The business environment, internal and external, the challenges that companies have to face every day are very complex due to the dynamics and constant changes that are generated. The graph below shows some of this great complexity in a general way.
Business complexity
In this complexity, the capture, organization and analysis of information is a determining factor in the timely making of decisions that lead to producing quality products and services that meet the needs of customers, obtaining their preference and loyalty.
It all starts with how the company or company perceives and interprets the needs, tastes and preferences of Clients. These needs are perceived and interpreted through the filter represented by the aspects that make up the business culture, beliefs, market knowledge, communication channels, etc.
Each competing company makes its own interpretation of the same needs, also based on its own cultural factors, and market knowledge.
This interpretation gives rise to product and service designs specific to each company, with quality characteristics and specifications that differ from other companies, and are aimed at the same market segments, thus initiating competition for customer preferences.
From the above we can deduce that the quality of the information that is had, the quality of its analysis, and the appropriate use of concise, consistent, timely, relevant and updated information has made and makes the difference in the success achieved by many organizations.. Having good information is the fundamental basis for a good analysis, strategy design and timely decision making.
Another decisive factor in the design of good strategies and decision-making is the quality of the analysis carried out, which provides inputs of the most probable scenarios, restrictions, predictions and trends of the behavior of the markets and the competition, possible risks., threats and opportunities.
But what resources "memory and intelligence" does the company have to face these challenges?
Company, competitors and competition
Companies have a Mission, a Vision, and a Business Culture that they must strengthen and internalize every day, in each of the members of their main asset: their People. They also have a Structure, Processes, Technologies, and Personnel with a set of knowledge, skills, aptitudes, competencies, strengths and weaknesses.
The aforementioned aspects must be analyzed as a whole, they must be aligned with each other, and oriented towards continuously improving the quality of products and services, customer satisfaction, preserving current customers and capturing new customers. Likewise, the external environment must be analyzed to establish the strategies in each movement.
The Analysis is composed of an Internal Analysis and an External Analysis. The Internal Analysis consists of identifying the strengths and weaknesses, the distinctive and comparative competences that the organization, company or company has to face the challenges and challenges that the environment presents, and advance in the achievement of the objectives.
External Analysis consists of analyzing and identifying the threats and opportunities that the environment presents. Threats that to a certain extent constitute impediments and resistance to achieving the objectives. On the other hand, this same environment offers opportunities that can be used by the company to improve, for example, a weakness and turn it into strength, improve its competitive position, improve its presence in the markets and preference by consumers, compete with a new product, or a renewed product, etc.
There are effective and widely used tools during the Analysis to organize and present the information, among which we can mention the 3C's (Customers, Competitors and Company), the PEST tool (Political, Economic, Social and Technological Factors), and the SWOT Matrix (Weaknesses, Opportunities, Strengths, Threats) of Albert Humphrey among others.
There are other very useful tools to identify the structure of markets such as Porter's 5 forces. The Balanced Scorecard used to integrate indicators derived from the strategy through four critical areas: Financial performance, Customer insight, Internal business processes, Learning and growth.
In this article we will only deal with the tools: 3Cs, PEST, and SWOT
The 3Cs tool is very useful to identify and characterize Clients and market segments, characterize Competitors, and characterize the company or company under analysis.
The PEST tool, also known as STEP, allows characterizing the environment in which the company or company operates. From the Political point of view it allows to identify the policies of taxes and customs duties, the labor laws in the region where it operates, environmental regulations, and political stability.
Economically, it allows identifying the factors that affect the purchasing power of potential clients, and the company's cost of capital. Identify the economic growth of the region, interest rates, inflation rate, and the exchange rate of the currency.
In the Social area, demographic and cultural aspects such as population growth rate, age distribution of the inhabitants, distribution of professions and professionals, emphasis on safety and health of the population are included.
From the technological point of view, it allows knowing the entry barriers, production levels, efficiency, and outsourcing decisions. It considers factors such as research and development activities, automation, technology incentives, and the rate of technological change.
SWOT Matrix is a widely used tool in Strategic Planning. Weaknesses can be seen as the absence of a strength, for example “poor reputation among customers”, “high production costs”. Strengths are the resources and capabilities that can be used to develop a competitive advantage or distinctive competence, for example "good brand reputation", "favorable access to distribution networks". Both the Weaknesses and the Strengths are part of the Internal Analysis of the company or company.
Opportunities are those favorable conditions that the environment offers to grow, improve income, customer satisfaction, and competitive position in the markets. For example, removal of international marketing barriers, an unmet need in customers, entry of new technologies, etc.
Threats, some changes in the external environment can present threats and adverse challenges for the company, such as changes in the preferences and tastes of customers that do not favor the products and services offered by the company. New regulations, increased marketing barriers, entry of substitute products, etc.
The crossing of strengths and weaknesses, with threats and opportunities, allows to build a matrix with a set of strategies in which the use of a strength can be used to take advantage of an Opportunity, or reduce the risk or impact of a threat.
SWOT analysis
These tools are very useful when evaluating the performance of the company, organizing and analyzing all the relevant information required for decision making.
Neither tool is better than the other, they all provide excellent benefits for the analysis, their use is combined, and they are not exclusive
There are also other widely used and very beneficial tools when analyzing problems and building solutions. Among them we can mention the Ishikawa or Fishbone Diagram is a cause-effect diagram used to identify the potential or real causes of a problem.
Other very useful tools are: Process Map, Workflow chart, Value Chain Map (Value stream mapping) used for the decomposition of processes.
