Strategic Analysis Tools

Key ideas#

Levels of strategy#

The BCS authors adopt the view of Johnson, Scholes and Whittington: strategy is about where an organization is heading over the long term and how it arranges its resources to gain advantage and satisfy stakeholders as its environment changes. It works at three levels: - Corporate — the whole organization and which businesses it is in. - Business unit — products, prices and how to compete in one market. - Operational — the resources, processes and people that deliver the strategy.

Analysts work mostly at the operational level but should check every change against the levels above.

Three lenses and the politics of strategy#

Johnson, Scholes and Whittington describe three ways strategy actually develops. Through the design lens, it is planned formally from the top: good for control, slow to revise. Through the experience lens, it grows out of culture and habit: safe, but usually more of the same. Through the ideas lens, it comes from new thinking, new leaders, or scanning the environment.

Strategy is also political. Groups gain power when others depend on their resources, when they control money, from their position, from doing something no one else can, and from coping with uncertainty on everyone’s behalf. Under high uncertainty, the “garbage can” model applies: problems, solutions and decision makers drift independently and meet almost by chance.

External analysis: PESTLE and Five Forces#

PESTLE covers Political, Economic, Sociocultural, Technological, Legal and Environmental factors. The BCS authors stress that it is not a form to fill in. Find the few factors that really matter, then use them to build several scenarios of the future, not just “good” and “bad”.

Porter’s Five Forces assess how attractive an industry is: - New entrants — a low threat when barriers are high (scale, capital, distribution access, patents). - Supplier power — high when suppliers are few or switching is costly. - Buyer power — high when buyers are concentrated and switching is cheap. - Substitutes — another product meets the same need, or customers do without. - Rivalry — high with many competitors, slow growth, high fixed or exit costs, weak differentiation.

Limits: government is not an explicit force (Porter argues it acts through the other five), and the model fits non-profits poorly.

Internal analysis: MOST and resource audit#

MOST checks whether direction is clear: Mission, Objectives (measurable), Strategy (the approach) and Tactics (the concrete means). A coherent MOST is a strength; a vague one is a weakness.

The resource audit works inside-out, on the idea that advantage comes from core competences. Review physical, financial and human resources, plus two intangibles: know-how (patents, technology) and reputation.

Portfolio view: the Boston Box#

A 2×2 grid of market share against market growth: question marks (low share, high growth: bets on the future), stars (high share, growing market), cash cows (high share, mature market: they fund the rest) and dogs (low share, low growth: exit candidates). It favors near-term financial return over long-term strategy.

Summary: SWOT#

SWOT sets internal Strengths and Weaknesses (judged against competitors) against external Opportunities and Threats. The BCS book warns against using it as the first tool: without prior external and internal analysis, a SWOT is thin. Keep each entry brief, specific, realistic, evidenced and tied to critical success factors.

Implementation: McKinsey 7-S and the Balanced Scorecard#

McKinsey 7-S reminds you that a new strategy affects six other elements. Three are “hard”: strategy, structure, systems. Four are “soft”: shared values, style, staff and skills.

Kaplan and Norton’s Balanced Business Scorecard translates strategy into four perspectives (financial, customer, internal business process, learning and growth) linked as a causal chain: learning improves processes, better processes satisfy customers, satisfied customers deliver financial results.

Success also depends on the pace and scale of change, the organization’s readiness, and a strategic leader who communicates a clear vision and sets an example.