What is Strategic Business Analysis?

Change is necessary for organizations to continue to thrive and grow, but how do

you pivot strategy and retool an organization to remain relevant?
 
Strategic business analysis involves outcome focused thinking, simultaneously
understanding business context, business challenges, and the complexities of the
internal and external environment to frame the scope of the transformation, articulate
the business need/outcome, and shape the agenda for transformation. Strategic
business analysis requires a focus on all aspects of the organization. It leverages
business analysis, change leadership, and program and project management. Strategic
business analysis focuses on ‘what and why’, not the ‘how’ of solution implementation.

Vision, Mission, and Values

To develop a business strategy, a company needs a very well-defined

understanding of what it is and what it represents. Strategists need to look at
the following:

 Vision – What it wants to achieve in the future (5-10 years)

 Mission Statement – What business a company is in and how it rallies
people
 Values – The fundamental beliefs of an organization reflecting its
commitments and ethics

After gaining a deep understanding of the company’s vision, mission, and

values, strategists can help the business undergo a strategic analysis. The
purpose of a strategic analysis is to analyze an organization’s external and
internal environment, assess current strategies, and generate and evaluate the
most successful strategic alternatives.
The following infographic demonstrates the strategic analysis process:

Perform an environmental analysis of current strategies

Starting from the beginning, a company needs to complete an environmental

analysis of its current strategies. Internal environment considerations include
issues such as operational inefficiencies, employee morale, and constraints
from financial issues. External environment considerations include political
trends, economic shifts, and changes in consumer tastes.

2. Determine the effectiveness of existing strategies

A key purpose of a strategic analysis is to determine the effectiveness of the

current strategy amid the prevailing business environment. Strategists must
ask themselves questions such as: Is our strategy failing or succeeding? Will
we meet our stated goals? Does our strategy align with our vision, mission,
and values?

 
3. Formulate plans

If the answer to the questions posed in the assessment stage is “No” or

“Unsure,” we undergo a planning stage where the company proposes strategic
alternatives. Strategists may propose ways to keep costs low and operations
leaner. Potential strategic alternatives include changes in capital structure,
changes in supply chain management, or any other alternative to a business
process.

4. Recommend and implement the most viable strategy

Lastly, after assessing strategies and proposing alternatives, we reach a

recommendation. After assessing all possible strategic alternatives, we choose
to implement the most viable and quantitatively profitable strategy. After
producing a recommendation, we iteratively repeat the entire process.
Strategies must be implemented, assessed, and re-assessed. They must
change because business environments are not static.

Levels of Strategy

Strategic plans involve three levels in terms of scope:

1. Corporate-level (Portfolio)

At the highest level, corporate strategy involves high-level strategic decisions

that will help a company sustain a competitive advantage and remain
profitable in the foreseeable future. Corporate-level decisions are all-
encompassing of a company.

2. Business-level

At the median level of strategy are business-level decisions. The business-level

strategy focuses on market position to help the company gain a competitive
advantage in its own industry or other industries.

3. Functional-level

At the lowest level are functional-level decisions. They focus on activities

within and between different functions, aimed at improving the efficiency of
the overall business. These strategies are focused on particular functions and
groups.

Unit 2: STRATEGIC BUSINESS ANALYSIS

This subject seeks to provide specialisation-level knowledge to accountants and financially
motivated general managers in the interface areas between accounting and the other business
functions. The subject is an advanced level course that enables students to apply the basic
conventions and doctrines of managerial and cost accounting and other generally accepted
managerial principles, in order to strategically analyse business situations across the various
functions of a business organisation. A number of cost and management accounting issues
relating to the design and implementation of strategic, marketing, risk management, value
analysis and other management models in modern firms are discussed, and major contemporary
issues that have emerged in business accounting in recent years are identified. This subject
provides an advanced study of the interface between modern managerial accounting and the
business functions of strategic planning, marketing, manufacturing and human resource
management. The accountant’s role in the marketing decision areas is specifically considered.

Synopsis:

 Describe the basic conventions and doctrines of managerial and cost accounting and other
generally accepted principles that may be strategically applied across the various functions of
a business organisation.
 Identify major contemporary issues that have emerged in strategic management
accounting.
 Critically evaluate a number of cost and management accounting issues relating to the
design and implementation of strategic, marketing, strategic value and other management
models in modern firms.
 Explain the management accountant’s role in the implementation of cost management
systems for marketing decision-making and business valuation.

Topics Covered :

Topic 1:  Strategic Thinking

This topic overviews the concepts and development of strategic planning in modern business
enterprises. The traditional areas of corporate strategy; such as strategic objectives and strategic
planning decision models are first introduced to the student. The state of strategic thinking in the
current environment is then considered, especially in relation to multiple approaches to analysing
corporate strategy. The use of Big Data in strategic planning and thinking is specifically
considered.

