CHAPTER 2 The business level strategy is the second tier in

the strategy hierarchy. Sitting under the corporate

STRATEGIC ANALYSIS strategy, the business strategy is a means to achieve the
Strategic analysis refers to the process of goals of the specific business units in the organization.
conducting research on a company and its operating The objectives and strategic initiatives within each
environment to formulate a strategy. The definition of business unit’s strategy will be focused on gaining a
strategic analysis may differ from an academic or competitive advantage in the particular market in which
business perspective, but the process involves several the business unit operates. There are different types of
common factors: business level strategies organizations adopt depending
on the competitive advantage they want to gain.
1. Identifying and evaluating data relevant to the Organizations face crucial decisions here, with options
company’s strategy like adopting a growth strategy, differentiation strategy, or
2. Defining the internal and external environments to embracing a cost leadership approach. If your
be analyzed organization has multiple business units, this strategy
3. Using several analytic methods such as Porter’s five level becomes crucial. However, if you only have one
forces analysis, SWOT analysis, and value chain business unit, you don't need to worry about this level and
analysis can skip to the functional strategy level.

Strategy is the ' taking of decision which allow an TYPE OF STRATEGY

organization to achieve a sustainable competitive
advantage over the long term'. The 'taking of decisions'
implies an intent, a desire to undertake some purposeful
actions in order to achieve a stated objective. In this case,
we can see that the objective is to meet customer needs
better than our competitors-that is, ‘competitive
advantage’. And unlike managerial or operational
decisions, which focus on short term horizons, strategy is
concerned with the ‘long term’. Also, strategy is to have
any value to the company we would expect the customer
benefit to exist over time and not be easily imitated by our
competitors, hence ‘sustainable’.

TYPE OF STRATEGY

1.Corporate Strategy:
3.Functional Strategy:
This level focuses on the overall scope of the
This level of strategy designs the approach for the
company, answering questions like "What businesses
different functional areas or departments. These functions
should we be in?" and "How should we allocate resources
can include the marketing department, finance, supply
across different businesses?". It often involves decisions
chain, manufacturing, human resources, and more. The
about mergers, acquisitions, and diversification. It is the
primary objective of functional strategy is to align the
highest-level strategy in an organization. It defines the
activities and efforts of these individual departments with
organization’s overall direction and the high-level ideas of
the broader goals and strategic objectives set at higher
how to move towards it.
levels, such as corporate and business strategy.
These plans are usually created by leadership,
Functional strategies have a fairly narrow focus. They are
such as the CEO and top management. Generally, this is
designed to address the unique challenges and
the group involved because they have a deep
opportunities within each functional area. Your finance
understanding of the company and the strategic business
strategy, marketing strategy, human resource strategy,
knowledge needed to steer the organization in the right
etc., all have goals and responsibilities to deliver. Having
direction. A corporate strategy is generally broader than
a visible functional level of strategy that aligns with the
the other strategy levels. Strategies at this level are more
overarching corporate strategy will increase the chances
conceptual and futuristic than the other levels. They
of success. These strategies involve resource allocation,
usually span a 3-5 year period.
measurable goals, and a focus on continuous
2.Business Strategy: improvement, all within the context of individual functions.
 hold certain traits outlined in the framework. This
STRATEGIC ANALYSIS categorization then allows organizations to identify the
Strategic analysis is the process of researching company resources and capabilities that provide a
and analyzing an organization along with the business competitive advantage.
environment in which it operates to formulate an effective
strategy. This process of strategy analysis usually The VRIO Model is composed of the following key
includes defining the internal and external dimensions:
environments, evaluating identified data, and utilizing V – aluable
strategic analysis tools. R- are
By conducting strategic analysis, companies can I - nimitable
gain valuable insights into what's working well and what O - rganized
areas need improvement. These valuable insights V - valuable resources
become key inputs for the strategic planning process, When a resource is valuable, it provides the
helping businesses make well-informed decisions to organization with some sort of benefit. However, a
thrive and grow. valuable resource that doesn't fit into any of the other
dimensions of the framework, is not a competitive
TYPE OF STRATEGIC ANALYSIS advantage. An organization can only achieve competitive
parity with a valuable resource that is neither rare nor hard
 Internal Strategic Analysis to imitate.
