The situation analysis: A cornerstone for successful strategic thinking

What it’s all about

The ability to think strategically enables managers to realistically anticipate future situations and make well-founded decisions in order to achieve long-term goals. Situational awareness plays a decisive role as the first step in this process. A thorough situation analysis minimises risks, identifies opportunities and threats, prioritises goals, increases adaptability and improves clarity and communication. Decision-makers have a range of tools at their disposal to carry this out. These include SWOT analysis, PESTEL analysis, Porter’s five forces model, scenario analysis, value chain analysis, benchmarking, the balanced scorecard, stakeholder analysis and resource and capability analysis.

What is strategic thinking?

Strategic thinking is a skill that enables a person to

think about complex future situations in the context of a defined task or objective,
draw as realistic a picture as possible of the associated framework for action, both in its entirety and in detail,
generate plans and make decisions based on this,
to develop a successful strategy for task realisation or goal achievement.

The importance of carefully analysing the situation

An important first step in the process of strategic thinking is to determine the situation. It is the basis for the continuation of the strategic process and provides the necessary data and information on the basis of which decisions can be made. The better and more sound this basis is, the easier it is to think strategically. Above all, this is about

Risk minimisation

Strategic thinking is often associated with high risks and uncertainties. A detailed situation analysis helps to minimise these risks. By identifying weaknesses and risks, a manager can take preventative measures or make targeted investments to improve the risk profile.

Identification of opportunities and threats

A comprehensive situation assessment includes not only an internal analysis of the company’s own resources and capabilities, but also an external analysis of market conditions, competitors and other factors. This analysis helps to identify opportunities and threats, which in turn can influence the strategic direction.

Prioritisation of goals

Once the situation has been clearly defined, strategic goals can be formulated. A clear definition of the situation allows these objectives to be prioritised so that resources and efforts can be focused on the most important and urgent areas.

Adaptability

The operating framework for companies is constantly changing. Accurate situational awareness at the beginning of the strategic thinking process ensures that leaders and their teams can better respond to change and adapt their strategies accordingly. This increases the organisation’s adaptability and competitiveness.

Clarity and communication

Precise situation definition creates clarity, not only for the manager, but for the entire team. This is important for internal communication and ensures that all employees are working towards the same goal.

Interim conclusion

Accurate situational awareness is the key to sound strategic thinking. Without this important first step, every subsequent step in the strategic process would be less effective and potentially error-prone. It is therefore crucial to devote the necessary time and resources to this aspect.

Instruments for carrying out situation analyses

SWOT analysis

The SWOT analysis is one of the most basic and widely used tools for strategic analyses. It enables managers to identify the strengths, weaknesses, opportunities and threats of an area of responsibility or organisation. By systematically analysing these four elements, you can gain a comprehensive picture of the internal and external factors that influence the success of the activity. The SWOT analysis helps to make strategic decisions by identifying the areas in which the organisation can improve and the external opportunities and threats to which it must respond.

PESTEL analysis

PESTEL (Political, Economic, Social, Technological, Environmental, Legal) analysis is another important tool for analysing the macroeconomic environment. This instrument helps managers to identify and evaluate the external factors that can influence the business environment. Political developments, economic trends, social changes, technological advances, environmental challenges and legal conditions are systematically analysed. The PESTEL analysis enables managers to better understand which external influences affect the company and how they can respond strategically.

Porter’s five forces model

Michael E. Porter’s five forces model is another key tool for strategic analysis. It is used to assess the intensity of competition within an industry. The five forces include the threat of new entrants, the bargaining power of customers, the bargaining power of suppliers, the threat of substitute products and rivalry among existing competitors. By analysing these forces, leaders can better assess how attractive an industry is and what competitive advantages the company needs to develop in order to be successful.

Scenario analysis

Scenario analysis is a strategic tool that makes it possible to anticipate various future developments and assess their potential impact on a company’s own activities. By creating and analysing different scenarios, managers can respond better to uncertainties and develop strategic plans that are flexible enough to accommodate different future scenarios. This method encourages forward thinking and helps to recognise potential risks and opportunities at an early stage.

Value chain analysis

Also known as value chain analysis, this is a tool for analysing a company’s internal activities. This method, which was developed by Michael E. Porter, helps managers to understand how individual activities contribute to value creation and where there is potential to increase efficiency or reduce costs. Through this analysis, managers can identify which activities make a business unit or company competitive and which need to be improved in order to maximise customer benefit.

Benchmarking

Benchmarking is another tool that can be used to evaluate performance in a field of activity or a company in comparison with other companies. By comparing with best practices from the industry or other industries, decision-makers can identify weaknesses and find out how they can optimise their own processes and procedures. Benchmarking promotes the continuous improvement process and helps to increase the company’s competitiveness.

Balanced scorecard

The Balanced Scorecard (BSC) is a strategic management tool that helps to holistically measure and manage the performance of the area of responsibility or company. The BSC considers not only financial key figures, but also non-financial aspects such as customer perspective, internal business processes as well as learning and growth. By using the balanced scorecard, you can ensure that all relevant areas are included in strategic planning and that all objectives are aligned.

Stakeholder analysis

Stakeholder analysis is a tool for identifying and evaluating the interests and influences of different stakeholder groups on an organisation. Managers need to understand the expectations and concerns of the various stakeholders and how these can influence the strategic direction of the company. By analysing stakeholders, managers can develop strategies to take the interests of stakeholders into account and build a positive relationship with them.

Resource and capability analysis

Resource and capability analysis focuses on the internal resources and capabilities of an organisation. It is important for managers to know what resources (financial, physical, human) and capabilities (know-how, technologies, processes) the company possesses and how these can be optimally utilised to achieve competitive advantages. This analysis helps to make strategic decisions that build on the company’s strengths and make the best possible use of existing potential.

Overall conclusion

Analysing the initial situation is a central step in strategic thinking and requires the use of various tools in order to gain a comprehensive picture of the internal and external factors that influence the company’s success. From SWOT analysis and PESTEL analysis to resource and capability analysis, each of these tools provides managers with valuable insights and helps them to make informed strategic decisions. By systematically applying these analytical tools, managers can set the course for the long-term success of their company and assert themselves in a dynamic and highly competitive environment.