Topics 2 Strategic Marketing Analysis and Budgeting

Here the marketing concept is introduced and the links between marketing and strategic business
analysis are illustrated; and the impact of Big Data analytics in customer-data driven marketing
strategies is considered. It is shown how concepts such as the product life cycle and product
portfolio matrix are linked to managerial accounting techniques such as budgeting and life cycle
costing to provide relevant information for strategic decision making. A comprehensive strategic
segmental marketing budget is developed in this topic.

Topic 3:  Financial Analysis in Product Portfolio Management

This topic looks at the interface between management accounting and marketing related “product
or services management” especially in competitive environments. The “product” is the first “P”
in the 4-Ps of marketing, the others being price, promotion and place distribution, which will be
discussed in detail in later topics.  It is shown that as a product/service moves through various
stages of its life cycle, there are differing financial aspects that need to be focused on for
competitive positioning. It is demonstrated that the company’s management accountant
possesses the tools and techniques required to provide the product/service managers with
decision-orientated information, especially in financing technological innovation in the digital
age.

Topic 4:  Pricing Methods and Strategies

Here the various aspects of pricing decisions are covered, especially in competitive
environments. Pricing methods and pricing strategies are specifically contrasted, and the use of
such techniques as CVP analysis and linear programming in the pricing area are discussed. Risk
averse pricing strategies and their limitations are also covered in this topic.

Topic 5:  Financial Dimensions of Pricing in International Business Strategies

This topic extends the discussion of the previous topic on pricing, and considers pricing within a
competitive international market. It is shown that setting a selling price in a foreign market has,
in addition to strategic marketing considerations, some unique international financial dimensions,
especially due to the lengthening of the channels of distribution and the impact of multiple
currencies.

Topic 6:  Promotion: Push Strategy and Human Resource Management

Here the principal ways of communicating with the market, referred to collectively as the
“promotional mix” are overviewed.  The objective of this mix is to make a sale, either by
“pulling” customers towards the product (using advertising) or by “pushing” the product to the
customer (using personal selling).  It is shown that the management accountant has a significant
role “push strategy”, especially in the human resource management areas of controlling field
sales operations and evaluating sales force performance.

Topic 7:  Promotion: Pull Strategy and Integrated Marketing Communication

This topic continues with the discussion on promotion, and specifically looks at “pull strategy”
and integrated marketing communication (IMC) with its heavy reliance on advertising;
especially via digital marketing platforms. It is demonstrated that the management accountant
has a significant role in formulating advertising budgets, especially using specific budget models,
and in the difficult areas of controlling advertising outlays and evaluating advertising
effectiveness.

Topic 8: Supply Chain Management and the Place-Distribution Decision

This topic considers the last “P” of the 4-P’s of marketing; i.e. place (or physical distribution). It
is shown that the control of the supply-chain distribution function involves a “trade-off” between
maximising customer service and minimising distribution costs, and that the management
accountant has a significant role to play in achieving this balance. The tools and techniques of
distribution cost analysis and control that are used in providing customers value and maintaining
efficient cost management in the digital world are highlighted in this topic.

Topic 9:  Performance Valuation and Strategic Financial Structures

This topic introduces Business Performance Measures and provides a link as to how these
measures are interrelated with the capital structure of the firm. The impact of financial structure
on planning performance evaluation is considered, specifically the relative measures (ratios) used
in financial statement analysis. Investment and Financing issues are separated; and capital
structure and its role in obtaining an appropriate discount rate for capital projects is particularly
considered. The topic also covers the more recent approaches to project and corporate funding
such as venture capital and crowdfunding.

Topic 10:  Strategic Value Analysis

This topic overview the different approaches to ‘value investing’; and introduces the concept of
Strategic Value Analysis. The topic compares this concept to the more traditional concept of net
present value; and demonstrates the impact of ‘free-cash flows’ on operational value, business
value, and shareholder value. It is demonstrated that the concepts of ‘value’ and ‘strategic value’
can be quantified for planning purposes, and in valuing companies.

Topic 11:  Risk Management – Corporate Radar and Early Warning Systems

Here the concept of risk; and the approaches to risk management using short-term (weekly) and
long-term (annual) corporate radar systems are considered, in order to determine the health of a
business organisation. Popular bankruptcy prediction models (such as Z-scores) and their
reliability and relevance in the 2000s are specifically considered.

Topic 12:  Strategic Scorecards

This topic focuses on corporate success, and the role of non-financial indicators in measuring
and controlling this success. The importance of monitoring both the internal and external
environment is highlighted, especially in terms of a firm’s ‘critical success factors’. The strategic
consequences of having intangible assets such as Brands and Human Capital on strategic
scorecards is also considered. Finally, a strategic scorecard that recognises the seven underlying
principles of ‘sustainable value creation’ in the design and marketing of products and services is
highlighted.