Significance of Business Analysis - Essay Example

Introduction The industry of ecommerce is not an exceptional as far as the business analysis is concerned. In actual sense, being an industry that experience great competition, high rate of innovation and dynamic technology, then there is need for any company venturing into the business. This papers show the application of different types of business analysis techniques both the old ones and the current ones in relation to the ecommerce industry. It also shows the history of business analysis evolvement in the last thirty years. Finally, it contains a conclusion. Significance of business analysis Business analysis refers to an activity that is performed in the process of running a business and it entails mastering the needs that are within the business as well as the solution to those problems (Olson, Slater & Hult, 2005). For any business to thrive in the world today, it should ensure that it undertakes a very detailed and intensive analysis (Olson, Slater & Hult, 2005). This ensures that the business is strong enough to stand for competition with other rival companies. It also helps the company or the business to increase its effectiveness and efficiency as far as its production is concerned. Another very important significance of business analysis is the aspect of the importance of all the information that is acquired after the analysis. It will enable the firm to focus on the future and predicts the trends, come up with ways of improving its operations as well as make appropriate decisions, which are beneficial to its success. Business Analysis and its role within organization This refers to an activity that is performed in the process of running a business and it entails mastering the needs that are within the business as well as the solution to those problems. Some of the solutions that the analysis comes up with includes the components of developing systems, improvement of some of the processes in the business, changes in the organization, some strategic planning as well as development of policies governing the organization. It represents a very important tool as far as the running of the business is concerned. This is because it aims at the identification of the changes that are needed in the organization and then gives room for solution identification in order for the organization to reach its goals (Olson, Slater & Hult, 2005). It involves a number of planning as the development process requirements so that the management can be able to set the priorities right and appropriately manage the changes. It also enables the management to describe all the technologies needed for collection of all the things required in a project from the stakeholders. It also gives the stakeholders a detailed plan to enable them understand well all the requirements and the ways of implementations. It is very instrumental in enabling the verification of the solutions in the organization’s proposal. Evolvement of a business Analysis in the last thirty years Business analysis started long time ago but the difference currently is the evolvement that has taken place. The difference is in the processes and techniques that are being used (Peter, 2007). The year between 1900 and 1930, marks the period in which the first binary and vacuum computers got invented. In the years 1926 there was the issue of analysis of the business in terms of the stock that is available for sales. This was followed immediately by the work done by foyle whereby he later explained that there is more to business than just stock. He explained that there is a need for human resource management as well as the reporting system concerning their work. By the year 1937, the concept of division and specialization of work was introduced. This opened a door of opportunity for better business analysis method (Tahai & Meyer, 2009). This led to the organization or restructuring of the analysis process to cover different needs of the organization like the product line, functions performed, customer profile, products or the services, territory or geography as well as customer flow. The last thirty years are marked by a growth in terms of computer technology (Pines, 2006). This is whereby the fourth generation computers were discovered. This led to demand in terms of software has to deal with the analysis needs of the businesses. This further led to the information economies evolvement different department were invented which includes data ware houses, information management systems, manuals for workflow, document managements and finally the evolvement of total quality management concept. The process of business analysis strategies was aimed at ensuring that the information within the business is equally being distributed. It also ensures that an approach that is institutionalized approach of regular discussions is sort as far the business performances are concerned (Tahai & Meyer, 2009). Finally, it enables investigation of ideas as well as all the problems and then provides a way forward for the business. COMPARISON BETWEEN THE OLD AND NEW BUSINESS ANALYSIS STRATEGIES There are so many strategies of business analysis, which are also known as analysis techniques. These techniques differ from each other depending on the time they were developed (Pines, 2006). The earlier ones only covered very little areas; the recent ones are more advanced and even go deeper in search. The earlier methods include SWOT and PEST while the recent includes porter five forces model (Peter, 2007). One of the greatest differences is that the recent method actually goes beyond the analysis of business like weaknesses, strengths, operating environment of the business as well as the businesses chances of competition. Old business analysis methods As stated earlier these techniques focus on the strength and weaknesses of the business. There are two main types of the techniques mainly the SWOT and the PESTLE SWOT This kind of analysis capitalizes on the opportunities and the strengths that a business has. It also shows threats and the weaknesses that any business is likely to face. The strengths of a businesses involves its advantages, the things that the business is doing very well as far as its field is concerned and its key areas which are performing very well within that particular company (Peter, 2007). A company dealing with computers is likely to have strengthens if it is dealing with the modern model of electronics (Narayanan & Fahey, 2005). The weaknesses represents the areas that are not doing so well and needs to be improved the areas that are currently being done very badly. A computer dealing company could have good electronic bur its sales and marketing strategy could not be good. Therefore, that factor could represent a very strong weakness to the business. The opportunities of the business represent the factors that give the company a better opportunity to stand in competition with other companies of the same caliber (Olson, Slater & Hult, 2005). This is usually the areas where the company’s competitors are not performing well and this could be the way in which a company packages its products as compared to other companies in line with it (Peter, 2007). Threats of a business include the obstacles that the organization faces (Grundy, 2006). They are also the areas that the competitors companies do well as compared to the company. Such threats include better human resource management in terms of better salaries. PESTLE This is used for the investigation of the external environment. This is because it takes care of factors like politics, economics, and technology, legal, environmental and sociological factors influencing the organization (Pines, 2006). Political influences as well as pressure are well identified; world, national and local economic interferences are also identified (Thompson & Martin, 2005). The sociological