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PART ONE STRATEGIC ANALYSIS
Managers face difficulties in trying to understand the encionment. First ¡°the environment¡¯ encapsulates many different influences; the difficulty is making sense of this diversity in a way which can contribute to strategic decision making. The second difficulty is that of uncertainty, managers typically claim that the pace of technological change and the speed of global communications mean more and faster change now than ever before.
1.Analysing the environment
1.1 Auditing Environmental Influence------PEST Analysis
As a starting point, it is useful to consider what environmental influences have been particularly important in the past, and the extent to which there are changes occurring which may make any of these more or less significant in the future for the organization and its competitors.
PEST Analysis involves identifying the political, economic, social and technological influences on an organization. It is increasingly useful to relate such influences to growing trends towards globalizations-of possible futures, to consider the extent to which strategies might need to change.
- Monopolies legislation
- Environmental protection laws
- Taxation policy
- Foreign trade regulations
- Employment law
- Government stability
2) Economic factors
- Business cycles
- GNP trends
- Interest rates
- Money supply
- Disposable income
- Energy availability and cost
3) Socio cultural factors
- Population demographics
- Income distribution
- Social mobility
- Lifestyle changes
- Attitudes to work and leisure
- Levels of education
- Government spending on research
- Government and industry focus on technological effort
- New discoveries/development
- Speed of technology transfer
- Rates of obsolescence
1.2 The Competitive Environment-------Five Force Model
The next step in environmental analysis is moves the focus towards an explicit consideration of the immediate environment of the organization-for example, the competitive arena in which the organization operates.
Five-force analysis provides a means of identifying the forces which determine the nature of the competitive environment, especially in terms of:
1) Barriers to entry.
2) The power of buyers.
3) The power of suppliers.
4) The threat of substitutes.
5) Other reasons for the extent of competitive intensity.
1.3 Identifying The Organization¡¯s Competitive Position---------Strategic Group Analysis
STRATEGIC GROUP ANALYSIS
The next major step in environmental analysis is analysis the organization¡¯s competitive position that is how it stands in relation to other organizations competing for the same resources, or customers, as it.
One problem in analyzing competition is that the idea of the ¡°industry¡± is not always helpful because its boundaries can be unclear and are not likely to provide a sufficiently precise delineation of competition.
Strategic group analysis aims to identify organizations with similar strategic characteristics, following similar strategies or competing on similar bases.
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2. Resources, competences and strategic capability.
ANALYSING COMPETENCES AND CORE COMPETENCES
In the first part of my portfolio I underlined the importance of analyzing and understanding the external environment in which an organization is operating. This environment creates both opportunities for and threats to the organization¡¯s strategic development. But successful strategies are also depend on the organization having the strategic capability to perform at the level which is required for success. In this part of my portfolio I am going to explain and analyze one of the three main factors that related to the strategic capability-----the COMPETENCE with which the activities of the organization are undertaken.
The difference in performance of different organizations in the same ¡°industry¡± is rarely fully explainable by differences in their resource base per se. Superior performance will also be determined by the way in which resources are deployed to create competences in the organization¡¯s separate activities, and the processes of linking these activities together to sustain excellent performance. Although the organization will need to achieve a threshold level pf competence in all of its activities, only some will be core competences. These are the competences which underpin the organization¡¯s ability to outperform competition ¨C or demonstrably to provide better value for money. Core competences need to be difficult to imitate, otherwise they will not provide long-term advantage.
Core competences are those competences, which critically underpin the organization¡¯s competitive advantage. Core competence will differ from one organization to another depending on how the company is positioned and the strategies it is pursuing.
3. STAKEHOLDER EXPECTATIONS AND ORGANISATIONAL PURPOSES.
There is a temptation to look for a neat and tidy way of formulating strategy. Such a method might, apparently, be achieved through the analysis of the organization¡¯s environment (part 1) and the extent to which the company¡¯s resources, or strategic capability (part 2), are matched with or fit the environment, or vice versa. However, this strategic logic can fail to recognize the complex role, which people play in the evolution of strategy. Strategy formulation is also about the purposes of the organization and what people want the organization to be like. This part of my portfolio is concerned with examine how the political and cultural contexts of an organization can be analyzed and understood as part of a strategic analysis.
