“Strategy is the direction an scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging business environment, to meet the needs of markets and to fulfil stakeholder expectations.”
Business strategy is the only driving force behind any successful business since it builds the foundation for the same. The business strategy is not just a statement of intent or a mere speech. Their scope is not just limited to the management. There are different strategies as per the business and the best one among them must be chosen which can fulfil the needs of the organisation and emends of a rapidly changing world for revolutionary business strategies. It must also be able to handle the internal pressure of the organisation when the plan is being executed.
- How can the business perform better than the competition in those markets? (Advantage)
- What external, environmental factors affect the businesses’ ability to compete? (Environment)
- Where is the business trying to get to in the long-term (direction?)
- What resources (skills, assets, finance, relationships, technical competence, and facilities) are required in order to be able to compete? (Resources)
- Which markets should a business compete in and what kind of activities is involved in such markets? (Markets; scope)
- Strategy at Different Levels of a Business?
- What are the values and expectations of those who have power in and around the business? (Stakeholders)
Definition of business environment:
“Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations”. http://tutor2u.net/business/strategy/what_is_strategy.htm
Why study the business environment:
In each and every organisation there is some relation with business environment, each and every type of business is surrounded with environment directly or indirectly. Business environment is surrounding with its customers and stakeholders and it have of political as well as legal forces this all together makes business environment, in order to achieve profit and also to fulfil the stakeholder expectation a business has to change its environment as per market need. The organisation which understood the business environment and make necessary changes according to the environment succeed in business in terms of profit and needs of stake holders. On the hand the business which does not changes according to the environment leads to failure of the business, so for each and every organisation business environment, Is really important.
Different level of business strategy:
In each and every organisation strategy is used at different levels of company among them the following is the modern levels strategy is being employed by organisatation.
This strategy is considered and completely influence by stakeholder needs. At this level fundamental decision about future direction of an organisation with the purpose to fulfil the needs of stakeholders at this level strategy is done by considering the stakeholders because they are the only one who invest in the organisation so the corporate strategy is or related stakeholder expectations
Business unit strategy:
This levels of strategy is completely focused on how a business competes in a particular targeted market, it concerns strategic decision in relation to product, meeting needs of the customers , taking benefit over competitor and employing strategy related to business operation and creating new opportunities for business. This is the only level which directly influences with the customers in respect to corporate strategy.
This level f organisation is concerned with how every part of the business is organized to fulfil the needs of corporate and business unit level strategy direction. Its major focuses on the issues related to recourses and processes. this level is also employing strategy related to people and surrounding of business.
Key elements of marketing strategic decision
In each and every organisation Business environment have existence by knowingly or unknowingly because it cannot exist without an environment. The process of strategy management is basically divided into two major environment and they are Microenvironment and Macro-environment. In the challenging business environment this are two main aspect that influences each and every businesses which are also known as inner environment (micro environment) which have direct effect or relation with the business for example: customer. And outer environments (macro environment) which have indirect effect on the business for example: political factor. There is an very clear indication that influences of environment or speeding up in the market so the organisation have to take it seriously consideration as the company who had taken its seriously had succeeded in the market and the organisation ignored its had failed in the market, both the major type and its factor of influences are briefly described as under.
Macro environment (Outer environment):
- The political environment: Politicians have instrumental in shaping general nature of external environment and being responsible for the legalization of rules and regulation that affects specific type of organisation, at very general level the stability of political system affects the business and strategy so the organisation has to change its strategy according to the legal matters otherwise it can indirectly affects the business and its activities
- The social and culture environment: The organisation is also being affected by its social and culture environment as the generation are also changing so the business environment has to be change according to the changing social needs, it is crucial for the business to fully appreciate the culture values of the society because if a business is doing its business in another country which is quite different from its own than there the attitude towards the product is different as compare to its own country, so for an organisation it is really important to consider the social and culture environment of the country where it’s doing business.
- The demographic environment: As population is growing day by day the size and the age is also going so in respect to this demographic environment changes the organisation has to change its strategy towards the stocks and prediction of the market because most organisation are dealing with the product which they have to keep ready in advance by predicting the future of sales
- The technology environment: As this is new era of business so the organisation have to overcome with new and latest technology because in this environment as technology is outdated the product is out of the market, so the organisation has update its technology within a time period, because once thrown out of the market and to get again the same position in the market it take a long time so this environments is really important and being speedily changes.
