Strategic analysis is the scope of any company on the long term and by which a firm configures its resources against challenging environment. By conducting strategic analysis companies try to meet the needs of the marketplace and fulfill their expectations for the long run. Johnson, G. (2005, p 61) To be able to evaluate companies' performances and position on the market, environmental scanning is conducted as the tool for identifying and tracking the institutions and forces external to the company that provides business opportunities or lead to threats. Accurately perceiving the external environment is difficult but this is done systematically using a classification of the environment
McDonald, M, (2002) asserts that scanning the external and internal environment is a significant strategic planning process. The inner environmental factors are classified as(S) Strengths and Weaknesses (W) and the external factors are classified as Opportunity (O) and (T) Threat and the whole analysis is often called (SWOT)
The major strengths and distinctive competencies of a business;
Particularly significant organizational shortcomings; and,
The internal performance of an organization.
Porter's Competitive Forces Model
Porter's competitive forces model contends that a lot of the success or failure of your business will depend on its ability to respond to its external environment. Figure 1 shows four external forces that each business must cope with at one time or another.
Figure 3-1: Porter's Competitive Forces Model.
Traditional competitors: always nipping at your heals with new products and services endeavoring to steal your visitors.
New market entrants: not constrained by traditional means of producing goods and services, they may easily jump into your markets and lure customers away with cheaper or better products and services.
Substitute products and services: customers may be willing to try substitute products and services if they decide your price is too high or the quality of your products and services is too low.
Customers: fickle to say minimal, they are now armed with new information resources which make it easier for them to jump to your competition, new market entrants, or substitute products.
Suppliers: the number of suppliers used may regulate how easy or difficult your business will have in controlling the supply chain. Too few suppliers and you lose a lot of control.
Core competency is something that an organization can do well and consumer benefits. A core competency may take various forms, including technical/subject matter understand how, a trusted process, and/or close relationships with customers and suppliers. Capabilities are incredibly significant to the organizations because they permit the firm performs its duties and tasks. It's the power that enables firms conduct their tasks in an efficient and agile manner. However, research has shown that organization-specific factors generally influence profitability more than industry factors (Hambrick and Fredrickson, 2001). To reflect this, most researchers give attention to internal analysis predicated on the resource-based view (RBV) of the firm, that can be used to assess the organization's assets and functions (Collis and Montgomery, 1995). According to RBV, the foundation for an organization's competitive advantage lies mainly in the use of the bundle of valuable resources at its disposal (Barney, 1986). For an organization to obtain sustained competitive advantage, these resources must be heterogeneous in nature rather than perfectly mobile, meaning that the organization needs valuable resources that are inimitable and non-substitutable (Barney, 1991).
(1) Strong research and development capabilities,
(2) Managerial autonomy, unlike other state-owned enterprises or institution-run firms,
(3) Far-reaching distribution, sales, and support network, coupled with its highly efficient, loyal supply chain network,
(4) Established manufacturing base with efficient management of cost such as labour and recycleables, leading to higher margins,
(5) Valuable brand names, with quality products and services,
When these strategies are successful in leveraging the organization's rare, valuable, inimitable and non-substitutable resources, the organization will probably gain an edge over its opponents and therefore earn superior profits (Thompson and Strickland, 2003).
Hamel and Prahalad (1993) also discuss distinctive competencies under the tile of core competencies, that they argue will be the result of a specific unique set of skills or production techniques that deliver value to the client. A couple of three tests of core competence: they have to provide potential access to a variety of markets, make an important contribution to the perceived customer advantages of the ultimate product, and become inimitatable by competitors
The Business Value Chain Model
Organizations seek to be much better than one another. That is the prime focus of all companies that are serious about winning the overall game in an industry. Areas of the business most influenced by leveraging technology are in producing the merchandise, setting it up to the stores, and making the customer happy. You can find primary activities. Just as important are support activities: human resources, accounting, and finance. These functions support the principal functions of production, shipping, and sales and marketing. The worthiness chain model shown below can help an organization focus on these activities and determine which can be critical to its success.
Figure 3-2: The Value Chain Model.
By effectively using an information system in a strategic role at any, or preferably all, degrees of the organization, an electronic firm provides more value in their products than the competition. If they can't provide more value, then your strategic information system should help them supply the same value but at a lesser price.
Benchmarking offers a method for businesses to regulate how they stand up against their competition within the same industry. For instance, if the industry standard in producing golf clubs is ten days, Ping can benchmark their production schedule of five days and determine they are successful. They are able to also research the best practices of other driver manufacturers and decide if they should fine tune their business processes to wring even more resources from the production process.
Information to formulate benchmarks and guidelines can come from internal sources, other companies within the same industry, external industries, university research units, or the federal government.
According to Porter (1985), strategy is the creation of a unique and valuable position, where an organization can differentiate itself for the targeted customer and add value by an asset of activities unique of those of rivals. He argues that the essence of strategy is choosing to execute activities differently or performing different activities from rivals (Porter, 1996). You can find two basic types of competitive advantage: less expensive and differentiation. Another important concern is competitive scope, which is important for the reason that organizations can sometimes gain competitive advantage from breadth by competing either globally or from exploiting interrelationships by competing in related fields. For example, Lenovo ( third in PC Industry) re-organized and integrated its domestic and overseas businesses to take good thing about the complementary functions across borders in the late 1980s as the firm expanded internationally. This new structure allowed the management to allocate resources and co-ordinate various activities a lot more effectively with a global perspective (Biediger et al. , 2005). Combining the type of advantage and the scope advantage, the notion of generic strategies is produced or different approaches to superior performance in an industry. Competitive advantage can thus be performed through differentiation leadership, cost leadership, or focus leadership.
"The internal analysis concerns the internal environment of the business enterprise like weaknesses, strengths, strategies, planning while external analysis targets the opportunities and threats of the business and its competitors, and outer performances". Internal scanning is approximately understanding organizational analysis and core competitive competencies, competitive advantages, value chain analysis and strategic issues. By analyzing internal factors of businesses, business planners can concentrate on the reason why behind businesses development and overcome business problems. An overall go through the internal factors that formulate strategic businesses, managers can understand the results of businesses initiatives and recruit the best & most powerful plans to implement successful strategies and put them in destination to achieve impressive success.
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