What is Strategic Analysis?

Strategic analysis, sometimes referred to as market analysis, refers to the process of collecting data that helps company leaders make decisions regarding priorities, goals, and the formulation or modification of long-term business strategies. This analysis provides the company with the ability to understand its environment and formulate a strategic plan accordingly. Strategic analysis is considered a very important process in any organization as it provides the context and framework upon which strategy formulation and overall business positioning are based.

Why is it not enough to simply refer to quantitative data and charts to develop a plan for the future?

The reason is that it is impossible for an organization to understand how to achieve success without having contextual information first, and this information consists of qualitative and quantitative data related to internal resources and the external environment. Strategic analysis is the process that adds context to quantitative data. Discovering trends and patterns in the data and evaluating them helps in determining your organization’s long-term plan.

How do you know you are conducting a strategic analysis?

If you are focusing on high-level strategy, meaning you are determining the priorities of operations, sales, marketing, or any other function, then the strategic analysis will not happen at the enterprise level as a whole. Instead, the focus should be on information that directly affects your long-term strategies and goals.

Strategic analysis also means looking backward and forward. It involves evaluating data related to past events so that you can identify the effects that resulted from that performance and predict what may happen in the future. The better your reports are at looking back, the more advanced your organization will be.

Company leaders participate in the process, where novice analysts collect the information, but the leadership team needs to make decisions and take actions based on that information.

Strategic analysis should not be limited to a one-time occurrence and then ignored when developing and implementing your strategy. To remain adaptable in a changing business environment, whether the changes are due to an increase in the number of employees, changes in government regulations, or any other changes, it is advisable to conduct strategic analysis periodically. In rapidly changing industries, this process should be more frequent and recurring than others. Conducting an annual update of your strategic market analysis will not only help keep your organization on the right track for a few years, but it will also contribute to guiding your annual list of initiatives.

Types of Strategic Analysis

There is no standard pattern for strategic analysis. Instead, there are several methodologies available to assist you in the process of collecting and analyzing relevant data for strategic planning. Two of the most common methods are SWOT and PESTLE analysis.

SWOT analysis, which stands for strengths, weaknesses, opportunities, and threats, helps organizations identify areas that are performing well and where improvements can be made, whether internally or externally. Strengths and weaknesses are internal factors, while opportunities and threats are external factors.

PESTLE analysis focuses entirely on external factors in the political, economic, social, technological, environmental, and legal domains that your organization cannot control but must be prepared for. This analysis can highlight things like changes in tax legislation, new regulations or legal procedures, interest rate fluctuations, and so on. Any change that occurs and has a material impact on your business should be considered in your strategic planning.

Many organizations use SWOT and PESTLE analysis to get a comprehensive picture of the business environment. The entire leadership team should participate significantly in these analysis sessions, and any other employee who can provide relevant data or perspectives should also be involved. Some team members may be able to discuss strengths and weaknesses based on their experiences, while others may have access to data that supports those perspectives and provides context around them. The team that possesses knowledge about the company and the industry can produce the most effective strategic analysis.