Phase 3: Strategic Analysis
Phase 3 is the most data-rich phase and sets up the organization's leaders to have prepared minds for bringing everything together. In this phase, I lead teams to conduct a thorough external, competitive, and firm analysis. The details of the analysis can be found in Walker & Madsen’s Modern Competitive Strategy (1), but I will provide a summary here. It is important to note that this analysis will take time upfront, and rely on regular research to stay up-to-date. In some cases, it may be difficult to identify a single industry, so the analysis must be conducted on multiple industries. This can be the case for innovative organizations creating new markets, for example, Netflix originally competed with Blockbuster for the rental market then cable and network TV for the on-demand market, and finally created the on-demand streaming market.
The strategic analysis phase consists of external and competitive analysis and internal firm analysis. Exhibit 5 is a strategic analysis canvas designed to help guide the collaborative approach to this structured analysis.
Exhibit 5: Strategic Analysis Canvas
External analysis
The first step of the external analysis is to identify the industries the firm is operating in and examine in detail the industry conditions. Porter’s forces analysis framework is a helpful tool for this, reviewing the barriers to entry, the threat of rivalry, the threat of substitutes, the power of complementors, and the power of suppliers and buyers to deeply understand industry dynamics (2). In addition to the forces, we also review technological, social, ethical, and economic trends in the industry to form a complete picture of the landscape.
Competitive analysis
In phase 2, we identified the main competitors for our product or service. In the competitive analysis, we go deeper to identify and examine the resources and capabilities of competing firms. I use tools such as VRIO, Value-Cost (V-C) (3) and value chain analyses (4) to understand how the competitors are playing the game. The goal is to identify competitive advantages and differentiate the firm advantages from those of its competitors.
Firm analysis
In conducting the firm analysis, we compare the same information as the competitors: VRIO, value chain, operating models, etc., to determine how the firm compares and competes strategically in the industries and markets it operates in. In this step, we also examine the organizational structures and identify strengths and weaknesses of the current operating and business models. The firm analysis also includes a structured and thorough analysis of the company’s financial situation, identifying key financial ratios and metrics, and their significance to the firm.
SECTIONS IN THIS CHAPTER
Phase 3: Strategic analysis
REFERENCES
Madsen, T. L., & Walker, G. (2015). Modern competitive strategy. McGraw Hill.
Porter, M. (1979). E.(1979). How competitive forces shape strategy. Harvard Business Review, 57(2), 137-145.
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of management, 17(1), 99-120.
Porter, M. E. (1985). Creating and sustaining superior performance. Competitive advantage, 167, 167-206.