Assignment brief: ( length – 2500)
Provide a critical examination of the effect of the internal and external environment on the strategic process. Review the outcome of a change in the internal or external environment affecting a real organisation.
Using relevant theoretical models, you should address the following issues:
- An introduction including a definition of strategic management
- A critical assessment of the process used by organisations to determine their strategy.
- A critical evaluation of the impact of internal and external environmental variation on organisational strategy, (explaining how and why the strategic approach changes).
- A review of an organisation’s strategic plan (Business Plan), providing an action plan for the organisation on the basis of a change in either the internal OR external environment. . (The Business Plan should be included as an Appendix)
- Write in a grammatically correct style and provide in text referencing throughout, including quotes, referenced according to the Harvard Referencing System. Provide a correctly formatted Reference List
The governance of an organization’s assets to improve organizational performance by achieving the planned goals is referred to as strategic management. Setting targets, analyzing the competitive system, analyzing the internal structure, trying to assess techniques, and making sure that leadership implements the techniques across the organization are all part of strategic management (Makadok et al., 2018).
This essay sheds light on certain critical aspects of strategic management. The essay will discuss certain strategic processes, the effect of external and internal factors on a strategy.
The theory of strategic management was first established in 1950 by “Peter Ducker” who is also known to be the father of “Modern Management theory”. According to Ducker strategic management means what the company wants to do to gratify its business objectives and planning of how to do it (Timeea-Alexandra and Doina, 2018). The author identified five major stages of strategic management involve the establishment of goals, collecting and analyzing data, forming a strategy, implementing the generated strategy and monitoring the developed strategy. However, this definition is way too simple and does not cater to many different elements of strategic management. Strategic management, according to Lester A. Digman, consists of developing and accessing various approaches, choosing one tactic, and continuing to develop specific plans for placing the action plan prepared after much deliberation into practice. Strategic planning entails initiatives from which overarching proposals for strategy execution are evolved (Stephens and Martin, 2019). Strategic control involves ensuring that the selected strategy is implemented properly and generating the needed results. Despite, such detailed explanation of the term and what it entails, the definition is not complete as it does not contain the limitations and control mechanism needed for the companies to execute a proper strategic management plan. Johnson and Scholes define strategy of a company as the long-term orientation and organization of the company’s objectives: which accomplishes benefit for the institution through its asset arrangement within a competitive and dynamic environment, to meet the new demands of the market, and to meet the expectations of the stakeholder (Yaakob et al., 2019). These two definitions provide a rather systematic and conclusive definition of strategic management, when seen in comparison to the one provided by Ducker.
Strategic management ensures that the efficiency of the organizational performance is enhanced thus improving the overall organizational business. All the organizations are required to follow appropriate plans so that they can meet specific goals for organizational betterment. It is defined to be a map that helps the organization to perform efficiently and to obtain the most fruitful outcomes (Bindra et al. 2019). There are several steps of processes that can be utilized by organizations to determine their strategies. Determination of the most potential objectives generally includes improvement of “email open rates”, up-gradation of website contents etc. The most essential objectives include the determination of the timeline and the assets that can be beneficial for achieving the organizational goals (Jabbar and Hussein, 2017). It also includes the determination of KPIs for measuring overall organizational success.
There are several ways and methods to develop and implement strategies within an organization. The choice of the model depends on the objectives of the company that is engaging in strategic management and the resources available at its disposal for doing so (Hitt and Duane Ireland, 2017). As per Andrews’ framework of strategic management, the two contributing factors for affecting management structure, behaviour, processes, and internal and external business connections are company’s strategic conceptualization and application. The strategic management model proposed by Andrews’ theoretical framework has some key elements that make it the ideal strategic planning model for any organization, regardless of the size or sector (Nwachukwu et al., 2018).
