Strategic Management
Strategic Management
Introduction
The current global market has been very dynamic and thus necessitating the managers to design and implement strategies that will lead to increased competitive advantage. Every business aims at maximizing profits through capitalizing on competitive opportunities worldwide. The perpetual growth of the business internationally mainly depends on how effective the managers analyze both internal and external factors that affect business development. Environmental influences such as politics, social, technology and economics just to mention a few must be critically analyzed to design tools and techniques for strategic management (Bachmeier, 2009).
Strategic management involves appreciation and understanding of the complexities of fluctuating demands, complexities of national institutions and effective allocation of resources. It is important to understand that assessment, predictability and handling of such influences since they occur on large global scale. However, the management in international business must have a developed strategy that will help in achieving competitive advantage for better thriving and development of the business entity.
TASK 1
- Critically analyse and appraise the need for strategic management in global environment
Strategic management in global environment is very essential to ensure perpetual growth and development of the business. The success of every business will largely depend on the organizations ability to strategize on ways and means of achieving competitive edge. The competition in global market has over the years increased to great heights thus making it important for the managers to strategize on how to increase competitiveness. This can only be achieved through proper understanding of both macro and micro business environment that surrounds the business. Analysis for political, economic, technological and social factors plays a great role in deriving techniques and tools for strategic development.
Most business executives must learn to design and implement a strategic plan to fit the dynamic global market. The current global market is very sophisticated and strategic plan is essential as it ensures that management will be able to handle the highly diverse business organization. Proper allocation of resources in strategic planning is very important since it helps effective realization of the strategic plan. Strong leadership culture is also a critical component for strategic planning in the modern volatile global economy. It is the obligation of the planning and the strategizing team to ensure that all emerging opportunities are taken advantage of for the betterment of the organization. The team is also expected to put in place processes, people and systems at their disposal and ensure that optimal results are achieved.
1.2. Evaluate strategic development process for strategic business management and planning
Strategic planning and development is a very critical process which should be implemented systematically. In order to develop an effective strategic planfor the development of the organization, it is essential for the development team to effectively understand the macro environment that surrounds the business. This will be achieved through determining the threats and opportunities as well as strengths and weaknesses associated with the business. Organization must also set its objectives clear through identifying the vision and mission statement for the organization. Both short term and long term organizational objectives must be clearly identified to ensure effective development and strategic plan.
After setting the organizational goals and objectives, it is always important to identify key strategic areas and put them in order of their priorities. This will be achieved through developing a strategy statement that gives the road map to strategic planning. After designing the appropriate development and strategic plan, the next step is to put in place resources, people and systems that will ensure optimal results are achieved. Proper operation plan must be put in place to make sure that everything goes on well according to plan. Budgeting and proper planning becomes very critical in developing a successful development and strategic plan in the global environment. The process involves thorough analysis, formulation of strategy, implementation and continuous evaluation to ensure that things are carried out as expected.
1.3. Critically analyze the different levels of strategy and their relationship with tactical and operational decision making.
International strategy is the continuous and comprehensive management technique designed to help companies operate and compete effectively across national boundaries. However, it is worth noting that the different strategic approaches employed by the different organizations are as a result of critical decision making processes. These decision making processes results to the three different levels of strategy as experienced in the global economy as outlined below;
Business level strategy forms the first strategy level in the global market. Under this strategy level, different strategic business units strategize on how a specific product can be sold in only one market. This is more a tactical decision making process since it involves strategizing on how a specific product can be sold in the market both in the short term and long term. The strategy may involve price discrimination among the different market segments with objective of maiming sales. Under business level strategy, firms may opt to select between the Porter’s 3 generic strategies which include differentiation, cost leadership and focus strategies.
Corporate level strategy is the other critical strategic level in global environment. It I at this level that the top organization management make decision the type of products they may decide to offer to the market, which market segment to enter and whether to acquire or merge with competitors. This is a tactical approach by the management t ensure that they remain competitive in the global economy. At this level of strategy, one must select between intensive, integration, diversification and defensive strategies which is a more tactical move.
The last strategy level is the global or international strategy. Under this strategy, the firm’s executive is supposed to make a major decision on which new markets to develop and how to enter them. It is under this section that the decision on how to diversify can be reached at. This can be classified as a strategic decision since it entails both long term and short term goals for the organization.
TASK 2
2.1. Describe the impact and influence of the external environment to an organization and identify its link with strategy formulation process.
Strategy formulation process is a very critical aspect in ensuring competitiveness of an organization both globally and locally. Several internal and external influences are important in determining the strategy that will ensure the overall development and success of the organization. However, external influences form the greater area of concern since they provide the external environment through which the business operates. In most cases, these external influences are very difficult to cope with since they are externally generated but it is the obligation of the organizations top management to ensure that the firm is not adversely affected by the external environment.
These external influences include; political, social, technological, environmental, legal and economic conditions just to mention a few. All these factors have different impacts to the overall performance of the organization. For instance, political instability can be very detrimental to the overall performance of the organization (Stead & Stead, 2004). However, the organization must formulate a strategy to ensure that the organization achieve its objectives. The same case can also apply to the legal, technological, social and economic factors. For instance, the global market has been faced with great technological advancement both in terms of production to sales. In order to have a successful strategy, the organization must be strategically placed in terms of technology to ensure that it remains competitive. Organization should also ensure that it operates within the legal systems as outlined in the different countries within which the organization operates. This will ensure a smooth running of the firm and hence help achieve the organizational objective. However, it is important to note that different economic conditions are experienced in different countries and thus it is the role of the executive to ensure that the operations of the organization are strategically placed.
