Strategy Analysis in a Nutshell
Not meant to be pretty, just get the point across.
Business strategy as I’ve learned it through my business courses at both the BSBA level and MBA level are compromised of 2 larger categories: External industry environment and internal company core competencies.
External Analysis comprises of:
Natural/Environmental, Political/Legal, Economics, Sociocultural, Demographics, and Technological segments.
Natural/Environmental: are there any natural disaster concerns? What is the availability of raw materials used to manufacture products or needed to offer services? Ex: Global Covid 19 pandemics, or a hurricane/earthquake, or maybe a giant solar flare from the sun causes the entire Earth to turn into a post apocalyptic wasteland.
Political/Legal: are there any region specific laws that restrict your business? Would the current governing body take action against your business venture? Ex: Maybe the administration decided they’re going to be “tough on China because they took our manufacturing” so there’s tariffs. Or maybe the current administration is anti-fracking so you can’t open your shiny new refinery.
Economics: is the market currently in a recession? What is your target consumer’s budget like? Ex: if current unemployment is high and consumers don’t have excess money, maybe it’s not the best time to try to launch your new $1,000 product.
Sociocultural: is your product trendy? Does your product fit into current consumer’s daily habits? Ex: does your new coffee product make it easy for coffee drinkers to use or will it take too long when they’re already 20 minutes late for work.
Demographics: what does your target customer look? How old are they? What gender are they? Where are they from? Ex: this differs from Sociocultural in the sense that this is characteristics that define the person. Sociocultural is all about their actions, habits, and trends rather than the actual type of person. These two are related but, slightly different.
Technological: does the technology exist to bring your idea to life? Ex: I don’t mean to break it to you, but teleporter beams are still a few years away. Probably not feasible to try to market that product yet.
Bonus External Analyis: Five Forces Analysis
Five Forces analysis dates all the way back to Michael Porter, which really is not that long ago, 80s and 90s. But, it seeks to help companies identify the risk of the FIVE FORCES (insert angelic music): Rivalry, Powerful Suppliers, Powerful Buyers, New Entrants, and Substitute Goods.
Rivalry consists of other companies competing for your same customers. If your supplier is a monopoly and can sell at whatever price they want, that’s the threat of Powerful Suppliers. The opposite would be powerful buyers. If you only sell to 1 buyer and they decide they don’t want to buy as much product, you’re out of luck. The threat of new entrants would be how easy is it for someone to replicate your product, think Chinese knock offs. Finally, substitute goods are replacements for your product. If you’re a CD salesman, then you really got screwed over by the invention of the iPod (thanks Steve Jobs you put all these CD stores out of business!)
Internal Analysis:
Internal Analysis can get really down in the weeds and it’s easy to get lost when you’re that narrow in focus. That’s not the purpose of this writing, we’re concerned with the overall picture.
So for now just know business level strategy concerns which markets you’re involved in. So Amazon would have 1 business level strategy for their consumer marketplace business (which is comprised of multiple sub-markets) and 1 for their Cloud Computing/Server business. Then, all the business level strategies, in theory, work together to form your overall Corporate Level Strategy.
So: business processes -> business level strategies -> ONE CORPORATE STRATEGY.
One of the most important things for a company’s internal strategy is: VALUE PROPOSITION. Does your product save time, money, or save a headache? Even better if your product does all 3.
So that’s some basic business strategy knowledge for you. Did you miss something in your business?
