After an analyst has gained an understanding of a company's external environment, he/she can start company analysis. This includes analysis of the company's financial position, products and/or services, and its competitive strategy. The analyst should try to determine if the strategy is primarily defensive or offensive and how the company intends to implement the strategy.
A firm can pursue one of the two basic types of competitive strategies: low cost or differentiation. To achieve abnormal profitability, a company should either incur low costs in its production process, or receive premium-to-average market price based on its products' differences preferential to customers. High profits will be possible only if the company with a cost advantage can sell its products at high-enough prices and if the company with a differentiation advantage can keep the costs of superior products sufficiently low.
A checklist for company analysis includes a through investigation of:
|ascruggs92: *thorough investigation|