Strategic Analysis and Strategic Planning: formula sheet

Key formulas

Stages of the strategic management process

Analysis → Formulation → Implementation → Evaluation and control (with feedback)

Write the stages in this order. Some books split analysis into vision/mission setting and environmental scanning; mention both if asked for detail.

Three levels of strategy

Corporate (what businesses?) → Business (how to compete?) → Functional (how to execute?)

Corporate is the widest and longest-term; functional is the narrowest and most operational.

Core question at each level

Corporate: scope and portfolio | Business: competitive advantage | Functional: efficient support

Use this one-line test to classify any example in an MCQ.

Hierarchy of direction

Vision → Mission → Goals → Objectives → Strategies → Action plans

Moves from broad and long term to specific and short term.

Characteristics of a good objective (SMART)

Specific, Measurable, Achievable, Relevant, Time-bound

Use this to test or write any objective. Some texts word A and R differently, such as Attainable and Realistic.

Vision vs mission in one line

Vision = where we want to be (future). Mission = what we do and why (present).

The core distinction examiners ask for.

Goal vs objective in one line

Goal = broad, qualitative aim. Objective = specific, quantified, time-bound target.

Add an example of each to earn full marks.

PESTEL factors

P + E + S + T + E + L = Political, Economic, Social, Technological, Environmental, Legal

Memorise all six. The second E is Environmental (natural environment), not Economic.

Link to SWOT

External analysis → Opportunities and Threats (O and T)

Internal analysis gives Strengths and Weaknesses. PESTEL only covers the external macro side.

Environmental scanning stages

Scan → Monitor → Forecast → Assess

Scanning detects signals, monitoring tracks trends, forecasting projects them, assessing judges impact on strategy.

Force 1: Threat of new entrants

Higher entry barriers → lower threat

Barriers include economies of scale, capital needs, brand loyalty, access to distribution, government policy, switching costs and cost advantages of existing firms.

Force 2: Bargaining power of suppliers

Few suppliers + unique inputs + high switching cost → high power

Also high if suppliers can integrate forward, or if your firm is not an important customer to them.

Force 3: Bargaining power of buyers

Few large buyers + standard products + low switching cost → high power

Also high if buyers can integrate backward or are price sensitive.

Force 4: Threat of substitutes

Close substitutes at similar or lower price/performance → high threat

A substitute meets the same need in a different way (rail vs air, tea vs coffee). It is not a rival's similar product.

Force 5: Rivalry among existing firms

Many equal rivals + slow growth + high fixed costs + low differentiation + high exit barriers → intense rivalry

Rivalry is the centre of the model and is shaped by the other four forces.

Overall rule

Stronger forces → lower industry profit potential

This is a general tendency. Judge the net effect using the evidence given.

Primary activities of the value chain

Inbound logistics → Operations → Outbound logistics → Marketing and sales → Service

These are directly involved in creating and delivering the product.

Support activities of the value chain

Firm infrastructure + Human resource management + Technology development + Procurement

These support all primary activities.

Margin in the value chain

Margin = Total value created − Total cost of value activities

Advantage comes from lower cost or higher value than rivals.

Core competence tests

Valuable + Rare + Hard to imitate + Extendable to many uses

A capability failing these tests is not a core competence.

SWOT classification

Internal: Strengths, Weaknesses | External: Opportunities, Threats

Strengths and opportunities help the firm. Weaknesses and threats harm it.

Relative market share

Relative market share = Your SBU's market share ÷ Market share of the largest competitor

A value above 1 means you are the market leader. A value below 1 means a rival is bigger. The common dividing line is 1, though some questions use 1.0 or a stated cut-off.

BCG classification

High growth + High share = Star; Low growth + High share = Cash cow; High growth + Low share = Question mark; Low growth + Low share = Dog

Use the cut-off for growth given in the question. If none is given, state your assumed cut-off.

GE matrix axes

Industry attractiveness (vertical) × Business strength (horizontal), each rated High / Medium / Low

Nine cells in three zones: invest/grow, selective/hold, harvest/divest.

Ansoff matrix

Penetration (existing product, existing market); Market development (existing, new market); Product development (new product, existing market); Diversification (new, new)

Risk rises from penetration to diversification.

