What are Analytical techniques

An analytical technique (analytical method) is a procedure or a method for the analysis of some problem, status or a fact.
Analytical techniques are usually time-limited and task-limited. They are used once to solve a specific issue. Opposed
to management methods that affect management of the organization in a longer term.
In practice there are used a lot of quite simple analytical techniques that managers and analysts use during normal work. Often
without naming it somehow. For such techniques, it is often enough just a system of “paper-pencil,” or general office equipment.
They are based primarily on the experience of the person who uses them. There are also a number of specialized analytical
techniques, which are overwhelmingly based on some mathematical model or which require certain equipment or tools.

Basic and most widely used analytical methods / techniques include:

 BCG matrix
 Brainstorming
 Benchmarking
 Gap Analysis
 Mind Maps
 Pareto principle, Pareto principle 80-20 rule
 Six Questions
 SWOT Analysis

Organizations are complex systems and therefore their needs are satisfied using different system analysis methods and enterprise
architecture description methods:
 EA (Enterprise Architecture)
 Job Analysis
 Job Description
 Job Specification
 Organizational Architecture
 Reengineering
 Social Network Analysis
 Sociogram
 Sociometry

These analytical techniques and methods are used for analysis and evaluation of an organization management:
 EFQM Excellence Model
 Malcolm Baldrige Framework
 CAF (Common Assessment Framework) - for public sector
 Process Audit (group of techniques for process analysis)
 Financial Audit
 Personnel Audit
 CMM – Capability Maturity Model

Analytical techniques for searching the causes of negative phenomena in organizations and systems:
 ETA (Event Tree Analysis)
 FTA (Fault Tree Analysis)
 FMEA (Failure Mode and Effect Analysis)
 HAZOP (Hazard and Operability Analysis)
 Ishikawa diagram – Cause and Effect Analysis
 PHA (Preliminary Hazard Analysis)

For solving various problems in the organization, there are different methods of decision making methods used such as:
 Marketing Mix 4P
 Action Research
 Box-Jenkins Methodology
 CCM (Critical Chain Method)
 Contingency Approach
 Control chart
 CPM (Critical Path Method)
 Davidson’s break

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  DBR (Drum Buffer Rope)
 Development diagram
 DOE (Design of Experiments)
 Eisenhower principle
 Equifinality principle
 Five Forces Analysis
 G8D (Global Eight Disciplines)
 General approach to problem solving
 Histogram
 Checkland‘s methodology
 Ishikawa diagram – Cause and Effect Analysis
 Mind maps
 MSA (Measurement System Analysis)
 NIMSAD Model
 Overcoming groupthink
 Paradox of Mintzberg
 Parallel teams
 Pareto Principle
 PESTLE analysis
 PPAP (Production Part Approval Process)
 QFD (Quality Function Deployment) – deployment of customer requirements, House of quality
 Regression Analysis
 Run chart
 Scatter diagram
 Sloan Filter
 SPC (Statistical process Control)
 Swapping
 TOC (Theory of Constraints)
 Value Stream Mapping
 VRIO analysis
 WIBI (Would I Buy It?)

There are also a variety of simulation and optimization methods, whose object is a calculation of possible developmental variants
while creating operational and strategic plans:
 Forecasting
 Impact analysis
 Monte Carlo Method
 Network Analysis Methods
 Space Optimization

BCG Matrix (Boston matrix)

The BCG Matrix was developed by the Boston Consulting Group (BCG) and is used for the evaluation of the organization's product
portfolio in marketing and sales planning. It aims to evaluate each product, i.e. the goods and services of the business in two
dimensions.

 The BCG Matrix (Growth-share matrix) is a method that comes from the consulting company Boston Consulting
Group (BCG), thus the name BCG matrix or Boston matrix. The BCG matrix is used for the evaluation of a
organization’s product portfolio in marketing and sales planning. It aims to evaluate each product,
i.e. goods and services of the business in two dimensions:
 Market growth
 Market share
 The combination of both dimensions creates a matrix into which the products from the portfolio are placed:

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 High market share Low market share
High market growth Star Question mark
Low market growth Cash cow Dogs

 Each type of products may be seen as:

 Cash cows - do not require high investment, these products form the basis of the company’s profitability
 Stars - have the potential to become cash cows, it is necessary to invest in advertising, incremental innovation, etc.
 Question marks - it is necessary to differentiate between them, promising products may become cash cows
 Dogs - these dampen production, they should be withdraw from the market

How to use of the BCG matrix in practice?