Figure-1: Andrews Strategic Framework (Andrews et al., 2017)
It establishes a solid foundation for organization studies, which is necessary for educated management arrangement and design. It acknowledges not every business has the same management structure – the tiers of framework differ from one corporation to the another significantly (Andrews et al., 2017). It tries to teach that tactics do not always develop as a consequence of a deliberate composition or institutional assessment; rather, it emerges to encounter emerging circumstances, whether they are emergency cases or unanticipated possibilities. It notifies that business strategy is the end result of strategy implementation, with design and execution being highly interconnected and bi-directional procedures. It states that strategic planning is a not a one-time process but a dynamic process, and that it should be allowed to treat as such (George et al., 2019). It depicts how, once a strategy is applied, the result should be used to notify strategic planning new formulation in order to close recently discovered gap that exists and plugging these gaps between objectives and consequences. The model is very effective; however, it does not entail the much-needed analysis of the internal and the external environment of the company and the market place it is operating in. The model completely fails to acknowledge the role of market and firm position in it.
Before setting up the objectives an organization needs to consider some of the essential points. Firstly, an organization needs to consider the initiatives which would be beneficial regarding the achievement of the organizational goals (Burlov, et al. 2018). Secondly, it is immensely essential to identify the factors that are influencing the strategic decision of an organization.
For example, most organizations tend to consider the needs of their customer base and tend to bring changes in their strategies accordingly. Thirdly the organizations are also required to identify their possible competitors in the market. It would be helping them to set the objectives in a way that can be beneficial for any organization to perform better than their competitors. The next most important point is the identification of the essential initiatives which need to be taken urgently (Grant and Baden-Fuller, 2018). Finally, all the organizations are required to contemplate the aspects that would be necessary for accomplishing the organizational goals and to also determine the organizational progress. Thus, all the organizations are required to ensure that the objectives determined are clear and measurable so that it would be helping them to achieve their respective goals.
Integral model of key administration proposes the combination of four chose components and an estimating framework. Every component has its own personality that makes it exceptional and not quite the same as the others. These particular highlights, for example the distinctions are protected in the model (Tetiana et al., 2018). It is significant that these distinctions are not too unmistakable that they are not hopeless, yet rather complete one another. Contrasts contribute the model to be more extravagant, more layered, more powerful, yet additionally more mind boggling and unsteady. Then again, concerning Integral model there are numerous shared attributes and similitudes between the components. Attachment and supportability of this model are based on that.
Figure-2: Integral Model of Strategic Management (Tsyganov, 2021)
Engineering of the fundamental model of vital administration doesn’t have pyramidal shape, on the grounds that in this model the components are not organized by chain of importance. Relations between the components are not founded on prevalence, or inadequacy. In this model there are no significant and less significant components (Tsyganov, 2021). Their jobs are diverse however equivalent. Minimization of any component would Integrally decrease the fundamental thought of working of indispensable model of vital administration.
The key to evolving a working strategic management plan comprise of developing a good understanding of the business environment of a company. The term “business environment” applies to the conditions that influence an organizational value. They might be inner, where the firm has control over the elements, or outer, where its corporation has no control over the elements. A company can modify its internal environment to match the needs of the business (Dagnino et al., 2017). However, macro environmental forces can also be changed; therefore businesses must devise ways for reacting to both of them and mitigating their consequences. Creating a business climate is critical. Democratic, regulatory, commercial, cultural, and legal issues are among them.
The environmental context refers to the different elements that impact the functioning of a firm but are outside the senior management command. A corporation must devise measures to mitigate its consequences. The macro environmental elements influence all enterprises in the market, not just one. They are usually controlled by other market participants. The PESTLE framework has been the most often utilized approach for analyzing a company’s business surroundings (Ahmadi et al., 2019).
There are also several political considerations in the area that influence company operations. Corporate and commercial indebtedness are both quite high. As either an outcome, customers have a bad response about buying. This will have a huge impact on all the organizations (Tetiana et al., 2018).
Economic issues are an important component of organization’s surrounding factors. They decide whether or not market users will be able to afford the company’s products. These elements also have an impact on the institution’s manufacturing costs, pricing, and income. The economic crisis has had an impact on organization’s operations since it interacts with industrial output. As an outcome, it issues the company’s efficiency and revenues (Pan et al.,2019).
Even when the corporation cannot regulate social variables, they have a substantial influence on business operations. Consumer qualities are critical in deciding a business’s bottom line. In today’s society, people like to buy all of their commodities underneath the place. The currency’s culture will assist to identify which commodities will be more profitable in the customer’s business (Schuetz et al., 2018).