The focus of internal strategic analysis is on diving
deep into the organization's core. It involves a careful To assess resource value, ask the following
examination of the company's strengths, weaknesses, questions:
resources, and competencies. By conducting a thorough  Does it benefit our customers or our bottom line?
assessment of these aspects, businesses can pinpoint  Does it align with our business strategy and goals?
areas of competitive advantage, identify potential  Can it improve our competitive positioning?
bottlenecks, and uncover opportunities for improvement.
R - rare resources
 External Strategic Analysis A resource that is uncommon and not possessed
On the other hand, external strategic analysis zooms by most organizations is rare. When a resource is both
out to consider the broader business environment. This valuable and rare, you have a resource that gives you a
entails conducting market analysis, trend research, and competitive advantage. The competitive advantage
understanding customer behaviors, regulatory changes, achieved from valuable and rare resources is usually
technological advancements, and competitive forces. By short-lived, though. Competitors will quickly realize and
understanding these external dynamics, organizations can imitate the resource without too much trouble.
can anticipate potential threats and uncover opportunities Therefore, it's only a temporary competitive advantage
that can significantly impact their strategic decision-
making. On a macro scale, external analysis includes Here are some questions to understand if your
macroeconomic, global, political, social, demographic, resource is "rare":
and technological analysis. The primary purpose of  Is it unique in our industry?
external analysis is to determine the opportunities and  Do competitors lack it?
threats in an industry or any segment that will drive  Is it a source of competitive advantage?
profitability, growth, and volatility.
I -inimitable resources
STRATEGIC ANALYSIS TOOLS Resources and capabilities are hard to imitate if
1. VRIO Analysis they are extremely expensive for another organization to
2. SWOT Analysis acquire them. A resource may also be hard for an
3. PESTEL Analysis organization to imitate if it's protected by legal means,
4. Porter's Five Forces such as intellectual property, patents or trademarks.
5. Value Chain Analysis Resources are considered a competitive advantage if
6. Gap Analysis they're valuable, rare, and hard to imitate. However,
organizations that aren't organized to take advantage of
1. VRIO ANALYSIS the resource fully, may mean the resource is an unused
An internal analysis tool used by organizations to competitive advantage.
categorize their internal resources based on whether they
 To analyze “inimitability”, ask the following examples demonstrate how organizations in vastly
questions: different industries can apply the VRIO framework to
 Is it hard for competitors to copy? maximize their unique resources. Whether it’s agile
 Are there barriers to imitation? If yes, what are they? supply chains or data-driven decision-making, VRIO
 Does it require specialized knowledge or technology? helps companies identify what sets them apart and
leverage those strengths for long-term success.
O - organized resources to capture value
An organization's resource is organized to SWOT ANALYSIS
capture value only if it is supported by the processes,
structure, and culture of the company. A resource that is A SWOT analysis helps define a company's
valuable, rare, hard to imitate, and organized to capture competitive position, asesses internal and external
value is a long-term competitive advantage. Only a firm issues, and evaluates its current and future potential. It is
that is capable of exploiting valuable, rare, and imitable a realistic, fact-based, data- driven analysis of an
resources can achieve sustained competitive advantage. organization.
It is a technique for assessing the performance,
Finally, these questions will help you understand competition, risk, and potential of a business, as well as a
if the resource is organized: part of a business, such as a product line or division, an
 Do we have the processes to use it effectively? industry, or other entity.
 Is there a clear strategy for its use?
 Are there mechanisms for continuous improvement? SWOT ANALYSIS
S-strength
VRIO ANALYSIS EXAMPLE W-weakness
Netflix’s Data-Driven Content Strategy O-opportunity
T-threats
Value: Netflix’s data-driven approach to content creation
is highly valuable because it allows the company to tailor STRENGTHS
content offerings to viewer preferences. By analyzing user Strengths describe what an organization excels
data, Netflix can predict what shows and movies will at and what separates it from the competition: a strong
resonate with audiences. brand, loyal customer base, a strong balance sheet,
unique technology, and so on. section focuses on the
Rarity: While many streaming services have access to aspects of your company that help it stand out from the
data, Netflix’s ability to leverage this data to directly inform pack. Consider its key selling points, achievements, and
content production is rare. Few companies combine reputation.
customer data with content creation at this scale.
