PART TWO (STRATEGIC ANALYSIS)

THE GENERAL ENVIRONMENT

The general environment consists of the economic, technological, socio-cultural and political

and legal trends that influence a business decision. The general environment is also known as

the Macro-economic environment. These are the forces that exist outside of the organizational

control which has a potential to either affects the organization most positively and negatively,

thus it behooves the manager to keep constant watch of the the environment for opportunities

and threats. The aim of general environmental scanning is to help the organization in decision-

making and strategic formulation.

The Environment which business operates is dynamic and complex; which makes managerial

planning reiterative thus managers should be flexible enough to adapt to environmental

changes.

THE COMPETITIVE ENVIRONMENT (A SURIVAL BASED VIEW STRATEGY)

The Competitive environment is the dynamic external system which business competes to

gain a larger market share. This more likely organization offers homogenous

products/services, the more competitive the environment will be. This can be referred as RED

OCEAN. It cannot be denied that competitive environment unlike the general environment

has a direct impact on the organizational performance in terms of profitability etc. The porter

five forces is a model used in assessing the balance of power in a business situation. Michael

Porter of Harvard University proposed it in 1979. The model is profound, because it helps you

understand the strength of your competitive position and strength of a position you

considering moving to. The model helps to analyze supplier’s power, buyer power,

competitive rivalry, threat of substation, and threat of new entry. A complementary 6th

force, which serves as an extension to the 5 porter forces are the complementors. Though

there are many critics of the 5 porter forces, some of which are the complementors proposed

by Brandenburger and Nalebuff 1995.

STRATEGIC GROUP: A group of firm in an industry following the same or similar

strategy

HYPERCOMPETITION: A situation where the degree of rivalry in the organization is very

intense and precludes any organization to have sustainable advantage over other for a long

time

SWOT ANALYSIS

SWOT analysis also known as SWOT matrix is a useful techniques for understanding

organizational Strength and Weakness (Internal environment) which the organization has

control over and Opportunities and Threats (external environment) is that which the

organization has no control over it. The strength is that which bestow an organization edge

over its competitors while its weakness is the area, which may be at a comparative

disadvantage. Opportunities in the environment is that blue ocean where the organization can

exploit with its strength in terms of resource and capabilities, and Threats are those obstacles

in the external environment that pose a challenge to the organization. Despite how profound

SWOT model is, however there are some limitations such as ambiguity i.e. some factors can

simultaneously be characterized as both strength and weakness also the model is focused

within the firm industry boundary

THE INTERNAL ENVIRONMENT (A RESOURCE BASED VIEW STRATEGY)

The resourced based view focused on the firm resources and capabilities at its disposal as a

basis of gaining competitive advantage. The internal environments are the forces within the

control of the organization. The internal environmental factors are basically the resources,

capabilities and core competencies of an organization that helps to exploit the opportunities in

the external environment and eliminate or reduce threats. By studying the internal

environment, firm determine what they can do couple with their resources and capabilities.

There are certain components of internal analysis that gives a competitive advantages and

strategic competitiveness to a firm. The firm resources are tangible and intangible, the

capabilities is to what extent the resources of an organization can be deploy in other to bring

about a competitive advantage against other firm. Core competences are both the resource

and capability of the resources that gives a competitive advantage to the firm. There are four

criteria of sustainable advantages for a firm which are: Valuable (helps firm to neutralize

threats and exploit opportunities), Rare (The firm resources and capacities shouldn’t be

possessed by many in order to gain a sustainable advantage over its rivalries), Costly to

Imitate (There should be something unique about the org that will be difficult for other firms

to easily imitate and lastly Non substitutable (that is, capabilities that other firms cannot

easily develop).

VALUE CHAIN ANALYSIS: Value chain analysis is a useful tool that allows the firm to

create the greatest possible value for its customers, having identify which parts of its operation

brings most value and which part do not. Michael porter identified two activities of business,

which are:

Primary activities: Activities directly concerned with creating and delivering a product

Support activities: Activities not directly involved in production but may increase

effectiveness and efficiency. It is on this basis that organization determines which part of the

activities should be outsourced (provided by others).

