Strategic Business Analysis (Notes)

Definition of Strategy and Strategic Business Analysis According to Peter Drucker Strategy to is a pattern of activities that seek achieve the objectives of the organization and adapt its scope. Resources and operations to environmental changes in the long term Johnson, Scholes and Whittington de...

Definition of Strategy and Strategic Business Analysis According to Peter Drucker Strategy to is a pattern of activities that seek achieve the objectives of the organization and adapt its scope. Resources and operations to environmental changes in the long term Johnson, Scholes and Whittington defined strategy As "the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competencies with the aim of fulfilling stakeholder expectations. Strategic business analysis Strategic business analysis involves management decisions to assess the impact of strategic events like new product development, expansion to new locations, hiring key staff, technology investments, risk management, legal compliance, and organizational changes. It considers both the corporate perspective and long-term view, Emphasizing the importance of strategy in business. In Moderns business environment, strategic business analysis is close linked with strategic management and planning, reflecting the challenge: of adapting to dynamic changes in the business landscape. 3 Levels of Strategy Corporate Strategy The first level of strategy in the business world is corporate strategy, which sits at the top of the heap'. Corporate strategy is concerned with deciding which business or businesses an entity should be in, and setting targets for the achievement of the entity's overall objectives. Business Strategy This level of strategy as a 'step down' from the corporate strategy level. In other words, the strategies that you outline at this level are slightly more specific and they usually relate to the smaller businesses within the larger organization. Business strategy, also called competitive strategy, is concerned with how each business activity within the entity contributes towards the achievement of the corporate strategy Functional strategy, also known as operational strategy, focuses on the day-to-day decisions that guide the organization. These decisions involve areas like product pricing, plant investments, and personnel policies. -It is crucial for functional strategies to align with Strategic business unit strategies, which then Connect to the overall corporate strategy. Successful implementation of functional strategies Is essential for achieving corporate and business Objectives. Elements of Strategic Management and Business Analysis Johnson, Scholes and Whittington state that strategic management consists of three elements: Strategic position 2\. Strategic choices 3\. Strategic into action Strategic Position Strategic position means making an analysis or assessment of the strategic position of the entity. The senior management of a company, for example, need to understand the position of the company in its markets: Three aspects to strategic position (Johnson, Scholes and Whittington) Environment an analysis of the business environment involves an analysis of the threats and opportunities that seem to exist, and an assessment of their significance. Strategic capability of the entity the management of an entity should also make an assessment of the strategic capability of the entity. This means reaching an understanding of what the entity is capable of achieving. An assessment of strategic capability involves an analysis of the strengths and weaknesses of the entity. Expectations and purposes an analysis of strategic position also requires management to make decisions about the purpose of the entity and what it is trying to achieve.. Strategic Choice THREE ELEMENTS Generation of strategic options, e.g. growth, acquisition, diversification or concentration. 2\. Evaluation of the options to assess their relative merits and feasibility. 3\. Selection of the strategy or option that the organization will pursue. Strategy into action/implementation These means implementing the chosen strategies. Three aspects to strategy implementation: Organizing An organization structure must be established That will help the entity to implement its strategies effectively In order to achieve its strategic targets. Organizing means Putting into place a management structure and delegating authority. Individuals should be made responsible and accountable for different aspects of the chosen strategies. Decision-making processes must be established. For example, should the organization be split into European, US and Asian Divisions? How autonomous should divisions be? Enabling It means enabling the entity to achieve success through the effective use of its resources. For example, appropriate human resources and fixed assets need to be acquired. Managing change Most strategic planning and implementation will involve change, so managing change, in particular employees' fears and resistance, is crucial. The Process of Strategy Development 4.1 Deliberate strategy, emergent strategy and incremental strategy Deliberate strategy Deliberate strategy is a top down approach to strategic planning that emphasize intention. This is built based on the vision and mission of the organization and is focused on achieving the purpose of doing business. Michael Porter introduced the concept of deliberate strategy and said that "Strategy is about making choice, trade-offs; it's about deliberately choosing to be different." He emphasized that businesses should strive to achieve one of the following positions in order to achieve a competitive advantage. These strategies are named as 'generic competitive strategies'. Cost leadership strategy achieving the lowest cost of operation in an industry Differentiation strategy offering a unique product that does not have a close substitute focus strategy achieving a cost leadership of differentiation status in a niche market Emergent strategy Emergent strategy is also referred to as 'realized strategy'. Emergent strategy is the process of identifying unforeseen outcomes from the execution of strategy and then. Learning to incorporate those unexpected outcomes into future corporate plans by taking a bottom up approach to management. Henry Mintzberg Introduced the concept of emergent strategy since he did not agree with the concept of deliberate strategy put forward by Michael Porter. His argument was that the business environment is constantly changing and businesses need to be flexible in order to benefit from various opportunities. Incremental Strategy This strategy is developed slowly overtime by taking small changes in the existing strategy Incremental strategy is only safe when an entity operates in a very stable environment, where changes over time are small and gradual. 