Strategic Planning And Strategy Formulation

Discussion Question 3.1: Why is it important for an organization to study and understand its external environment?

Hunger, J. D., & Wheelen, T. L. (2011). Essentials of strategic management (5th ed.). Upper Saddle River, NJ: Pearson Education.

Internal environment Combined with the knowledge of its external environment, a firm analysing its internal environment, in particular its resources, capabilities and core competencies, is able to create its vision, mission and implement its strategies for obtaining a sustainable competitive advantage (Hanson et al., 2008). It is argued by Berman, Down & Hill (2002) that only the sound combination of firm’s unique tangible and intangible resources provides a basis for competitive

It is important to implement the right and winning strategies fit into the company’s internal and external situations which can enhance the organization performance, build sustainable competitive advantage and uplifting company’s productivity.

There has been a large amount of research into what strategy is, since Michael Porter’s perennial work in the 1980s. Studies done on the execution of strategy have been far less numerous. However, there is one major understanding about the execution of strategy. The execution of strategy is a vital part of success in business. A summary of many myths surrounding various strategic executions will be outlined, along with their subsequent analyses.

Grant (2010) states, “For a strategy to be successful, it must be consistent with the firm’s external environment, and with its internal environment – its goals and values, resources and capabilities, and structure and systems.” (Grant, 2010, p.13).

Both internal and external sourcing has strengths and limitations such as an organization that relies solely on internal sourcing also runs the risk of limiting new ideas and insights and on the other hand external candidates may be more likely than insiders to see challenges and opportunities in a new way and to bring fresh ideas to the company. But than again, external sourcing usually takes longer than internal sourcing and costs more as well, all in all, at some point many organizations rely on external recruiting sources to bring in new talent or desired skills (Phillips & Gully, 2014).

An internal analysis’ purpose is very similar to that of an external analysis. Both are essentially developed to assist an organization build a successful strategy. Where they differ is that the external analysis focuses on the influential external elements; an internal analysis focuses on the internal forces. An internal analysis can unquestionably assist an organization drive up the profits aligning with internal matters. First, it is important to recognize what an internal analysis entails. In the course of this paper we will be looking into the key components that comprise this analysis. These components are StilSim’s value-chain, resources, core competencies, stakeholders, and finally their mission and vision.

When manipulating a business’s strategy, it is important to focus on the external factors in the environment. An external analysis is where a business conducts environmental scanning that present a company with the key external forces influencing the organization. The facets of external forces examined are the business environment, remote environment, or the competitive environment. A business environment is all of the external factors in the general environment that a firm cannot control, but can affect their strategy. The remote environment is the forces that affect most firms. Lastly, a competitive environment is the firm’s specific industry and its entirety. The external analysis is pertinent to a company called Dick’s Drive- In; without it, Dick’s would not be a thriving popular business today.

Alfred Chandler(1963) defines strategy as ‘ the determination of the long-run goals and objectives of an enterprise and the adoption of courses of action of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals’. And Michael porter(1996) sees it as ‘Competitive strategy is about being different. It means deliberately choosing different set of activities to deliver a unique mix of value’.

‘Strategic Management’ is a very complex term as many eminent researchers and scholars have had different views and conclusions on strategy. According to White (2004), “Strategic Management involves both systematically developing an idea together with its implications and testing the empirical validity & usefulness of that idea against the real world.” Thus strategy is not only about planning for future but also about confirming the validity of the hypothesis considered and implementing it successfully. Strategy formation may take various forms such as implicit, explicit or emergent. Implicit strategy is a strategy formed by intuitions of an individual. As per implicit strategists, strategic management is about reading the environment

Many factors shape and form the operations strategy of a corporation, for example, the ever increasing need for globalizing products and operations and thus reducing the unit cost, creating a technology leadership position, introducing new inventions, taking advantage of mass customization, using supplier partnering, and looking for strategic sourcing solutions. All of these factors require an external or market-based orientation; these are the changes that take place in the external environment of the company.

Johnson, Wittington, Scholes, Angwin and Regnér (2014, p. 3) defines strategy as ‘the long-term direction of an organisation’.

The internal external matrix deals mostly with both the internal and external factors of an organization. This tool is helpful especially under the management of portfolio. It usually contains nine cells, and each of the cells has a specific meaning to help come up with strategies. (The IE matrix for Ford Corporation is illustrated in figure 1.2)

This report is focused on identifying the externality, analysing the possible solution to internalise the externality.