There are four broad influences on an organization¡¯s purposes : corporate governance, business ethics, stakeholders and cultural context.
In my portfolio I am just going to analyze the stakeholder expectations influence the organization¡¯s purpose.
STAKEHOLDERS: Are those individuals or groups who depend on the organization to fulfill their own goals and on whom, in turn, the organization depends. Few individuals have sufficient power to determine unilaterally the strategy of an organization. Influence is likely to occur only because individuals share expectations with others by being a part of a stakeholder group. Individuals need to identify themselves with the aims and ideals of these stakeholder groups, which may occur within departments, geographical locations, different levels in the hierarchy, etc.
3.1) Identifying stakeholders
When identifying stakeholders there is a danger of concentrating too heavily on the formal structure of an organization as a basis for identification, since this can be easiest place to look for the divisions in expectations mentioned previously. However, it is necessary to unearth the ¡°informal¡± stakeholder groups and assess their importance. Other problems in analysis are that individuals tend to belong to more than one group and also stake holder groups will ¡°line up¡± differently depending on the issue or strategy in hand.
3.2) Stakeholder Mapping
Stakeholder mapping identifies stakeholder expectations and power and helps in establishing political priorities. It consists of making judgments on two issues:
- How interested each stakeholder group is to impress its expectations on the organization¡¯s choice of strategies.
- Whether they have the means to do so. This is concerned with the power of stakeholder groups.
This classifies stakeholders in relation to the power they hold and extent to which they are likely to show interest in the organization¡¯s strategies. The Matrix indicates the type of relationship, which the organization needs to establish with each stakeholder group. As such, it is a useful analytical too both in assessing the political ease or difficulty of particular strategies and also in planning the political dimension of strategic changes.
Stakeholder mapping: the power/interest matrix
Low AMinimalEffort BKeepInformed
High CKeepSatisfied DKeyPlayers
The value of stakeholder mapping is in assessing the following:
- Whether the level of interest and power of stakeholders properly reflect the corporate governance framework within which the organization is operating, as in the examples above (non-executive, directors, community groups)
- Whether strategies need to be pursued to reposition certain stakeholders. This could be to lessen the influence of a key player or, in certain instances, to ensure that there are more key players who will champion the strategy (this is often critical in the public sector context).
- Who are the key blockers and facilitators of change and how this will be responded to.
- The extent to which stakeholders will need to be assisted or encouraged to maintain their level of interest or power to ensure successful.
Case: Sheffield theatres trust
The case study concerns a charitable turst which is responsible for two of the U.K¡¯s leading provincial threatres ¨C the Crucible and Lyceum Theatres in Sheffield(plus a third stage ¨C the studio). It covers the priod from 1971 (when the Crucible Theatre opended) to 1996. During the 25-year period the theatres saw many new developments and significant changes in the enviourment, particularly regarding fundings. Stakeholder analysis is a useful method of analyzing this political dimention. The fact that the theartre has both commercial and public service objectives to pursue illustrates that strategy formulation usually proceeds through a process of compromise and the balancing of different stakeholder interests and not through optimization of the needs of just on group.
Part 2. STRATEGIC CHOICE
In part one showed that organizations are continually attempting to readjust to their environment, and one of the major criticisms which can be made of managers concerns their inability or unwillingness to consider the variety if strategic options open to the organization, they tend to remain bound but their paradigm and resistant to change. It is for this reason that this part of the portfolio presents a systematic way of looking at strategic choice
Corporate financial strategy:
A basic issue, which has to be faced, is how an organization is to be financed. Decisions on finance will be influenced by ownership and by the overall corporate intent of the organization. Executives also need to re