For example, Pizza Hut’s strengths are:
Inimitability: Netflix’s vast repository of user data and its o Strong brand reputation: Pizza Hut is one of the
advanced recommendation algorithms are difficult to world’s most recognizable pizza brands with a high
replicate. Competing services may have data, but Netflix’s market share.
unique integration of technology, analytics, and content o History of innovation: Pizza Hut has successfully
production is built on years of refinement, making it hard released numerous innovative products. Its
for others to catch up. customers expect great ideas and memorable meals
from the company.
Organization: Netflix is fully organized to capitalize on its o Global presence: Pizza Hut is internationally
data insights. The company’s entire business model, from recognized, owning popular restaurants in over 110
content creation to marketing, revolves around data- countries as of 2020.
driven decision-making. This organizational alignment o Excellent customer relations: Pizza Hut puts a lot
ensures that Netflix maximizes the value of its data to stay of stock in customer engagement as the company
ahead of competitors. runs focus groups and responds to customer
feedback.
Result: Netflix’s data-driven content strategy has
provided a sustained competitive advantage, allowing it to WEAKNESSES
lead the streaming industry with original content that Weaknesses stop an organization from
consistently engages and retains subscribers. These performing at its optimum level. These are areas where
the business needs to improve to remain competitive: a
weak brand, higher-than- average turnover, high levels of PESTEL ANALYSIS
debt, an inadequate supply chain, or lack of capital. A PESTEL analysis is a framework or tool used
by marketers to analyze and monitor the macro-
For example, check out Pizza Hut’s weaknesses: environmental (external marketing environment) factors
o Pricing: Pizza Hut’s pricing strategy can sometimes that have an impact on an organization, company, or
be higher compared to its competitors, which may industry. It examines the Political, Economic, Social,
affect its ability to attract budget-conscious Technological, Environmental, and Legal factors in the
customers. external environment. A PESTEL analysis is used to
o Inconsistent Quality: Some customers report identify threats and weaknesses which are used in a
inconsistencies in food quality between locations. SWOT analysis

OPPORTUNITIES POLITICAL
Opportunities are favorable external factors that Factors include government policies, leadership,
could give an organization a competitive advantage. and change; foreign trade policies; internal political issues
and trends; tax policy; regulation and de- regulation
For example, check out Pizza Hut’s opportunities: trends.
o Expansion into Emerging Markets: There are  The tax policies and employment laws of a company
significant growth opportunities in emerging markets can have a specific impact on its sales. If the tax
like India, Africa, and Southeast Asia. policies are fair, the company may earn good revenue
o Health-Conscious Menu Items: As more consumers from the business.
shift to healthier lifestyles, Pizza Hut can capitalize by o The government of many counties may have some
introducing low- calorie, low-carb, or plant-based laws which are ideal for businesses. Starbucks can
menu options. get a good chance of expansion in those countries.
o Partnerships and Collaborations: Collaborating with o The Bureaucratic movements in the developed
popular influencers or celebrities can drive buzz and countries can be a significant threat to the business
reach younger consumers. of the company.

THREATS ECONOMIC
The Threats section of the SWOT analysis Factors include current and projected economic
considers the external factors that could potentially harm growth; inflation and interest rates; job growth and
the company or derail the pursuit of its goals. Who or what unemployment; labor costs; impact of globalization;
is your company worried about right now? disposable income of consumers and businesses; likely
changes in the economic environment.
For example, check out Pizza Hut’s threats:  Most of the developing countries are having an
o Intense Competition: Competitors like Domino’s, emerging economy. It can be a good sign for the
Papa John’s, and local pizzerias continue to grow in countries that are willing to expand their business.
market share, making it difficult for Pizza Hut to  The increasing cost of raw materials and labor
maintain its dominance. charges can be a threat concerning the development
o Health Trends: The increasing focus on healthy of their business.
eating, including lower-carb or organic diets, poses a  There are several alternatives of Starbucks, which
threat to traditional pizza models. are gradually getting hold of the market. The
o Supply Chain Issues: As seen globally, disruptions in competitive market scenario can be a threat to the
the supply chain (e.g., due to inflation or labor business of the company.
shortages) can affect product availability and costs.