Economic: Business and Economy are highly inter related. Businesses cannot be successful in an economy on decline and if businesses are not doing well it is highly unlikely for the economy to boom. For ex Lehman brothers, this was the fast company to get doomed because of economic crisis.
Legal: Legality means doing whatever the law permits. Same applies for business also. Business strategies and operations are permissible as long as they are legal. Business needs to function within the legislative limits. Business not only needs to comply with the existing legislations but also the changes in them. (“strategy management” peter Fitzroy/James Hulbert)
Micro environment (Inner environment)
- Employees: In running each and every organisation employees are must to carry out day to day business activities and they are the one who deals with other parties of the business on behalf of the business as they are having direct effect to the business they falls under microenvironment
- Customers: Customer are a crucial part of an organisation in microenvironment it’s really simple no customer means no business. An organisation should be seriously consider about the changing requirement of the customer, because in challenging business environment everybody are targeting the customer so this factor of micro environment is really important for each and every organisation
- Supplier: The supplier provides an organisation with goods and services than is being transformed by the organisation and by adding value to it than further sold to its customer this factor of microenvironment is also important because if there is not proper supply and there is no product and in challenging business environment the product service should be fast as well as quick
- Competitor: In challenging business environment there is high rate of competition in the market so it’s very important to keep updating the strategy of the competitor and try to understand their strategy like their future moves their future product this is also an important microenvironment in such a challenging business environment.
- Financial organization: This financial environment is consist of both shareholder and the investor which support the organisation and they are timely being reassured about the achievement of goals both short and long term because if they don’t trust the company than they might take their investment back from the organisation and which effects the a lot to the business.
- The government: The demands of government agencies are also consider of microenvironment commercial organisation provides government with taxation and revenue so the organisation has to in touch with the government policy in relation to their tax and regulation and can make their strategy according to the changes of the regulation so the organisation has to take careful consideration of this environment also
Internal environment is very important part of any business environment and include finance, marketing, production, personnel and R&D. These elements are considered to be within the organisation. The most important job of an internal environment is developing strategies for an organisation management process. Is also focuses on the point that the organisation should always have a well trained staff to do a right job at the right time since they are the biggest asset of any organisation and also they are directly related to most important thing of any business i.e. customers. It also focuses on the point that business strategies should always change with the changing need of the customers.
SWOT ANAYSIS: How NOKIA uses SWOT analysis to determine internal factors and external factors.
- The largest cell phone vendor by far, with almost doubles the market share of nearest competitor.
- The product being user friendly and have all the accessories one want that is why is in great demand making it No-1 selling mobile phones in the world.
- One of the top 20 brands in the world
- The re-sell value of Nokia phones are high compared to other company’s product
- The price of the mobile phones offered by the company.
- The service centers in India are very few as compared to the number of users and therefore after sales service are not good.
- Slow to adopt new ways of thinking
- Telecommunication growth in India being at the peak time, Nokia has an opportunity to increase its sales as well as the market share.
- Make a significant position in the cdma market.
- New growth markets where cell phone adoption still to come.
- The threats like emerging of other big mobile companies such as Motorola, Sony Eriksson, etc in the market.
- The growing demand of WLL network
- Late in the entry of 3G market.
How Acer uses Porters 5 Forces as an analytical tool to determine strategy and success over its competitors
Threat of substitutes: Acer face that from rival dell who can provide the same goods and value and sell at a much lesser price, as there is a threat from consumer to switch to alternatives, this could force Acer to reduce its product price and income to struggle with other markers
Bargaining power of suppliers: The exact for suppliers to retailers is that is they pay a helpful price for its supplies, and would not sell to retailers if the price quoted was not paid, then the suppliers would not sell its goods of them. Since Acer having a market share from other company as well as small shop keepers, has an advantage to dictate the price the suppliers will be paid for their goods, thus if supplier do not tend to decrease price, it is clear that they would be left with a smaller market share to sell their product.
Power of consumers: Due to a large competition in the electronic market industry, it has forced markets to switch to low product cost in order to attract more buyers, thus more power favoritism the buyers, in order to achieve more customers and trade with struggle is more victorious to customer preservation, and has also led to increase in profits. And customer wants lower price and service, better choices.
Threat to new entrants: Due to high market share of company like Acer, Dell, Sony which has to led to barriers for new markets to enter competition, since most of these markets lower prices of their goods in order to win a better client care, pays a much lesser which would buy less goods at a better rate. Thus Acer also has an upper hand on economies of scale
How Mc Donald’s uses PESTEL as a strategy to overcome challenges and gain advantages over its competitors.