 The BCG matrix is used for evaluation of a company´s product portfolio, it can also be used to assess key business units
such as divisions or individual companies of a large corporation. Both market share and growth rate are essential in the
assessment of a product´s value. A product´s market share and the rate of its growth vary in time. The producer must
therefore manage the good´s lifecycle, the provider must manage the service´s lifecycle. BCG matrix analysis results help
the organization to identify the strategic plan of the entire product portfolio so that each of the quadrants contains the
products of the organization. The products in the quadrants must be balanced so that products defined as cash cows allow
for the funding of other products. However, with the product life cycle, it is necessary to have a future potential in the form
of stars and question marks in the portfolio. On the basis of its specific strategy, situation and reasons of the position of the
products in the quadrants, the organization must decide on its product strategy. It is appropriate to add to the model a third
dimension of profitability of a product or a service which can be either high or low. The square thus becomes a three-
dimensional cube. Within the cube, the quadrants which correspond to high profitability are most significant. It is also
necessary to consider whether there are reasonable prospects of high profitability of products or services in the future.
 BCG matrix is in practice used very often and it is one of the most practical and most comprehensible analytical
techniques for an organization. It is crucial for the determination of the correct product strategy of every business.

Brainstorming
Brainstorming is a group creativity technique. The aim is to generate as many ideas on the topic. It is used in many fields - from
problem solving to generate highly creative ideas.

Brainstorming is a group creativity technique. The aim is to generate as many ideas on the topic. It is used in many fields -
from problem solving to generating highly creative ideas. It is used in the management, marketing and the scientific activities.
Copywriter Alex Faickney Osborn came first with this idea in 1939 and developed it later in a specific method in his book Applied
Imagination (1953).
Five basic principles are generally known. Their goal is to eliminate all restrictions and alternatively stimulate the creation of new
ideas:
 Pleasant atmosphere - it is important to induce a creative climate and pleasant environment, and properly plan whole
meeting
 We focus on quantity - the more ideas, the more likely they will contain quality design solutions
 No criticism - no restrictions exist, we postpone criticism until later to not hamper the flow of ideas and suggestions
 Unusual ideas are welcome - a new way of thinking, we generate ideas regardless of their reality, logic, rationality
 We combine and improve the already formed ideas - “1 +1 = 3”, ideas are formed by cooperation between the team

Modification of brainstorming:
 Role storming
 Imaginary brainstorming
 Negative brainstorming
 Visual brainstorming
 Brainwriting
 Method 635
 Discussion 66

Benchmarking
Benchmarking is generally usable method based on the systematic measurement and comparison of selected indicators.

Benchmarking is a generally usable method, which was first used by the company Xerox Corporation in the early 80’s of the 20th
century.
Benchmarking is a method based on the systematic measurement and comparison of selected indicators. Its use is not limited only

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to strategic management, as stated by some sources. It can be used at any level of management and for almost any indicators. It is
based on comparison of selected indicators against other reference values (benchmarks) that can be either historical (time series of
values from 5 years back) or they can be compared against another reference entity (e.g. another comparable department or a
comparable organization). The comparison is always relative. It can’t be said that higher or lower values for the parameters are bad
or good. The biggest benefit of benchmarking is that different values provoke questions about what is causing the different value
and because of this management should undergo to additional research.
Benchmarking is usable in almost all fields.

Gap Analysis
Gap Analysis is a simple methodology that is useful in the situations where some strategies or changes are planned.
Gap Analysis was designed by Igor Ansoff. Gap Analysis consists of the following steps:
 Description of the current state
 Setting objectives (description of the target state)
 Determining the difference (gaps) between the current and target state
 Proposal of options to achieve the target state (an alternative strategy)
 Evaluation of options and selection of the most suitable one
 If necessary, the entire process is repeated until the target state is solved
Note: In cognitive psychology, a similar problem (problem solving) have been dealt in the 70’s of the 20th century by Allen
Newell and Herbert A. Simon under the name means-end analysis.

Use of Gap Analysis in practice: This analytical technique is one of the decision making and problem solving methods. It is a
simple methodology that is useful in situations where some strategies or changes are planned.

