Free «Business Strategy Assignment» Essay Sample
The activity of a corporation depends on a variety of circumstances, naturally and logically established in a certain social and economic structure of a particular country. These factors have a possibility to influence and predetermine the behavior of the corporation in every sphere of its functioning. However, this impact does not have a counter-effect as the enterprise cannot control these forces. Since every economic entity is an open economic system, such external forces form external environment of some enterprise or some association. In the same way, alterations in such environment induce changes in the management of a corporation. This is due to the vital necessity for adaptation (Stead & Stead, 2013). The external environment of the company includes external competition, economic, social, political, ethical, technological, legal, and other factors.
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The most motivating external force with direct influence is competition. It can be accepted as the inevitable part of market game, where each marketing step causes the competitor to act in retaliation to grasp the market share. It assumes the interdependence and interference of competitors. The volume of business and the field of activity are inessential for competition. For instance, if it is either the broad industry with a lot of economic ties and existing enterprises or the narrow activity of several operating corporations, the level of competition appears in any way. In this case, it is essential to talk about the free market competition, where a considerable number of competing corporations establish the rules of the market, or the monopoly (oligopoly) and the leader influences the competition of this industry. The impact of competition on the activities of the company and its strategic management determines its further development. Decisive action and competitive status may be the influencing factors in the maintenance of the strategic management performance. It predetermines the further steps of the corporation. The successful analysis of competitive advantages and the flexibility of the strategy allow to strengthen the competitive position of the corporation and improve its efficiency.
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Time brings changes to the competition dynamics and influences other factors. Therefore, the economic situation of the country or world economy also changes the corporation’s plans regarding its performance. Social and ethical factors include values and intentions of consumers, so the changes of their expectations should be taken into account when developing mission, setting the strategic goals as well as creating the corporate culture. Changes in legislation, commercial disputes, and judicial processes of the corporation form the experienced management personnel and display the corporate image. The development of scientific and technological progress can have both direct and indirect impact on the effectiveness of the corporation, so a considerable role in the development of the strategy should be devoted to technical and technological aspects. Political factors, which include the political course of a country, the public mood, and other nuances associated with the mentioned factors, are crucial for the strategic and tactical actions of the corporation. These and other aspects of the enterprise should be seen as an opportunity to promote and strengthen the competitive status and therefore be considered in strategic management.
Strategic management of the corporation is the process of generating and implementing the strategy, which implies a short and long-term satisfaction of customers, employees, partners, society, and the increase of its profits. It plays a major role in the formation of corporation and its development. Therefore, strategic management, as a process, should be available at any stage of the life cycle of the corporation. Within the correct approach to strategic management, strategy should be in the form of the final result, which the company wants to achieve, and have the key characteristics as being holistic, comprehensive, flexible, and able to answer any questions, which the corporation can confront. In other words, during the process of strategic management, it is important to consider its content. The important points of strategic management are seen in the results of the analysis of the external and internal environment; the system diagnostics of a particular situation; the formation of the mission; the formulation of the major strategic and tactical goals; the establishment of strategic directions of development for individual elements of the organizational structure; development of a prospective program; tactical implementation of program elements; monitoring the implementation of the strategy; the analysis of the financial results, etc. (Hitt, Ireland, & Hoskisson, 2012).
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The external environment of the enterprise influences the functioning of the corporation, even with a well-functioning system of strategic management. Depending on the economics, the external environment can be dynamic and risky, or predictable and with the lowest possible risk. The research of the environment and the adoption of this information in developing the strategy have a significant competitive advantage. Awareness of certain changes and external risks determines the ways to solve potential problems by the corporation. The external environment of the corporation is usually divided into micro- and macroenvironment.
The external microenvironment of enterprises includes customers, competitors, suppliers, labor market, and those elements that have a direct impact on the corporation. Its consumers directly generate demand for its products or services, so their opinion, taste, traditions, and consumption behavior should be considered not only in the development of tactics but also in the formation of the mission. Competition as an important element should also be included in the strategic plan as actions of competitors are complicated, but it is necessary and important to foresee their operations (Hubbard, Rice, & Galvin, 2014). The influence of suppliers is caused by the fact that there is dependency from the available resources. To ensure the smooth operation of the corporation, partnership with suppliers should be well-developed. The potential source of recruitment of new professionals is the labor market. This external factor is not displayed by many corporate strategies, which leads to reduced quality of its products and services.
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The macro-level external environment of the corporation includes economic, technological, socio-cultural, and other elements, which influence the enterprise and its indirect value. Such factors comprise the state of the economy, the prospects for development in a particular industry, the possibility of entering new markets, including the international ones, changes in demand due to social and cultural events, etc. Analysis of these factors will determine the possibility of the corporation to receive benefits from such changes.
The internal environment of the corporation is formed under the influence of external factors. Such dependence is caused by the need to adapt to the environment; however, such factors are difficult or impossible to influence. For the strategic management, it is important to use the information about the internal competition, analyze the internal environment, establish and maintain entire social conditions for the workforce as well as consider the rationality of the organizational structure. The validity of strategic management is also provided by the resources, which are the basement of the corporations, and technologies that it uses.
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Strategic management is designed for the creation and implementation of the program of actions for the corporation, which will allow it to have not only appropriate and timely response to emerging issues but also influence the outcomes. These steps should be defined by strategic management. So, techniques of decreasing the influence of the environment on the corporation include the methods for lowering and minimizing the risks. In addition, the market research allows to predict changes in market conditions, which will provide some stability for further development of the corporation. Promotion of aesthetics in the production and decent advertising contribute to reduction of influence of the environment and allow the corporation to grow.
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The concept of five competitive forces is the structural unit of a holistic model, which allows to determine the possibility of making a profit on the market. This model regards the risk of the emergence of new competitors, the existing competition in the industry, the market power of consumers, the ability of suppliers to determine their conditions, and the risk of substitute products appearance. These factors can affect the competitive status of the corporation.
The availability of significant barriers to enter the market reduces the risk of the emergence of new competitors and creates the competition conditions on the market. At the same time, weak competitors leave the market due to low competitiveness.
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The risk of the strong competition, as an external factor, is always accompanied by a desire to strengthen the company’s competitive position. Intensity of competition leads to higher levels of spending on sales promotion, but it does not always show the improvement of the quality of products and/or services. The positive aspect here is the ability to invest in new technologies.
Bargaining power of buyers is ensured by means of meeting their needs. At the same time, consumers dictate the conditions that affect the increase in costs due to the improvement of quality, putting pressure on prices. The negative aspect is the reduction of income due to direct dependence on the growing influence of consumers.
Suppliers also have a market power. This occurs due to the limited number of suppliers and their monopoly on the market. In addition, the industry can also be a priority for them, which adversely affects the development of the manufacturing enterprise. It is also important to note that companies can also acquire unnecessary expenditures by changing the terms of the contract or vendor (Hill, Jones, & Schilling, 2014).
The emergence of products, which function as substitutes, affects the product and/or service prices. This may reduce the profitability of corporations. Differentiation of their own products and increased levels of additional costs are the phenomena which companies have to face with the emergence of substitute products, especially those that are able to provide the best quality.
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Therefore, the successful implementation of the activities by the corporation depends on the degree of influence of the external and internal environment. The direct and indirect pressure on the corporation should be predicted and analyzed by the methods of strategic management. It is important to remember that there is a need to consider the impact of competitive forces of the market in the formation of the company’s capacity. A flexible and dynamic system will allow the corporation to use internal and external circumstances for the increase of its profitability.