4.2 Strategy Lenses Strategy Lenses refers to different perspectives or frameworks used to understand and analyze strategic management. Strategy development can be seen: As design As experience 3.As ideas Strategy as Design: The Design Lense Strategy can be seen as the result of a design process. Strategy development is logical, analytical and planned. Characteristics of seeing strategy development as a design process are as follows: Strategy development is a formal and deliberate Process. Thinking about strategy, and making strategic choices as an outcome from this thinking process, precedes the implementation of strategy. Strategies are logical and clear. Strategic choices are made by senior management. Senior managers are the strategic decision makers. Strategy as Experience Strategy as Experience is a concept from strategic management that focuses on the role of organizational learning and experience in shaping strategy. -This perspective emphasizes that strategy evolves through the accumulated knowledge and practical experiences of an organization rather than being solely a product of deliberate planning. Strategy as Ideas Strategy as design and strategy as experience do not explain innovation. Formal strategic planning can help an entity to deal with the problems of change in the business environment, but it is not particularly well-suited to innovation and radical new ideas Strategy as ideas is similar to emergent strategy Using The Three Strategy Lenses Johnson and Scholes suggested that there is no single correct approach to strategy development. All three strategy lenses provide a different insight into strategy, and any one lens might be appropriate in a particular situation. Management should therefore be prepared to use all three lenses Strategic Planning framework Although strategic development in practice might be the outcome from deliberate strategies and emergent strategies (and possibly also some incremental strategies), it is useful to study the subject of business analysis and business strategy as if it were an organized process of planning and implementation. This helps to provide a framework for understanding the issues in strategic management and business analysis. Two strategic planning frameworks that are useful to bear in mind are the rational planning model and strategic gap analysis. The Rational Planning Model The 'rational planning model is a strategic planning framework that Sees the purpose of strategy as the achievement of clearly-established objectives Considers strategic planning to be a formal process, led by senior management Sees strategic planning as a multi-layered process, with corporate strategy, business strategy and functional strategies Gap Analysis as an Approach to Strategic Development Gap analysis provides an alternative model for planning and developing strategy in a formal way. This approach consists of the following stages. Identifying objectives and setting targets: Where do we want to be? Establishing the current position. Where are we now? Measuring the difference between where we are and where we want to be as a strategic gap The gap might be expressed in a variety of ways. For example, at a corporate strategy level, a gap might be expressed including total annual sales revenue and total profitability, or product-market areas that the company should be operating in. The purpose of strategy development should be to choose and implement strategies that will fill this strategic gap (or planning gap) so that the objectives can be achieved. Filling the gap requires: An analysis of environmental threats and opportunities, and the internal strengths and weaknesses of the entity Identifying the competitive advantage that the entity enjoys. If necessary, re-stating the business objectives as a result of this strategic appraisal, so that objectives remain realistic and achievable: this will change the size of the strategic gap Identifying alternative strategies, evaluating them and selecting strategies to fill the strategic gap implementing the selected strategy The Relationship between Strategic Business Analysis, Strategy, and Strategic Management Strategic Business Analysis Strategic Business Analysis (SBA) is a crucial element that bridges the gap between an organization's high-level strategic goals and its operational activities. It connects deeply with both Strategy and Strategic Management by providing the necessary insights, frameworks, and processes to ensure effective planning, execution, and evaluation of strategic initiatives Relations to Strategy Informing Strategy Development SBA provides the essential data and analysis needed to formulate robust strategy. Aligning Strategic Goals with Business Needs SBA ensures that the strategic goals reflect the actual needs an conditions of the business. Enabling Strategic Execution SBA translates high-level strategic goals into specific, actionable initiatives. Relations to Strategic Management Definition of Strategy and Strategic Business Analysis According to Peter Drucker strategy to is a pattern of activities that seek achieve the objectives of the organization and adapt its scope. resources and operations to environmental changes in the long term Johnson, Scholes and Whittington defined strategy as \"the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competencies with the aim of fulfilling stakeholder expectations. Strategic business analysis Strategic business analysis involves management decisions to assess the impact of strategic events like new product development, expansion to new locations, hiring key staff, technology investments, risk management, legal compliance, and organizational changes. It considers both the corporate perspective and long-term view, emphasizing the importance of strategy in business. In Moderns business environment, strategic business analysis is close linked with strategic management and planning, reflecting the challenge: of adapting to dynamic changes in the business landscape. 