Extra Notes for

Chapter 2

Elements of Competitive Advantage

i. Product Differentiation
 A product's intended customers perceive to be different and desirable.

 Differentiation looks to make a product more attractive by contrasting its unique

qualities with other competing products

 Examples: Apple iPhone attributes is more sophisticated such their apps.

ii. Cost Efficiency

 Maximizing cost efficiency is highly desirable for a business since its achieved
for the least amount of financial investment

 Example: A goal of media marketing that is aimed at minimizing advertising

expenses incurred while maximizing product publicity to a target market in terms
of breadth and frequency of exposure.

 Example: One machine can be operated 12 hours a day since demand is

increasing. Thus, one factory can safe a cost of buying another machine that needs
a high maintenance.

External Environment (Specific or Task Environment)

mbalectures June 30, 2010 14 Comments

External environment refers to the major factors and forces outside the organization that have the
potential to significantly affect the performance of an organization. External environment is
divided into two parts i.e. mega environment or general environment and specific or task
environment.  External environment can significantly influence the effectiveness of an
organization to large extent. The explanation of specific or task environment is given below.

 Task or Specific Environment

Task environment or specific environment refers to the forces and institutions outside the
organization with which an organization interfaces in the course of conducting its business. Such
forces and institutions are directly relevant to the achievement of the organizational goals
because they have direct and immediate impact on decisions and actions of managers. The
specific environment of each organization is unique and changes with conditions. The important
constituents of task environment are: customers, suppliers, competitors, and Pressure Groups.
 •    Customers and Clients

Customers and clients of an organization refer to those individual and organizations that
purchase its products and services. Organizations exist to meet the needs of customers through
which they earn large sum of profits. But these customers possess potential uncertainty to an
organization success because of their changing tastes, preferences, lifestyle etc. Therefore
various organizations are making efforts to improve the quality of their products and services,
stay close with the customers, listen to the customers about their needs etc.

 •    Suppliers

Organizations need different resources such as raw materials, goods and services etc to conduct
their operations. Therefore they purchase these resources from various individuals and
organizations known as suppliers. The term suppliers also include providers of financial inputs
(such as banks, insurance companies, pension funds etc) and labor inputs (such as labor unions,
universities, local labor markets etc). It is the responsibility of each manager to ensure the steady
flow of needed inputs at the lowest price available in order to maintain the effectiveness of an
organization.

 •    Competitors

Competitors refer to those organizations that either offer or have a potential to offer rival
products or services. It means that not only the existing rivals are threat to the success of
organization but the potential newcomers could be disastrous too.  Competitors in term of better
pricing, new products, quality services etc represent an environmental force that managers must
monitor along with the competitive scene for potential newcomers.

 •    Pressure Groups

Pressure groups refer to the special-interest groups that attempt to influence the actions of
organizations. Such groups have the potential to influence the success of organization therefore
managers have to be careful in their decisions and actions. Examples of pressure groups are:
MADD (mother against drunk driving) which has pressurized the bar and restaurant industries.
Similarly PETA’s (People for the Ethical Treatment of Animals) has pressurized food restaurants
over their handling of animals during the slaughter process. The power of pressure groups
changes with the change in social and political attitudes. Therefore organizations have to
continuously monitor the major shifts in the society.

http://mba-lectures.com/management/principles-of-management/632/external-environment-
specific-or-task-environment.html (2010), (20/1/16)

written by mbalectures
The PESTEL Analysis is a framework used to scan the organization’s external macro
environment. The letters stand for Political, Economic Socio-cultural, Technological, Legal
and Environmental.

 Political
A political factor is the stability of the political environment and the attitudes of
political parties or movements. For example government influence on tax policies,
or government involvement in trading agreements.

 Economic
Economic environment consists of external factors in a business' market and the
broader economy that can influence a business. For example interest rate,
inflation and recession.

 Socio-cultural
Socio-cultural is the culture of the society that an organization operates within.
For example demographics, age distribution, population growth rates, level of
education, distribution of wealth and social classes, living conditions and lifestyle.

 Technological
Technology refers to the rate of new inventions and development. For example
incredible gadgets by Apple’s have used new technologies like 3D touch and live
photos.

 Environmental

The sum total of all surroundings of a living organism, including natural forces
and other living things, which provide conditions for development and growth as
well as of danger and damage. For example natural resources, waste disposal and
recycling procedures.

 Legal

Allowable or enforceable by being in conformity with the law of the land and the
public policy; not condemned as illegal. For example national employment laws,
international trade regulations and restrictions, monopolies and mergers’ rules,
and consumer protection.
S.W.O.T Analysis

the internal for example, factors relating to products,

environment - the pricing, costs, profitability, performance, factors tend
Strengths and
situation inside the quality, people, skills, adaptability, to be in the
Weaknesses
company or brands, services, reputation, processes, present 
organization infrastructure, etc.
the external for example, factors relating to markets,
environment - the sectors, audience, fashion, seasonality, factors tend
Opportunities
situation outside the trends, competition, economics, politics, to be in the
and Threats
company or society, culture, technology, future
organization environmental, media, law, etc.
Chapter 4
Comparison Chart

Basis for
Strategic Planning Operational Planning
Comparison

The planning for achieving the Operational Planning is a process of deciding in

Meaning vision of the organization is advance of what is to be done to achieve the tactical
Strategic Planning. objectives of business?

Time Horizon Long term planning Short term planning

Approach Extroverted Introverted

Modifications Generally, the plan lasts longer. The plan changes every year.

Performed by Top level management Middle level management

Scope Wide Narrow

Planning of vision, mission and

Emphasis on Planning the routine activities of the company.
objectives.

http://keydifferences.com/difference-between-strategic-planning-and-operational-planning.html (2016) /
(20/01/16)