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eassy on internal and external factors on a company
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. Competitive advantage requires organizational awareness of internal and external factors in a relational context. Categorically, external factors are political, economic, sociocultural, technological, ecological, and legal in nature. Rothaermel defined the organization’s external environment as all factors with the potential to alter the competitive advantage, creating opportunities and threats; considering the global nature of trade and economies, this potential is amplified. After the Brexit Referendum passed, the value of the pound declined, subsequently impacting consumer confidence (bbc.com, 2016). This event encompassed political, economic, sociocultural, and legal factors that caused an upheaval for businesses in the United Kingdom and abroad. Osterwalder and Pigneur (2010) described external factors of demand as the circumstances, with respect to design drivers and constraints, that reveal the business model (BM) position and provide a juncture for discerning adjustment; these factors empower the organization to deliberate on the impact of new trends, evaluate how the BM may evolve, and prompt innovation. The role of external factors serves to apprise the BM designer of trends and events significant to the organizational …show more content…
These forces address the agents, their roles, and their influence on the BM. Market forces analyze issues, segments, needs and demands, switching costs, and revenue attractiveness. Industry forces analyze competition in respect to incumbents, insurgents, substitutes, value chain actors, and stakeholders. Key trends signal technology, regulatory, societal and cultural, and socioeconomic effects. Macroeconomic forces analyze markets, commodities, and economic infrastructure. Brexit impacted each of these
Our book says: “A firm’s external environment consists of all the forces that can affect its potential to gain and sustain a competitive advantage. (Rothearmi, 2013) Analyzing the general environment, we can mitigate threats and leverage opportunities.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2011). Strategic management: Competitiveness and globalization, concepts and cases: 2011 custom edition (9th ed.). Mason, OH: South-Western Cengage Learning.
The feasibility study of a business’s design comprises of all strengths and weaknesses analyses within a particular business in order to determine whether the design is practicable and potential to benefit that business in a foreseeable future (Trimi, Berbegal-Mirabent 2012). To access this study, the researcher need to have a comprehensive understanding of the business’s resources and their interconnections which are included in the business model Canvas (Stephen, Richard 2014). This model is considered the most effective methodology in the process of supporting innovation and making decisions, thus, to assure the successfulness of a business or a project (Hanshaw 2015). This essay will discuss some central characteristics including customer
This source of competitive advantage, ‘dynamic capabilities’, accentuates two angles. Initially, (Teece, 2007) it alludes to the moving character of environment; second, it underscores the key part of strategic management in properly adjusting, coordinating, and re-arranging internal and external organizational skills, resources, and utilitarian skills toward evolving environment (Teece, 1977). Just as of late have scientists started to concentrate on the specifics of growing firm-particular capabilities and the way in which skills are restored to react to shifts in the business environment (Simon, H. 2002). The dynamic capabilities approach gives a sound system to incorporate existing applied and exact information, and encourage remedy (Simon, H. 2002).
External factors are usually beyond the control of the business. The best way for a business to deal with these external changes is to be pro-active. A successful business would be ahead of these changes rather than hurriedly making knee-jerk reactions. There are six main external factors which would possibly affect the performance of a small business :Political, Economic, Social, Technological , Legal and Environmental (PESTLE Analysis)
Johnson, M.W., Christensen, C.M., & Kagermann, H. (2008). Reinventing your business model. Harvard Business Publishing. Retrieved from http://hbr.org/
In today’s technologically advanced environment, computers are everywhere. Electronic devices are in incorporated into our lives from the mirrors in our bathroom to the smart phones in our pockets and everything in between. The vision of Andrews, Inc is “To be the manufacturer’s choice for sensors, powering the things of everyday life.” Our goal is to build sensors which are adequate, affordable and accessible to the business customers building the products of today. The Andrews business customer is looking for sensors which will get the job done. Put another way, they are need a basic sensor designed to meet their product needs. Our customers are looking for ways to increase their contribution margins and maintain a reasonable price point for their consumers. Lastly, these business customers need the product to meet their production schedule. It is essential to be a key supplies contributing to the customers value chain activities.