SOCIAL
Factors include demographics (age, gender,
PESTEL ANALYSIS race, family size); consumer attitudes, opinions, and
P-Political buying patterns; population growth rate and employment
E-Economic patterns; socio-cultural changes; ethnic and religious
S-SociaL trends; living standards.
T-Technological  The changes in the lifestyle of the people and their
E-Environmental choice of food can toll upon the company's sale.
L-Legal People are more tending to have a healthy, low-
 calorie diet, which can decrease the sales of their moment. Failing to do so may cancel their trade
sugary beverages. license.
o The food items offered by the company are expensive o Licensing regulations and collisions with trade laws can
considering their alternatives. It is the reason they are hinder the expansion of the company.
losing customers from lower and middle-income o The company must ensure employee rights and customer
groups. safety regulations while expanding its business in a
o As the coffee culture is getting new meaning country. Otherwise, their business may suffer.
worldwide, the cafe chain can utilize it. It will help to
expand its business. PORTER’S FIVE FORCES
 Threat of new entrants
TECHNOLOGICAL  Bargaining power of suppliers
Factors affect marketing in (1) new ways of  Bargaining power of buyers
producing goods and services; (2) new ways of  Threat of substitute products or services
distributing goods and services; (3) new ways of  Competitive rivalry
communicating with target markets.
 The increasing technological aid can make the Porter's Five Forces is a tool used to analyze a
journey of coffee from the farm to the mug smoother market or industry and determine its competitiveness.
and faster. The easy transport and high-tech coffee These five forces were developed by Harvard business
machine both can contribute to this. professor Michael Porter, who wrote about the strategic
 As smartphone purchases have increased, more analysis model in the Harvard Business Review in 1979.
people can access the delivery service to get their
coffee from home. Threat of New Entrants
 The company may see a drop in their sales because This factor examines the ease with which competitors
of the easy availability of good quality coffee can enter the market. As more companies enter an
machines in the market. industry, existing businesses may face the potential loss
of customers and profits. The threat of new entrants may
ENVIRONMENTAL be considered high when barriers to entry are low, such
Factors are important due to the increasing as minimal costs or lack of patent protection for a
scarcity of raw materials; pollution targets; doing business company's ideas or technology.
as an ethical and sustainable company; carbon footprint
targets. Elements that can affect barriers to entry include:
 The company's business can get affected if the  Government regulations: Strict regulations can
growth of coffee suffers from insects, diseases, increase the cost and complexity of entering the
climate, or natural disasters. market.
o The company can concentrate on following the  Customer loyalty: Strong customer loyalty to
business sustainability trend, which can make the existing brands can create a barrier to entry.
customers support the company for their policies, and  High costs of entry: Significant capital requirements
this can earn more environment- conscious or other high costs can deter new entrants.
customers.  Limited access to distribution: Restricted
o The company can work on recyclable packaging distribution channels can make it difficult for new
which can be companies to reach customers.
 environment-friendly. They can support social and  Technological requirements: Specialized
environment- related campaigns, which can be a fair technology or expertise may be necessary to enter
opportunity to promote their business. the market.
 Economies of scale: Existing companies may have
LEGAL cost advantages due to economies scale.
Factors include health and safety; equal
opportunities; advertising standards; consumer rights and Bargaining power of suppliers
laws; product labeling and product safety. Bargaining power of suppliers refers to the ability of
 The company needs to adhere to the employment suppliers to dictate terms and conditions, such as prices
rules and product safety regulations proposed by and quality. When a company has limited supplier options,
the law of the countries they are serving at that suppliers have more power to increase prices or reduce
quality, potentially impacting the company's profitability.
Conversely, a company with access to multiple suppliers options to choose from, potentially reducing a company's
has more flexibility to negotiate favorable terms. market share and profitability.
