of the company.
- Determine the analytical methods and tools to evaluate the performance such as SWOT analysis, Porter 5 forces model, Value Chain analysis, analysis of core competencies of the company, etc.
PESTEL ANALYSIS: Every business organization has to analyze the external environment of the company that can hinder the growth of the company. PESTEL analysis is the macro environmental analysis framework that scans and evaluates all the components of external strategic analysis. The internal or microeconomic factors of the company get influenced and affected by the macro external factors. PESTEL is the acronym of Political, Economic, Social, Technological, Ecological and Legal factors of the environment. The companies would analyze all the activities and factors in relation to their operations. Through PESTEL analysis, management can achieve the following factors:
- Management can identify the major issues and challenges to be faced by the company which is uncontrollable in nature.
- Changing scenario of political and legal factors of the environment at a particular point of time.
- It helps in the identification of the impact of key issues in the environment.
- It provides knowledge of the importance of key issues to an organization.
- The analysis provides the information of likeliness of occurrence of a particular event.
Porter 5 forces analysis is a framework tool to analyze five competitive forces of the industry. Which will help in identification of strength and weaknesses of the company according to circumstances and situations of an industry? 5 forces business analysis model helps to analyze the sustainability of the business model at different levels of profitability. The five forces of competitive analysis are as follows:
- Competition Rivalry of the industry
- Potential of new entrants into the industry
- Power of Suppliers
- Power of Customers
- The threat of substitute products in the market.
Core competencies are the harmonized combination of various resources and kill of a particular company or an organization that distinguishes it from other companies in the market. core competencies of the company fulfill the following criterions of the company:
- Core competency provides the potential to access a wide variety of market.
- It contributes to building positive perception for the end customer of the product supplied.
- The core competency of the company will create difficulty for the competitors to exactly imitate the products and services.
The analysis of the core competencies of the company can be done in the following ways:
- Define the internal competencies of the company that provide the advantage of strategic positioning of the company to deliver sustainable value to the customer.
- The analysis of the core competency of the company provides knowledge of the strengths and weaknesses of the company.
- The core competencies of the company provide the yardstick for comparison with other related companies in the market and develop the strategies accordingly.
- The management can design the road map of the company on the basis of core competencies.
- Management can separate the key factors of the company from other resources and factors to transform the weaknesses of the company into strength.
Management ensures the inclusive participation of the core competencies of the company in the overall development of the company.