Presentation Topic: Strategic Management

Presented By: Tanzina Sharmin Munia

Introduction
Organizational environment consists of both external and internal factors. Environment must be scanned so as to determine development and forecasts of factors that will influence organizational success. It helps the managers to decide the future path of the organization. Scanning must identify the threats and opportunities existing in the environment. While strategy formulation, an organization must take advantage of the opportunities and minimize the threats. A threat for one organization may be an opportunity for another.

Type of environment
On the basis of the extent of intimacy with the firm , the environmental factors may be classified into two different types Internal and external.

Internal environment
The internal environment is the environment that has a direct impact on the business. Here there are some internal factors which are generally controllable because the company has control over these factors. It can alter or modify such factors as its personnel, physical facilities, and organization and functional means, like marketing, to suit the environment.
Value System: The value system of the founders and those at the helm of affairs has important bearing on the choice of business, the mission and the objectives of the organization, business policies and practices. Mission, Vision and Objective: Vision means the ability to think about the future with imagination and wisdom. Vision is an important factor in achieving the objectives of the organization. The mission is the medium through which the objectives are achieved. Management Structure & Nature: The structure of the

organization also influences the business decisions. The organizational structure like the composition of board of directors , influences the decisions of business as they are internal factors . The structure and style of the organization

External environment
It refers to the environment that has an indirect influence on the business. The factors are uncontrollable by the business. There are two types of external environment: Micro Environment & Macro Environment Micro Environment: The micro environment is also known as the task environment and operating environment because the micro environmental forces have a direct bearing on the operations of the firm. Some micro environment components are:
Suppliers: An important force in the micro environment of a company is the suppliers, i.e., those who supply the inputs like raw materials and components to the company. Customer: the major task of a business is to create and sustain customers. A business only exist because of its customers Marketing intermediaries: The marketing intermediaries include middlemen such as agents and merchants that help the company find customers or close sales with them. Financers: The financers are also important factors of internal environment. Public: Public can be said as any group that has an actual or potential interest in or on an organizations ability to achieve its interest. Public include media and citizens.

External environment [Contd]

Macro Environment: Macro environment is also known as General environment and remote environment. Macro factors are generally more uncontrollable than micro environment factors. When the macro factors become uncontrollable , the success of company depends upon its adaptability to the environment.
Economic Environment : Economic environment refers to the aggregate of the nature of economic system of the country, business cycles, the socio-economic infrastructure etc. Social Environment: The social dimension or environment of a nation determines the value system of the society which, in turn affects the functioning of the business. Sociological factors such as costs structure, customs and conventions, mobility of labor etc. have far-reaching impact on the business.

External environment Macro Environment [Contd]

Political Environment: The political environment of a country is influenced by the political organizations such as philosophy of political parties, ideology of government or party in power, nature and extent of bureaucracy influence of primary groups etc. Legal Environment: Legal environment includes flexibility and adaptability of law and other legal rules governing the business. It may include the exact rulings and decision of the courts. Technical Environment: The business in a country is greatly influenced by the technological development. The technology adopted by the industries determines the type and quality of goods and services to be produced and the type and quality of plant and equipment to be used.

PEST ANALYSIS
An analysis of the political, economic, social and technological factors in the external environment of an organization, which can affect its activities and performance It is a simple and effective tool used in situation analysis to identify the key external (the macro environment level) forces that might affect an organization. These forces can create both opportunities and threats for an organization. Therefore, the aim of doing PEST is to find out the current factors affecting a company, what changes are going to happen in the external environment and to exploit those changes or defend against them better than competitors would do. The outcome of PEST is an understanding of the overall picture surrounding the company It is also done to assess the potential of a new market. The general rule is that the more negative forces are affecting that market the harder it is to do business in it. The difficulties that will have to be deal with significantly reduce profit potential and the firm can simply decide not to

PEST ANALYSIS [Contd]

Steps of PEST Analysis
Step 1. Gathering information about political, economic, social and technological changes + any other factor(s). Step 2. Identifying which of the PEST factors represent opportunities or threats.

Example: Political: what degree the govt. intervenes in the economy

New political forces, which are against tax reductions, may be elected in the next years elections Import restrictions will increase in 2013 Government is increasing its funding to specific industry Government is easing regulations for employment

PEST ANALYSIS Example [Contd]

Economic: factors include economic growth, interest, inflation, exchange rates.
GDP will grow by 3% in 2013 Availability of credit for businesses will slightly grow or remain unchanged in 2013. Unemployment is expected to decrease to 7% Inflation will fall to 3% or 2% in 2013 Corporate tax rate will decrease by 2% next year to 23% Dollar exchange rates are expected to decrease compared to euro

Socio Cultural: include cultural aspect, health awareness, population growth etc.
Positive attitude towards green vehicles Immigration is increasing Increasing attitude toward jobs with shorter work hours People tend to buy more domestic rather than foreign products

PEST ANALYSIS Example [Contd]

Technological: factors include technological aspect such as R&D activity, automation, the rate of technology change
New machinery that could reduce production costs by 20% is in development Countrys major telecom company announced its plans to expand its internet infrastructure and install new optic fiber cables Driverless cars may be introduced in the near future New type of table will be introduced into the market next year

Legalfactors includediscrimination law,consumer law,antitrust law,employment law, andhealth and safety law. These factors can affect how a company operates, its costs, and the demand for its products.

Business Level Strategy

Definition: Integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets Purpose is to create differences between position of a firm and its competitors Satisfying customers is the foundation of successful business strategies Effectively managing relationships w/ customers Reach, richness and affiliation Who: Determining the customers to serve What: Determining which customer needs to satisfy How: Determining core competencies necessary to satisfy customer needs

Business Level Strategy [Contd]

1.

Types of Business Level Strategy

Cost Leadership Integrated set of actions designed to produce or deliver goods or services with features that are acceptable to customers at the lowest cost, relative to competitors standardized goods Continuously reduce costs of value chain activities Low-cost position is a valuable defense against rivals Competitive advantage: THE low-cost leader and operates with margins greater than competitors

Business Level Strategy [Contd]

2. Differentiation Integrated set of actions designed by a firm to produce or deliver goods or services at an acceptable cost that customers perceive as being different in ways that are important to them Competitive scope: Broad Target customers perceive product value Customized products differentiating on as many features as possible Competitive advantage: Differentiation Examples: Apples iPod

Business Level Strategy [Contd]

Focus Strategy: Companies that use focused strategies may be able serve the smaller segment (e.g. business travelers) better than competitors who have a wider base of customers. This is especially true when special needs make it difficult for industry-wide competitors to serve the needs of this group of customers. 3. Focused Low Cost- Organizations not only compete on price, but also select a small segment of the market to provide goods and services to. For example a company that sells only to the U.S. government. 4. Focused Differentiation - Organizations not only compete based on differientation, but also select a small segment of the market to provide goods and services. Risks:

Business Level Strategy [Contd]

Integrated Low-Cost/Differentiation Strategy Efficiently produce products with differentiated attributes Efficiency: Sources of low cost Differentiation: Source of unique value Can adapt to new technology and rapid changes in external environment Simultaneously concentrate on TWO sources of competitive advantage: cost and differentiation consequently Example: Southwest Airlines However, organizations that choose this strategy must be careful not to: becoming stuck in the middle i.e., not being able to manage successfully the five competitive forces and not achieve strategic competitiveness. Must be capable of consistently reducing costs while adding differentiated features.

Thank You