If a product or service is easy to replicate, there may
Elements that can influence a supplier's power over a also be a risk that customers might create substitutes
company's profitability include: themselves.
o Number of suppliers: A limited number of suppliers
increases their bargaining power. Elements that can affect the threat of substitute products:
o Supplier size: Larger suppliers may haveo more Number of substitutes: A greater number of substitutes increases
leverage in negotiations. the threat.
o Substitute suppliers: The availability of alternative
o Quality of substitutes: High-quality substitutes can attract
suppliers can reduce supplier bargaining power. customers away from the original product.
o Product uniqueness: Unique or specialized o Price of substitutes: Lower-priced substitutes can make it difficult
products can give suppliers more leverage. for companies to compete.
o Product quality: High-quality suppliers mayo have Likelihood of customer switching: The ease with which customers
more bargaining power. can switch to alternatives affects the threat.
o Distribution channels: Suppliers with ostrong Perceived differences: If customers perceive little difference
distribution networks may have more influence. between products, the threat of substitutes is higher.
o Product volume: Large purchase volumes can o give
Competitive aggressiveness: Aggressive pricing or marketing
companies more bargaining power. strategies from competitors can pose a threat.
o Switching costs: High costs associatedo with Competitive profits: High profits among competitors may incentivize
switching suppliers can increase their bargaining new entrants and increase competition.
power.
o Industry importance: If the supplier's industry is Competitive rivalry
critical to the company's operations, their bargaining Industry competition can refer to the number and
power may be higher. strength of competitors within a market, as well as the
quality of their products and services. High competition
Bargaining Power of Buyers may arise when an industry has many similar-sized
Bargaining Power of Buyers may encompass the companies, and customers can easily switch between
ability of customers to influence prices and negotiate them. This can lead to aggressive marketing, price wars,
favorable terms. Buyers tend to have greater bargaining and reduced profitability. Conversely, low competition
power when they are fewer in number but have a wide typically occurs when few companies offer similar
range of substitute products available. This can lead to products, creating opportunities for growth and
lower prices and reduced profits for businesses. profitability.
Conversely, buyers may have less bargaining power
when they purchase in small quantities or have limited Elements that can influence competitive rivalry include:
alternative options. o Number of competitors: The more competitors, the
higher the competition.
Elements that can affect how much power buyers have o Variety of competitors: A wide range of competitors
over a company's pricing include: can increase competition.
o Number of customers: A small number of customers o Product differences: Unique products or services
can exert more influence on pricing. can create competitive advantages.
o Purchase volume: Larger purchase quantities can o Quality differences: Superior quality can
give buyers more bargaining power. differentiate a company from competitors.
o Substitute products: The availability of substitute o Industry balance: A balanced industry with no
products increases buyer bargaining power. dominant players can lead to higher competition.
o Price sensitivity: Customers who are more sensitive o Industry growth: A growing industry may attract
to price changes have greater bargaining power. more competitors, increasing competition.
o Customer loyalty: Strong customer loyalty can
Threat of substitute products or services reduce competition.
The threat of substitute products can refer to the o Barriers to exit: High costs associated with leaving
likelihood that customers may switch to alternative the industry can limit competition.
offerings that satisfy their needs. If many similar products
or services are available, customers may have more
VALUE CHAIN ANALYSIS
 A value chain is the full range of activities needed Gap analysis is a method used by organizations
to create a product or service and make it available to to compare their current state to their desired future state.
consumers. It is a series of consecutive steps that go into This process includes assessing the actual performance
the creation of a finished product, from its initial design to of your organization to determine whether business goals
its arrival at a customer’s door. or objectives are being met and, if not, creating an action
plan that will bridge those identified performance gaps. It's
PRIMARY ACTIVITIES a great tool for your company's internal analysis. Almost
o Inbound Logistics: all major businesses usually assign the completion of a
include functions like receiving, warehousing, gap analysis template to project managers or business
and managing inventory into a business. analysts.
o Operations:
include procedures for converting raw materials GAP ANALYSIS
into a finished product out to the customers.
o Outbound logistics:
include activities to distribute a final product to a
consumer.
o Marketing and sales
include strategies to enhance visibility and target
appropriate customers—such as advertising,
promotion, and pricing.
o Service
includes programs to maintain products and
enhance the consumer experience, like customer
service, maintenance, repairs, refunds, and
It also presents a framework for collaborating on
exchange.
creating a strategic plan and a common execution
roadmap that is visible and aligned with all stakeholders.