ASSESSING ORGANIZATIONAL PERFORMANCE

The goal of a business is to maximize profits for its owners or stakeholders thus performance

have to be measured against the aims and objectives of the business. Kaplan and Norton

(1992) developed Balance Score Card as a performance management tools beyond the

traditional financial measures. According to Freeman (1994) Shareholders are individual or

groups, which affect or are affected by the achievement of an organization’s objectives.

Having understood that the focal point of business existence is to meet the needs of

stakeholders therefore different stakeholders are affected by the organization’s decision.

Every stakeholder has different interest, which has influence on the overall objectives of the

organization. Thus management must prioritize the different interest if stakeholders and assess

the influence they exert on organization’s objectives. This can be easily assessed with a model

proposed by Mendelow (1994), which ranks stakeholders according to their power and

interest. The model is called “ The Stakeholder Power –Interest Matrix”. Benchmarking is

a process used in performance management; measuring products, services and management

practices against other companies recognized as industry expert carries this out. There is

another argument against the traditional that states that the primary purpose of organization

establishment is to serve shareholders. This contrast the stakeholder’s view, which argues that

corporation, must also be socially responsible.

PART 3 (STRATEGY FORMULATION)

BUSINESS LEVEL STRATEGY

An organization existed within an industry (a firm offering similar products and services). The

question of how to compete within a confined industry gave rise to Business level strategy.

The aim of BLS is to aid organization compete favorable and gain advantages over other firms

within its operating industry .in doing this, Michael E porter generic competitive strategies

was discussed which are, overall cost leadership, differentiation and focus. All the strategies

are profound however, with some risk

Overall Cost Leadership: Reduction of price of product and services against other

competitors. Adopting a cost leadership can be capital intensive as there is expansion in the

firms capital equipment, and a change in technology may render past investment in

technology obsolete thus allowing competitors to take market share.

Differentiation: offering a product that the consumers perceived to be unique and of better

value than other competitors products. As with other strategy, differentiation also has its own

risk .The organization must ensure that the price charged for differentiation is not too pocket

deep hence the consumer might perceive the difference unworthy of paying for. There are

other risks not limited to the above.

Focus: which segment of the market can the organization competes favorably to gain

competitive advantage. However, it is not a durable strategy because, other competitors would

come into the market due to its attractiveness.

The criticism of the generic above is not limited to the risk, organization has increasingly

finding a better approach to the strategy thereby combining low cost with some form of

differentiation which is called HYBRID STRATEGY.

Industry goes through four stages of development, which is called the industry life cycle.

These stages are introduction, growth, maturity and decline. Though there are slight variations

as to the length in different industries. Competitive strategies has huge role to play in market

turbulent and hyper competitive markets. With better understanding of the environment and

all market forces, managers can create a strategic fit to their own benefit. There are two ways

market turbulence can occur within an industry as a result of competence enhancing or

competence destroying disruption, which also can result in four different pattern of disruption:

Equilibrium, Fluctuating Equilibrium, punctuated equilibrium and disequilibrium

CORPORATE LEVEL STRATEGY

Unlike the Business level strategy that focuses on how to compete favorably within an

industry, corporate strategy focal point is on what business do we want to compete in? Also

how organizational add values across the businesses is also part of the questioning confronting

corporate strategy which is basically the role of the Corporate Parenting. The main objective

of corporate parent is to achieve synergy i.e. when the output of collective efforts is greater

than the input of individual effort. Therefore the value of combined business is greater than

the value that can be derived from the value of two separate businesses. The Ansolf [growth

vector matrix provides four different strategies an organization can pursue for growth, these

four strategies are: market penetration, product development, market development and

diversification which can either be related “diversification or unrelated diversification”.

There are several ways which growth strategy can be implemented which are mergers and

acquisition, internal development, joint ventures and strategic alliance.