3 Levels of Strategy Corporate Strategy The first level of strategy in the business world is corporate strategy, which sits at the top of the heap\'. Corporate strategy is concerned with deciding which business or businesses an entity should be in, and setting targets for the achievement of the entity\'s overall objectives. Business Strategy this level of strategy as a \'step down\' from the corporate strategy level. In other words, the strategies that you outline at this level are slightly more specific and they usually relate to the smaller businesses within the larger organization. Business strategy, also called competitive strategy, is concerned with how each business activity within the entity contributes towards the achievement of the corporate strategy Functional strategy, also known as operational strategy, focuses on the day-to-day decisions that guide the organization. These decisions involve areas like product pricing, plant investments, and personnel policies. -It is crucial for functional strategies to align with strategic business unit strategies, which then connect to the overall corporate strategy. Successful implementation of functional strategies is essential for achieving corporate and business objectives. Elements of Strategic Management and Business Analysis Johnson, Scholes and Whittington state that strategic management consists of three elements: 1\. Strategic position 2\. Strategic choices 3\. Strategic into action 1\. Strategic Position Strategic position means making an analysis or assessment of the strategic position of the entity. The senior management of a company, for example, need to understand the position of the company in its markets: Three aspects to strategic position (Johnson, Scholes and Whittington) 1\. Environment an analysis of the business environment involves an analysis of the threats and opportunities that seem to exist, and an assessment of their significance. 2\. Strategic capability of the entity the management of an entity should also make an assessment of the strategic capability of the entity. This means reaching an understanding of what the entity is capable of achieving. An assessment of strategic capability involves an analysis of the strengths and weaknesses of the entity. 3\. Expectations and purposes an analysis of strategic position also requires management to make decisions about the purpose of the entity and what it is trying to achieve.. 2\. Strategic Choice THREE ELEMENTS 1\. Generation of strategic options, e.g. growth, acquisition, diversification or concentration. 2\. Evaluation of the options to assess their relative merits and feasibility. 3\. Selection of the strategy or option that the organization will pursue. 3\. Strategy into action/implementation These means implementing the chosen strategies. three aspects to strategy implementation: 1\. Organizing An organization structure must be established that will help the entity to implement its strategies effectively in order to achieve its strategic targets. Organizing means putting into place a management structure and delegating authority. Individuals should be made responsible and accountable for different aspects of the chosen strategies. Decision-making processes must be established. for example, should the organization be split into European, US and Asian divisions? How autonomous should divisions be? 2\. Enabling It means enabling the entity to achieve success through the effective use of its resources. for example, appropriate human resources and fixed assets need to be acquired. 3\. Managing change Most strategic planning and implementation will involve change, so managing change, in particular employees\' fears and resistance, is crucial. The Process of Strategy Development 4.1 Deliberate strategy, emergent strategy and incremental strategy Deliberate strategy Deliberate strategy is a top down approach to strategic planning that emphasize intention. This is built based on the vision and mission of the organization and is focused on achieving the purpose of doing business. Michael Porter introduced the concept of deliberate strategy and said that \"Strategy is about making choice, trade-offs; it\'s about deliberately choosing to be different.\" He emphasized that businesses should strive to achieve one of the following positions in order to achieve a competitive advantage. These strategies are named as \'generic competitive strategies\'. Cost leadership strategy achieving the lowest cost of operation in an industry Differentiation strategy offering a unique product that does not have a close substitute focus strategy achieving a cost leadership of differentiation status in a niche market Emergent strategy Emergent strategy is also referred to as \'realized strategy\'. Emergent strategy is the process of identifying unforeseen outcomes from the execution of strategy and then. learning to incorporate those unexpected outcomes into future corporate plans by taking a bottom up approach to management. Henry Mintzberg Introduced the concept of emergent strategy since he did not agree with the concept of deliberate strategy put forward by Michael Porter. His argument was that the business environment is constantly changing and businesses need to be flexible in order to benefit from various opportunities. Incremental Strategy this strategy is developed slowly overtime by taking small changes in the existing strategy Incremental strategy is only safe when an entity operates in a very stable environment, where changes over time are small and gradual. 