3 Must-Know Methods for Strategic Analysis
Strategic analysis is important when you start a project or a business. It will help you increase your chance of success. It may also help you get through tough times. Aside from these obvious scenarios, it should also be done periodically when things are going as planned because things can change under the radar or escalate very quickly and catch you off guard. I will introduce three basic and easy-to-use models that are taught to almost every business student.
SWOT stands for strengths, weaknesses, opportunities, and threats. In this methodology, you would assess your organization's internal capabilities (especially relative to competitors). These are your strengths and weakness. Then, you would assess the external factors. These are your opportunities and threats. External factors can include market conditions and general economic trends among other things. For example, inflation and shortages are two threats supply chains currently face. The SWOT model is the most basic of the three presented here. The next two models still consider strengths, weaknesses, opportunities, and weaknesses but they will dive further into various external influences so that targeted actions can be developed to address each of them.
Porter's Five Forces
This model is named after its creator, Professor Michael Porter, from Harvard. The five forces are:
threat of new entrants;
threat of substitutes;
bargaining power of suppliers; and,
bargaining power of buyers.
Having a good understanding of each of these forces will allow you to develop a strategy to take advantage of opportunities and counteract threats. While all 5 forces are important, the vertical forces (bargaining power of suppliers, industry competition, bargaining power of buyers) are particularly important for supply chain professionals as they directly deal with them on an operational level.
PEST analysis deal with macro-level trends that affect an organization. PEST stands for political, economic, social, and technological. Each of these four areas will affect your supply chain and overall business in significant ways. For example, under political considerations, trade agreements and regulatory requirements will affect your sourcing options and decisions. In addition to PEST, legal and environmental have since been added to the original model and revised to PESTLE.
The models presented are frameworks to help you organize your thoughts but checklists alone will not give you strategy. Good strategy by its nature requires insight and focus that is not common. Challenge yourself to go against the grain. The more difficult it is for your competitors to see and predict your strategy, the greater your advantage. Finally, once you have a strategy, focus on execution. The strategy is not good unless you can execute it but that is another topic for another time. Stay tuned!