Business analysis models can be loosely defined as ‘coordinated models that informs a company on strategic decision making’. Business analysis models are an ‘instrumental framework in value based management and strategy formulation’. ‘In particular they are deprived from pure market economics and are based on the theory of market competition’. A firm will seek to gain a competitive advantage by applying business analysis models to its daily operations, this will allow the firm to identify and analyse the current situation of their market, as well as the role of the firm within the market in question.
Further analysis will lead to the firm comprising the area it should focus its activities in and as a result ensures that the firm uses its assets in the most effective means possible, hence gains a competitive advantage. Business analysis ‘ is therefore a process of collecting and analysing information, which can be used to inform managers on strategic decisions within a business’. The information collected can then be used to assess both the firm’s current market situation and highlight any opportunities or threats within the market.
According to Porter the role of business analysis is to ‘critically interrogate the environment within which the business operates and to seek out a method of sustaining a competitive advantage’. However despite the usefulness of business analysis models, they are not completely free from drawbacks, which limit the effectiveness of the analysis models, such as the lack of detail involved which means that a business analysis model can not be the sole means of decision making especially with higher level strategic decisions.
Strategic planning within a firm is important in order to sustain a competitive advantage, this involves a firm incorporating business analysis models such as swot, pest and the Boston matrix analysis when undertaking relatively large strategic decisions. In the remaining part of this essay I plan to critically discuss the usefulness and limitations of SWOT analysis and the Boston matrix analysis and conclude whether these forms of analysis can provide the sole means of decision-making within and organisation.
SWOT (strengths, weaknesses, opportunities and threats) Analysis is a very effective way of identifying a firms Strengths and Weaknesses, and examining the Opportunities and Threats that a firm is likely to face. Carrying out an analysis using the SWOT framework allows a firm to focus their activities into areas where you are strong and where the greatest opportunities lie, therefore ensuring a firm uses its available assets to it advantage. SWOT analysis can be used as a tool for auditing an organization and its environment. It is the first stage of planning and helps businesses to focus on key issues.
Once key issues have been identified, they assist in forming overall business objectives. Swot can be used in conjunction with other tools for audit and analysis, such as PEST analysis and the Boston matrix analysis. SWOT analysis can be simply understood as the examination of an organization’s internal strengths and weaknesses, and its environments, opportunities, and threats. It is a general tool designed to be used in the preliminary stages of decision-making and as a forerunner to strategic planning in various kinds of applications (Johnson et al.
, 1989; Barton et al. , 1991). The multinational soft drinks corporation Coca-cola have often utilized the Swot approach through an internal survey of their strengths and weaknesses and an external analysis of their opportunities and threats. Coca-Cola’s use of the Swot analysis and other business analysis models has proved to be a major factor in their global success as it was mobilised under increasing global competition and the need to improve their physical and technical efficiency.
Swot analysis would allow Coca-cola to analyse its internal attributes in relation to the external market they operate in and therefore enables the company to devise a strategy, which would enable them to use their strengths to target competitor’s weaknesses, opportunities within their market and threats from competitors and overall improve physical and technical efficiency. The swot analysis can be applied to Coca-cola for example their strengths amongst many is their great scale of market domination on an international front, which enables them to dictate price levels and hence ultimately control the soft drinks market in their favour.
The Coca-Cola Company also has a large market presence and is a highly reputable company, therefore this means that sales will often remain high as they are well established and in addition to this their level of intangible assets are also likely to be high, as a result of their reputable brand name. Furthermore Coca-cola is a financially secure company and this is likely to rule out any threats such as hostile takeovers.
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