Strategic analysis
An objective analysis and understanding of your markets and your costs and capabilities forms the bedrock for the strategy development process. From this analysis and by applying creativity will come a number of options and opportunities that can be used to build and implement a solid strategic plan for new or existing markets.
Setting a strategy requires knowledge in three areas:

Customers: Existing customers and potential customers and markets. What do they do? What would help them do what they do better? What are their needs? Where are the most profitable customers?
Competencies: Skills, knowledge and relationships. What do you do well? What abilities could you draw on? What costs do you have to carry? Where do you make money?
Competition: The whole competitive environment from regulation to real life competition. What is the basis of competition? Where are the threats? Where is their pressure and where is the market easy?
Analysis of the three areas is interrelated. Who you choose as your target audience will have implications for what capabilities you need, which will have an impact on what competitive pressures are around which will influence who you choose as your target audience.
STRATEGIC CHOICE

In practice, the process for choosing a strategy may be structured something like Figure 11.3, although the reality is likely to be much messier. The structure of this chapter is also based on this figure. The process of choice starts by identifying available options. The chosen strategy will have to answer the questions ‘what’, ‘how’, ‘why’, ‘who’, and ‘when’, so each option will provide provisional answers to each of these questions.
There are likely to be different kinds of options. Figure 11.3 shows three types— products/services/markets, resources/capabilities, and method of progress—that are typical but not necessarily exhaustive.

PRECONDITIONS OF CHOOSING THE BEST STRATEGY
Factors Taken into Consideration for Strategic Analysis and Choice
Key Internal Factors
•       Marketing
•       Management
•       Operations/Production
•       Accounting/Finance
•       Computer Information Systems
•       Research and Development

Key External Factors
•       Political/Governmental/Legal
•       Economy
•       Technological
•       Social/Demographic/Cultural/Environmental
•       Competitive

Techniques Used in Strategic Analysis
The following devices or techniques are used in the procedure of strategic analysis:
•       Five Forces Analysis
•       PEST Analysis (Political, Economic, Social and Technological Analysis)
•       Market segmentation
•       Scenario planning
•       Competitor analysis
•       Directional policy matrix
•       SWOT Analysis (Strength, Weaknesses, Opportunities, and Threats Analysis)
•       Critical Success Factor Analysis

Characteristics of Strategic Analysis and Choice
Following are the features of strategic analysis and choice:
•       Establishment of long term goals
•       Producing strategy options
•       Choosing strategies to act on
•       Selecting the best option and accomplishing mission and goals


10 Commandments for Crafting Successful Business Strategies
-- Build long term competitiveness
-- Respond promptly to changing conditions
-- Create a sustainable competitive advantage
-- Don’t underestimate the reactions and the commitment of rival firms
-- Attack competitive weaknesses
-- Avoid cutting prices without an established cost advantage
-- Boldly pursue differentiation to open up very meaningful gaps
-- Don’t get stuck in the pack
-- Aggressive strategic moves often invoke aggressive retaliation


The BCG matrix

Placing products in the BCG matrix results in 4 categories in a portfolio of a company:
1. Stars (=high growth, high market share)
- use large amounts of cash and are leaders in the business so they should also generate large amounts of cash.
- frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold share, because the rewards will be a cash cow if market share is kept.

2. Cash Cows (=low growth, high market share)
- profits and cash generation should be high , and because of the low growth, investments needed should be
       low. Keep profits high
- Foundation of a company

3. Dogs (=low growth, low market share)
- avoid and minimize the number of dogs in a company.
- beware of expensive ‘turn around plans’.
- deliver cash, otherwise liquidate
4. Question Marks (= high growth, low market share)
- have the worst cash characteristics of all, because high demands and low returns due to low market share
- if nothing is done to change the market share, question marks will simply absorb great amounts of cash and
later, as the growth stops, a dog.
- either invest heavily or sell off or invest nothing and generate whatever cash it can. Increase market share or
deliver cash


Some limitations of the Boston Consulting Group Matrix include:
High market share is not the only success factor
Market growth is not the only indicator for attractiveness of a
market
Sometimes Dogs can earn even more cash as Cash Cows