or rather the ways in which the society influence or is likely to affect the organization, the new emerging technology, the legal laws and legislations as well as the environmental issues globally, internationally and locally are laid down Business analysis methods These are techniques which goes beyond the normal analysis of the weaknesses, strengths, opportunities and threats that are affecting the business. They are the key techniques that dig deeper to analyze the profitability potential of a particular company or organization within a given industry. One of the most used techniques is the Porter’s Five Forces Model (Thompson & Martin, 2005). Porter’s Five Forces Model This method is very influential as far as the assessment of competition nature in any given industry is concerned. This is a framework form of a strategy that was developed by Porter E. Michael in the year 1979. It analyses five main forces that brings the determination of any business’s level of competition (Thompson & Martin, 2005). The five factors are divided into two. The first three deals with the external form of competition while the other two deals with the internal competition (Grundy, 2006). This technique however works hand in hand with the SWOT analysis. Michael called the factors micro environmental factors they represent what hinder the company or an organization from making a profit as well as serving the customers. This means that for any company to change any of the factors it has to carry out a market research to be able to meet its profit target within the industry (Olson, Slater & Hult, 2005). This model is very applicable in the ecommerce industry involving computers. This is because the looking at the industry as a whole the profit that is yielded is quiet low, however, the application of this model at an individual company level, the company is well able to make profits way much beyond the returns accounted by the industry as a whole (Pines, 2006). The following are the five main factors that represent the five forces of porter’s. The forces that are on the horizontal competition include substance products threat, established rivals threats and the new entrant’s threat. Two forces representing the vertical competition namely suppliers bargaining power and the customers bargaining power (Thompson & Martin, 2005). Each of the forces influences the productivity of the business in very different ways. Threat due to the new competitors The greater the potential of a market to achieve profit, the more new firms gets attracted to it; this is also a very great disadvantage to all the firms that are in the industry. This is because the situation leads to a situation of low profit yield for the firms. This is whereby the issue of barriers is needed especially the incumbents to avoid the profits from going down to null. Some of the barriers include equity of the brand, government policies, requirements in terms of capital, loyalty of the customers and cost advantages (Tahai & Meyer, 2009). This is very applicable in the industry of ecommerce where there so many people venturing to ensure that the business owners do not end up operating at loss. Substance products threat This is whereby a company goes ahead and provides products that are extremely beyond the boundaries of the common products (Olson, Slater & Hult, 2005). The intent of the whole issue is to present the customers with an opportunity for variety in the market (Pines, 2006). This option enables the company to be advantageous in that the buyers opts to switch costs, provide product differentiation, increase the quantity of product in the market available for sales and deal with the depreciation of the products quality. Established rivals threats This is one of the factors that determine the rate of competitiveness within a particular industry and so for any company to counteract this effect it must do a number of things as precaution measures. It is important to monitor the expenses of advertisement, web mastery, invent some strategies for competition, and come up with better competitive advantages like through innovation (Grundy, 2006). Therefore, the companies must be able to cater for the problem through innovations, price fixation and quality improvement. If a company in the ecommerce industry improves its innovation then it means it will be in a position to increase its prices for the products yet sell. Suppliers bargaining power Suppliers represent the input market. This is because they bring the raw materials, labor, components and other services like great expertise (Olson, Slater & Hult, 2005). This can be a challenge especially when the supplier causes problems to the firm by refusing to offer their services. This can be overcome by strengthening the distribution channels, creation of labor union and increasing competition in terms of supply by having many suppliers for the same raw material among others. If a company in the ecommerce needs to make it, it can for instance have different suppliers bring the same product to ensure that one supplier does not exploit it. The customers bargaining power This is whereby a firm experiences pressure from the customers hence their prices sensitivity gets affected. This affects the volume of buyers, the availability of knowledge for the buyers. If a company is able to strike a balance of this factor, then it means that it can thrive in the industry despite the challenges (Chan et el, 2005). A company in the ecommerce industry for instance can be able to overcome this challenge by ensuring that it has cut short its channels of distribution. The reason being that the loner the chain of distribution the more expensive the product gets hence affecting the power of the customers to bargain. This is because too much bargain may lead the company to a loss. Other business analysis methods Some of the business analysis methods like STEEPLE, PESTEL and PESTELD, which includes the aspect of legislation. It is very evident that many businesses are greatly affected by the legislations as well as perspectives pertaining to the business. Some of the legislations that brought great impact in the businesses include the Basal Accord II as well as the 2002 Act of the Sarbanes-Oxley (McWilliams et el, 2005). The two significantly affected businesses. The Sarbanes-Oxley was developed due to a number of scandals that occurred in the world of business. It was key in the restoration of the American’s confidence in the capital market. However, it said to cause a reduction of the edge of international competition of the America as compared to their counterpart service providers. It helped the firms to analyze their transparency and its control internally. On the other hand, Basel II is a law that was formulated to be implemented in the banking world, however, it also very helpful in the industry of ecommerce. It is very useful in the sense that it helps in the process of capital allocation, separating credit risks and operational risks and finally it helps in aligning regulatory and economic capital. The two legislations are instrumental in better management of firms in the ecommerce industry. Conclusion For any business to thrive and take lead in today’s business world, no matter which industry it is, there is need for business analysis. It is very evident that an industry like ecommerce dealing with the computer technology where there is great demand, dynamic technology and great competition, business analysis is very important. It will be beneficial for such firms to use both the past as well as the current techniques of business analysis to be able to maximize their profit, make better decisions and come up with perfect solutions for their problems. This means that business analysis is a very important component of any business. Reference Chan, K. C., Chen, C. R., & Cheng, L. T. 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