Understanding Strategy
Before delving deeply into strategic analysis and its tools, it is crucial to highlight the concept of strategy. A strategy is essentially a plan designed to achieve long-term objectives and is at the core of strategic management. It empowers an organization to perform essential activities inherent to its operations, enabling it to compete successfully with other entities. Additionally, it illustrates how the organization can attract and satisfy customers to meet its goals. This concept encompasses a complex amalgamation of ideas, theories, insights, experiences, and expectations, serving as a guiding framework for executing specific tasks aimed at achieving particular objectives.
The term “strategy” originated in military contexts, denoting a scenario with two opposing parties, each striving to leverage its available resources to surpass the other. Each party must assess both external and internal conditions to gain an advantage that will help meet its objectives. This concept subsequently transitioned into the business realm, where modern industrial and commercial organizations have devised strategic plans to gain a competitive edge over rivals, capture significant market share, and maximize profits.
Strategic Analysis
Strategic analysis, or Strategy Analysis, represents a comprehensive framework for strategic management processes. It consists of several key stages, beginning with an evaluation of the internal and external (or ecological) environments. This is followed by strategy formulation, the conduct of strategic analysis using appropriate tools, defining methods for implementing and assessing these strategies, and ultimately culminating in feedback. Notably, various types of strategies exist, including Corporate Strategy, Business Strategy, and Functional Strategy. The tools associated with strategic analysis include:
- SWOT Analysis: This tool involves assessing the strengths and weaknesses of the internal environment of the organization, as well as identifying the opportunities and threats present in the external environment. It examines strengths as strategic internal factors representing the organization’s capabilities that enhance its competitive advantage in executing its strategies to achieve its vision, mission, goals, and objectives. Weaknesses are also scrutinized as internal strategic factors that create barriers to achieving these visions and goals. Opportunities, deemed strategic external factors, are those from which the organization can benefit to improve its standing or competitive advantage. Lastly, threats, which are external strategic factors, are those that obstruct the organization’s capacity to achieve its objectives or bolster its competitive edge.
- Integrated Growth: This involves actively seeking new opportunities for advancement and sustainability. It is regarded as one of the most effective tools that offers various alternative strategies from which the best can be selected, or enables transitioning among them based on internal changes and external environmental variables, encompassing both horizontal and vertical diversification.
- Business Units: The range of strategic options at this level is extensive. It is essential to define business units as those that manage activities within strategic work units, facilitating effective competition in a specific business area while aligning with the overarching purposes of the organization. This managerial level raises critical questions, such as what product or service the unit will market, who its target customers are, and how the unit can achieve a competitive advantage within its marketing sector. Strategic options for business units are classified into competitive and cooperative strategies.