Political: All the international operations of Mc Donald’s are as per the policies enforced by the individual governments. On the other hand, the company is controlled by the individual policies and regulations of operations. like any business venture, these McDonald’s stores have to contend with the issues of employment procedures as well as their tax obligations so as to succeed in the foreign market.
Economical: Food chains like Mc Donald’s do have their individual concerns involving economic factors. Their Branches and franchises have the tendency to experience hardship in instances where the economy of the respective states is hit by inflation and changes in the exchange rates. Their problem depends on the response of the consumers on these fundamentals and how it could influence their general sales. Exchange rate fluctuations also play a significant role in the operations of the company. The companies also have to consider the economic standing of the state on which they operate on.
Socio-Cultural: The organisation improves on establishing a positive mind-set from their core consumers. McDonald’s indulge a particular variety of consumers with definite types of personalities. In 2005 McDonald’s has launched a sensibly valued set of food that tenders a reliable level of quality for the respective market where it operates. Technical: McDonald’s generates a demand for their own products. The company’s key tool for marketing is by means of television advertisements. The company’s marketing is also done through toys and play spots. The operations of McDonald’s have significantly been infused with new technology. Elements like the inventory system and the management of the value chain of the company allows for easy payments for their suppliers. The integration of technology in the operations of McDonalds tend to add value to their products.
Legal: The reputation of McDonald’s is apparently a huge matter and with the opposition to the fast food industry Mc Donald’s apply a more consideration on their corporate social responsibilities. The company has provided their customers the relevant data that they need with reference to the nutritional substances of their products. This is to attend to the arguments of obesity charged against the products of the company. Environment: Mc Donald’s employ of non-biodegradable substances for their drinks glasses and Styrofoam coffers for the meals. The social responsibilities of McDonald’s on the state are influential to the operations of the company. These entail accusations of environmental damage. (http://ivythesis.typepad.com/term_paper_topics/2009/02/pestle-analysis-of-mcdonalds.html)
Strategic management must also ensure ethical values i.e. personal values and fairness. Many of the organisations around the world are not following this and hence they have to face the problem in the future. A commitment to transparency is necessary with greater communication and sharing of information within the firm. Strategic management is also about meeting the share holders expectation and capturing the full potential of the firm. It also takes into consideration the future perspective of the strategy. It also includes an alternative if in case the plan does not work. In short Strategic management is not an easy task if properly implemented. .(“strategy management” peter Fitzroy/James Hulbert)
STAKEHOLDERS AND ORGANIZATIONAL VALUE:
1. Shareholders: They are one of the important factors in micro-environment because they all the one who had given capital in the company so in order to make their expectation the stakeholders are being received by the short term and long term goal in challenging business environment they are one of the important factors of environment.
Conclusion and Recommendation:
A sound corporate strategy is the best way to ensure for the organization to create value for stakeholders and to unify the business activities to meet the organizational objective. Successful companies have gone through successive incremental strategic changes that were appropriate at the time. Thus it is imperative that trade-offs are essential to any successful strategic decisions.
Most companies owe their success to the unique strategic position derived from strategic management of behavior, operation and critical & rationally scanning of the business environment. It enables the company to take assessment of the current position, analyze and prepare for the future. Strategy provides a structure for decision making and enables organizations meet the requirement of the stakeholders by pattern of the available resources. Use of Strategic Analytical tools like few discussed above empower organizations to take picture of their current place and optimize their resources to achieve competitive position.
Businesses cannot afford to overlook their environment. All its income, opportunities, perspective, problems are factors of its environment. Strategy cannot be formulated with taking into account environmental influences. positive monitoring of the environment and incorporating the environmental trends provides the frame for optimizing opportunities and configuration of resources to achieve the business objective.
- Richard lunch, “corporate strategy”4th edition, Pearson education ltd.Page no. 2-5.
- Peter Fitzry, “strategy management”, John wiley & sons ltd. page no.40-50
- Adrian palmer & Bob Hartley, “The Business environment” fifth edition, published by Mc-Graw-Hill Education.
- Johnson. G, Scholes. K, and Whittington. R. (2008).Exploring Corporate Strategy. 8th ed. London: Prentice Hall. pg7.
- Lynch, R. (2009), ‘Strategic Management’, 5th ed. London, FT Prentice Hall.