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Pamela McClinton
Liberty University
STRATEGIC MANAGEMENT ANALYSIS TOOLS 2
Abstract
Strategic management allows organizations to review current processes and make intentional
decisions about the direction of a company. Many business managers do not fully understand the
organizations gain a competitive edge within their industry, but not without the analysis of
various strategic management analysis tools that have been designed to aid in the strategic
management process and promote organizational growth. A review of the literature supporting
strategic management and tools such as Porter’s five-forces, SWOT, BCG growth matrix, value-
chain analysis, competitive advantage and balanced scorecard (BSC) provide a comprehensive
companies ahead of the competition and sustain a competitive advantage in the world
marketplace. This review also provides a synthesis of these tools to show organizational leaders
the differences when comparing one tool to another which facilitates the determination of the
The global marketplace has changed dramatically over the past century. The rise of the
Industrial Age brought nationalization as businesses began to expand from being situated in one
city or state to positioning themselves across state lines and into various parts of the country.
The Information Age thrust businesses even further, taking expansion across continents and
growth on a massive scale with divisions of their organizations thousands of miles apart. Not
only did organizations desire to thrive, but in order to continue their growth, managers needed to
maintain a competitive edge in the marketplace. The evolution of the global business
that would propel their organizations farther. Managers have found that sustaining competitive
edge yields greater revenue, organizational growth, and industry leadership over their
contenders.
But staying competitive in the marketplace did not prove to be an easy undertaking. Thus,
managers from organizations around the world devised systems that have become known
of benefits, and many researchers have theorized the goals of strategic management in their
literature. Furthermore, an examination of the most common strategic management tools aids
the awareness of how these instruments, when applied within a business organization, lead to
competitive advantage, growth, and greater business revenue. This research paper seeks to share
leading researcher’s views of the goals of strategic management and illustrate the most common
strategic management tools: Porter’s Five Forces, SWOT, BCG growth matrix, value chain
STRATEGIC MANAGEMENT ANALYSIS TOOLS 4
analysis, competitor analysis and BSC along with their comparisons and contrasts when used
Strategic Management
responsibilities that govern an entity, has existed. Through the coordination of activities to get
the necessary work accomplished that produces a product or delivers a service, management has
experienced challenge. These challenges have ranged from employee supervision, to customer
satisfaction, to business growth. When the founder of strategic management, Alfred Chandler
(1991) began investigating organizational growth, his interest was drawn largely due to the
intense crises endured by businesses such as Du Pont, General Motors, and Sears Roebuck.
Chandler deliberated the challenges noticing that when Sears Roebuck was forced to choose
survival or downfall, the business made tactical steps to move its mail order business to chain
stores situated mostly in urban areas. The concept of strategy in business was fashioned and a
few years later, Chandler released his book Strategy and Structure (1962), which is still
organizational strategy before carrying out the structural procedures of day-to-day business.
This new idea proposed that when management employed strategies for long-term growth, they
reduced overwork at the top and opened up the capability to move into new product markets and
even shift into new geographic areas. Chandler’s work has been touted “a theoretical
masterpiece” ("Alfred Chandler, Strategy and Structure, 1962," 2003, para. 2) in the business
industry, and strategic management has evolved to look not only at a broad organizational
strategy, but now comprises the detail of identifying and evaluation the statistics in an
STRATEGIC MANAGEMENT ANALYSIS TOOLS 5
organization important to strategy planning, delineating the external and internal environment of
When a business chooses to incorporate Chandler’s theory into their organization, its
managers must recognize that strategic management is a continual and collaborative process
(Lana, 2008, para. 9). This constant process drove researchers, businessmen, and scholars to
devise tools to help businesses implement Chandler’s strategic management theory. Strategic
management can be a broad concept that may overwhelm administrators when trying to apply it
organization, strategic management analysis tools help managers divide their goals into
manageable parts and examine the use of the organization’s resources to create cost savings,
revenue growth, business growth through efficiency, value, and effectiveness, and customer
satisfaction. These tools are also useful for evaluating weaknesses, competitor strengths,
environmental and societal demands that could jeopardize organizational growth. Some of the
most common strategic management analysis tools are Porter’s Five Forces, SWOT (strengths,
weaknesses, opportunities, and threats) analysis, BCG (Boston Consulting Group) growth
matrix, value chain analysis, competitor analysis, and BSC (balanced scorecard) analysis. The
application of one tool over another relies heavily on the goals of the tool and the objectives of
the organization.
