Friday, October 4, 2019
Strategic Analysis Tools
There are several different strategic analysis tools that can be used by managers and leaders to evaluate their business. One of these tools is PEST or Political, Economic, Social, and Technology. Political factors include tax policy, labor laws, environmental laws, trade restrictions, tariffs, and political stability. Economic factors include economic growth, interest rates, exchange rates, and inflation rates. Social factors include aspects such as cultural differences, population growth rate and age distribution. Technology factors include research and development activity, automation, technology incentives, and the rate of technology change. According to Lannon (2006) “this is a great tool to use in tandem with SWOT”.
Another tool used in strategic analysis is SOAR or Strengths, Opportunities, Aspirations, and Results. This tool differs from the commonly used SWOT (strengths, weaknesses, opportunities, and threats) because it engages all levels and functional areas of an organization, while SWOT typically breaks down the system to gain insight. SOAR focuses on the organization and enhancing what is currently done well, rather than concentrating on perceived threats and / or weaknesses.
One of the pro’s to using PEST analysis is to identify key factors, constraints, or forces that influence a firm's competitive position. It is used during the planning and control process. Another pro to using this tool is to help establish the dominant drivers of change helps managers make better decisions.
One of the con’s to using the PEST analysis is the fact that the environmental analysis is complex. Historical behavior does not guarantee future behavior. Determining the relevant trends remains a subjective decision. Another con to the PEST analysis is that assessing and tracking interdependencies between trends is difficult and prone to errors. Behavior can be modeled through simulation; however, it would increase the cost of analysis.
One of the pro’s for using SOAR is that it engages managers from every level of the organization to communicate and share input on strategy and strategic planning. Another pro to using SOAR is that most of the company’s resources are spent on building the organization’s strengths instead of spending time correcting their weaknesses.
A con for using SOAR analysis is that managers may ignore weaknesses and threats. They may believe that their solution will overcome any difficulties. This may not be the case. By ignoring their weaknesses and threats, it will be difficult for a company to show improvement overall.
Lannon, R. (May 10, 2016). Strategy Spotlight: 8 Tools & Techniques to Apply to Strategic Analysis & Planning. Retrieved from https://www.batimes.com/.../8-tools-and-techniques-to-apply-to-strategic-analysis-and-planning.html
Vargas, K. (August 25, 2017). SOAR: An Appreciative Inquiry Approach for Strategic Planning. Retrieved from https://news.nnlm.gov/.../soar-an-appreciative-inquiry-approach-for-strategic-planning/
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