SUPPORT ACTIVITIES
When multiple people are involved in strategic planning
The role of support activities is to help make the
and execution, their different approaches can sometimes
primary activities more efficient. When you increase the
conflict with each other.
efficiency of any of the four support activities, it benefits
This framework can also be used to analyze
at least one of the five primary activities.
historical performance. The first time you run a gap
analysis process, you will explicitly capture the current
o Procurement
performance of your business (in both qualitative and
concerns how a company obtains raw materials.
quantitative forms). So, the next time you do one, you will
o Technological development
have a benchmark against which you can compare your
Is used at a firm’s research and development
most recent performance to efficiently set goals.
(R&D) stage, like designing manufacturing
techniques and automating processes.
WHEN TO USE GAP ANALYSIS?
o Human resources (HR) management
o Create a new strategy for your team and want to
involves hiring and retaining employees who will
understand where you currently sit
fulfill the firm’s business strategy and help design,
o Figure out the right areas of focus to achieve your
market, and sell the product.
business goals
o Infrastructure
o Develop a new product, understanding the gap
includes company systems and the composition
between your current offer and what customers want
of its management team, such as planning,
o Find out why you aren't meeting important KPIs and
accounting, finance, and quality control.
strategic objectives
o Develop a change management strategy, but you
need first to identify the gap between the current and
STEPS TO VALUE CHAIN ANALYSIS
desired state
1.Identify primary and secondary value chain activities.
o Identify opportunities to improve current processes or
2.Determine the values and costs of those activities.
workflows
3.Identify competitive advantage opportunities.
o Prepare for an audit and showcase how you are
proactively addressing gaps
GAP ANALYSIS
o Prepare a strategic plan and prioritize resource What Are Capabilities?
allocation Capabilities are the abilities of a startup to deploy
its resources effectively in order to achieve business
EXAMPLE OF GAP ANALYSIS goals. These are the processes, skills, and competencies
o New Product Launch that enable a startup to execute its strategy and deliver
A technology company plans to launch a new value to its customers. Key capabilities include:
mobile app to expand its product offerings and reach a
wider audience. To ensure the app's success, they o Operational Capabilities: The ability to efficiently
conduct a gap analysis to evaluate their current app manage production processes, supply chains, and
development processes, features, and user interface day-to-day operations.
compared to competitors in the app market. o Marketing Capabilities: The startups capacity to
By identifying gaps and areas for improvement, identify customer needs, create value propositions,
they refine the app's and execute marketing strategies effectively.
functionalities, enhance user experience, and align it o Innovative Capabilities: The ability to develop new
better with customer needs, positioning it as a standout products, services, or business models that
solution in the competitive app market. differentiate the startup in the marketplace.
o Strategic Capabilities: The foresight and agility to
o Human Resources Strategic Planning set long-term goals, adapt to market changes, and
The Human Resources (HR) team at a medium- make decisions that align with the startup’s vision.
sized organization faces challenges with employee
retention and satisfaction. To improve the department's The Importance of Strategic Analysis for Startups:
performance, they conduct a gap analysis to assess their
current practices, employee feedback mechanisms, and 1. Identifying Core Competencies:
talent management strategies. Startups often operate with limited resources,
By pinpointing gaps between existing practices making it crucial to identify and focus on their core
and desired outcomes, they develop a strategic action competencies—those areas where they can perform
plan. This plan includes implementing effective employee exceptionally well. Understanding core competencies
engagement programs, talent development initiatives, allows startups to leverage their strengths, differentiate
and performance management systems, leading to themselves from competitors, and deliver unique value to
improved retention rates and increased employee their customers.
satisfaction.
2. Resource Optimization:
STRATEGIC ANALYSIS: Strategic analysis helps startups understand how
INTERNAL RESOURCE & CAPACITY AUDITING to best utilize their limited resources. By identifying areas
where resources are being underutilized or where
What Are Internal Resources? additional investment is needed, startups can optimize
Internal resources are the assets that a startup their operations and avoid wasting time, money, and effort
owns or controls, which are used to create value and on non-essential activities.
execute business operations. These resources are the
building blocks upon which a startup's business model is 3. Risk Management:
built, and they can be classified into several categories: Startups face a high level of uncertainty and risk.
