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Strategic Planning: Position or situation analysis

management, business, strategic planning, corporate planning, directing, controlling, leading, staffing

It is important to have a system for regularly analyzing the external environment in order to develop the firm’s strategic position. Such a system could consist of the following approach:

1.Examine the environment to see what influences are affecting the organization, and then assess the nature of these influences;

2.Analyze the key environmental influences and their degree of relevance. This would include examining;
•the entry barriers for new firms in the industry;
•the extent of competition in the industry;
•the nature and strength of substitute products;
•the extent of power possessed by buyers;
•the extent of power possessed by suppliers.

3.Identify the competitive position of the organization. This can be done by looking at the life-cycle model to identify the stage of development of its markets. Another way is to map out the power of competitors according to the shares that they hold in specific segments of the markets;

4. The stage after assessing the external environment is to assess the firm’s resources based upon knowledge of its strengths and weaknesses. The main activities and resources of a firm are analyzed and assessed and this forms a background for judging the firm as a whole and assessing its efficiency and effectiveness. This will include its planning and control systems, operating procedures and the effectiveness of its organization structure;

5.The strengths and weaknesses of the organization can be examined by considering whether or not the firm’s present strategy can deal with all the changes in the business environment. Methods used include:
(a) SWOT analysis –strengths, weaknesses, opportunities and threats. This aims to relate the strength and weaknesses of the internal organization against the opportunities and threats shown up by an analysis of the external environment;
(b) Exploring corporate strategy which is a simple procedure which attempts to match identified opportunities and threats against the strengths and weaknesses of the organization. Benefits or adverse effects are rated plus or minus and the statements are examined against each other. It is only a crude analysis, providing some rating of opportunities and threats and the degree to which current strategies address the issue of a changing environment.

Tows Matrix
Another matrix called tows matrix is a framework for an analysis that helps to match external threats and opportunities with an organization’s internal weakness and strengths. There are four alternative strategies possible based on the above and the position considered most desirable in the one where a company uses its internal strengths to take advantage of external opportunities.
Published: 2007-04-14
Author: Martin Hahn

About the author or the publisher
Martin Hahn PhD has received his education and degrees in Europe in organizational/industrial sociology. He grew up in South-East Asia and moved to Europe to get his tertiary education and gain experience in the fields of scientific research, radio journalism, and management consulting.

After living in Europe for 12 years, he moved to South-East again and has worked for the last 12 years as a management consultant, university lecturer, corporate trainer, and international school administrator

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