Three grand strategy directions

Growth = expand | Stability = hold | Retrenchment = shrink or exit

Use this as the top-level classification before naming the exact strategy.

Expansion routes

Market penetration + Market development + Product development

Existing product/existing market; existing product/new market; new product/existing market.

Diversification types

Concentric (related) vs Conglomerate (unrelated)

The test is whether the new business is linked to the current technology, product or market.

Integration types

Vertical (backward, forward) vs Horizontal

Vertical moves along the supply chain; horizontal combines with competitors at the same stage.

Retrenchment ladder

Turnaround → Divestment → Liquidation

Increasing severity. Turnaround keeps the firm intact, divestment sheds a part, liquidation ends the firm.

Porter's generic strategy grid

Advantage (lower cost OR uniqueness) × Scope (broad OR narrow) = Cost leadership, Differentiation, Cost focus, Differentiation focus

Cost leadership and differentiation are broad-scope; the two focus strategies are narrow-scope.

Condition for differentiation to pay

Price premium > Extra cost of differentiation

If the premium does not cover the added cost, profit falls.

Profit logic of cost leadership

Profit per unit = Price − Cost; lower cost gives a profit even at a lower price

The cost leader can match rivals' price and earn more, or cut price and still earn a profit.

Quick revision

• Strategic management levels: corporate, business and functional.
• The process runs from direction-setting through analysis and choice to implementation and evaluation.
• Vision says where the firm wants to be; mission says what it does and for whom.
• Objectives should be specific and measurable, while goals are broader.
• PESTEL covers political, economic, social, technological, environmental and legal factors.
• Porter's Five Forces: rivalry, threat of new entrants, threat of substitutes, buyer power and supplier power.
• SWOT: strengths and weaknesses are internal; opportunities and threats are external.
• BCG Matrix uses market growth and relative market share to place businesses as stars, cash cows, question marks or dogs.
• GE Matrix uses industry attractiveness and business strength and has more factors than the BCG Matrix.
• Corporate strategies: growth, stability and retrenchment.
• Business strategies aim at competitive advantage, for example through cost leadership, differentiation or focus.

Common mistakes

• Treating strategic management as a one-time plan made at the start. Fix: State that evaluation findings feed back into analysis and formulation, so the process is continuous.
• Mixing up corporate and business level strategy. Fix: Corporate is about which businesses to be in; business is about how to compete in one chosen business.
• Treating vision and mission as the same thing. Fix: Tie vision to the future and mission to present purpose. Always mention time orientation in the answer.
• Calling a broad aim an objective. Fix: Check for a measure and a deadline. If either is missing, it is a goal.
• Giving general facts about the economy instead of factors linked to the firm. Fix: Tie every factor to the firm's product, customer or cost. Say what it does to that firm.
• Mixing PESTEL with Porter's Five Forces and listing competitors or suppliers. Fix: PESTEL is the macro environment. Competitors, buyers, suppliers and substitutes belong to industry analysis.
• Treating competitors' similar products as substitutes. Fix: Substitutes meet the same need in a different form (a train instead of a flight). Direct rivals belong under rivalry.
• Listing the five forces by name with no application to the case. Fix: For each force, give at least one fact from the case and a rating. Marks go for application.
• Listing a market trend such as rising demand as a strength. Fix: Positive but external means opportunity. Strengths must be inside the firm.
• Treating every resource as a core competence. Fix: Apply the tests: valuable, rare, hard to imitate, extendable. Name the capability, not the asset.

Exam tips

• For 'distinguish between corporate and business level strategy', draw a two-column answer with four to six points such as decision-maker, scope, time horizon and focus.
• In MCQs, apply the scope test: which businesses, how to compete, or how to execute.
• Always write the stages in order and mention feedback, as many students omit it.
• Give a short Indian company-style example for each level; it gains presentation marks without extra length.
• If a question says 'explain with examples', do not stop at definitions; use at least one example for the process or each level.
• Distinction questions are common. Write a two-column comparison with at least four points and one example each.
• Use Indian company examples or simple business examples, and do not claim exact official statements of real companies unless you are sure.
• For MCQs, look for numbers and deadlines to spot objectives, and for future ambition to spot a vision.