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Strategic Analysis: Definition, Types, and Benefits

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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.

 

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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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