Assignment:
1. Evaluating a Company's External Environment and Evaluating a Company's Resources, Capabilites, and Competitiveness
As we dive we will explore the concepts and tools used for strategically assessing a company's external environment. This chapter concentrates on specific tools used when determining levels of competition, marketing position, and also the importance of evaluating the long-term growth and profitability landscape.
Let's briefly revisit last weeks' lecture and the topics shared.We identified the importance of the strategy formulation and execution process and how this actually begins with an assessment of the company's current condition. In evaluating the company's current condition two facets are examined:
1. "the competitive conditions in the industry in which the company operates-its external environment
2. and its resources and organizational capabilities-its internal environment" (Gamble, Peterraf, and Thompson, 2016).
In assessing the external environment, an external audit is required. David and David (2015) state that "the purpose of an external audit is to develop a finite list of opportunities that could benefit a firm and threats that should be avoided. The external audit is not aimed at developing an exhaustive list of every possible factor that could influence the business; rather, it is aimed at identifying key variables that offer actionable responses". After analysis of such factors a company must either respond offensively or defensively to these factors and formulate a strategy that takes advantage of these external opportunities or find ways to minimize the impact of possible threats (David &David, 2015).
External Factors
As we dissect the external environment it is important to review the six categories impacting external forces.
1. Political Factors - ex. Relationships with other countries (Russia, Europe, etc.), antitrust legislation.
2. Economic Factors - ex. Availability of credit, interest rates, tax rates, unemployment trends.
3. Sociocultural Forces - ex. Number of marriages, births, avg. disposable income, traffic congestion.
4. Technological Factors -ex. Internet, online reputation.
5. Environmental Forces - ex. Energy conservation, pollution control, inner city environments.
6. Legal and Regulatory Factors - ex. changes in tax laws, environmental protection laws.
As we analyze these forces it is important to note that any change in these external forces impacts and changes consumer demand for both the industrial and consumer products/services. Let's take a second to think outside the box, a broader view, when any change in one external factor occurs this can have a trickle affect on the business as a whole. External factors have an impact on the types of products developed, nature of positioning, types of services offered and the impact of mergers and acquisitions (acquire and sell); affecting both suppliers and sellers (David &David, 2015).
2. Evaluating a Company's Resources, Capabilities, and Competitiveness.
We will discuss the various techniques used by company's evaluating internal conditions which includes collecting valuable resources, their current cost position and its competitive strength versus its rivals. When evaluating a company's internal position Gamble, Peteraf and Thompson (2016) states that there are five questions that must be answered and the answer to these five questions will address the issue of "where are we now"? and position the strategy of the company accordingly. The five questions are as follows:
1. How well is the company's strategy working?
2. What are the company's competitively important resources and capabilities?
3. Is the company's cost structure and customer value proposition competitive?
4. Is the company competitively stronger or weaker than key rivals?
5. What strategic issues and problems merit front-burner managerial attention?
Every business and or organization has both strengths and weaknesses. No organization is equally strong or weak in all areas. For example, Maytag is known for excellent production and product design, whereas Procter & Gamble is known for outstanding marketing. Apple is known for being innovative while Samsung is quicker to the market. Internal strengths and weaknesses, coupled with external opportunities and threats along with a clear vision and mission statement, provide the basis for establishing objectives and strategies for a company. Objectives and strategies are established with the intention of capitalizing on internal strengths and overcoming weaknesses (Gamble, Peteraf and Thompson, 2016).
Strengths, Weaknesses, Opportunities and Threats (SWOT)
Let's discuss what a SWOT analysis entails. Evaluating a company's strengths and weaknesses and its external opportunities and threats, SWOT analysis, provides a good synopsis of whether its overall condition is fundamentally healthy or unhealthy (Gamble, Peteraf and Thompson, 2016). A SWOT analysis provides the basis for crafting a strategy that capitalizes on the company's strengths, aims at capturing the company's best opportunities, and defends against the threats. The value of a SWOT analysis involves more than making four lists (as outlined in the course chapter). The most important parts of a SWOT analysis is to draw conclusions from the listings of the overall company's condition. In addition, translate those conclusions into strategic actions that mirrors the company's strategy to its strengths and market opportunities, correcting challenging weaknesses, and defending against troublesome external threats.
References
David, F. R., & David, F.R. (2015) Strategic management: A competitive advantage approach concepts and cases (16th ed.). Pearson.
Gamble, J., Thompson, A. A., &Peteraf, M. A. (2016). Essentials of strategic management: The quest for competitive advantage (5th ed.). McGraw Hill.