Phases in the strategic management process

Establishing the Strategic Intent(defining the

vision, business mission, purpose, and broad objectives.) Formulation of strategies. Implementation of strategies. Evaluation of strategies. Strategic Control

Establishing the Strategic Intent

Creating and Communicating Vision Designing Mission. Defining Business Setting Objectives

2.Formulation of strategies
Environmental Appraisal Organizational Appraisal Corporate Level Strategies

Business Level Strategies

Strategic Analysis Strategic Choice Formulating Strategy

3.Implementation of strategies.
Behavioural Implementation Functional Implementation

4.Strategic Evaluation and Control Performing Evaluation Exercising Control Reformulating Strategies

Taruna Dureja Banga

Concept of Environment
Environment literally means surroundings, external objects, influences or circumstances under which someone or something exists. Environment of any organization is the aggregate of all conditions, events and influences that surround and affect it

Characteristics of Environment
a) Environment is complex: The environment is not made of any one simple constituent but consists of a number of factors, events, conditions and influences, arising from different sources. It is difficult to guess the factors that constitute a given environment. Hence, environment is at the same time complex and somewhat easy to understand in parts, but difficult in totality. b) Environment is dynamic: The environment does not remain constant but keeps on changing, For instance, the environment changes with the competitor's products and strategies, govt, policies, customers' preferences, etc. Hence, in order to survive and grow, it becomes very important for every organization to understand its impact and adapt itself with such changes.

Characteristics of Environment
c) Environment is multi-faceted: Same element or influence of environment affects different firms in different ways. This is frequently seen when the same development, say liberalization, is welcomed as an opportunity by one company while another company perceives it as a threat. d) Environment has a far reaching impact: The environment has a long term and lasting impact on organisations. The growth and profitability of an organization depend critically on the environment in which it exists.

External and Internal Environment

External Environment includes all the factors outside the organization which provides opportunities or pose threats to the organization .The internal environment refers to all the factors within an organization which imparts strengths or cause weaknesses External Environment deals with opportunities and Threats Internal Environments deals with Strengths and weaknesses Also known as SWOT , WOTS-UP or TOWS analysis

SWOT

Opportunity Threats Strength Weaknesses

Environmental influence are:

Opportunity is a favorable condition in the organization environment which enable to strengthen its position Eg: Growing demand for product or services that company provides. Threat is a unfavorable condition in the organization environment which enable to weaken its position and creates a risk or causes damages to organization Eg: Stiff Competition to companies Strength is an inherent Capacity which an organization can use to gain strategic advantage Eg: Superior R&D skills used for new product development. Weaknesses is an inherent Limitation or constraint which created strategic disadvantage Eg: Overdependence on organization product line can cause risk.

Strengths

Strengths are the qualities that enable us to accomplish the organizations mission. Strengths are the beneficial aspects of the organization or the capabilities of an organization, which includes human competencies, process capabilities, financial resources, products and services, customer goodwill and brand loyalty. Examples of organizational strengths are huge financial resources, broad product line, no debt, committed employees, etc.

Weaknesses

Weaknesses are the qualities that prevent us from accomplishing our mission and achieving our full potential. Weaknesses in an organization may be depreciating machinery, insufficient research and development facilities, narrow product range, poor decision-making, etc. Weaknesses are controllable. Examples of organizational weaknesses are huge debts, high employee turnover, complex decision making process, narrow product range, large wastage of raw materials, etc.

Opportunities

Opportunities are presented by the environment within which our organization operates. Organizations can gain competitive advantage by making use of opportunities. Organization should be careful and recognize the opportunities and grasp them whenever they arise. Opportunities may arise from market, competition, industry/government and technology

Threats

Threats arise when conditions in external environment jeopardize the reliability and profitability of the organizations business. Threats are uncontrollable. When a threat comes, the stability and survival can be at stake. Examples of threats are - unrest among employees; ever changing technology; increasing competition leading to excess capacity, price wars and reducing industry profits; etc.

The General Environment

External Environment

General Environment

Competitive Environment

The Five Factors of the General Environment

(1) Sociocultural (2) Demographic (3) Economic (4) Technological (5) Political/Legal

General Environment
International

Market Environment

Technological

Socio cultural

Supplier

Political/Legal

Economic

Although the general environmental factors are divided into specific and unique categories they are vigorously interactive, interrelated, and interdependent.

Market Environment

a.

b.

c.

Market Environment consists of factors related to organization that compete with and have an impact on organization. Customer or client factors such as need, preferences, perception ,attitude, values, bargaining power , satisfaction of customers, Product factors such as demand, image, features, price, promotion and availability of substitutes etc. Competitors related factors such as competitors, entry and exit of competitors, nature of competition.

Technological Factors
Technological factors pertain to a countrys adaption to innovation. It relates to knowledge applied and materials and machines used in the process of production. Innovation/inventions can lower production costs and/or improve quality, create entirely new products, devise new techniques of providing services Eg: Sources of technology: external sources, foreign sources, cost of technology acquisition. Technological development, stages of development. Communication and infrastructural technology

Sociocultural Factors

Sociocultural factors relate to a country's dominant religions, the population's general desire for leisure-time, attitudes toward consumerism, environmentalism, and the role of gender in society and business. It is important to identify the current status of these factors AND to determine whether they are changing or likely to start changing. In general, sociocultural factors are characterized by the lifestyles, values, and belief systems of populations.

Supplier Environment
It relates to factors like cost, reliability and availability of factors of production or service that have an impact on business. Cost ,availability of raw materials, parts and components. Cost ,availability of finance for projects Cost ,availability of energy used in production. Cost ,availability of manpower. Cost ,availability of fixed assets. Eg: Power shortage affects industry considerably.

Economic Factors
It relates to macro-level factors relating to means of production and distribution of wealth. Economic factors relate to a country's inflation or deflation rates, interest rates, tariffs, balance of trade issues, growth of national economies, exchange rates, unemployment rates, labor availability, gross domestic products, savings rates, etc. These factors differ significantly between underdeveloped and developed countries AND they can also vary within nations, particularly those with significantly varied geographies. Most countries have both poor segments and affluent segments. Eg: Economic slowdown results in lesser spending by consumers.

Political/Legal Factors

Political/Legal Factors center on the political stability of a country, its legal system, and its general attitude toward business. Antitrust laws are examined and current philosophies of regulation and deregulation are assessed. The extent and nature of "Protective Laws" are studied to determine potential problems or conflicts as a business implements its strategy. Laws regarding required education and/or certification for various jobs are assessed. Policies related to distribution and pricing Policies related to imports and exports.

Socio- cultural environment

Socio cultural environment consists of factors relating to human relationship within a society, the development, forms and function of such relationships. Demographic characteristics such as population size of a country, geographic distribution of people, income distribution, average age, number of people in the family, etc. Socio-cultural concerns such as environment pollution, consumerism, corruption. Socio-cultural Attitudes and values, expectation of society from business , social customs, beliefs etc. Educational level, awareness etc.

International Environment

International Environment consists of all those factors that operate at the transnational, cross cultural and across the border level. Eg:Globalization Global Economic forces Global trade and commerce Global Financial System Global Demographic Patterns

The Competitive Environment

External Environment

General Environment

Competitive Environment

Competitive Environment: Nine Factors

Customers Suppliers Unions New Entrants Interest Groups Substitutes Competitors Creditors