By thoroughly analyzing their internal resources and
o Physical Resources: Includes office space, capabilities, startups can identify potential vulnerabilities,
technology infrastructure, equipment, and raw prepare for challenges, and develop contingency plans to
materials. mitigate risks.
o Human Resources: Refers to the team’s skills,
expertise, creativity, and entrepreneurial spirit, which 4. Aligning Resources with Growth Strategy:
are often the most critical resources for startups. For a startup, aligning internal resources and
o Financial Resources: Encompasses the startup’s capabilities with its growth strategy is vital. Whether the
capital, funding from investors, cash reserves, and focus is on scaling operations, entering new markets, or
revenue streams. developing new products, a clear understanding of
o Intangible Resources: Comprises brand identity, internal strengths and weaknesses allows for more
intellectual property (like patents and trademarks), informed strategic decisions.
company culture, and customer relationships.
 Leveraging Internal Resources and Capabilities for
Key Steps in Strategic Analysis for Startups Growth:
1. Conducting a Resource Audit
2. Evaluating Capabilities 1. Fostering Innovation.
3. SWOT Analysis for Startups: Startups thrive on innovation. By leveraging their
4. Value Chain Analysis: internal resources and capabilities, startups can foster a
5. Developing Strategic Initiatives: culture of innovation that drives new product
development, improves processes, and keeps them
1. Conducting a Resource Audit. ahead of the competition. For example, a startup might
The first step is to perform a comprehensive audit use its agile development capabilities to rapidly iterate on
of the startup’s resources. This involves cataloging all product ideas based on customer feedback.
available resources—physical, human, financial, and
intangible—and assessing their current value and 2. Building Strategic Partnerships.
potential contribution to the startup’s objectives. For Strategic partnerships can help startups
instance, a startup might discover that its strongest overcome resource limitations and enhance their
resource is its team’s deep industry knowledge or its capabilities. By collaborating with other companies,
innovative technology platform. startups can gain access to new technologies, markets,
or expertise that they lack internally. For instance, a tech
2. Evaluating Capabilities. startup might partner with a well-established company to
After identifying resources, the next step is to leverage their distribution channels or R&D capabilities.
assess the startup’s capabilities. This includes analyzing
how effectively the startup can utilize its resources to 3. Continuous Learning and Adaptation.
create value. Startups should focus on identifying their The business environment is constantly evolving,
core capabilities that provide a competitive advantage, especially for startups. Continuous learning and
such as a unique product development process or an adaptation are crucial for startups to stay competitive. By
exceptional customer service approach. regularly re-evaluating their internal resources and
capabilities, startups can remain agile, adapt to changes
3. SWOT Analysis for Startups. in the market, and continue to grow.
A SWOT (Strengths, Weaknesses, Opportunities,
and Threats) analysis is particularly useful for startups. It 4. Scaling Operations.
allows them to map out their internal strengths and As startups grow, they need to scale their
weaknesses in the context of external opportunities and operations without losing efficiency or quality. Strategic
threats. This analysis helps startups understand where analysis helps identify the capabilities that need to be
they can capitalize on opportunities and how to address scaled and the resources required to support growth. For
potential threats using their internal strengths. example, a startup might need to scale its customer
service capabilities as it expands into new markets.
4. Value Chain Analysis.
Value chain analysis involves breaking down the
startup’s operations into its primary and support activities,
identifying areas where value is created, and looking for
opportunities to enhance efficiency and effectiveness. For
startups, this might involve streamlining operations,
improving customer interactions, or enhancing product
development processes to deliver more value at a lower
cost.

5. Developing Strategic Initiatives.

Based on the insights gained from the strategic
analysis, startups can develop specific initiatives that
align resources and capabilities with their long-term
growth goals. These initiatives might include investing in
talent acquisition, upgrading technology, enhancing
marketing efforts, or exploring partnerships to fill
capability gaps.