Pareto Principle (Principle 80/20)

Pareto Principle or Principle 80/20 is a simple analytical technique, a tool that helps to simplify and focus the management and
decision making. It is named after the Italian economist and sociologist Vilfredo Pareto who in the late 19th century found out that in
Italy is 80 % of the wealth in the hand of 20 % of the people.

Pareto Principle (also called Principle 80/20) is named after the Italian economist and sociologist Vilfredo Pareto who in the late
19th century found out that in Italy 80 % of the wealth is in the hands of 20 % of the people. Over time it became clear that the
principle also applies in the life of the organizations and in the management practice. Pareto Principle is a simple analytical
technique, a tool that helps to simplify and focus the management and decision making, for example as follows:
 80 % of business revenue comes from 20 % of customers
 20 % of products generate 80 % profit
 20 % of possible causes generate 80 % of problem situations, such as in the production
Generally, the Pareto Principle can be expressed as follows: 20 % of causes generate 80 % of results.
Practically, this means that while managing, planning and decision making is necessary to focus primarily on those critical 20 %,
which can reach 80 % of potential effect. Thus the management is done with the greatest effect. Pareto Principle can be used in
practice in all fields and areas.
In the field of Quality Management the Pareto Principle was applied by Joseph M. Juran.

Six Questions
Six Questions is one of the most general while most effective analytical techniques. The method is also known as Five Ws and one H.
The method is about asking the questions starting with who, what, where, when, how and why.

I keep six honest serving-men

They taught me all I knew;
Their names are What and Why and When
And How and Where and Who.
Rudyard Kipling
Six Questions is one of the most general while most effective analytical techniques. The method is also known as Five Ws and one
H, Six Ws or Six Servants.
With a little exaggeration it can be said that it is about asking the essential “kids” questions - who, what, where, when, how and why
- relating to a particular topic.
There are several variations of the questions formulations - for example:
 Who - determination of concerned subjects
 What - determination of concerned objects, things, entities, etc.
 When - determination of temporal aspects

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  Where - spatial localization of the problem, spatial aspects
 How - determination of events, processes, mechanisms, methods of operation, etc.
 Why - determination of causes, reasons, purposes, etc.
Another alternative:
 What is and what is not a problem?
 When does the problem occur and when doesn’t?
 Why does the problem occur and why doesn’t?
 Where does the problem occur and where doesn’t?
 Who causes the problem and who contributes to its solution?
 How do we know that the problem occurred and how do we know that it did not occur?

Read later
SWOT Analysis
SWOT Analysis is an universal analytical technique focused on the evaluation of internal and external factors affecting the success of
the organization or any other evaluated system. Naturally and most commonly, the SWOT analysis is used in the strategic
management of the organization in evaluating a strategic intention.

1) SWOT Analysis is an universal analytical technique focusing on the evaluation of internal and external factors affecting
the success of a organization or any other evaluated system. Most often, SWOT analysis is used in the strategic management of an
organization in the evaluation of a strategic intention.
2) Internal and external factors within the SWOT analysis are evaluated. Internal factors include the Strengths and
Weaknesses of the organization/system. External factors include Opportunities and Threats which are related to the surroundings of
the organization/system. SWOT is an acronym formed by the first letters of the designations of the individual factors.
3)

4) The essence of the analysis is to identify key strengths and weaknesses of the organization and key opportunities and
threats stemming from the external environment. To analyze the external environment of the organization (OT), the PESTLE
Analysiscan be used. For the assessment of the resources as internal factors (SW), a VRIO Analysis can be used. Subsequently, ways
are sought as to determine how to use the identified strengths and opportunities and how to eliminate the identified weaknesses and
threats.
Use of SWOT analysis in practice

5) Given that the SWOT analysis is a very universal and one of the most widely used analytical technique, its application in
practice is very wide. It can be used for an organization/ an business as a whole or for individual areas, projects or other purposes.
Since it contains both external and internal factors, it is also part of the broader risk management of an organization. As it affects
key risk sources, it helps to realize them and the possibilities for countermeasures. It is necessary to clearly define in advance the
external factors which apply to the analyzed problem or entity. These may be the surroundings of an organization or organizational
unit.

6) In practice, there are lots of different methodologies, interpretations and ways of creating SWOT analyses.

EFE Matrix
EFE Matrix is an analytical technique for evaluation of external position of the organization or its strategic intents.

 EFE Matrix is an analytical technique related to the SWOT analysis. EFE is an acronym of the External Factor Evaluation.
EFE Matrix evaluates the external position of the organization or its strategic intents.