Michael E. Porter, a Harvard graduate and professor, produced the five-forces model in
his book Competitive Advantage: Techniques for Analyzing Industries and Competitors released
STRATEGIC MANAGEMENT ANALYSIS TOOLS 6
in 1980 (Childress & Kirkwood, 2006). In this model, Porter rationalizes that in order to manage
an organization strategically, management must start with analyzing the competition. Based on
this analysis, managers can then examine the threat of new entrants, recognize the bargaining
power of suppliers, identify the bargaining power of buyers, be aware of the threat of substitutes,
and acknowledge the rivalry among existing competitors (Lee, Kim, & Park, 2012). These five
components comprise the five forces facing an organization that must be strategically planned
marketplace.
The threat of new entrants identifies the challenges facing new businesses that desire to
penetrate the marketplace. This information is vital for an organization to examine because
threats to entry into the marketplace can impede goals to expand the organization nationally or
internationally. For example, there may be some markets where entry into the industry is
threatened by high investment rates, solid commitment to industry trademarks, or delivery paths
that are run by industry contenders (Evans & Neu, 2008). Organizational leaders must recognize
that not only customers but suppliers as well can impact businesses in an industry through the
The bargaining power of suppliers refers to “the ability of suppliers to raise prices or
reduce quality of inputs” (Lee, Kim, & Park, 2012, p.1784). From an organizational perspective,
when suppliers attempt to control the market through by escalating prices or decreasing the
quality of inputs this causes suppliers to become a danger to the growth of a business. Suppliers
with this type of power can be identified if they are small and concentrated in the same area, if
STRATEGIC MANAGEMENT ANALYSIS TOOLS 7
costs are high when moving to another supplier, if the services and products offered by the
supplier are unique, and if the market is not of interest to the suppliers (Lee, Kim, & Park, 2012).
Similar to the bargaining power of suppliers, buyers can choose to control the industry by
requiring lower prices or demanding a higher price but only with a higher quality of the service
or product. Buyers increase their power by buying in bulk volume or by utilizing a majority
Threats of substitutes.
Within an industry, the service and product offerings produced by industry contenders
increases market share. When substitutes enter the market, the opportunity for buyers and
suppliers to get their needs fulfilled by other businesses or other industries also presents itself
(Lee, Kim, & Park, 2012). Organizations must be aware of the substitutes that may be a threat to
their business’ market so that they are poised to reduce the number of substitutes that can steal
satisfaction, and product quality, intense rivalry among existing competitors can be unproductive
for all businesses. Lee, Kim & Park (2012) advise that extreme rivalry has been known to
significantly impact business revenue. The strength of the rivalry among competitors is typically
related to the industry’s structure, demand and the ability to meet that demand by the market, the
diversity of the organizations involved, and the height of barriers that allow organizations to exit
the market.
Stanford University professor, Alfred Humphrey, is credited with the origination of the
SWOT analysis though the name SWOT and its source are unknown (Helms & Nixon, 2010).
Several other researchers took the development of SWOT further defining the strategic
management analysis tool as “a systematic procedure for identifying a firm’s critical success
factors: its internal strengths and weaknesses and its external opportunities and threats”
(Blocher, 2010). SWOT has been touted as a chief instrument for tackling complicated strategic
conditions because it is simple, easy to follow and it minimizes the amount of data to aid in
strategic management. The SWOT analysis gives organizational managers the structure needed
to handle issues, improve strengths, seize opportunities, avoid threats, and decrease weaknesses
Strengths.
examination of the features, services, products, or procedures that the organization accomplishes
well. These strengths can reside in a multitude of areas, from the organization’s service,
specialization, or even its location. Once recognized, the organization would place these
characteristics in the top-left quadrant of the SWOT diagram (see Fig. 1).
Strengths Weaknesses
• Strength #1 • Weakness #1
• Strength #2 • Weakness #2
• Strength #3 • Weakness #3
Opportunities Threats
• Opportunity #1 • Threat #1
• Opportunity #2 • Threat #2
• Opportunity #3 • Threat #3
STRATEGIC MANAGEMENT ANALYSIS TOOLS 9
Weaknesses.
Weaknesses also represent an internal analysis of the organization, but these are areas
that inhibit progress, where competitors have the opportunity to win potential customers or
components of the organization’s processes that constantly draw on its resources (DeSilets,
2008). Organizations may not always be able to recognize clearly weaknesses with processes
and procedures, thus it is helpful to identify areas where inefficiency, waste, and high cost
expenditures persist. Once recognized, these weaknesses are placed in the top-right quadrant of
Opportunities.