2.2. Critically use PESTEL, PEST and STEEP techniques to assess external environment of the organization.
In order to formulate an effective strategic plan, it is the obligation of the management to carry out an effective situational analysis. There are different tools that can be put in practice to enable effective situational analysis and one of them is the PESTLE/PEST/STEEP analysis which is critical for analyzing external business environment (Tallman, 2007). PESTLE analysis involves proper understanding of political, economic, social, technological, ethical and legal factors. It is a simple situational analysis that creates both opportunities and threats for the organization. In essence, the main objective of conducting PEST analysis is to find out current external factors, identifying the factors likely to change in future and exploit the opportunities and defend the organization against the threats from the factors in a better way than its competitors. In order to effectively perform a PEST analysis, it is important to carry out a thorough information gathering.
2.3. Critically evaluate the use of Porter’s Diamond’s five forces model.
Another important situational analysis tool for analyzing external factors affecting the daily operations of an organization involves the Porters diamond five forces model. This model was named after Michael E Porter and involves understanding 5 competitive forces that influence the industry performance. Proper understanding of the forces helps determine the strengths and weaknesses in the industry and act accordingly.
Rivalry
Competition in any industry can be very detrimental to the overall success of the organization. It is argued that stiff competition among rival firms drive profits to zero. The firms should strive for competitive advantage over their rivals both locally and at global levels. In order to have a proper strategic plan, the organization must clearly understand the current industry analysis. In order to achieve a competitive edge, the organization must develop a strategy that will make it more competitive through increased innovation and promotion (Grundy, 2012). .
Threat of substitute
This is the threat offered by products that come from outside the industry. If an organization is faced by great threat of substitute will experience great price elasticity which could be detrimental to the overall success of the organization. Substitutes can also lead to great price competition and thus the organization must place itself strategically to deal with the threat of the substitutes.
Bargaining Power of suppliers
Every organization requires raw materials, labor, components and other essential supplies that enable its smooth learning. If the suppliers have a high bargaining power then, there is likelihood that the overall performance of the organization (Proctor, 2014). This is because it can provide supplies at very high prices thus capturing some of the industry’s profits. The organization must ensure that it position itself strategically to ensure that it minimizes the bargaining power of the suppliers
Threat of new entrants and entry barriers
In most cases, profitable markets will always attract new entrants in the market. If the industry gets more entrants, then the profitability within the industry will eventually decrease significantly. The players within the industry must also be strategically placed to ensure that there are no new entrants in the market.
Bargaining power of buyers
This is also described as the market outputs and is concerned with the pressure that they apply to the market. The industry must also be concerned with the sensitivity to price changes and customer loyalty. The bargaining power of customer is always high if there are several alternatives. To deal with this menace, the organization can reduce this power through introducing loyalty programs and offering competitive prices.
Fig 1 Verbeke (2012)
2.4. Analyse the use of scenario planning approach to forecast environmental change.
This is also another strategic planning tool which is also known as scenario analysis. Under this method, the organization makes long term plans as a result of analyzing the current scenario of the organization. The scenario planning approach involves dividing what is known into two parts; things that are known and elements that are considered uncertain or unknowable. After proper understanding of the two different categories, the executive members of the organization can be able to make strategic choices to ensure proper thriving of the firm (Verbeke, 2012).
TASK 3
3.1. Identify the features and core purposes of SWOT analysis
SWOT analysis is also another important tool for situational analysis. It involves the analyzing of the organizations strengths (S) weaknesses (W) opportunities (O) and threats (T). This situational analysis tool is mainly concerned with both the internal and external factors that affect the overall performance of the organization. SWOT analysis encourages matching the strengths and weaknesses of the organization to the opportunities and threats operating in the environment in order to achieve a desirable strategy (Pahl & Richter, 2007).
3.2. Analyse the turbulence of environmental change and the impact on strategy dynamics
In most cases, business environment changes with time and it is not an exception to the global economy. Most of these business environment changes are caused by different forces like demographic, political, economical, technological, infrastructure, ecology, legal and social forces. Other forces include internationalization, Innovation, globalization and mass individualization. The different environment is classified in to two broad categories which include; dynamism and complexity. The turbulent environment field is located in the highest level of dynamism and complexity, and it arises from variances in components of the environment in which the organization is part of. These variances affect the whole organization, and leads to high levels of uncertainty. This has great impact on the strategy dynamics as explained by Ansoff matrix below.
Fig 2 Bachmeier, (2009)
3.3. Critically discuss the present economic recession to an organization’s core areas of specialization and identify the needs of re-formulization strategy.
. Economic condition forms a great part of the external factors that determine the strategic plan in an organization. In times of economic recession, most firms suffer immensely both at the local and the international levels. Economic recession can be very detrimental to the core areas of specialization in an organization. This is because there is high likelihood that the potential customers will feel the economic pinch thus affecting the sales significantly. As a result of decrease in sales and profit margins, the organization may be forced to re-formulate its strategy for specialization and diversify its products to ensure sustainability f the organization. During times of economic recession, it may be difficult for an organization to specialize as it will be difficult to sustain the organization on the minimum profits.
Conclusion
In conclusion, it is important for every organization to have a proper strategic plan that will help it achieve its objectives. This can only be realized through intensive situational analysis that will determine both internal and external environment in which the business operates. Continuous evaluation of the strategic plan is also essential in order to ensure that desired results are always realized.
References
Grundy, T., 2012. Demystifying strategy how to become a strategic thinker. London: Kogan Page.
Proctor, T., 2014. Strategic Marketing an Introduction.. Hoboken: Taylor and Francis.
Stead, E. W., & Stead, J. G., 2004. Sustainable Strategic Management. New York: M.E.Sharpe.
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