Preview

Business Strategy Analysis -

Powerful Essays
Open Document
Open Document
633 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Business Strategy Analysis -
1. Business strategy analysis

Strategy analysis enables the analyst to understand the underlying economics of the firm and the industry in which the firm competes. Involves 3 key steps:

1. Industry analysis
 What economic factors drive the industry choice? Impact on profitability?
2. Competitive strategy
 How has the company positioned itself in the industry?
3. Corporate strategy
 Can the company create value across the range of its business? (Ability to exploit synergies, minimisation of transaction costs,

There are a number of benefits to developing this knowledge before performing any financial statement analysis.

1. Strategy understanding provides a context for evaluating a firm’s choice of accounting policies and hence the information reflected in its financial statements (e.g. revenue recognition and cost capitalization policies)

2. Strategy analysis highlights the firm’s profit drivers and major areas of risk and provides an indication about whether these are likely to change (important for forecasting).

3. Strategy analysis makes it possible to understand a firm’s financial policies and whether they make sense.

In summary, understanding a firm’s business, the factors that are critical to the success of that business, and its key risks are critical to effective financial statement analysis.

2. Accounting analysis enables the analysts to ‘undo’ any accounting distortion by recasting a firm’s accounting numbers. Sound accounting analysis improves the reliability of conclusions from financial analysis. 3. Financial analysis seeks to use financial data to evaluate the performance of a firm. The outcome from financial analysis is incorporated into prospective analysis, the next step in financial statement analysis.

4. Prospective analysis synthesises the insights from business strategy analysis, accounting analysis, and financial analysis in order to make predictions about a firm’s future.

A2 Your

You May Also Find These Documents Helpful

  • Powerful Essays

    Blackmores

    • 1304 Words
    • 6 Pages

    • • Strategy drives the actions of an organisation Studying a firm’s strategy provides: – An understanding of what drives risks, profitability, and competitive advantages – A basis for future performance to be forecasted – An idea of how to measure the success of a firm’s actions…

    • 1304 Words
    • 6 Pages
    Powerful Essays
  • Best Essays

    Brasil Foods Case Study

    • 3467 Words
    • 14 Pages

    Johnson, J., Scholes, K. and Whittington, R. 2008. Exploring Corporate Strategy. 8th ed., Essex: Pearson Education Limited.…

    • 3467 Words
    • 14 Pages
    Best Essays
  • Powerful Essays

    One critical piece of the Strategic Planning process is Strategic Analysis. It is an integral part of a company’s evaluation program; it provides managers with a comprehensive assessment of the organization’s capabilities and market factors; revealing growth opportunities and vulnerabilities. With this information, managers can more effectively choose from strategic alternatives and create the greatest future reward potential.…

    • 1095 Words
    • 5 Pages
    Powerful Essays
  • Good Essays

    Treacy and Wiersema (1995) offer another popular generic framework for gaining competitive advantage. In their framework, a firm typically will choose to emphasize one of three “value disciplines”: product leadership, operational excellence, and customer intimacy.…

    • 695 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    Marketing Strategy

    • 2055 Words
    • 9 Pages

    While there’s merit in evaluating the strategy from a qualitative standpoint (its completeness, internal consistency, rationale, and relevance), the best quantitative evidence of how well a company’s strategy is working comes from its result. The stronger a company’s current overall performance, the less likely the need for radical changes in strategy.The weaker a company’s financial performance and market standing, the more its current strategy must be questioned.…

    • 2055 Words
    • 9 Pages
    Powerful Essays
  • Powerful Essays

    Business Strategy

    • 6660 Words
    • 27 Pages

    Strategic planning is essential for evaluating the competitive context where an organization runs. And also for making reasoned and reasonable referrals for just how that company should position itself and exactly what actions it need to require to make best use of worth creation. The main objects of strategic planning are to recognise the advantages, which are: to understand the product finding out the answers to successful planning and implementation. Strategic planning is an action by action process with certain objectives and final product that could be carried out and examined. Quite merely, it is a procedure whereby we explore the future, repaint an image of that future based upon present styles, and affect the pressures that will affect us. Strategic planning looks 3 to five years ahead. It graphs a definite course based on sturdy indicators of what the company setting will resemble in those years. Indicators include census demographic data, financial signs, government policies, and technological advancements. They disclose strong fads relating to changes in way of livings and the financial and political climates, which are necessary elements influencing the facilities preparing and administration market. Several of these fads are potential opportunities, some prospective risks, and some are both. Analysing the opportunities and making strategies to meet the challenges can assist the company take full benefit of possibilities and decrease hazards. Basically, we could take control of the future. We can utilize our resources a lot more properly and conduct our business more efficiently, in spite of modifications in the environment. Strategic planning is the secret to guaranteeing that our organization is readied for the difficulties of tomorrow.…

