Instead strategic analysts are seeking insights about the firm's operating environment with a view to identifying possible future scenarios, opportunities and threats.
Strategic planning focuses on the three 3C's, namely: Customer, Corporation and Competitors. A detailed analysis of each factor is key to the success of strategy formulation. The 'competitors' element refers to an analysis of the strengths of the business relative to close rivals, and a consideration of competitive threats that might impinge on the business' ability to move in certain directions. The 'customer' element refers to an analysis of any possible changes in customer preferences that potentially give rise to new business opportunities. The 'corporation' element refers to a detailed analysis of the company's internal capabilities and its readiness to leverage market-based opportunities or its vulnerability to external threats.
Mintzberg suggests that the top planners spend most of their time engaged in analysis and are concerned with industry or competitive analyses as well as Internal studies, including the use of computer models to analyze trends in the organization. Strategic planners use a variety of research tools and analytical techniques, depending on the environment complexity and the firm's goals.
Fleitcher and Bensoussan, for instance, have identified some 200 qualitative and quantitative analytical techniques regularly used by strategic analysts while a recent publication suggests that 72 techniques are essential. No optimal technique can be identified as useful across all situations or problems. Determining which technique to use in any given situation rests with the skill of the analyst. The choice of tool depends on a variety of factors including: data availability; the nature of the marketing problem; the objective or purpose, the analyst's skill level as well as other constraints such as time or motivation.
The most commonly used tools and techniques include:
Research methods
- Environmental scanning
- Marketing intelligence (also known as competitive intelligence)
- Futures research
Analytical techniques
- Brand Development Index (BDI)/ Category development index (CDI)
- Brand/ Category penetration
- Benchmarking
- Blindspots analysis
- Functional capability and resource analysis
- Impact analysis
- Counterfactual analysis
- Demand analysis
- Emerging Issues Analysis
- Experience curve analysis
- Gap analysis
- Herfindahl index
- impact analysis
- Industry Analysis (also known as Porter's five forces analysis)
- Management profiling
- Market segmentation analysis
- Market share analysis
- Market Segmentation analysis
- Perceptual mapping
- PEST analysis and its variants including PESTLE, STEEPLED and STEER (PEST is occasionally known as Six Segment Analysis)
- Portfolio analysis, such as BCG growth-share matrix or GE business screen matrix
- Precursor Analysis or Evolutionary analysis
- Product life cycle analysis and S-curve analysis (also known as technology life cycle or hype cycle analysis)
- Product evolutionary cycle analysis
- Scenario analysis
- Segment Share Analysis
- Situation analysis
- Strategic Group Analysis
- SWOT analysis
- Trend Analysis
- Value chain analysis
Brief description of gap analysis
Gap analysis is a type of higher order analysis that seeks to identify the difference between the organization's current strategy and its desired strategy. This difference is sometimes known as the strategic gap. Mintzberg identifies two types of strategy namely deliberate strategy and inadvertent strategy. The deliberate strategy represents the firm's strategic intent or its desired path while the inadvertent strategy represents the path that the firm may have followed as it adjusted to environmental, competitive and market changes. Other scholars use the terms realized strategy versus intended strategy to refer to the same concepts. This type of analysis indicates whether an organization has strayed from its desired path during the planning period. The presence of a large gap may indicate the organization has become stuck in the middle; a recipe for strategic mediocrity and potential failure.
Brief description of Category/Brand Development Index
The category/brand development index is a method used to assess the sales potential for a region or market and identify market segments that can be developed (i.e. high CDI and high BDI). In addition, it may be used to identify markets where the category or brand is under-performing and may signal underlying marketing problems such as poor distribution (i.e. high CDI and low BDI).
BDI and CDI are calculated as follows:[53]
BDI = (Brand Sales (%) in Market A/ Population (%) in Market A) X 100
CDI = (Category Sales (%) in Market/ Population (%) in Market A) X 100
Brief description of PEST analysis
Strategic planning typically begins with a scan of the business environment, both internal and external, this includes understanding strategic constraints. An understanding of the external operating environment, including political, economic, social and technological which includes demographic and cultural aspects, is necessary for the identification of business opportunities and threats. This analysis is called PEST; an acronym for Political, Economic, Social and Technological. A number of variants of the PEST analysis can be identified in literature, including: PESTLE analysis (Political, Economic, Social, Technological, Legal and Environmental); STEEPLE (adds ethics); STEEPLED (adds demographics) and STEER (adds regulatory).
The aim of the PEST analysis is to identify opportunities and threats in the wider operating environment. Firms try to leverage opportunities while trying to buffer themselves against potential threats. Basically, the PEST analysis guides strategic decision-making. The main elements of the PEST analysis are:
- Political: political interventions with the potential to disrupt or enhance trading conditions e.g. government statutes, policies, funding or subsidies, support for specific industries, trade agreements, tax rates and fiscal policy.
- Economic: economic factors with the potential to affect profitability and the prices that can be charged, such as, economic trends, inflation, exchange rates, seasonality and economic cycles, consumer confidence, consumer purchasing power and discretionary incomes.
- Social: social factors that affect demand for products and services, consumer attitudes, tastes and preferences like demographics, social influencers, role models, shopping habits.
- Technological: Innovation, technological developments or breakthroughs that create opportunities for new products, improved production processes or new ways of transacting business e.g. new materials, new ingredients, new machinery, new packaging solutions, new software and new intermediaries.
When carrying out a PEST analysis, planners and analysts may consider the operating environment at three levels, namely the supranational; the national and sub-national or local level. As businesses become more globalized, they may need to pay greater attention to the supranational level.[58]
Brief description of SWOT analysis
A SWOT analysis, with its four elements in a 2×2 matrix.
In addition to the PEST analysis, firms carry out a Strengths, Weakness, Opportunities and Threats (SWOT) analysis. A SWOT analysis identifies:
- Strengths: distinctive capabilities, competencies, skills or assets that provide a business or project with an advantage over potential rivals; internal factors that are favorable to achieving company objectives
- Weaknesses: internal deficiencies that place the business or project at a disadvantage relative to rivals; or deficiencies that prevent an entity from moving in a new direction or acting on opportunities. internal factors that are unfavorable to achieving company objectives
- Opportunities: elements in the environment that the business or project could exploit to its advantage；external factors of the organization including: new products, new markets, new demand, foreign market barriers, competitors' mistakes, etc.
- Threats: elements in the environment that could erode the firm's market position; external factors that prevent or hinder an entity from moving in a desired direction or achieving its goals.
Typically the firm will attempt to leverage those opportunities that can be matched with internal strengths; that is to say the firm has a capability in any area where strengths are matched with external opportunities. It may need to build capability if it wishes to leverage opportunities in areas of weakness. An area of weakness that is matched with an external threat represents a vulnerability, and the firm may need to develop contingency plans.
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