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What is the evaluation process of EFE matrix?
 Process the table of internal factors (such as key 5S and 5W of SWOT)
 Assign to each factor a weight in the range from 0.00 to 1.00 according to the importance of the strengths or weakness - the
sum of weights must be equal to 1.00
 Rate factors as follows:
o 4 points - major O
o 3 points - minor O
o 2 points - minor T
o 1 point - major T
 Multiply the weight and rating for each factor - the result is a weighted ratio
 Sum of the weighted ratios of individual factors - result is an overall weighted ratio
 Overall evaluation - resulting weighted ratio evaluates the internal position of the organization or strategic intent. The best
possible score is 4, the worst is 1. Average values are around 2.5.
Where to use EFE Matrix in practice?
 Strategy of the organization or mutual evaluation and comparison of different strategic intentions can be evaluated with
EFE Matrix. The intention with the best result of overall weighted average should be chosen. EFE Matrix results should be
combined with the results of IFE matrix. CEO and senior management makes the strategic decisions based on IFE matrix.

IFE Matrix
IFE Matrix is an analytical technique related to the SWOT analysis. IFE is an acronym of the Internal Factor Evaluation.
IFE Matrix is an analytical technique related to the SWOT analysis. IFE is an acronym of the Internal Factor Evaluation. IFE
Matrix evaluates the internal position of the organization or its strategic intent.
1. The evaluation process:
2. Process the table of internal factors (such as key 5S and 5W of SWOT)
3. Assign to each factor a weight in the range from 0.00 to 1.00 according to the importance of the strengths or weakness - the
sum of weights must be equal to 1.00
4. Rate factors as follows:
o 4 points - major S
o 3 points - minor S
o 2 points - minor W
o 1 point - major W
5. Multiply the weight and rating for each factor - the result is a weighted ratio
6. Sum of the weighted ratios of individual factors - result is an overall weighted ratio
7. Overall evaluation - resulting weighted ratio evaluates the internal position of the organization or strategic intent. The best
possible score is 4, the worst is 1. Average values are around 2.5.
How to use IFE Matrix in practice?
8. Strategy of the organization or mutual evaluation and comparison of different strategic intentions can be evaluated with IFE
Matrix. The intention with the best result of overall weighted average should be chosen. IFE Matrix results should be
combined with the results of EFE matrix. CEO and senior management makes the strategic decisions based on IFE matrix.

Marketing Mix 4P
Marketing Mix 4P is a method for determining product strategy and product portfolio. Marketing Mix 4P consists of four
components: Product, Price, Place, Promotion.

Marketing Mix 4P is a method for determining product strategy and product portfolio. Father of this thought was Neil H. Borden.
It was based on the analogy withe a cake mix. He claimed that the starting powder is a suitable basis for baking a good cake. It can
be modified to some extent (sugar, flavour…), but it is no good to overdo it (e.g. too much sugar).
E. Jerome McCarthy continued on Borden’s thoughts. McCarthy conceived the mix as we know it today. According to him,
the marketing mix of the enterprise (or product) consists of four components:
 Product - the product and its features from the customer perspective - quality, reliability, design, brand, warranty, service
and other services, etc.
 Price - the price of the product and total pricing policy
 Place - the way of distribution the product from the manufacturer to the final customer
 Promotion - the ways of product promotion
Individual components of the marketing mix are also known as:
 Product mix
 Contract mix
 Distribution mix

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  Communication mix
Marketing mix 4P is one of the keystones of the marketing strategy of the organization within the marketing and sales
management.
Marketing mix 4P is the marketing mix in business perspective, the alternative is marketing mix 4C, that comes from the customer
perspective.

Five Forces Analysis 5F (Five Forces Model)

Five Forces Analysis is the work of Michael E. Porter. It is a way of analyzing the industry and its risks. The model works with the
five elements (Five Forces).

Five Forces Analysis (or Five Forces Model) is the work of Michael E. Porter. It is a way of analyzing the industry and its risks.
The model works with the five elements (Five Forces). The principle of this method is a forecasting of the development of the
competitive situation in analyzed industry, based on the estimate of the potential behavior of the subjects and objects involved in a
given market and forecasting of the risk of imminent business from their side:
 Rivalry among existing firms - their ability to affect the price and offered quantity of given product/service
 Potential entrants - the possibility that they enter the market and affect the price and offered quantity of
given product/service
 Suppliers - their ability ot affect the price and offered quantity of necessary inputs
 Buyers - their ability to affect the price and demanded quantity of given product/service
 Substitutes - price and offered quantity of products/services are at least partially able to replace given product/service
In essence, the basics of the model are consistently based on microeconomics - from market analysis, firm behavior and consumer
behavior.

