With the wealth of information available today, businesses can find a wide variety of schemes visualizing the strategic planning process are available. In essence they usually consists of a series of steps or building blocks.The analysis starts with defining the business and formulating a vision and then goes on to assess the internal and external environment. The strategic planning process ends with the financial budget and goes into a feedback loop The essence of formulating a strategy is relating a company to its environment. Therefore the analysis phase is crucial to the outcome of the total planning process. A major part of the analysis phase is a diagnosis of the external environment. Several tools and techniques have been developed to assist the planners in evaluating the external environment. Of particular interest is the assessment of the profit potential in the industry.Many years ago, most business analyzed themselves in a comparative sense. The comparative advantages of a business were determined through an economic theory, first developed by David Ricardo of England, that attributed the cause and benefits of international trade to the differences among countries in the relative opportunity costs (costs in terms of other goods given up) of producing the same commodities. In Ricardo's theory, which was based on the labor theory of value (in effect, making labor the only factor of production), the fact that one country could produce everything more efficiently than another was not an argument against international trade.The theory of comparative advantage is a strong argument in favor of free international trade and specialization among countries. The issue becomes more complex, however, as the simplifying assumptions (e.g., a single factor of production, a given stock of resources, full employment, and a balanced exchange of goods) are relaxed.More recently, Michael C. Porter put forth the idea that competitive advantages w...
