Skip to ContentGo to accessibility pageKeyboard shortcuts menu
OpenStax Logo
Principles of Management

9.3 The Role of Strategic Analysis in Formulating a Strategy

Principles of Management9.3 The Role of Strategic Analysis in Formulating a Strategy
Search for key terms or text.
  1. Why is strategic analysis important to strategy formulation?

In the previous chapter, you read about the various levels of analysis that a manager carries out in order to understand their firm’s competitive environment. A strategic analysis of a firm’s external environment (the world, competitors) and internal environment (firm capabilities and resources) gives its managers a clear picture of what they have to work with and also what needs to be addressed when developing a plan for the firm’s success. Analysis comes early in the strategic process because the information a manager gets from the analysis informs the decision-making that follows. The information is so critical that entrepreneurs writing business plans (before the business even exists) do this analysis to understand if their business idea is feasible, and to understand how to position their business relative to existing competitors or potential customers in order to maximize their odds of success. Exhibit 9.5 outlines just a few of the questions that strategic analysis tools can help answer.

A diagram outlines a set of questions that three different strategic analysis tools can answer.
Exhibit 9.5 Some Questions That Strategic Analysis Should Answer

As an example of how the strategic tools help inform decisions, look back at the Walt Disney mission and vision in Exhibit 9.4. Imagine if you were Mr. Walt Disney today, and you wanted to start a company with a vision of making people happy in the 21st century. What products or services would you plan to offer? A PESTEL analysis would tell you that technology is an important part of entertainment and that sociocultural trends include people’s preference for on-demand entertainment, to be convenient and compatible with their busy schedules. Disney’s mission statement is broad enough about products and services to include a wide variety of offerings (they are thinking about the future too!), but if you were starting this company today, where would you start? Would you make movies for movie theaters, or develop a way to offer video entertainment online? Would you make console video games or phone apps? Who would your competition be, and what do they offer? How could you offer something better or cheaper?

Managers learn about the conditions that their business will have to operate in by doing strategic analysis, and understanding those conditions is required in order to develop the plans and actions that will lead to success.

Concept Check

  1. What strategic analysis tools from the previous chapter would a manager use when planning a strategy for an existing business? What tools would be most helpful for a start-up business?
PreviousNext
Order a print copy
Citation/Attribution

This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission.

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Attribution information
  • If you are redistributing all or part of this book in a print format, then you must include on every physical page the following attribution:
    Access for free at https://openstax.org/books/principles-management/pages/1-introduction
  • If you are redistributing all or part of this book in a digital format, then you must include on every digital page view the following attribution:
    Access for free at https://openstax.org/books/principles-management/pages/1-introduction
Citation information

© Dec 18, 2024 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.