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On the picture, there is a model of Five Forces according to Michael E. Porter (adjusted).
Note: If we want to get the model even closer to microeconomics, we can add to the original model two more dimensions:
 Government behavior - industry regulation
 Complements market - offered price and quantity
In the case of complements, it actually takes into account the situation in the related markets (e.g. oil price affects the demand for
cars).

Ishikawa diagram
Ishikawa diagram is a simple analytical technique for display and subsequent analysis of the causes and consequences, which is the
brainchild of Kaoru Ishikawa.

 Ishikawa diagram, also called cause and effect diagram, fishbone diagram or Ishikawa is a simple analytical
technique for display and subsequent analysis of the causes and consequences, which is the brainchild of Kaoru Ishikawa.
 Ishikawa diagram is based on the principle of simple causality - each consequence (problem) has its own cause or a
combination of causes. Its objective is therefore to analyze and determine the most likely causes of the solved problem.
Where to use of the Ishikawa diagram in practice?
 Due to its versatility, the Ishikawa diagram is used in the field of quality in the search for causes of poor quality, but also in
fields of risks or problem solving. It is often used for finding solutions during team techniques such as brainstorming. While
problem solving, in the debate or with other analytical technique, the possible causes are systematically searched and
represented by the form of the fish bone (hence its name).
 The causes are mostly searched at the basic dimensions - following list shows eight typical dimensions used in the
production (8M):
 Man power - People - causes caused by people
 Methods - causes caused by rules, regulation, legislation or standards
 Machines - causes caused by equipment such as machinery, computers, tolls
 Materials - causes caused by defect or material properties
 Measurements - causes caused by improper or poorly chosen measurement
 Mother nature - Environment - causes caused by the environment - temperature, humidity or the culture
 Management - causes caused by improper management
 Maintenance - causes caused by improper maintenance
 Ishikawa diagram can be used both retrospectively to find the cause of the problem. and forward in product design for
preventive identification and elimination of possible causes of the products.

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 
 Note: Ishikawa diagram can be illustrated in a form of the mind maps and it can be used a software (e.g. FreeMind).

PESTLE Analysis
PESTLE Analysis is an analytical technique used for the strategic analysis of organizational surroundings. PESTLE is an acronym
and each letter represents a different type of external factors: political, economical, social, technological, legal, ecological.

PESTLE Analysis is an analytical technique used for the strategic analysis of organizational surroundings. PESTLE (sometimes
also PESTEL) is an acronym and each letter represents a different type of external factors:
 P - Political - existing and potential effect of political influences
 E - Economical - effect and influence of local, national and global economy
 S - Social - projection of social changes inside the organization, cultural influences are also part of it (local, national,
regional, global)
 T - Technological - effects of existing, new and advanced technologies
 L - Legal - effects of national, European and international legislation
 E - Ecological - local, national and global environmental issues and questions of its solution

The essence of the analysis is to identify for each of the factors the most important phenomena, events, risks and influences that
affect or will affect the organization. PESTLE method is part of the methods used in impact analysis. Sometimes is used for analysis
of external factors in SWOT analysis.

Sometimes, it is used similar simplified version called PEST analysis:

 P - Political - existing and potential effect of political influences
 E - Economical - effect and influence of local, national and global economy
 S - Social - projection of social changes inside the organization
 T - Technological - effects of existing, new and advanced technologies

Sometimes it is used the term/acronym STEEPLED analysis, where the factors are identical to the PESTLE, but there are added
ethical and demographic factors.
Alternatively, it is used the name of STEER analysis, when the identical factors are arranged as follows:

S - Socio-cultural factors
T - Technological factors
E - Economic factors
E - Ecological factors
R - Regulatory factors (legislation as the regulation)

Other variation are known as SLEPT or STEP methods.

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Situation Analysis 5C
Situation analysis 5C is a comprehensive analysis of capturing all relevant information and factors (internal and external) that affect
the current and future situation of the organization.