DeSilets (2008) states that an opportunity is an external element that “is a combination of
circumstances, times, and places that, if accompanied by a certain course of action, is likely to
result in significant positive benefits” (p. 197). Opportunities represent potential areas that the
organization can use to gain or sustain competitive edge in their industry. An organization can
accurately identify opportunities by considering the activities, places, or processes they would
like to be involved with in the coming years. Opportunities are placed in the bottom-left
Threats.
Threats are another external factor that an organization must consider in order to position
themselves to survive in the world marketplace. Threats can come from buyers, suppliers,
economic, societal, and governmental pressures and if imposed can result in significant
consequences for the organization. Bolcher (2008) notes that threat are easily identifiable by
The BCG growth matrix, sometimes called the growth-share matrix, was developed by
the Boston Consulting Group in the 1970s and unlike the previous strategic management analysis
tools “helps marketers to identify high and low potential business units or products” (McDonald
& Roberts, 1992, p. 55). When the growth matrix was in development, strategic managers of the
Boston Consulting Group sought to understand how to take diversified businesses offering not
only multiple products, but sometimes even an organization involved in multiple businesses and
perpetuate growth (Deshpande & Parasuraman, 1996). The BCG growth matrix was born and
has been considered to be more of a business portfolio analysis that uses a grid to analyze all
business lines according to four dominant product types: star products, problem child products,
Star products.
Star products symbolize sizeable growth and share and substantial return on investment
(Morrison & Wensley, 1991). These products are arranged on a 2x2 grid ( see Fig. 2) with
products identified by circles on the matrix. The axes for the grid measure relative growth
against market growth, and star products are located in the top-left quadrant of the grid
signifying high relative growth and high market growth. These products produce sizeable
revenue for the organization and the products are in markets that are growing rapidly.
Cash cows are products that indicate industry leadership with high relative growth, but
are in markets that have stopped growing (Deshpande & Parasuraman, 1996). So products in
this category produce a substantial amount of revenue for the organization, but their future
STRATEGIC MANAGEMENT ANALYSIS TOOLS 11
growth is restricted due to decline. These products are located in the bottom-left quadrant of the
Products in the question mark category are in growing markets, but require investment as
they do not bring in notable revenue. Deshpande & Parasuraman (1996) share that organizations
cannot support too many question mark products because of the investment and low initial
return. These products are located in the top-right quadrant of the growth matrix (see. Fig. 2).
Dog products.
Dog products, or pet products as some researchers identify them, are products in an
organization that represent a constant draw on business revenue and are not in growth markets.
While these products may be pleasing, strategically, they do not offer growth potential to the
organization. Morrison & Wensley (1991) report that BCG’s growth matrix strategy encourages
organizations to “divest and cut the losses” (p. 110) of products or businesses such as these. Dog
products are located in the bottom-right quadrant of the BDG growth matrix (see. Fig. 2).
STRATEGIC MANAGEMENT ANALYSIS TOOLS 12
which products or businesses within their multidimensional organizations to focus growth and
pour revenue into for overall organization growth and future competitive advantage.
When Harvard business professor, Michael Porter presented the strategic management
analysis tool, the value stream, Competitive Advantage: Creating and Sustaining Superior
Performance (Value Chain, 2010) in 1985, the concept of creating value took the business world
by storm. Porter reasoned that all services or products within an organization travel through a
chain of processes or procedures from their beginning to delivery. Within each phase of the
chain, the service or the product has the ability to develop value. Consequently, the value-chain
tool made known to the business world and strategic management researchers that the method of
creating value within an organization is where the competitive edge in an industry is created. In
value-chain analysis, every business has the ability to grow and maintain a competitive edge over
rivals in their industry by fostering value-added strategies at every stage in the process. As a
result, value-chain analysis has grown from Porter’s value stream to “an analysis tool
organizations use to identify the specific steps required to provide a competitive product or
service to the customer” (Blocher, 2010, p. 10). At the time that Porter’s concept of value-chain
analysis was imagined, its general design was to provide businesses with a map to chart the
process of flows that could differentiate and separate value-creating activities (Value Chain,
2010) so that organizations could focus on one activity or process at a time. Initially, the design
planned to provide three principal phases: an upstream phase that concentrated on product or
providing the service or product; and a downstream phase, which focused on the distribution of
STRATEGIC MANAGEMENT ANALYSIS TOOLS 13
the service or the product to buyers (Blocher, 2010). The central components of this strategic
management analysis tool are the identification of value-added activities that are executed by
managers within the organization and the creation of competitive advantage by implementing
strategies that reduce cost or adding value to the organization. Value chain analysis has
expanded into a internationally recognized strategic management analysis tool due to its potential
Employing value chain analysis into an organization benefits the business in three ways.
