Businesses can’t make sound choices without first conducting thorough market research. To put it simply, it aids businesses in learning about their clientele, market tendencies, and rivals. Yet, you can’t just rely on market research to make wise choices. The strategic analysis can help with this.
Decision-makers can benefit from a strategic analysis since it is a systematic approach to assessing a business’s internal and external conditions.
In this post, we’ll discuss what strategic analysis is, the several kinds there are, and how they’re used in market research.
What is Strategic Analysis?
A company’s SWOT (strengths, weaknesses, opportunities, and threats) can be determined by strategically analyzing its internal and external environments.
It helps help businesses decide on future strategies and approaches with confidence. Basically, it’s the backbone of committing to sound decisions.
Strategic analysis is done to improve business performance by identifying opportunities for growth, lowering costs, and reducing vulnerabilities. Analyzing the organization’s internal and external environments makes it possible to identify its strengths and weaknesses.
For instance, if a business knows it has a strong R&D department, it can use that knowledge to its advantage by creating marketable innovations.
Yet, suppose a corporation realizes its marketing department needs improvement. In that case, it can strengthen that area of the business to expand its customer base and revenue.
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Types of Strategic Analysis
Different types of strategic analysis exist, including SWOT, PESTEL, and Porter’s Five Forces. Each type of analysis is used to evaluate various aspects of a company’s internal and external environment.
SWOT Analysis
When conducting a strategic analysis, the SWOT framework is often employed. An analysis framework consisting of strengths, weaknesses, opportunities, and threats. The SWOT analysis assesses the internal and external factors affecting an organization and determines the likelihood of various outcomes.
An organization’s strengths and weaknesses are things within its own sphere of influence.
For instance, a high personnel turnover rate is a weakness, but a well-respected brand name is a strength.
The corporation can do little to control the occurrence of opportunities or threats. While a thriving market presents opportunities, a weakening economy poses risks.
PESTEL Analysis
The PESTEL matrix can be used to analyze an organization’s external environment. The acronym PESTEL stands for
- P - political,
- E- economic,
- S- social,
- T- technological,
- E- environmental, and
- L- legal
An evaluation of these components’ effects on a company’s operational environment is at the heart of this examination.
Government policies, trade agreements, and tax codes are all examples of political factors. Indicators of the economy’s health include the pace of expansion, the inflation rate, and the currency’s value.
The characteristics of the population, the norms of culture, and the habits of individuals are all examples of social influences. Invention and technical progress are two examples of technological factors.
Several factors contribute to environmental sustainability, including climate change and pollution. Regulations governing labour, consumer protection legislation, and intellectual property rights.
Porter’s Five Forces
An industry’s competitiveness can be assessed using Porter’s Five Forces analysis. There are five factors taken into account in this analysis:
- Competitors who may enter the market- The competitive threat of new entrants measures how simple it is to enter a market.
- Buyers’ bargaining strength – Consumers’ influence on the market is measured by buyer negotiating leverage.
- Suppliers’ bargaining power – It is an indicator of suppliers’ influence in the market.
- Competitor rivalry intensity – The intensity of competition between market participants can judge the competitive landscape.
- The danger of replacements – The danger of substitutes determines replacement product availability.
Conducting Strategic Analysis in Market Research
A structured process is required to conduct a strategic analysis.
Here are the steps businesses can follow to conduct strategic analysis in market research:
Step 1: Define the Objective
Identifying the target of one’s efforts is the first stage. The objective needs to be well-defined. Assessing the viability of a new product in the market or recognizing potential risks could be the goal.
RELATED: Setting Survey Goals And Objectives: A Comprehensive Guide
Step 2: Collect Data
After an end goal has been established, data collection can begin. Compiled information can come from a variety of sources, including primary and secondary sources.
Primary research gathers information from direct sources, such as questionnaires, interviews, and focus groups. Data for a study can be gathered through secondary sources, such as academic papers, government documents, and market research studies.
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Step 3: Analyze the Data
Ensure you have the right tools for analyzing the data. For instance:
- A SWOT analysis can better understand an organization’s internal and external possibilities and dangers.
- In a similar vein, a PESTEL analysis can serve as a valuable tool for assessing the potential influence of political, economic, social, technological, environmental, and legal aspects on a company’s bottom line.
Analyzing data in the right setting is equally important. Data analysis must take into account external factors, including the industry, market trends, customer behavior, and regulations that might affect the company’s performance.
By considering these considerations, businesses can improve their understanding of the issue and make better decisions that contribute to their growth.
Step 4: Develop Recommendations
A recommendation can be made after the data has been analyzed. Suggestions should be based on the analysis, and suggestions should be made to help meet the objectives.
If determining the viability of a product’s market is the goal, then suggesting that the product be introduced to a specific market group may be the best course of action.
Step 5: Implement Recommendations
When implementing, it is essential to take a methodical and regulated approach. The success of the implemented recommendations depends on constant monitoring and evaluation of the implementation process.
The Conclusion
The process of studying the market always includes a dose of strategic analysis. As a result, businesses have better evidence to support their decisions.
Several types of strategic analyses exist, including SWOT, PESTEL, and Porter’s Five Forces. A company’s internal and external environments can be evaluated using many approaches.
To undertake a strategic analysis, a corporation must follow a specific sequence of steps, starting with the formulation of a target and implementing recommendations based on the analysis of the data gathered.
The strategic analysis can help a business improve its competitive position, boost its profits, and reduce risk exposure.
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