Good input - the foundation of good strategy (part 1) – Situation Analysis and Assumptions

There are two major prerequisites to strategy formulation. First, there must be good information about the current situation: situation analysis. Second, we must give thoughtful consideration to those possible future events and developments which might have a significant impact on us: assumptions.

Situation Analysis

Situation analysis is concerned with our business and the environment within which it operates as it exists today.

With respect to our business, we have a good understanding of both the quantity and quality of our talent resources and our capital resources; our competencies, capabilities, limitations, strengths and weaknesses. And we need to understand our ability to obtain additional talent and capital resources. We also need to understand our competitive advantages and disadvantages. Furthermore, we need to understand our organization’s structure, corporate climate, capital structure, cost structure and company performance.

With respect to the environment, we must have good knowledge of our markets, customers, competitors and suppliers. We must have good knowledge of the technologies pertaining to our products, services and processes. And we must have a good understanding of the economy and the sociopolitical climate within which we operate. All of this must be understood on a local, regional, national and global basis.

“We need to understand the current environmental situation from a tactical standpoint. But from a strategic standpoint what we need to understand is the future environmental situation.”

Assumptions

Even if perfect information about the current situation were possible, it would still not be adequate to our purposes. From a strategic planning standpoint, a good understanding of the current situation is merely the starting point for our understanding of the future environment. We need to understand the current environmental situation from a tactical stand-point. But from a strategic standpoint what we need to understand is the future environmental situation. A proper course and direction must deal with the environmental (external) situation as it will be - not as it has been in the past or as it is at present. Therefore, we must give thoughtful consideration to uncertain future external events and developments with respect to markets, customers, competitors, suppliers, technologies, the economy, and the sociopolitical climate on a local, regional, national and global basis.

(part 2 – missing or faulty data will appear next week).