Strategic policy analysis is a vital part of the strategic planning process for organizations large and small. The analysis process enables corporations, public and private agencies and other entities to explore various policy options for achieving their long-term goals. Methods of strategic policy analysis consider internal and external factors to craft a pathway to success.
Strategic policy analysis helps organizations determine the optimal policies for allocating resources to achieve strategic goals. Corporations, government agencies and other organizations use strategic policy analysis methods.
Three major approaches to strategic policy analysis include SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis, PEST (Political, Economic, Social, and Technological) analysis, and decision tree analysis. All three approaches use graphical techniques to analyze policy options for reaching strategic goals.
SWOT is a method of analysis that surveys an organization’s internal and external environment. Under this process, the organization classifies internal factors as either strengths or weaknesses. Analysts then classify external factors as opportunities or threats.
After assessing and classifying internal and external factors, analysts construct a 2-by-2 matrix with the following four cells: strengths-opportunities (S-O), weaknesses-opportunities (W-O), strengths-threats (S-T), and weaknesses-threats (W-T). This analysis helps organizations match their capacities to the environment in which they operate.
PEST is concerned with the manner in which political, economic, social and technological factors affect an organization’s operations. Analysts group relevant issues under these four headings. Examples of political factors could include applicable regulations, taxation issues and government policies. Economic factors include inflation, business cycles, government spending and economic policies and consumer confidence. Social factors include demographics, public attitudes and income distribution. Energy use and the impact of technological change are examples of technological factors.
PEST analysis involves not only identifying the relevant factors, but also considering options for responding to these influences.
Decision Tree Analysis
Decision tree analysis combines graphical and statistical analysis by presenting policy options, decisions and possible outcomes in a graph known as a decision tree. Each policy option and possible outcomes would represent “branches” in the decision tree, which often will display statistical probabilities associated with each outcome. This approach to strategic policy analysis is helpful when organizations face a sequence of decisions, as well as a level of uncertainty regarding the consequences.
Strategic policy analysis methods require valid data collection and analysis, as well as creative thinking about policy options. Thoughtful analysis can help organizations craft strategies that will help them maximize strengths, overcome weaknesses and gain a competitive advantage for achieving their goals.