    • 6660 Words
    • 27 Pages
    Powerful Essays
  • Best Essays

    Canon Case Study

    • 3460 Words
    • 14 Pages

    Corporate strategy is the pattern of decisions that guide an organization’s activities to reveal the principal objectives purposes and resources. In other words it refers to the range of business the company is to pursue, with the nature of the activities it intends to be and the nature of the economic and non-economic contribution it intends to make to its shareholders and stakeholders”. In effect, it corporate strategy maps out a sense of direction for a company’s activities. Corporate strategy in effect maps out the businesses in which an organization intends to compete in.…

    • 3460 Words
    • 14 Pages
    Best Essays
  • Good Essays

    Accounting Analysis

    • 2050 Words
    • 9 Pages

    Financial statements are used to determine the business activities of a firm and the role of accounting analysis is to determine the accuracy and quality of the information provided. This analysis would look into the degree of its accounting figures captures its business reality through the policies used and its resulting noise, potential forecast errors and its impact on Myer’s profit.…

    • 2050 Words
    • 9 Pages
    Good Essays
  • Powerful Essays

    Business strategy plays a vital role in the establishment and progress of any business as it determines the long term goals, objectives, action plans and the required resources to achieve those goals. Thus a business strategy formulates an organisation’s approach to establish a market or bring out a business component. This strategy is developed by internal analysis of an organisation that what is the current situation, what are the strengths, weaknesses and opportunities. Internal analysis is also significant in order to explore the resources and to develop the competencies to revaluate the value adding activities to be more established and to address the weaknesses that might hinder the progress of the business. The next step is future planning to determine the goals and then the most important step is to think and formulate an action plan to achieve the goals.…

    • 2571 Words
    • 7 Pages
    Powerful Essays
  • Powerful Essays

    Tesco Pestel Analysis

    • 1663 Words
    • 7 Pages

    Corporate strategy dictates the future direction of a company by examining its objectives, available resources and how it connects with the external environment, (Lynch, 2005)…

    • 1663 Words
    • 7 Pages
    Powerful Essays
  • Powerful Essays

    Johnson, G. and Scholes, K. (2002). Exploring corporate strategy. 6th ed. Essex: Pearson Education Limited.…

    • 2610 Words
    • 11 Pages
    Powerful Essays
  • Powerful Essays

    Financial accounting is a useful tool to management and to external users such as shareholders, potential owners, creditors, customers, employees and government. It provides information regarding the results of its operations and the financial status of the business. The following are the functional areas of financial accounting:-…

    • 907 Words
    • 4 Pages
    Powerful Essays
  • Powerful Essays

    Body Shop

    • 2380 Words
    • 10 Pages

    We may consider a company’s strategy from a number of aspects, but generally we are interested in answering the question: How well is the company’s present strategy working? To understand and analyse success in terms of strategy, we must begin by understanding what the strategy is. From Thompson, Strickland and Gamble (2012) we might examine the following areas…

    • 2380 Words
    • 10 Pages
    Powerful Essays
  • Powerful Essays

    The basis of financial planning, analysis and decision making is the financial information. Financial information is needed to predict, compare and evaluate the firm’s earnings ability. It is also required to aid in economic decision making, investment and finding decision making. The financial information of the enterprise is contained in the financial statement or accounting reports. Accounting system of the firm is the main sources of financial information. The accounting system helps to accumulate, measure and communicates financial information in clued owner, creditors, manager, employee, customer, supplier, government and society.…

    • 5822 Words
    • 24 Pages
    Powerful Essays
  • Best Essays

    Jones, G., Scholes, K. & Whittington, R. (2008). ‘Exploring corporate strategy’, 8th edn, Pearson Education Ltd, Essex, England.…

    • 1767 Words
    • 8 Pages
    Best Essays