The business can offer quality and value to its customers by increasing efficiency and
effectiveness throughout the service and products lines (Noke & Hughes, 2010). Effectiveness
permits the product or service to be offered in a useful manner and encourages the
accomplishment of goals established by the customer. Efficiency lets the product or service
provide a combination of expertise and timeliness. Value chain analysis also produces
innovation in the composition and distribution of the product or service (Noke & Hughes, 2010).
Innovation has the capability of producing greater volume or larger business revenue, whereas
the manufacture of the product still remains low. This brings about higher revenue for the
overall business. Lastly, employing value chain analysis helps managers acquire a vital shift in
their perspective of the product or services that are offered. With business growth, managers are
able to deliberate on how the products and services offered by the organization are able to
generate value in new ways than ever before (Noke & Hughes, 2010).
Competitive Analysis
In competitive analysis, organizations are able to take several techniques from other
strategic management tools to analyze its current products and services against the products and
services offered by competitors in the same industry (Swamidass, 2004). As the business
STRATEGIC MANAGEMENT ANALYSIS TOOLS 14
environment changes rapidly, organizations are faced with globalization and new markets
surfacing that threaten business growth. Thus a strategic plan to analyze a rival’s strengths and
weaknesses is essential but not easy (Ho & Lee, 2008). Competitive analysis uses segments of
Porter’s five-forces tool, SWOT, along with Henry Mintzberg’s strategy concept: the five p’s for
strategy, but this analysis focuses on components related to strengths and weaknesses of the
competitor against an organization and does not examine in detail market growth of an
Competitive analysis centers on five major steps: determining the size of the industry
and discovering main competitors, outlining what is of value in the target industry, gathering
business intelligence on the competitor and describing the competitor’s structure, illustrating the
competitor’s behavior in light of their organization’s structure, and evaluating the competitor’s
reaction to the investigating firm’s strategic options (Ho & Lee, 2008). The competitive analysis
gathered by an organization can be different as the tool does not have a grid, map, or structure as
some other strategic management tools. For example, Brock (1984) highlights that when
performing a competitive analysis, analysts should evaluate the relative perceptions of the
organization against its competitor from the aspect of value provided to customers and the cost
the other hand, corresponds more with Ho & Lee (2008) highlighting the need to recognize key
competitors, understand the competitor’s objectives, examine the success rate of the strategies
used by competitors, identify the competitor’s strengths and weaknesses, and evaluate how a
competitor responds to an offensive move by a rival in the industry. All components are
gathered and organizations are able to use the information to help their business build more
effective strategies, plan attacks on the competition with more precision, establish the necessary
STRATEGIC MANAGEMENT ANALYSIS TOOLS 15
defenses to ward off threats from the competition, and perhaps recognize the buying behavior of
another highly used technique is necessary. This analysis tool is the balanced scorecard (BSC).
The BSC is one of the latest strategic management analysis tools and developed in the 1990s by
Harvard professor, Robert Kaplan and David Norton, a management consultant (Balanced
Scorecard, 2009). Kaplan and Norton argued that when an organization relies heavily on
financial performance as a performance indicator of the organization’s health, their views tend to
Kalagnanam, Sheehan, & Vaidyanathan, 2011). To underscore the importance of using both
financial and nonfinancial information and to strategically assess an organization in its entirety,
Kaplan and Norton devised the balanced scorecard (BSC) which reports a firm’s critical success
factors in four areas: financial performance, customer satisfaction, internal processes, and
Financial performance.
Financial performance has been recognized as the best way to assess an organization’s
strength for decades. The financial successes and losses by earnings, earnings per share, returns
on investments, and earnings growth are all indicators of the financial performance of an
Customer satisfaction.
All organizations are interested in how their business is identified by its customers. In
the BSC, customer satisfaction allows an organization to gauge quality, service, and affordability
STRATEGIC MANAGEMENT ANALYSIS TOOLS 16
among other benefits that it provides and determine how well it satisfies its customers in these
Internal processes.
The internal processes within an organization are the daily operations that the
organization performs to get products manufactured or services offered. The internal processes
would “measure efficiency and effectiveness with which the firm produces a product or service”
(Blocher, 2010, p.11). Outages, delays, and upgrades all significantly impact the internal
processes of an organization.
Probably the most vital of all the components of the BSC is learning and growth (Werner
& Xu, 2012). Learning and growth focuses on the future of the organization and corresponds to
employees and the expertise that employees have to move the organization forward. Evaluating
learning and growth within an organization is also recognized as a useful way to motivate
employees and determine the ability to improve and employ human resources to achieve
Synthesis
analysis tools into their organizations, but determining which tool to use can be complicated.