The exterior business world is heavily influenced by technological variables. In today’s world, there is technological development. Modern manufacturing processes increase efficiency while decreasing the costs of production. It helps businesses to extend their business to increase sales. Organization’s introduction of ICT has substantially enjoyed success (Çitilci and Akbalık, 2020).
The modern consumers have become conscious about the environment and try to contribute to the sustainability by supporting organizations with green objectives. The governments around the world have circulated several notifications and rule to maintain the environment quality (Song et al., 2017). These rules affect the operations and management within the companies.
The legal environment defines the type of compliances that the company will have to engage in the market. The degree of compliances defines the difficulty or the ease of doing business in a market place. The government control and penetration into the activities of the business enterprise impacts the internal and external operations of the companies (Thakur, 2021).
PESTEL is a great tool to assess the macro and micro-environment of a company. However, this is not a very good approach to assess the external environment of a company. The analysts who conduct PESTLE analysis oversimplify the degree of statistics that are used for decision making – it’s simple to use too little data. The danger of collecting far to much data is that it will lead to ‘analysis paralysis.’ The information used could be based on speculation that afterward turn out to be false (Sobhabi et al., 2020).
SWOT is yet another framework that is vividly used by the organizations to evaluate the internal and external environment of a company, firm or a business. The variables of determination in a SWOT analysis are- Strengths, Weaknesses, Threats and Opportunities.
Strengths are the elements that describe what an organization performs best and the traits that distinguishes it from the competing businesses such as a strong brand, a customer loyalty base, a balanced portfolio, technological innovation, etc (Vlados, 2019).
Weaknesses are the traits of a company that prevents it from accomplishing its best. A weak franchise, average turnover, no expansion in the past years, an insufficient operations management, or an inadequate funding are examples of a few areas where the company must optimize in order to stay competitive (Amiri et al., 2018).
Opportunities are external variables that can provide an organization with a competitive advantage. These variables if used properly can enhance the strengths and eliminate weakness (Dutta, 2018).
Threat actors are very important that have the potential to cause harm to an organization. These are the risk factors that can jeopardize the organization’s competitive advantage (Puyt et al., 2020).
However, this model for internal and external environment is not very apt as it offers the insight into the problems of the companies and does not offer any solutions. The model is rather too simplistic and people often confuse Weaknesses with Threats (Akman, 2019).
Strategic Business Plan of Sainsbury
Scenario- Restrictions on crowding and assembly because of Pandemic
|Government has restricted the gathering of the crow
|The company will face losses because of the reduced customers visiting its outlets
|The company can introduce online slots booking system for its customers. At a time a limited number of clients can be allowed to enter the supermarket as per the government norms
|Every week, the sales will be monitored by the sales manager of the company
|Reduced number of elderly people stepping out of the house
|To avoid contracting COVID-19 aged people are trying to avoid going to the supermarkets as they are crowded and they are the ones to be the worst affected by the virus
|Special home delivery services for the elderly people. The company can offer deals and discounts to promote this service offering
|The marketing manager will supervise this in every fifteen days
|Launching an eCommerce app to increase the sales
|To eliminate the restrictions of COVID-19, company can offer complete online order services
|Developing an app for Sainsbury and taking orders and delivering them online through no contact delivery
|The research and development team of the company can monitor the process of app development
Strategic management is crucial for the company’s success. The choice of relevant model and strategy is very important. The assignment has discussed some important aspects of strategic management. The essay has also discussed some relevant frameworks and models that can be used to formulate a strategic management plan. Along with this, the relevance of internal and external business environment has been discussed. The essay has also displayed a business action plan for Sainsbury. Many strategic experts believe that the organizations should focus their strategies on differentiation, cost leadership or on a single factor. If is believed that if a business is not placing its focus on a single factor, it is likely to waste its resources. The proposed strategy mainly focuses on either a specific product or service which in turn results in unique selling plan or generating “economies of scale” so that the low cost of product is achieved. The lower cost of product or product differentiation is considered to be an advantage against the competitors. Thus, making it important to look at the market position of the brand and company.
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