Business transformation and process adaptation are integral towards the competitive survival of business enterprises. The dynamics of Business analysis play a vital role in ensuring that strategic plans for transformation are developed properly and implemented efficiently.
Business Analysis involves modelling, systematic thinking, investigation of business processes and their improvement, deciding allocation of resources, innovation and certain other analytical aspects that need to be learned by an Entrepreneur if he is to survive in the competitive business climate.
Precisely, Business Analysis is the understanding of real business and finding out ways for improvement, it contains the basics for any kind of change in Business. We present ten strategic analysis models that every entrepreneur and business leader must learn.
#1. Ansoff Matrix
Ansoff Matrix is used as a yardstick in formulating plans when deciding to choose a market or product growth strategy. The matrix has proposed four different growth strategies.
With market penetration strategy the company seeks to increase market share for existing products within existing markets. This could be done by offering high quality products at discounted prices etc.
With market development strategy the business seeks expansion for its existing products into new markets or market segments such as exporting products to overseas markets etc.
In product development strategy, we focus on developing newer products targeted to the existing market segments. This is feasible when the business has ample opportunities for growth of its new products in existing markets.
Diversification involves a business stepping into a complete new line of business or opting for a forward or backward integration i.e becoming its own supplier or becoming its own distributor. The business seeks to exploit new horizons by launching new type of products in newer markets.
#2. Balanced Scorecard
Balanced Scorecard is a strategic performance management tool that aims to align the business activities with the vision and mission of an organization. Proposed by Kaplan and Norton this model assumes the business should not only analyze its performance through financial perspectives but rather consider other non financial factors that have long term influence over the future performance of a company. The four perspectives to consider are
- Customers Perspective
- Financial Perspective
- Internal Business Processes
- Learning and Growth Perspective
#3. BCG Matrix
BCG Matrix was proposed by Boston consulting Group to help companies plan their business units portfolio (or major products portfolio). This framework allows companies to invest resources into products or business units according to where do they fall within the grid. The four types of Products are
Cash Cow is a product or business unit that has a high market share in a mature or slow moving market. Such products does not require investment of resources and should be used to generate cash that can be invested elsewhere.
Question Mark (Problem Child)
Question Mark (Problem Child) is a product that has low market share in a fast growing market. These resources might require some investment but its not evident whether further investment will transform them into star products.
Star products have a high market share in a fast growing market. These products may generate cash but might require further investment to maintain market leadership.
Dog product has low market share in a mature market with little growth prospects. Usually these products may not generate cash or require further investment. These products should be liquidated unless there is a strategic purpose for retention into the portfolio.
#4. Mendelow Matrix
Mendelow Matrix is a tool for mapping various stakeholders according to their interest in the company and the power to influence the decisions of a company. It guides management about what sort of response should be made towards various stakeholders in order to satisfy them. The powerful stakeholders are shareholders, suppliers, customers while less powerful stakeholders are environmental groups, general public etc.
#5. PEST Analysis
Pest Analysis is a framework which provides a current position analysis of a company in a specific market that involves scanning various macro environmental factors that lay a strong impact on an enterprise. The six factors to consider are Political, Economic, Social, Technological, Environmental and Legal. This helps a Business identify its Strategic Position in a specific market and helps in decision making for investing resources.
#6. Porter’s Value Chain
Porter’s Value Chain analyzes the various generic value adding activities of an organization i.e primary and secondary. The primary activities include Inbound Logistics, Operations, Outbound Logistics, Marketing & Sales, Service whilst the secondary activities include Procurement, Technology Development, Human Resources Management and Firm Infrastructure.
The enterprise may improve its value adding activities to seek competitive advantage globally for example the use of IT and e-Procurement may help improve efficiency of inbound logistics whilst hiring a dedicated distribution company to supply products to customers may improve Outbound Logistics.
#7. Porter’s Diamond Model
Micheal Porter proposed this model on the assumption that certain Nations or industries within a Nation have competitive advantage on a global scale courtesy some local factor conditions available to them.
Porters Diamond Model assumes the following four determinants of National Competitive Advantage.
The factor conditions are usually cheap raw materials, skilled workforce, knowledge resources and infrastructure etc. The more factor conditions a Nation possess the higher is the global competitive advantage.
The high demand and market share in local markets helps drive growth, innovation and competitive advantage on a global scale. The export revenue streams won’t largely effect business if it is operating successfully in home market giving it a competitive edge.
Relating and Supporting Industry:
If relating and supportive industries in a country are more competitive they will help drive cost efficient availability of resources and open doors for more innovative approach which will indirectly help a business gain some advantage on a global scale.
Firm Strategy, Structure and Rivalry:
The structure and rivalry of a business will help it gain some competitive advantage on a global scale.
In a nutshell, Porter’s Diamond Model help entrepreneurs figure out the favorable conditions that exist in their country and also helps exploiting new factors to gain competitive advantage globally
#8. Porter’s Five Forces
Porter’s Five Forces model proposed by Micheal Porter assumes that there are five forces which have a strong effect upon a business. These five forces are Customers, Suppliers, Competitors, New Entrants and Substitute Products. The goal is to achieve high bargaining power i.e the ability to influence the decisions.
For example if a business has just a single supplier than it has a high switching cost and the supplier will have a high bargaining power (imposing his decisions upon the business) but on the other hand if there are 20 suppliers of the same raw materials than each supplier has low switching cost and business is in a strong position to acquire raw materials at a favorable price (high bargaining power).
In the same manner lower the number of customers, higher is their switching costs and business is in a weak position to charge high prices but if customers are scattered and large in volumes than the business in a strong position to charge discretionary prices for its products.
Just think higher the number of competitors, higher the risk of loss in revenue, the more new entrants the more chances of losing market share and more the number of substitute products better chances for a profitable product turning obsolete or Dog Product.
#9. SWOT Model
SWOT model is probably the most common, useful and well known model for the strategic planning of a business. It involves analyzing internal and external environment of business to judge the viability of a new project or a business venture.
SWOT Model analyzes the strengths and weaknesses (the factors internal to a business that can be influenced by decisions from business leaders), while threats and opportunities (external factors upon which business has no control) posing towards a business.
#10. Mckinsey 7S Model
McKinsey 7S model is a strategic analysis model that considers all aspects of an organisation. It is useful for ensuring that you consider all aspects of the organisation when identifying its strengths and weaknesses. The 7S stand for: Structure, Systems, Style, Staff, Skills, Strategy and Shared Values.
In short these Business Analysis Models are useful for decision making by business leaders and must not be overlooked when seeking a business change.