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. to be successful in this competitive world,
business organizations should periodically conduct strategic analysis to determine
which segments need to be improved and which areas are doing well and also try to
keep a track of external factors. For an enterprise to function effectively, it is
necessary to know the ways through which the positive changes that are 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.
What are the steps to Perform a Strategic Analysis?
The strategic analysis can be performed in an enterprise in the following
different ways.
1. Analysis of the environment of the current strategies: At
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 considered while
analyzing the external environment.
2. 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?
3. 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.
4. 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.
SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition,
Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some
measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered to be
external factors over which you have essentially no control.
SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of
the business and its environment. Its key purpose is to identify the strategies that will create a firm
specific business model that will best align an organization’s resources and capabilities to the
requirements of the environment in which the firm operates.
In other words, it is the foundation for evaluating the internal potential and limitations and the
probable/likely opportunities and threats from the external environment. It views all positive and
negative factors inside and outside the firm that affect the success.
An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats) is given below-
1. Strengths - Strengths are the qualities that enable us to accomplish the organization’s
mission. Strengths can be either tangible or intangible. These are what we are well-versed in
or what we are have expertise in, the traits and qualities your employees possess
(individually and as a team) and the distinct features that give your organization its
consistency.
Strengths are the beneficial aspects of the organization or the capabilities of an organization,
which includes human competencies, process capabilities, financial resources, products and
services, customer goodwill and brand loyalty. Examples of organizational strengths are
huge financial resources, broad product line, no debt, committed employees, etc.
2. Weaknesses Weaknesses are the factors which do not meet the standards we feel they
should meet.
Weaknesses in an organization may be depreciating machinery, insufficient research and
development facilities, narrow product range, poor decision-making, etc. Weaknesses are
controllable. They must be minimized and eliminated. For instance - to overcome obsolete
machinery, new machinery can be purchased. Other examples of organizational weaknesses
are huge debts, high employee turnover, complex decision making process, narrow product
range, large wastage of raw materials, etc.
3. Opportunities - Organizations can gain competitive advantage by making use of
opportunities.
Organization should be careful and recognize the opportunities and grasp them whenever
they arise. Selecting the targets that will best serve the clients while getting desired results is
a difficult task. Opportunities may arise from market, competition, industry/government and
technology.
Threats - Threats arise when conditions in external environment jeopardize the reliability
and profitability of the organization’s business. They compound the vulnerability when they
relate to the weaknesses. Threats are uncontrollable. When a threat comes, the stability and
survival can be at stake. Examples of threats are - unrest among employees; ever changing
technology; increasing competition leading to excess capacity, price wars and reducing
industry profits; etc.
4. ist all strengths that exist now. Then in turn, list all weaknesses that exist
now.
5. Step 2 - List all opportunities that exist in the
future. Opportunities are potential future strengths. Then in turn, list
all threats that exist in the future. Threats are potential future
weaknesses.
6. Step 3 - Plan of action - Review your SWOT matrix with a view to creating
an action plan to address each of the four areas.