Situation Analysis 5C is a comprehensive analysis of capturing all relevant information and factors (internal and external) that
affect the present and future situation of the Organization. Using situation analysis organization collects information about their
strengths and weaknesses, opportunities and threats.
Situation analysis in practice: Situation analysis is done mostly for strategic and marketing planning - the organization must first
get to know the reality that decisions on the future direction not only based on impressions and suppositions. Its content is different,
the most commonly used structure 5C (sometimes 4C or 7C).
 Company (enterprise) - analysis of the internal conditions of the organization, its resource and Product
 Customers (customers) - analysis of markets, customer segments
 Competitors (competition) - Analysis of competing organizations
 Collaborators (cooperating companies, people) - Analysis of the people with whom it is possible to establish cooperation
 Climate / Context (Macroeconomics factors external environment) - Analysis of other environmental conditions of the
business operation (economic, political and other conditions)
Situational analysis contributes to a better awareness of the company resources, products, the prosperity, the market situation and
possible future development directions. Therefore it helps significantly during strategic decision processes. Its importance increases
if the environment or the markets are unstable and rapidly changing. Experienced executives conduct a situational analysis in a
certain way constantly so that they are able to respond flexibly to any changes.
The result of situational analysis as a basis for creating strategies, plans or proposals of possible scenarios for the future conduct of
the company.

What is Situation Analysis 7C

7C use following structure: Company, Competitors, Customers, Cost, Country, Climate, Change

SPACE Analysis
SPACE Analysis is an analytical technique used in strategic management and planning. SPACE is an acronym of Strategic Position
and ACtion Evaluation.

 SPACE Analysis is an analytical technique used in strategic management and planning. SPACE is an acronym of Strategic
Position and ACtion Evaluation. The analysis allows to create an idea of the appropriate business strategy for the enterprise.
The analysis assesses the internal and external environment and allows to design an appropriate strategy.
 The analysis describes the external environment using two criteria:
 Environmental Stability (ES) - it is influenced by the following sub factors: technological change, inflation rate, demand
volatility, price range of competitive products, price elasticity of demand, pressure from the substitutes
 Industry Attractiveness (IA) - it is influenced by the following sub factors: growth potential, profit potential, financial
stability, resource utilization, complexity of entering the industry, labor productivity, capacity utilization, bargaining power
of manufacturers
 The inside environment is also described by two criteria:
 Competitive advantage (CA) - it is influenced by the following factors: market share, product quality, product lifecycle,
innovation cycle, customer loyalty, vertical integration
 Financial strength (FS) - it is influenced by the following indicators: return on investment, liquidity, debt ratio, available
versus required capital, cash flow, inventory turnover

How to use the SPACE analysis in practice?

 According to this model the SPACE analysis is used in strategic management. It concerns of key decisions that are made
by CEO and senior management of the organization.
 To evaluate:
 For each sub factor in each criterion a value of 0-6 is assigned (for CA and ES it is 0 to -6)
 For each criterion, the value of the total factor is expressed as the mean of the individual factors.
 The values of factors are put into the relevant axes of the matrix (see figure)
 In the quadrant, where the largest part of the surface of the resulting quadrilateral is, there is a suitable alternative of the
business behavior.

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

 The strategic position of the company and alternatives of the strategic behavior are following:
 Aggressive position - an attractive and relatively stable industry, the company has a competitive advantage and it can
protect it, a critical factor is the possible entry of new competitors into the industry, it may be considered new acquisitions,
increasing market share and focusing on competitive products
 Competitive position - attractive and relatively unstable environment, the company has some competitive advantage, a
critical factor is the company’s financial strength - the company should look for ways of their attachment, the solution is the
possibility of joining another company, increasing production efficiency and strengthening cash flow
 Conservative position - a stable industry with low growth rate and financially stable company, a critical factor is in the
product competitiveness, company should protect its successful products and develop new ones and think about the
possibilities of the penetration into the industry more attractive and reduce costs.
 Defensive position - an unattractive industry, the company lacks competitive products and financial resources, a critical
factor is the competitiveness, the company should reduce costs, reduce investment and consider leaving the industry.

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VRIO Analysis
VRIO Analysis is an analytical technique brilliant for the evaluation of the company's resources and thus the competitive advantage.

