5 Types of Business Analysis Techniques Every Manager Should Know

As a manager, you are responsible for ensuring that your team is working efficiently and effectively. To achieve this, you need to have a solid understanding of your business’s performance, strategies, and goals. Business analysis techniques can help you gain a deeper understanding of your organization and make informed decisions that drive business growth. This article covers five types of business analysis techniques every manager should know.

1. SWOT Analysis

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This analysis technique helps you evaluate your business’s internal and external factors that affect its performance. By identifying your business’s strengths and weaknesses, you can develop strategies to capitalize on the former and mitigate the latter. Similarly, by identifying opportunities and threats, you can make informed decisions that help your business grow while minimizing potential risks.

EXAMPLE: A small e-commerce business uses SWOT analysis to evaluate its position in the market. It notices its strengths include a strong online presence and loyal customer base while its weakness is a lack of physical stores. Its opportunity lies in expanding into new markets, while the threat is increasing competition.

2. PESTLE Analysis

PESTLE stands for Political, Economic, Sociocultural, Technological, Legal, and Environmental. This analysis technique helps you evaluate the external factors that affect your business. By identifying the opportunities and threats posed by these six factors, you can develop strategies to improve your business’s performance and mitigate risks.

EXAMPLE: A restaurant uses PESTLE analysis to evaluate external factors that affect its business. It notices that customers are becoming more environmentally conscious (Sociocultural), local laws impose restrictions on outdoor dining (Legal), and new technologies can help reduce food waste (Technological).

3. Gap Analysis

Gap analysis helps you evaluate the performance of your business by comparing its current state to its desired state. By identifying the gaps between them, you can develop strategies to bridge the gap and achieve your desired goals.

EXAMPLE: A startup uses Gap analysis to evaluate its current performance. It identifies gaps in its sales funnel, employee training, and market reach, and develops strategies to overcome these challenges.

4. Root Cause Analysis

Root Cause Analysis helps you identify the underlying causes of problems and develop strategies to address them. By understanding the root cause of a problem, you can develop solutions that improve your business’s performance in the long-term.

EXAMPLE: A manufacturing company uses Root Cause Analysis to evaluate production delays. It identifies that the root cause is insufficient maintenance of machinery and develops a strategy to improve maintenance procedures.

5. Cost-Benefit Analysis

Cost-Benefit Analysis helps you evaluate the potential benefits and costs of a course of action. By comparing the potential benefits to the costs, you can make informed decisions that maximize your business’s profitability.

EXAMPLE: A retail business uses Cost-Benefit Analysis to evaluate the potential benefits and costs of expanding into a new market. It determines that the potential benefits outweigh the costs, and decides to move forward with the expansion.

Conclusion

By incorporating these five business analysis techniques into your decision-making process, you can make informed decisions that drive your business’s growth and success. By identifying your business’s strengths, weaknesses, opportunities, and threats, you can develop strategies to improve its performance. By evaluating your business’s external factors, you can avoid potential risks and capitalize on emerging opportunities. By evaluating your business’s performance and identifying underlying problems, you can develop solutions that address the root cause of the issue. And by evaluating the potential benefits and costs of a course of action, you can make informed decisions that maximize your business’s profitability.