Business Model Innovation as a research field and practice, offers a way to think about renewing competitive advantage and bolter growth in an increasingly challenging environment. Developing a successful business model is insufficient to assure competitive advantage as imitation is often easy: a differentiated (and hard to imitate) - yet effective and efficient business model is more likely to yield profits. Business model innovation can itself be a pathway to competitive advantage if the model is sufficiently differentiated and hard to replicate for incumbents and new entrants alike (Teece 2010). Moreover, studies on the topic have shown that firms that were financial outperformers put twice as much emphasis on business model innovation as underperformers (Giesen et al. 2007) and a better business model often will beat a better idea or technology (Chesbrough 2007).
In the business environment it is important for organisations to look at their competitors, and aim to be better than them. An Inside Out strategy examines what their strengths and weaknesses are, once they are identified the organisation will then produce the products and attempt to market it well (CMA, 2012). Whereas the Outside In strategy looks at customer value as its starting and end point, emphasising the outside environment when undertaking strategic thinking (Brandmatters, 2010). Strategy looks at issues that may concern the future of organisations, and to prepare for or overcome these issues as a number of strategies can used to identify them. This essay will define the Inside Out and Outside In of organisations. In particular, the different strategic theories and concepts will be looked at using examples of organisations to explain how the Inside Out and Outside In will explain the success of organisations.
The essence of competitive strategy for a company is to find a position in its industry where it can best cope with Porters Five Forces or can influence them in its favour. Once the forces (suppliers, buyers, substitutes, potential entrants and rivalry), and their underlying drivers have been diagnosed, a company is in a position to identify its strengths and weaknesses relative to the industry norms (Grant, 2013). This helps a company’s positioning so that its capabilities provide the best defense against the existing array of competitive forces, influence the balance of the forces or anticipate and respond to shifts in competitive balance before rivals recognise it. Not all industries have equal potential. They differ fundamentally in their ultimate profit potential as the collective strength of the forces of competition differs. High growth industries tend to present better growth opportunities. Successful fast-growth businesses scan the environment to identify new threats as they emerge, taking a broad view of internal and external risk issues. Slow growth industries lead to an intense competition for market share, price competition, advertising battles, and hence reduced profitability.
empirica Gesellschaft, 2014, “The Need for Innovations in Business Models”, European commission DG Research and Innovation,
However, an important concept associated with the open innovation paradigm is the significance of business model. Shafer defines business model as a “representation of a firm’s underlying core logic and strategic choices for creating and capturing value within a value network”. Specifically, the functions of the business model are to articulate the value proposition, identify market segment, define the structure of the firm’s value chain, specify revenue generating mechanism, define cost structure and formulate a competitive strategy. The importance of business model is that it serves as an intermediate link between the technical and economic domains....
When the buzzword of business model was very active and reactive during the internet boom, many individuals did not understand the concept of the proper business model for the proper business (Magretta, 2002). When not utilizing the right type of model for the organization, the model will be misused and distorted (Magretta, 2002). Understanding the traditional organization and learning organization, will allow an organization to determine which time of organization they desire the most.
In a world of free trade, growing competition and accessibility to foreign markets, the need for methodical market analysis and assumptions is steadily rising in today’s business environment. It is just a normal way of thinking to primarily intent to eliminate the financial before entering a new and foreign market. This suggests that enterprises have to develop an overall strategy for their business in order to gain competitive advantage and consequently market share. With the words of Michael E. Porter, professor at Harvard University and leading authority on competitive strategy, this desirable market success is indirectly linked to the individual structure of a market. The unique structure of a single market influences the strategic behaviour and the development of a competitive strategy within a firm. The competitive strategy finally decides whether a company performs successfully on the market or not. Referring to this interpretation of business success, M. E. Porter established his five forces framework that enables directives to gather useful information about the business environment and the competitive forces in industries.
Organizations should scan the environment in order to recognize any external factors that could affect their position on the market, and therefore build up successful responses to protected or improve their position in the future. They scan in order to evade surprises, spot pressure and opportunities, increase competitive advantage, and improve long-term and immediate planning. An organization's capability to adapt to its external environment is strongly dependent on the interpretation of external factors.