Strategic Business Analysis Tools for Your Entreprise

To conduct Business Analysis effectively, you will have to use effective analytical tools. The most common strategic business analysis tools are SWOT and PEST.

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strategic business analysis tools

Entrepreneurs, business owners, and managers need to know where they stand in a market, who they are competing against, and what possible issues might arise along the way; all the while understanding their own enterprise. To achieve that, you require a close look inwards to the enterprise, within your industry, and a global view as an important step in gaining strategic insight. This you can do using strategic business analysis tools.

There are several ways of doing so, but two effective and efficient tools have become the bedrock of analysis for decision-makers: SWOT (a strategic planning technique used to help a person or organization identify strengths, weaknesses, opportunities, and threats related to business competition or project planning) and PEST (often with LoNG) (political, economic, social and technological – the LoNG stands for Local, National and Global) – a management method where an organization can assess major external factors that influence its operation. The former analyzes the more local issues of the individual firm in a micro sense while the latter analyzes larger issues in a macro sense.

These two basic strategic business analysis tools that are taught in business schools are used to perform an overall analysis of a company or organization. Both were first thought up and introduced in the 1950s by Albert Humphries in the 1950s while at Stanford University (though it is not always clear who some of the original authors were).

How to put LoNG-PEST into practice

There are several items that need to be considered and thought out in the analysis, keeping in mind the macro implications to the firm, its stakeholders, the environment (from the very local to the international). Note that the LoNG-PEST analysis is done with respect to the firm and the industry or business that it is operating in, but incorporating information and trends from everywhere.

The political environment for your enterprise should be considered from all three areas; the local (how is the mayor treating businesses such as yours?), the national (in what ways are the national government policies affecting taxes, regulation, and so on?), and finally, global (how is the global political environment – pro-globalization, or protectionist?). The economic, social, and technology environments for your local area might be similar to the national, and the global, but could also be different, but similar questions as were raised with the first should be applied and then answered for the other three.

Practicing SWOT analysis

The next business analysis tool is the SWOT, also referred to as the TOWS, an analysis used on the small (micro) scale of the individual firm and organization. In this, we analyze how the firm might be affected by each of its tenets. Utilize the earlier information that was brainstormed in the LoNG-PEST to help identify the different factors affecting the organization. This time it is on a micro-level that the analysis is taking place with individual factors either presently affecting the firm or issues that have a high likelihood of affecting the firm in the near future.

Dividing the first two: the strengths of the organization should look towards where the obvious strong points are, including the competitive advantage that it holds, while conversely, the weaknesses are what should be improved. Both of those two requires introspection. Opportunities are both the internal and the external chances to improve the strengths, create new strengths, and improve the organization’s raison d’être. The weaknesses are those that take away from the strengths, hinder opportunities, and generally hurt overall performance. The threats are those that threaten the organization, both internally and externally (a review of the LoNGPEST is helpful in recognizing threats).

Read: Best Goal Setting Strategy for You and Your Business

Utilizing the business analysis tools

LoNGPEST and SWOT are very useful tools to be sure, but before working on them, it is important to brainstorm the stakeholders in the organization that is being analyzed and incorporated into its strategic planning. This is the strategy and direction that decides where to utilize and allocate time, money, and all other resources. Once priorities are set, decisions can be made that align with the strategy.

It is important to look to the stakeholders for input as that helps gather and clarify the information that goes into analysis and how it might be affected by the various factors, both extraneous and internal in nature. The brainstorming techniques are a good way to achieve the understanding to go ahead with the analysis. In addition keep in mind the raison d’être of a company, or organization, namely through the Vision and Mission Statements. Ask yourself at the end if they fit what you are finding and where you want to see the organization move to (if not, you will need to adjust).

Remember, these analyses are also to help you look at your firm and have the ability to see trends and when they might fit into the organizational structures. The issues that you need to address are often ones that may or may not come immediately to mind. But, with the help of doing analysis, it is often brought into clarity when they are used, ensuring that you understand and better prepare your organization for the future. One caveat is to be sure to avoid analysis paralysis, by spending too much time analyzing and creating excuses to avoid implementation and moving forward.

So, make sure to take the time to do both for your business, regardless of the stage of your business is at – from start-up to a mature business. Remember to regularly (at least annually) to update them because it is critical that current SWOT and LoNPEST analysis are accessible to management and owners. Having these will keep the business on track and moving in the right direction. They are also invaluable for investors, banks, and other stakeholders when added to a business plan and any presentations that need to take place, which is easy to do if they are already prepared.

Prof. Richard Miller

A professor at Osaka Jogakuin University in Osaka Japan and a visiting lecturer at Management University of Africa