 VRIO Analysis is an analytical technique briliant for the evaluation of company’s resources and thus the competitive
advantage. VRIO is an acronym from the initials of the names of the evaluation
dimensions: Value, Rareness, Imitability, Organization.
 The VRIO Analysis was developed by Jay B. Barney as a way of evaluating the resources of an organization (company’s
micro-environment) which are as follows:
 Financial resources
 Human resources
 Material resources
 Non-material resources (information, knowledge)

What is the VRIO good for?

 Is perfect for evaluation of the company’s resources. One you know your resources you can better understand
your competitive advantages or weaknesses. The VRIO considers for each type of the resource the following questions
(called evaluation dimension) both for your company and for your competitors. The dimensions of VRIO are:
 Value - How expensive is the resource and how easy is it to obtain on the market (purchase, lease, rent..)?
 Rareness - How rare or limited is the resource?
 Imitability - How difficult is it to imitate the resource?
 Organization, respectively arrangement - Is the resource supported by any existing arrangements and can the organization
use it properly?

How to make the VRIO Analysis?

 VRIO analysis is a complement to a PESTEL analysis (which assesses macro-environment). VRIO is used to assess the
situation inside the organization (enterprise) - its resources, their competitive implication and possible potential for
improvement in the given area or for a given resource. Such an assessment is then used for example in the strategic
management of development in various areas or for decision making about the advantage of an external or internal process
and the securing service (e.g. outsourcing decision).
 If the resource is not valuable it should be outsourced because it brings no value to us
 If the resource is valuable but not rare the company is in competitive conformity. It means we are not worse than our
competition,
 If the resource is valuable and rare but it is not expensive to imitate it, we have a temporary competitive advantage.
Other companies will try to imitate it in the near future, then we lost our competitive advantage.
 If the resource is valuable, rare and is expensive to imitate it but we are not able to organize our company, the resource
become expensive for us (unused incurred costs)
 if we can manage the advantages and we are able to organize our company and temporary competitive advantage, it
becomes as permanent competitive advantage

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 
 In practice, the VRIO analysis is also used in combination with other analytical techniques to help organizational
management evaluate business resources in a more detailed view. For financial resources, there are many detailed financial
indicators that evaluate the financial condition or performance of the business from different perspectives. Likewise, human
resources, property or information are other detailed indicators of their performance, efficiency or quality. The advantage of
a VRIO analysis is its simplicity and clarity.
Example of VRIO analysis from Starbucks

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Forecasting
Forecasting deals with anticipation of the future development of an organization, society, economy, branch, environment etc. Its goal
is to get an idea about future situation, which is based on rational forecasting methods.

“Never make forecasts, especially about the future.”

Niels Bohr
Forecasting deals with anticipation of the future development of an organization, society, economy, branch, environment etc. Its goal
is to get an idea about future situation, which is based on rational forecasting methods. Obtained predictions are important
for strategic management, risk management and planning.
Forecasting use various forecasting methods and techniques that are broken down into the following groups:
 Five Forces Analysis
 Strategic methods and techniques
o Statistical trends forecasting methods
o Time series
 ARIMA models, SARIMA models, SAR models, SMA models, SARMA models
 Box-Jenkins methods
 Random walk models
 Moving averages models (MA)
 Autoregressive models (AR)
 Mixed processes (ARMA)
o Regression models, Regression analysis
o Structural analysis
o Paired and multiple correlation
o Special methods (e.g. Envelope curves, Exponential smoothing etc.)
 Expert and qualitative forecasting method
o Delphi method
o Trend Impact Analysis (TIA)
o Brainstorming
o Brainwriting
o Evaluation of expert estimates
o Extrapolation
 Participatory methods
 Methods based on scenario
o Scenario technique

Impact Analysis
Impact Analysis is used in change management and project management, or in the field of strategic management. Impact Analysis is
used to evaluate planned impacts or assumptions in a project or changing activity. Impact methods are also used when comparing
different options.

Impact Analysis is used in change management and project management, or in the field of strategic management. Impact Analysis
is used to evaluate planned impacts or assumptions in a project or changing activity. Impact methods are also used when comparing
different options. Among them, it is also probably the most widely used economic impact analysis of the CBA.
Impact analysis methods in the organization:
 BIA (Business Impact Management)
 CBA (Cost-Benefit Analysis)
 CCA (Cost Consequence Analysis)
 CEA (Cost Effectiveness Analysis)
 CIA (Cost-of-Illness Analysis)
 CMA (Cost Minimization Analysis)
 CorIA (Core Impact Assessment)
 CUA (Cost Utility Analysis)
 PESTLE Analysis
 RIA (Regulatory Impact Analysis)
 Simulation methods (impacts and option simulation)
Specialized impact analysis methods are, for example:

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  MMDIS - for evaluation of change impact of the information system
 Hexagon - impacts evaluation in the public administration
Generally, there are also applicable other analytical methods and techniques.

