What is Strategic Analysis?

Strategic analysis refers to the process of conducting research on a company and its operating environment to
formulate a strategy. The definition of strategic analysis may differ from an academic or business perspective,
but the process involves several common factors:

1. Identifying and evaluating data relevant to the company’s strategy

2. Defining the internal and external environments to be analyzed
3. Using several analytic methods such as Porter’s five forces analysis, SWOT analysis, and value
chain analysis
What is Strategy?
A strategy is a plan of actions taken by managers to achieve the company’s overall goal and other subsidiary
goals. It often determines the success of a company. In strategy, a company is essentially asking itself, “Where
do you want to play and how are you going to win?” The following guide gives a high-level overview of
business strategy, its implementation, and the processes that lead to business success.
 Vision, Mission, and Values
To develop a business strategy, a company needs a very well-defined understanding of what it is and what it
represents. Strategists need to look at the following:

● Vision – What it wants to achieve in the future (5-10 years)

● Mission Statement – What business a company is in and how it rallies people
● Values – The fundamental beliefs of an organization reflecting its commitments and ethics
After gaining a deep understanding of the company’s vision, mission, and values, strategists can help the
business undergo a strategic analysis. The purpose of a strategic analysis is to analyze an organization’s
external and internal environment, assess current strategies, and generate and evaluate the most successful
strategic alternatives.
 Strategic Analysis Process
The following infographic demonstrates the strategic analysis process:

1. Perform an environmental analysis of current strategies

Starting from the beginning, a company needs to complete an environmental analysis of its current strategies.
Internal environment considerations include issues such as operational inefficiencies, employee morale, and
constraints from financial issues. External environment considerations include political trends, economic shifts,
and changes in consumer tastes.
 
2. Determine the effectiveness of existing strategies
A key purpose of a strategic analysis is to determine the effectiveness of the current strategy amid the
prevailing business environment. Strategists must ask themselves questions such as: Is our strategy failing or
succeeding? Will we meet our stated goals? Does our strategy align with our vision, mission, and values?
 
3. Formulate plans
If the answer to the questions posed in the assessment stage is “No” or “Unsure,” we undergo a planning stage
where the company proposes strategic alternatives. Strategists may propose ways to keep costs low and
operations leaner. Potential strategic alternatives include changes in capital structure, changes in supply chain
management, or any other alternative to a business process.
 
4. Recommend and implement the most viable strategy
Lastly, after assessing strategies and proposing alternatives, we reach a recommendation. After assessing all
possible strategic alternatives, we choose to implement the most viable and quantitatively profitable strategy.
After producing a recommendation, we iteratively repeat the entire process. Strategies must be implemented,
assessed, and re-assessed. They must change because business environments are not static.
 
Levels of Strategy
Strategic plans involve three levels in terms of scope:
 
1. Corporate-level (Portfolio)
At the highest level, corporate strategy involves high-level strategic decisions that will help a company
sustain a competitive advantage and remain profitable in the foreseeable future. Corporate-level decisions are
all-encompassing of a company.
 
2. Business-level
At the median level of strategy are business-level decisions. The business-level strategy focuses on market
position to help the company gain a competitive advantage in its own industry or other industries.
 
3. Functional-level
At the lowest level are functional-level decisions. They focus on activities within and between different
functions, aimed at improving the efficiency of the overall business. These strategies are focused on
particular functions and groups.
 Strategic, Tactical, and Operational Business Analysis
by Angela & Tom Hathaway | Sep 1, 2012 

Strategic Business Analysis (aka Enterprise Analysis) encompasses all of the pre-project work to identify
business problems, define business opportunities, develop a business case, and recommend whether to
initiate a project. This level of business analysis is relatively methodology independent because it has nothing
to do with software development per se. The only impact is the form in which the outcome is expressed. If
a traditional methodology is in place, Strategic Business Analysis delivers business strategies, goals, and
objectives and develops Project Scope and Business Requirements.

Strategic Business Analysis defines the high-level of the project in terms of Themes and Business Epics, which
are less formal and postpone details until the developers need them. In either case, those performing this level
 of business analysis need a broad set of tools and techniques to ensure that the resulting projects support the
organization’s business goals and objectives.

Tactical Business Analysis

targets the project level and is more the traditional “Business (System) Analyst” role. The selected plan will
impact this level of business analysis in two ways:

1. Timing of Analysis
2. Level of Detail of the Outcome

Tactical business analysis assumes sufficient knowledge of specific business analysis

techniques  to get the current job done. People who do not have a business analyst title often perform
this function. At this level, agile primarily implies a change in the timing and depth of business analysis
activities. Whoever is wearing the business analyst hat maintains a backlog of stakeholder
requirements in the form of user stories and decomposes epics into user stories as the development
team needs them. This moves all analysis results closer to their moment of impact. The agile team’s
ability to do effective business analysis activities is one of the primary determinants of their likely
success.

