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Strategic Audit

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  • July 2013
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An important part of business strategy is concerned with ensuring that resources and competencies are understood and evaluated, a process that is often known as a Strategic Audit. The external environment in which a business operates can create opportunities which a business can exploit, as well as threats which could damage a business; however, to be in a position to exploit opportunities, or respond to threats, a business needs to have the right resources and capabilities in place. The process of conducting a strategic audit can be summarized into the following stages: Resource Audit, Value Chain Analysis, Core Competence Analysis, Performance Analysis, Portfolio Analysis and SWOT Analysis. The resource audit identifies the resources available to a business. Some of these resources can be owned (e.g. plant and machinery, trademarks, retail outlets); whereas others can be obtained through partnerships, joint ventures or simply supplier arrangements with other businesses. Value Chain Analysis describes the activities that take place in a business, and relates them to an analysis of the competitive strength of the business. Influential work by Michael Porter suggested that the activities of a business could be grouped under two headings: 1. Primary Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly); 2. Support Activities - which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities. Value Chain Analysis is one way of identifying which activities are best undertaken by the business and which are best provided by outsourcing. Core competencies are those capabilities that are critical to a business achieving competitive advantage. The starting point for analyzing core competencies is recognizing that competition between businesses is as much a race...