CBA (Cost-Benefit Analysis)

Cost-Benefit Analysis (CBA) is used to evaluate projects mainly from the public sector, and provides a guidance for solving problems
that are associated with these projects.

 Cost-Benefit Analysis, usually the abbreviation CBA is used. It is used to evaluate projects mainly from the public sector,
and provides a guidance for solving problems that are associated with these projects. The method compares
the benefits which express any positive effects of costs or injury, which affect the negative effects of the investment.
 The essence of the method is to analyze the investment impact on actors, quantification of the identified effects and
conversion to a common numeric (ideally financial) unit. Then we can use the indicators of criteria of net present
value, internal rate of return of economic CF, profitability index, and payback period.
 For processing CBA analysis we can use this procedure:
 Description of the nature of the project (from technical, marketing and organizational point of view)
 Creating a financial plan for the project from the perspective of an investor
 Defining beneficiaries, i.e. the entities to which the project impact
 Description of options of the project:
o Zero option - means a state without the project
o Investment option (or options) - the project will be implemented
 Defining a maximum of benefits and harm throughout the life cycle of the investment, their division into quantifiable and
non-quantifiable
 Converting quantifiable benefits and harm to the cash flows
 Determination of the discount rate and calculation of criterial indicators
 Interpretation of the results, the decision whether the investment is acceptable
What is Cost-Benefit Analysis for in practice?
 This method is used in the evaluation of community projects, when we need to take into account the wider social benefits of
the project and we need to convert the non-financial benefits to the financial statement.

CMA (Cost Minimization Analysis)

CMA (Cost Minimization Analysis) is a method which seeks to minimize the cost of the output, which has the form of standard.

CMA (Cost Minimization Analysis) is a method which seeks to minimize the cost of the output, which has the form of standard.
This method is used if we have set the desired output standard.
CMA is one of the mono-criterial evaluation methods of public expenditure. Inputs are monetary units, outputs are not
measured. Input cost minimization is the evaluation criterion.
Use of the CMA in practice: The method is suitable for projects which do not measure outputs (output is comparable for all
variants) and we only try to minimize the costs of their implementation.

CUA (Cost Utility Analysis)

CUA (Cost Utility Analysis) is based on measuring the change in utility depending on the change in the unit cost.

CUA (Cost Utility Analysis) is based on measuring the change in utility depending on the change in the unit cost.
CUA is one of the mono-criterial evaluation methods of public expenditure. Inputs are in monetary units, the outputs are usually
measured in non-monetary units. Changes in benefits are an evaluation criterion (measured as the degree of satisfaction) by using
additional units of inputs.
Evaluation is carried out so that a scoring scale is defined to the utility - possible level of utility (e.g. excellent, satisfactory, good,
insufficient) and utility growth rate or size is determined.
If it is difficult to express the utility, it is possible to define a generally defined goal and determine the percentage of its achievement
(e.g. by observation, questioning, subsequent analysis). The best option is then the one which best meets the defined goal.
Use of the CUA method in practice: The method is suitable for projects where we are not able to quantify the benefits in monetary
units.

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Space Optimization
Space Optimization is a designation for the pursuit of the most efficient, economical and effective space coverage with a certain
service in compliance of quality service parameters.

Space Optimization (or spatial optimization) is a designation for the pursuit of the most efficient, economical and effective space
coverage with a certain service in compliance of qualitative service parameters.
It is clear that the different service parameters are significantly influenced by the spatial distribution of service centers in a given
area. This is mainly (but not exclusively) the following context:
 quality - from the spatial aspect, time availability of the service and the resulting customer satisfaction or dissatisfaction is
affected by deploying service centers
 economy - is influenced by the number of centers in the investigated area - the greater the number of centers will be, the
greater the consumption of resources will be
 efficiency - it is a balancing of costs to the provider (resource consumption) and benefits on the customer side (to
minimization of the time spent on the road)
 effectiveness - a service usually serves its purpose only in compliance of a certain critical value of time availability
Space optimization leads to mutual balancing of described service parameters.

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