I. STRATEGY FORMULATION: MISSION STATEMENT (Unit 1.

B)

II. STRATEGY FORMULATION: ENVIRONMENTAL SCANNING /

external audit

Environmental scanning is the process of conducting research through

survey, observation and other methods and gathering and analyzing
information for the organization.

Purpose of environmental scanning

The strategic manager will be aware of the market structure
characterized by:
 Market concentration - the degree by which a small number of
companies dominate a particular market.
 Entry barriers - the difficulties and challenges by potential new
entrants which are entering the market
 Product differentiation - the degree by which a company is
able to distinguish its product or service to other players in the
market as valued by customer.

III. STRATEGY FORMULATION: COMPETITIVE INTELLIGENCE

Competitive intelligence is the act of gathering, analyzing and distributing

vast information coined as intelligence that would help the firm compete in
the market.

Competitive intelligence works in the following areas:

1. Assessment of strategies
2. Perception of competitors strategies
3. Effective for current operations
4. Capabilities of competitors
5. Long term market prospects

Approaches of competitive intelligence

1. Strategic intelligence - understanding the competitors future
prospects and goals
2. Tactical intelligence - a small scale intelligence and
operational in the short-run
3. Counter intelligence - knowing how to defend company
secrets

IV. STRATEGY FORMULATION: INTERNAL AUDIT

An internal audit / assessment is focused on identifying and

evaluating a firm’s strength and weaknesses in the functional areas of the firm.
All organizations have strength and weakness in the functional areas. SWOT
coupled with a clear mission statement provides the basis for establishing
objectives and strategies.
Purposes of Internal Audit
1. Provides an opportunity to understand how their jobs,
departments and division fit into the whole organization.
2. Internal audit is an excellent vehicle for improving the process
of communication.

V. STRATEGY FORMULATION: SWOT ANALYSIS

SWOT Analysis is a way to analyze competitive position of the firm. SWOT

matrix assess both the internal and external aspects of the business. It is the
framework of auditing the firm and its environment. This is a framework that
allows mangers to synthesize insights obtain from the environmental analysis

STRENGTHS - a resources advantage relative to competitors and

the needs of the market a firm serves or expect to serve
WEAKNESS - a limitation or deficiencies in one or more
resources or competencies relative to competitors that impedes a
firm’s effective performance.
OPPORTUNITY - a major favourable situation in a firm’s
environment.
THREATS - a major unfavourable situation in a firm’s
environment.
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