Therefore a synthesis of the tools will be examined to aid organizations in deciding which
The major themes present in the five-forces analysis are threat of new entrants, the
bargaining power of suppliers, the bargaining power of buyers, the threat of substitutes, and the
STRATEGIC MANAGEMENT ANALYSIS TOOLS 17
rivalry among existing competitors. All of the factors in the five-forces model focus on external
pressures perceived by the organization. Organizations use this model to position themselves ton
to be knowledgeable of these dangers, avoid the hazards, and thrive in the midst of potential
threats. This model is suitable for organizations that are small, penetrating a new industry, or
expanding its current organization to include additional business segments. On the contrary, the
SWOT model analyzes internal strengths and weaknesses and external opportunities and threats
to the organization. While SWOT identifies threats, similar to five-forces, it also provides the
organization with an analysis of its internal strengths and weaknesses. Considering the strengths
and weaknesses allows the organization to recognize vital areas that the organization can use to
defend against threats. SWOT also investigates opportunities external to the organization that
may provide the business with a competitive edge over industry competition.
The BCG growth matrix is a strategic business portfolio analysis that uses a grid to
analyze all business lines according to four dominant product types: It measures revenue growth
against the market growth of products or businesses within an organization. Organizations that
utilize the BCG growth matrix typically are multifaceted, comprising several business units or
producing several products that generate revenue using different business lines. The 2x2 grid
gives a simple, visual analysis of how products from the organization’s business lines impact the
revenue and market potential of the overall business. The BCG growth matrix does interpret
strengths and weaknesses of the organization, but only from a product line perspective.
Similarly, the growth matrix gives a product line interpretation of opportunities and threats, but
does not investigate external opportunities and threats to the organization. Only an analysis of
The value chain analysis, on a completely different scale, gives only interpretations of
revenue and market growth. The main components of value-chain analysis is locating value-
creating activities within organizational departments and focusing on promoting the value that
these activities offer to reduce cost for the organization or create additional value. Value-chain
analysis utilizes the phases of production, operation, and distribution to find value-creating
activities that provide efficiency, effectiveness, foster innovation, and encourage a value-driven
mindset in managers. These two strategic management analysis tools provide an organization
with very distinct offerings, thus the organization must conclude if its overall goal is to manage
the products lines with the business or introduce a forward-thinking perspective that offers future
The competitive analysis of an organization can take on several variations, but most
researchers use the competitive analysis tools to determine the size of the industry and
discovering main competitors, outline what is of value in the target industry, gather business
intelligence on the competitor by describing the competitor’s structure, illustrate the competitor’s
behavior in light of their organization’s structure, and evaluate the competitor’s reaction to the
investigating firm’s strategic options (Ho & Lee, 2008). These assessments give organization a
business develop better strategies, plan strategic moves in light of the competition with more
precision, establish critical defense mechanisms to ward off threats, and recognize the buying
behavior of customers. The competitive analysis exams only external components because it
focuses primarily on the competitor, but implementing a competitor analysis into an organization
The balanced scorecard (BSC), on the other hand, is an internal assessment of financial
performance, customer satisfaction, internal processes, learning and growth. The BSC examines
examining how all areas of the organization impact its growth. Organizations looking for
strengthen its resources internally would benefit from the BSC, while organizations that are
penetrating a new market or small business looking to expand benefit most from competitive
analysis.
Conclusion
The introduction of strategic management into the global marketplace changed the face of
the business industry. The Pulitzer Prize winning professor, Alfred Chandler, underestimated the
impact of his discovery sharing “my goal from the start had been to study the complex
interconnections in the modern industrial enterprise between structure and strategy, and an ever-
changing external environment” (Chandler, 1991, p. 36). But strategic management garnered so
much attention that researchers have spent over a half century devising tools to help
management analysis tools give organizations a comprehensive look into the pressures threats
facing their business, help the organizations examine their own strengths, weaknesses, and
opportunities, scrutinize product lines to determine if they generate revenue or stimulate market
growth, explore value-creating activities that may be hidden within an organization and can offer
consider an overall approach that includes financial, customer satisfaction, internal process,
learning and growth within a company. These various tools benefit an organization in an
with tools to help them succeed and grow. As companies move forward in the twenty-first
century, gaining and sustaining competitive edge will be necessary to have a significant impact
on market share. Employing strategic management analysis tools are not only a good
investment, but provide forward-thinking perspectives to drive business onward as the world
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