Introduction to Strategy and Strategic Analysis

Vocabulary terms and definitions covering the fundamentals of strategic analysis, including tools, frameworks, data types, and performance measures.

Strategic Analysis

The assessment of an organization’s current competitive position and the identification of future valuable competitive positions and how to achieve them.

Generalist

A person whose knowledge, aptitudes, and skills are applied to a field as a whole or to a variety of different fields, rather than a specialist.

Strategic Reasoning

An integrative perspective used in analysis that accounts for rivalry, dynamics, and complexity.

PESTLE

An environmental and trend analysis tool used to identify major current and future trends impacting the industry and company.

Porter’s Five Forces Analysis

An industry analysis tool used to assess market attractiveness, bargaining power, and barriers to competition.

Competitive Life Cycle Analysis

A tool used to determine how the competitive structure of a market is likely to evolve.

VRIO/VRIN

Frameworks used in capabilities analysis to determine how sustainable an advantage is based on unique resources and assets.

Portfolio Planning Matrices

Tools used to assess if a firm can leverage assets across markets to improve their competitive position.

Strategic Maps

A tool used to position a firm in the market relative to its rivals.

Hypothesis Testing

A four-step framework for analyzing strategic options: frame option as a hypothesis, identify core assumptions, conduct thought experiments, and collect data.

Payoff Matrices

A tool used to predict how competitors are likely to react to specific strategic actions.

Scenario Planning

An analysis tool used to evaluate if strategic actions remain valid in different envisioned future worlds.

Real Options Analysis

An analysis tool used to determine if a strategic action provides the firm with strategic flexibility.

Data

A set of descriptive values or unstructured raw facts and figures about the state of the world.

Information

Data that has been endowed with meaning and purpose through being contextualized, categorized, calculated, and condensed.

Knowledge

A product of individual experience and understanding that is tacit and implies know-how; it is used to derive meaning from information.

Interpretation

The process of making sense of data based on an individual's knowledge and experience.

CAGR

Compound Annual Growth Rate; an industry structure measure used to calculate growth over a specific period.

Concentration Ratio (CR4)

An industry structure measure used to determine the market power of the top four firms in an industry.

Herfindahl-Hirschman Index

An industry structure measure used to evaluate the level of competition and market concentration.

EBIT

Earnings Before Interest and Taxes; a performance measure used to evaluate a firm's profitability.

ROA

Return on Assets; a performance measure used to evaluate how efficiently a company uses its assets to generate profit.

Tornado Charts

A visualization tool used within sensitivity analysis to show the impact of different variables.

Monte Carlo Analysis

An inference tool used in sensitivity analysis to account for uncertainty by running many simulations.

The Value Test

One of the four core assumptions in strategic hypothesis testing used to evaluate if a strategic option creates value.

The Execution Test

One of the four core assumptions in strategic hypothesis testing used to evaluate if the organization can implement the chosen strategy.