Analysis Techniques and Process - Chapter 2
Learning Objectives and Strategic Introduction
The primary learning objectives for strategic business analysis include:
Recognizing various techniques utilized in strategic business analysis.
Utilizing analysis in the construction of strategies and in the decision-making process.
Employing performance measurement as a tool for the analysis of productivity.
Decision-makers must carefully choose strategies and techniques because these choices directly affect the effectiveness and applicability of the action plan.
Management holds the responsibility for evaluating the action plan to ensure it meets organizational goals.
Ways and Techniques for Assessing Strategies
Strategic assessment involves examining four key areas:
Internal Factors: This involves the analysis of current resources, policies, processes, performance, and capabilities. Leaders evaluate the reality of company performance based on their existing potential. These factors are reviewed periodically to maximize strengths and identify limitations for improvement. The resources of the company are categorized as the " Ms":
Manpower: The human capital and workforce.
Money: Financial resources and capital.
Machinery: Equipment and industrial tools.
Materials: Raw materials and supplies.
Methods: Procedural and operational techniques.
Policies: These are defined as guided principles used to accomplish decisions and achieve specific outcomes.
External Factors: These lead to the identification of opportunities and threats. Factors include:
Political or government conditions.
Sociological norms and trends.
Technology and innovations.
Economics.
Legal or Law.
Review of Performance: This allows management to take appropriate actions during the implementation stage. Management can classify performance through a matrix. Performance reviews can be conducted at various intervals:
Daily.
Weekly.
Monthly.
Quarterly.
Yearly.
Examples of performance reviews include monitoring Sales, Expenses, and Financial ratios.
Dynamic Concept: This involves analyzing the correlation, significance, and effect of one variable on others, often referred to as the "Domino effect."
Example: High sales may lead to good profitability. Conversely, low sales may trigger "tight belt" tactics regarding expense spending.
SMART Objectives as an Analysis Platform
The SMART acronym is a foundational framework for setting and analyzing objectives:
S: Specific
M: Measurable
A: Attainable
R: Realistic
T: Time-bound
Integrating SMART objectives into business analysis offers several advantages:
Provides a specific direction for the organization.
Ensures goals are handled in a strategic and competitive manner.
Increases overall productivity.
Helps avoid idle time.
Fosters teamwork among staff.
Assists in avoiding unnecessary costs.
Encourages the development of creative and analytical solutions.
Presentation and Reporting of Analysis
Presentation Definition: Reporting through both written and oral formats to demonstrate results/exhibits, disseminate information, and arrange proposed action plans for the purpose of analysis and problem-solving tasks.
Levels of Presentation:
Through Immediate Superior or Boss:
Mode: Person-to-person meeting.
Description: The presenter discusses findings, observations, and proposals directly with their boss.
Report Types: Findings, Summary of analysis, Action plans.
Departmental or Division:
Mode: Group meeting.
Description: Findings and proposals are presented to the group for verification, brainstorming, enhancement, polishing, and potential approval or rejection.
Top Management:
Mode: Group meeting or board meeting.
Description: Discussion of findings and proposals at the highest level, subject to verification, enhancement, and final approval/rejection.
Important Factors During Presentations of Reports:
Clarity of the objectives.
Comprehensive situation analysis.
Alignment with the mission and vision of the company.
Financial accuracy.
Consideration of opportunity cost.
Integration of ESG (Environmental, Social, and Governance) metrics.
Risk assessment.
Action steps and timeline.
Performance metrics.
Communication and presentation style.
Structured Analysis Techniques
Analysis techniques are structured methods used to evaluate business problems, identify opportunities, and support strategic decision-making by providing systematic frameworks for examining data and environments.
Critical Analysis: Examines arguments, evidence, and assumptions to evaluate strengths and weaknesses. The goal is to challenge ideas, uncover biases, and ensure logical consistency.
Scenario: A company controller reviews an annual financial report and questions if revenue growth is sustainable or merely driven by temporary discounts.
Outcome: Identification that profit margins are actually shrinking despite higher sales, leading to a pricing strategy rethink.
Creative Analysis: Uses imagination and innovation to generate new solutions or perspectives, exploring unconventional strategies.
Scenario: A retail chain faces declining foot traffic in physical stores.
Outcome: Managers brainstorm a hybrid digital-physical shopping model (e.g., virtual shopping or ESG-themed pop-up stores) to attract new customers.
Diagnostic Analysis: Examines past performance or incidents to determine root causes and factors contributing to specific outcomes.
Descriptive Analysis: Focuses on explaining the current state (e.g., market share reporting).
Prediction Analysis: Focuses on forecasting the future (e.g., demand forecasting).
Prescription Analysis: Recommends specific actions (e.g., strategic investment decisions).
Quantitative, Qualitative, and Combined Analysis
Quantitative Analysis: The use of numerical data, statistical techniques, and mathematical models to evaluate performance and support decisions.
Examples: Cost-benefit analysis, Financial ratio analysis.
Qualitative Analysis: The process of evaluating non-numerical information to understand internal capabilities, environment, and strategic challenges. It focuses on opinions, perceptions, and behaviors.
Examples: SWOT analysis, PESTLE analysis, Interviews, Case studies.
Combination Analysis (Mixed-Methods): The simultaneous use of both qualitative and quantitative data.
Case Study: A construction supplies business in Iloilo city conducting combined analysis:
Quantitative: A survey of customers to measure satisfaction levels.
Qualitative: Interviews with selected customers and managers to understand the underlying reasons behind the reported satisfaction or dissatisfaction results.