4.2 Strategy Lenses Strategy Lenses refers to different perspectives or frameworks used to understand and analyze strategic management. Strategy development can be seen: 1\. As design 2\. As experience 3.As ideas Strategy as Design: The Design Lense Strategy can be seen as the result of a design process. Strategy development is logical, analytical and planned. Characteristics of seeing strategy development as a design process are as follows: Strategy development is a formal and deliberate process. Thinking about strategy, and making strategic choices as an outcome from this thinking process, precedes the implementation of strategy. Strategies are logical and clear. Strategic choices are made by senior management. Senior managers are the strategic decision makers. Strategy as Experience Strategy as Experience is a concept from strategic management that focuses on the role of organizational learning and experience in shaping strategy. -This perspective emphasizes that strategy evolves through the accumulated knowledge and practical experiences of an organization rather than being solely a product of deliberate planning. Strategy as Ideas Strategy as design and strategy as experience do not explain innovation. formal strategic planning can help an entity to deal with the problems of change in the business environment, but it is not particularly well-suited to innovation and radical new ideas Strategy as ideas is similar to emergent strategy Using The Three Strategy Lenses Johnson and Scholes suggested that there is no single correct approach to strategy development. All three strategy lenses provide a different insight into strategy, and any one lens might be appropriate in a particular situation. Management should therefore be prepared to use all three lenses Strategic Planning framework Although strategic development in practice might be the outcome from deliberate strategies and emergent strategies (and possibly also some incremental strategies), it is useful to study the subject of business analysis and business strategy as if it were an organized process of planning and implementation. This helps to provide a framework for understanding the issues in strategic management and business analysis. Two strategic planning frameworks that are useful to bear in mind are the rational planning model and strategic gap analysis. 1\) The Rational Planning Model The \'rational planning model is a strategic planning framework that sees the purpose of strategy as the achievement of clearly-established objectives considers strategic planning to be a formal process, led by senior management sees strategic planning as a multi-layered process, with corporate strategy, business strategy and functional strategies 2\) Gap Analysis as an Approach to Strategic Development Gap analysis provides an alternative model for planning and developing strategy in a formal way. This approach consists of the following stages. Identifying objectives and setting targets: Where do we want to be? Establishing the current position. Where are we now? Measuring the difference between where we are and where we want to be as a strategic gap The gap might be expressed in a variety of ways. for example, at a corporate strategy level, a gap might be expressed including total annual sales revenue and total profitability, or product-market areas that the company should be operating in. The purpose of strategy development should be to choose and implement strategies that will fill this strategic gap (or planning gap) so that the objectives can be achieved. filling the gap requires: an analysis of environmental threats and opportunities, and the internal strengths and weaknesses of the entity identifying the competitive advantage that the entity enjoys. if necessary, re-stating the business objectives as a result of this strategic appraisal, so that objectives remain realistic and achievable: this will change the size of the strategic gap identifying alternative strategies, evaluating them and selecting strategies to fill the strategic gap implementing the selected strategy The Relationship between Strategic Business Analysis, Strategy, and Strategic Management Strategic Business Analysis Strategic Business Analysis (SBA) is a crucial element that bridges the gap between an organization\'s high-level strategic goals and its operational activities. It connects deeply with both Strategy and Strategic Management by providing the necessary insights, frameworks, and processes to ensure effective planning, execution, and evaluation of strategic initiatives Relations to Strategy Informing Strategy Development SBA provides the essential data and analysis needed to formulate robust strategy. Aligning Strategic Goals with Business Needs SBA ensures that the strategic goals reflect the actual needs an conditions of the business. Enabling Strategic Execution SBA translates high-level strategic goals into specific, actionable initiatives. Relations to Strategic Management SUPPORTING STRATEGIC PLANNING Strategic Management is the process of defining the organization's vision, setting goals, and determining the actions needed to achieve them. GUIDING DECISION-MAKING Strategic Management involves making key decisions about urce allocation, market positioning, and growth initiatives, MONITORING AND ADJUSTING STRATEGIES SBA is vital in the ongoing assessment and refinement of strategies. What is/are the difference between Strategic Business Analysis and Strategic Management and Planning? Strategic Management and planning is a broader concept that includes the entire process of setting goals, determining actions to achieve those goals, and mobilizing resources to execute the actions. While the Strategic Business Analysis main objective is to gather and analyze data to make informed decisions about business opportunities and threats. While they are both long-term in nature, it is understood that Strategic Business Analysis is strategizing for the organization and Strategic Management and Planning is controlling the organization to both achieve a goal.