Strategic analysis helps managers understand the conditions a business faces before deciding what it should do. This lesson explains how analysis of the external environment and the firm’s internal situation informs strategy, and how the needs of an established business differ from those of a start-up.
Strategic analysis is the process of examining relevant conditions inside and outside an organization to understand its situation and inform its choices. It takes place early in the strategic management process because its findings provide evidence for the decisions that follow.
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What is strategic analysis?
The examination of a firm’s external environment and internal resources and capabilities to inform strategic decisions.
Why is strategic analysis important to strategy formulation?
It provides information about the firm’s circumstances and helps managers make informed choices about plans and actions.
What is a key difference between analysis for an established business and a start-up?
An established business can examine current operations and its track record; a start-up usually has limited operating data and focuses more on market feasibility, customers, competitors, and founding-team resources.
How does SWOT organize strategic information?
It brings together internal strengths and weaknesses with external opportunities and threats.
Quiz questions
What is the role of strategic analysis in making a strategic choice?Answer: It supplies evidence for managers, who still choose among alternatives.
What does internal analysis examine?Answer: The firm’s resources and capabilities.
Which set lists the factors considered in PESTEL analysis?Answer: Political, economic, sociocultural, technological, environmental, and legal factors.
Why can a start-up not analyze its own performance history as deeply as an established business?Answer: It has little or no operating history to use as evidence.
How does SWOT organize information for strategic analysis?Answer: It groups internal strengths and weaknesses with external opportunities and threats.
Based on Principles of Management by David S. Bright, Anastasia H. Cortes, Eva Hartmann, K. Praveen Parboteeah, Jon L. Pierce, Monique Reece, Amit Shah, Siri Terjesen, Joseph Weiss, Margaret A. White, Donald G. Gardner, Jason Lambert et al. (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.