ANTHONY E. BOARDMAN
Van Dusen Professor of Strategy
Faculty of Commerce
University of British Columbia
AIDAN R. VINING
CNABS Professor of Business & Government Relations
Faculty of Business Administration
Simon Fraser University
June 10, 2003
INTRODUCTION: THE STRATEGIC ANALYSIS FRAMEWORK
This paper presents the basic framework for comprehensive strategic analysis. The basic purpose of strategic analysis is to help analyze how the firm can generate returns in excess of the firm’s opportunity costs (these are rents) by engaging in a more effective corporate strategy and, at the business level, more effective competitive strategy (Porter, 1996). The framework describes and briefly explains the major components of a strategic analysis, and outlines the major components of strategic analysis and the order they should be covered in a project write-up.
It consists, therefore, of a coherent “skeleton” of a comprehensive strategic
analysis. Of course, it is only a generic guide. A project should be adapted to the specific needs (i.e., the project specification) of the client. Corporate-level analysis for firms with multiple business units is more complex than an analysis of firms in a single line of business. Some projects are more oriented to an industry analysis (a potential client for this type of analysis might be a firm considering entering the industry). Other projects are essentially analysis of entry into a new market or (new) business plans (see business plan power point slides). The logic of a comprehensive strategic analysis is simple: describe and explain the issue/problem, assess it, try to solve it. Of course, we actually analyze p roblems in a much more nonlinear manner than this in practice, but writing-up a n analysis in this linear, “rational” mode is the only way to make the analysis understandable to the client.
Therefore, usually, a written
comprehensive strategic analysis contains three major parts, in the following order: analysis of the current situation, assessment of the current situation (fulcrum) and solution analysis. Analysis of the Current Situation
T he purpose of the current situation analysis is to provide a “snapshot” of the issue/problem and of the firm. Here some of the important questions normally addressed are: What is the issue/problem? Who owns and/or controls the firm? What has been the recent history of the firm? What business, or businesses, is the focal firm in? What are the focal firm’s products in each business? What are the customer segments in each business? What is the structure and dynamics of each industry that the firm competes and how competitive are they? What changes are taking place in the industry, or industries, that will affect the focal firm specifically and/or industry profitability over the next few
years? How does the firm compete at the product or business level? What are the firm’s internal sources of competitive advantage/disadvantage? What is the focal firm’s current strategy? How well is the firm performing from a financial perspective?
Assessment of Current Situation (the Fulcrum)
T he purpose of the fulcrum is to synthesize the current situation analysis into an assessment of current and future expected performance. It should also consider the broad direction of a new strategic initiative, if the status quo is sub-optimal. The important questions here are: How well is the focal firm performing from a broad strategic perspective? Is the current strategy highly successful, successful, inadequate or disastrous? What is predicted to happen to overall performance if the existing strategy continues? If the strategy is not successful, what is the source, or sources, of the problem? In which broad strategic direction should the firm move? When dealing with these issues, the analyst also needs to think ahead: what type of choice method will be used to evaluate the...