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Company Analysis: Business Potential & Performance

Business analysis requires consideration for the past, present, and future conditions of the company in question. A firm’s past condition provides insights into its growth and the challenges it has faced. On the other hand, the present business condition indicates how the company really fares, given current issues in the industry and market. The company’s future possibilities imply how it aims to improve its performance and achieve long-term success.

Investors evaluate interactions between the company and its business environment to determine potential growth and profitability. A company that effectively addresses current domestic and international markets must remain effective in the long term. In this way, investors benefit from the company’s business performance, long-term growth, profitability, and shareholder value.

Different models and theories are used to analyze companies, yielding a variety of business information. Commonly, detailed financial analysis is used to assess business conditions and potential. For example, financial statements provide information on such variables as profitability and liquidity. However, there are other approaches, models, and theories for determining business soundness, as follows:

1. Mission and Vision Statements. A company’s mission and vision statements show business focus and direction. The mission statement presents what the company aims to do, while the vision statement shows the target future condition of the business. ( Browse Articles: Mission & Vision Statements of Companies )

2. Generic Competitive Strategies and Intensive Growth Strategies. A company’s generic strategy (based on Michael Porter’s model) indicates how the business achieves and maintains competitive advantages. The intensive growth strategies show how the company intends to grow its business. ( Browse Articles: Generic Competitive Strategies & Intensive Growth Strategies of Companies )

3. Organizational Structure. A company’s organizational structure affects its business abilities. Analyzing a company’s organizational structure yields information about potential barriers in addressing business issues. Some organizational structures support rapid change, while others ensure business consistency. ( Browse Articles: Organizational Structures of Companies )

4. Organizational Culture. Analyzing a company’s organizational culture shows social characteristics in the workplace and the business potential of human resources. Business factors, like leadership, employee morale, and human resource development are under the influence of the company’s organizational culture. ( Browse Articles: Organizational Cultures of Companies )

5. SWOT Analysis. Business strengths, weaknesses, opportunities, and threats (SWOT) are factors influencing companies’ performance. The internal strategic factors (strengths and weaknesses) are based on the company’s nature and characteristics. The external strategic factors (opportunities and threats) are based on market and industry conditions. The SWOT analysis model provides information about the major challenges that the company must address. ( Browse Articles: SWOT Analyses of Companies )

6. Five Forces Analysis. The Five Forces Analysis (based on Michael Porter’s model) identifies the external factors affecting competitive rivalry in the company’s industry environment. Investors can use the Five Forces Analysis model to evaluate the soundness of business strategies for long-term success despite competition. ( Browse Articles: Five Forces Analyses of Companies )

7. PESTEL/PESTLE Analysis. The PESTEL/PESTLE Analysis model determines the P olitical, E conomic, S ociological, T echnological, E cological, and L egal external factors that affect business. This analysis indicates the condition of the company’s remote or macro-environment, along with trends, opportunities, and threats relevant to the business. ( Browse Articles: PESTEL/PESTLE Analyses of Companies )

8. Marketing Mix. An analysis of a company’s marketing mix or 4Ps shows how the business implements its marketing plan. Investors can use this type of analysis in determining the suitability of marketing campaigns, business potential for success in certain markets, and the soundness of a company’s marketing strategy. ( Browse Articles: Marketing Mix or 4P of Companies )

9. Stakeholder Analysis, Corporate Social Responsibility, and ESG. A company’s stakeholders influence the business in diverse ways. For example, customers directly affect sales revenues, while communities influence corporate image. Analyzing a company’s stakeholders and corporate social responsibility (CSR) and environmental, social, and corporate governance (ESG) programs yields information about how stakeholders’ interests are addressed. ( Browse Articles: Stakeholders, CSR & ESG Analyses of Companies )

10. Operations Management. An analysis of a company’s operations management shows how business activities are organized and directed. The firm must carefully address the 10 strategic decision areas of operations management. These decisions pertain to key areas or aspects of the business. Successful operations management leads to optimal productivity and business efficiency. ( Browse Articles: Companies’ 10 Strategic Decision Areas of Operations Management )