Answer To: Assignment This will consist of an individual assignment circa 5000 words. (including references)...
Dilpreet answered on Nov 28 2021
A CRITICAL AND CONTRASTING STUDY OF EXTERNAL AND INTERNAL FACTORS ON ORGANISATIONAL STRATEGY FORMULATION
Table of Contents
Introduction 3
Impact of market driven or external aspects on strategy formulation 3
Legal/ political factors 4
Economic factors 4
Technological factors 5
Accurate strategy formulation based on real time data 5
Easy entry into new markets 6
Analysis of competition 7
Scope for multiple strategy development 7
Benefitting from current market trends 8
Development of unique brand identity 9
Benefit of the employees 10
Impacts of resource based view or internal aspects on strategy formulation 10
Financial resources 11
Physical resources 12
Human resources 12
Influence of past experiences 12
Leadership style of the organisation 13
Cultural differences within the organisation 13
Organisational structure 14
Recommendations 15
Conclusion 16
References 16
Introduction
It has been observed that there exist two contradicting and contrasting views when it comes to overall development of business strategies. Some people are of the view that it is the external factors of the organisation, which are the main drivers for making strategic choices and decisions while others are of the belief that internal factors or the core competencies of the organisations are responsible for influencing the strategic choices and decisions made by the organisations. This report shall present a critical analysis of the two approaches namely market driven view, which will focus on the external factors of the organisation influencing strategic choices, and resource-based view, which will focus on the internal factors or core competencies of the organisation for determining the strategic choices of the organisation. This report will help to develop a better understanding of the impacts of these two views on the strategic decisions and choices made by different organisations.
Impact of market driven or external aspects on strategy formulation
External environment of the organisation consists of several factors, which influence the decisions made regarding the business strategies of the organisation. These factors greatly influence the overall performance and culture of the organisation. It is therefore important for organisations to adapt to these external factors for making better choices regarding the strategic decisions, which will help in the overall growth and development of the organisation. As mentioned by Epstein (2018) external factors are important to consider for sustainable growth of organisations. Focusing on the external environment of the organisation will help to analyse the actions taken by the competitors so that organisations can chose better strategies than their competitors to gain competitive advantage could. Also analysing the external aspects will help the organisation to understand the changing business climate and will assist the organisation to take the decisions accordingly. While making strategic decisions it is important that organisation should have a focus on both the opportunities and threats created by the external environment. The external environment of the organisation includes legal, economical, political and technological factors. As opined by Pekovic, Rolland and Gatignon (2016) external factors of the organisation greatly influence its strategies oriented towards customer satisfaction and customer retention.
Fig 1: External Environment of the organisation
Legal/ political factors
Legal and political factors comprise the policies and framework existing in the external environment to which the business organisations must abide by. This includes rules and regulations, which are used as medium to create a relational system between the political parties and the business. The tax laws, environment laws and labor laws greatly affect the strategic decisions made by the organisation to avoid any risks in the near future, which may discourage the activities of the organisation and hinder its sustainable growth and development. Therefore, it is necessary for the organisations to ensure that there is a climate of political and legal stability. In the opinion of Larcker and Tayan (2015), corporate governance is a major factor considered by the organisations while formulating strategies of business and operations.
Economic factors
Economic factors are the direct external forces, which have a huge impact on the choices made by the organisations while formulating their business strategies. The economic factors, which the organisation considers while deciding on the beat strategy among the various options, are price fluctuations of the raw material, price fluctuation of the finished good, inflation, fiscal policy and interest rates. As stated by Castaño, Méndez and Galindo (2015) economic factors largely influence the decisions made by the organisation when it comes to investing on latest and advanced technologies.
Technological factors
With the increasing needs and demands of the customers, it is important that organisation incorporate new and advanced technologies into their day-to-day business operations. Technological advancements have an impact on the market penetration strategies of the organisations. These factors also affect the decisions of the organisation when it comes to increasing the productivity of the organisation. Based on the technological changes occurring in the market, the organisation decides on its strategies to come up with new and innovative products to satisfy the customers and to gain competitive advantage in the market. As opined by Zhu (2015) new technology will not only help the organisations to enhance its operations but will also help to improve the performance of the employees. These factors affect the decisions taken by the organisation when it comes to training and development of the employees.
Accurate strategy formulation based on real time data
Taking into account, the external factors while formulating the strategies for the growth and development of the organisation have proved to be extremely beneficial for the organisations in long term. The real time data, which can be collected from the market regarding business changes, technical changes, legal/political and economical changes occurring in the external environment of the business, can prove to be extremely handy while choosing the right strategy for the growth and development of the organisation. Changes in the interest rates, labor laws and tax laws will help the organisation to determine the strategies, which will contribute to the profitability of the organisation. Considering these factors also helps the organisation to take into account inflation and price fluctuations occurring in the market, which may affect the performance of the organisation overall. As stated by Xu, Frankwick and Ramirez analysis of the real time data will help the organisation to align its operations with the market.
Moreover, the data driven strategies will be beneficial for the businesses in the long term as well as will assist the organisations to achieve their short term and long-term goals of the organisation. Considering these external factors will help the organisation to understand the actual condition of the market and then decide upon the strategies that will help in the sustainable development of the organisation and will add to the overall value of the organisation. Data driven strategic decision-making will help the organisation to be consistent in its business operations and assists in the continual growth of the business. As mentioned by Janssen, van der Voort and Wahyudi (2017) data analysis will help to improve the quality of the decisions made. The data collected from the external environment of the business will generate more revenue for the business; create more opportunities in the market and predict the trends for future growth and development. Moreover, this data will help the organisation to analyse the threats in the market and will assist the business to develop countermeasures so that the organisation can encourage its business operations despite of the threats in the external market. This will help to optimise the current business operations and will help to gain actionable insights regarding the plans according to actual condition of the market.
Easy entry into new markets
Considering the technological and economical factors, which are external to the business, may help the business to choose the right strategies to undertake technological and economical developments in the operations of the organisation. These strategies will help the organisation to easily penetrate into the new market and gain a major share of the market. The strategic decisions taken based on the technological factors of the external environment of the business will help it to increase the productivity of the business. This will also prove to be extremely beneficial for developing innovative and creative products, which can satisfy the ever-increasing needs and demands of the customers. These strategies will help the business to capture a larger share of the market ensuring customer satisfaction and customer loyalty. Considering the economic and technological factors when it comes to entering into the new markets will prove to be extremely beneficial for the organisation for value creation and enhancement of brand image into the new market.
With the help of these external factors, the organisation can choose upon the most suitable market development strategy. These efficient market development strategies will help to increase the sales of the business exponentially and thus will help the business to grow through huge profits and brand image. The strategic decisions made on the external factors will help to quickly diffuse the products in the market and will in fast adoption of the products in the market. as opined by Aldrich and Wiedenmayer (2019) the economical traits will have a huge impact on the decisions to launch new products into the market. This possible because of the strategies and products, which have been, developed keeping in mind the market segment for which the organisation is planning to introduce a new product or service. This will also help to create goodwill for the organisation entering into a new market and will help to withstand the competition, which the already established players may provide to the new entrant into the market.
Analysis of competition
Analysis of the competitive market has become extremely for the organisation in the current business scenario. The process of analysing the competition is not an easy task (West, Ford and Ibrahim, 2015). Therefore, it is important that the organisations must formulate their business strategies in a way, which may help them to withstand the ever-increasing competition in the market. The organisation must watch out for the strategies under taken by its competitors in order to ensure that the strategies, which the business has formulate for its growth and development should be better than that of the...