What is a Strategic Audit?
A strategic audit provides managers with the tools, information and commitment to evaluate the degree of advantage and focus provided by their current strategies. It produces the data needed to determine whether a change in strategy is necessary and exactly what changes should be made. The two major elements of a strategic audit are the external and internal environmental assessments. A strategic audit involves assessing the actual direction of a business and comparing that course to the direction required to succeed in a changing environment. A company’s actual direction is the sum of what it does and does not do, how well the organization is internally aligned to support the strategy, and how viable the strategy is compared to external market, competitor and financial realities. The external environmental assessment provides the company with a critical external link between its competitors, customers, and products or services it offers. Since an organization’s business environment is never static, the success or failure of a company often depends on its ability to monitor changes in the environment and meet the needs of its current and prospective customers. It must prevent its competitors from meeting those needs in a better way. In doing so, it needs to create and identify ways to meet future and emerging needs. Companies that fail to influence their environments automatically concede the opportunity to do so to their competitors. In order to assess the external environment, managers must develop a basic understanding of the trends and issues that will significantly change, influence and affect the industry. The overall industry understanding comes from looking at elements such as capital markets, industry capacity, technological factors, pressure from substitutes, threat of new entrants, economic, political, regulatory, geographic, and social factors. Once the external environment has been assessed, managers need to...
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