Operational Business Analysis –

THIS IS THE CORE INPUT TO STRATEGIC BUSINESS ANALYSIS

is the level most concerned with the business use of information technology.  it uses stakeholder
requirements in the traditional sense or user stories in the agile world to define solution (functional and
quality) and transition requirements.

Operational analysis is a method of examining the current performance of an operational (or steady-state)
investment and measuring that performance against an established set of cost, schedule, and performance
parameters.  An operational analysis is, by nature, less structured than performance reporting methods applied to
developmental projects (such as Earned Value Analysis).  It is less structured in nature, and should trigger
considerations of how the investment’s objectives could be better met, how costs could be saved, and whether, in
fact, the organization should even be performing a particular function.

Beyond the typical developmental performance measures of “Are we on schedule?” and “Are we within budget?”, an
operational analysis should seek to answer more subjective questions in the specific areas of:

● Customer Results,
● Strategic and Business Results,
● Financial Performance, and
● Innovation.
In addressing Customer Results, the analysis should focus on whether the investment is fully meeting the
customer’s needs and whether the cost to the customer is as low as it could be for the results delivered.   The focus
here is on how well the investment is delivering the goods or services that it is intended to deliver.   Discuss such
issues as:

● Is the investment delivering the agreed-upon products or services on schedule?

● Does the quality delivered meet the customers’ expectations?
● Have the customers requested additional features or services that are not being delivered?
Strategic and Business Results measure the effect of the investment on the performing organization itself, and
should provide a measure of how well the investment is meeting business needs and contributing to the
achievement of the organization’s strategic goals.  The operational analysis should address itself to questions such
as:

● “Does this investment help us get our job done?”

● “What strategic goal does this investment address, and how does it help us achieve that goal?”
● “Is there another organization that could be doing this work better, more efficiently or at lower cost?”
In measuring the Financial Performance of a steady-state investment, the operational analysis should compare
current performance with a pre-established cost baseline.  While financial performance is typically expressed as a
very quantitative measure, the investment should also be subjected to a periodic (annual?) review for
reasonableness and cost efficiency.

Addressing Innovation in the operational analysis is an opportunity to conduct a qualitative analysis of the

investment’s performance in terms of the three previous factors.  This aspect of the operational analysis should
address questions such as:

● “How could we better meet the customer’s needs?”

● “Could we meet these same customer needs at lower cost?”
● “How could this investment be combined with others to better meet our organization’s strategic goals?”
● “How could we make better use of technology to provide a better level of service at lower cost?”
The following are some guidelines for conducting an operational analysis. They can be considered as a “checklist”
of things that should be included. While they provide an outline of items that should always be included in an
operational analysis, the exact format and detailed content are the choice of the organization doing the analysis:

Describe the baseline against which you measure the investment’s performance.  Is there an approved and up-to-
date charter or program plan?  The baseline could be defined in documents such as an Annual Performance Plan,
or the Strategic IT Plan.  The important point is that you discuss the continued need for the investment, along with
performance metrics for measuring its performance.  The performance metrics should have a clear relationship to
both the investment’s business need and your organization’s strategic direction.

Describe the method you are using to measure and track cost, schedule and performance metrics.    Describe the
investment’s cost, schedule, and performance baseline, and describe the management technique you are using to
monitor metrics against the baseline(monthly status review meetings, budget reviews, etc).  Also describe the
quantitative metrics you are using to measure variances from the baseline, and the frequency with which you apply
these measurements.  It could also be helpful in this section to describe any tools you are using to track
performance metrics (Microsoft Project, Excel spreadsheets, etc).

Describe the investment’s management control process.  What are the operational, mid-management and senior
management policies for review and intervention?  If the investment’s variances exceed defined boundaries, what
action is taken to rectify the situation?  How, and how often, does management ensure the continued strategic fit of
the investment with the organization’s strategic direction?

Discuss the current performance of the investment.  Is performance within limits of variance?  If not, what corrective
actions are you taking to get back on track?  Has upper management concurred in the planned corrective actions?

Discuss the results of the most recent review of the investment.  Is the investment still considered viable?  Does it
continue to be aligned with your organization’s strategic direction?  Discuss the most recent alternative analysis
conducted.  How could the business need for the investment be met more efficiently, more effectively, or at lower
cost?  Demonstrate that you have actually done a thorough analysis of the need for the investment, the
performance being achieved by the investment, the advisability of continuing the investment, and alternative
methods of achieving the same investment results.