Business Analysis

Business Analysis is a reviewing process of a company operations and production methods to determine the capability of the company to generate profits.

The management uses different management tools to analyze the company depending on its size and its operations.  The scopes of tools also vary depending upon the kind of information required to analyze the company.  A review is undertaken on each business unit or operation based on the information arrived at.  Thus, business decisions are taken on various operational needs.

SWOT Analysis:  Swot is a business analytical tool which stands for Strengths(S), Weaknesses (W), Opportunities (O), and Threats (T).  Swot helps to gather information on internal strengths and weaknesses of the business, and also externally the opportunities and threats facing the business.  Swot helps the management to analyze how well the company can operate in the current economic environment.  Thus, Swot Analysis provides information to evaluate the company performance.

Company's strengths include patents, its reputation, and goodwill, cost advantages, production methods, and supply chains.  Weaknesses include high material costs due to inefficient purchasing pattern, poor or no customer reputation and a very weak market position for its products and resources.

Opportunities are new technologies, very few regulatory or government restrictions, and unfulfilled customer needs in the market place.

Threats mean changing consumer needs and demands, competition with similar or substitute products, lower prices, and sudden and unexpected government regulations.

Balanced Score Card:  This is also a management tool for business analysis to help measure a company`s financial, customer, business, and growth areas.  The balanced score card reviews each of these areas both internally and externally.  Financially, the score card analyses operating income, margin money, capital financing processes, and overall economy of the company.  Customer review includes customer satisfaction and customer retention, and the market share of the company.  Business processes mean internal analysis of training methods, hiring and retention processes of employees with the right skill sets.  The balanced score card is an extremely useful tool to review all areas of a company that need improvement.

Bench-marking:  Bench marking is a statistically related analysis.  Here the strengths and weaknesses of the company are measured on financial and operational ratios.  What is important in bench marking is comparison to competition and industry standard ratios.  Bench marking also provides very crucial financial performance; the ratios used here are liquidity ratios, capital finance ratios, and operational ratios.  Liquidity is company`s capability to pay off its bills; capital finance indicates how well a company funds its assets and uses debts; operational ratio shows how efficiently a company moves its inventory to improve the operations.

Thus, the importance and usefulness of Business Analysis cannot be over-emphasized.

Questions:

• Describe the SWOT analysis and its usefulness in Business Analysis.
• Explain Balance Score Card.