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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 decisionmaking 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 suppliers 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 shouldnt 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 organizations objectives.
Having understood that the focal point of business existence is to meet the needs of
stakeholders therefore different stakeholders are affected by the organizations 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 organizations 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 stakeholders 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.