Question

Analyze the internal environment of any organization.

What are the key findings from your VRIO or Value Chain analysis?

How well does the organization leverage its strengths to execute the business strategy?

How effective is the organizational structure and management system design?

Analyze the external environment of the organization.

What are the key findings from your PESTEL analysis?

What are the key findings from your Five Forces analysis?

How can the organization respond to these forces to better position itself?

Recommend a course of action for leadership based on your analysis.

Answer 1

Analyze the internal environment of any organization.

• The internal factors refer to anything within the company and under the control of the company no matter they are tangible or intangible. These factors after being figured out are grouped into strengths and weaknesses of the company. If one element brings positive effects to company, it is considered as strength. On the other hand, if a factor prevents the development of the company, it is a weakness. Within the company, there are numerous criteria need to be taken into consideration.

  • Human Resources

  • Capital resources

  • Operational efficiency

  • Organisational structure

  • Infrastructure

  • Innovation

What are the key findings from your VRIO or Value Chain analysis?

Value Chain Analysis is a three-step process:

• Activity Analysis: First, you identify the activities you undertake to deliver your product or service.

• Value Analysis: Second, for each activity, you think through what you would do to add the greatest value for your customer.

• Evaluation and Planning: Thirdly, you evaluate whether it is worth making changes, and then plan for action.

• How well does the organization leverage its strengths to execute the business strategy?

  • Strategy should be dynamic: Although your goals may remain the same, the strategy you adopt can change.

  • Strategy is a long-term plan: Strategic planning takes a lot of time and effort. Thus, it has to be completely in sync with the goals of the organisation.

  • Strategy is a road-map: It should cover everything from the identity of the company to its reason for existing. That’s why the roadmap will begin by formulating or revisiting your organization’s vision, mission, and values.

  • Working towards goals to achieve a vision: The goals should be achievable, realistic, measurable and specific.

• How effective is the organizational structure and management system design?

  • It is effective in three segments

    • Customers: Some companies may deal with a diverse group of customers. For example, a software company that sets up electronic bill-paying may target consumers, banks, corporations and health clubs. Consequently, the software company may organize its structure by customer type. Organizing by customer type may be more effective than other organizational structures because the products and procedures may vary greatly among customer type.

    • Benefits: The benefits that companies wish to achieve with various organizational structures include increased communication, efficient use of resources and even chain of command. For example, a company will usually develop an organizational structure that facilitates communication through various management levels. That way timely decisions can be made by the right individuals. Companies also want to make efficient use of resources and avoid any duplication of efforts.

    • Considerations: Some companies may need to decentralize their organizational structure geographically. For example, a company that relies heavily on direct sales may need to decentralize its sales and marketing functions by region. Consumer product companies sometimes decentralize sales and marketing functions because consumer tastes vary per region.

• Analyze the external environment of the organization.

  • On the contrary to internal factors, external elements are affecting factors outside and under no control of the company. Considering the outside environment allows businessmen to take suitable adjustments to their marketing plan to make it more adaptable to the external environment. There are numerous criteria considered as external elements. Among them some most outstanding and important factors need to listed are current economic situation, laws, surrounding infrastructure, and customer demands.

    • Economic situation

    • Laws

    • Surrounding infrastructure

    • Customer demands

• What are the key findings from your Five Forces analysis?

  • The five forces are:

    1. Supplier power. An assessment of how easy it is for suppliers to drive up prices. This is driven by the: number of suppliers of each essential input; uniqueness of their product or service; relative size and strength of the supplier; and cost of switching from one supplier to another.

    2. Buyer power. An assessment of how easy it is for buyers to drive prices down. This is driven by the: number of buyers in the market; importance of each individual buyer to the organisation; and cost to the buyer of switching from one supplier to another. If a business has just a few powerful buyers, they are often able to dictate terms.

    3. Competitive rivalry. The main driver is the number and capability of competitors in the market. Many competitors, offering undifferentiated products and services, will reduce market attractiveness.

    4. Threat of substitution. Where close substitute products exist in a market, it increases the likelihood of customers switching to alternatives in response to price increases. This reduces both the power of suppliers and the attractiveness of the market.

    5. Threat of new entry. Profitable markets attract new entrants, which erodes profitability. Unless incumbents have strong and durable barriers to entry, for example, patents, economies of scale, capital requirements or government policies, then profitability will decline to a competitive rate.

    Arguably, regulation, taxation and trade policies make government a sixth force for many industries.

    What benefits does Porter’s Five Forces analysis provide?

    Five forces analysis helps organisations to understand the factors affecting profitability in a specific industry, and can help to inform decisions relating to: whether to enter a specific industry; whether to increase capacity in a specific industry; and developing competitive strategies.

• What are the key findings from your PESTEL analysis?

  • You can judge 6 types of environmental influences in the PESTEL framework. They are political, economic, social, technological, environmental and legal. You should not see these factors as independent factors. They are all interdependent. For example, technological advances can affect the economy in different markets.

    • Political Factors

      These are all about how and to what degree a government intervenes in the economy. This can include – government policy, political stability or instability in overseas markets, foreign trade policy, tax policy, labour law, environmental law, trade restrictions and so on.

      It is clear from the list above that political factors often have an impact on organisations and how they do business. Organisations need to be able to respond to the current and anticipated future legislation, and adjust their marketing policy accordingly.

      Economic Factors

      Economic factors have a significant impact on how an organisation does business and also how profitable they are. Factors include – economic growth, interest rates, exchange rates, inflation, disposable income of consumers and businesses and so on.

      These factors can be further broken down into macro-economical and micro-economical factors. Macro-economical factors deal with the management of demand in any given economy. Governments use interest rate control, taxation policy and government expenditure as their main mechanisms they use for this.

      Micro-economic factors are all about the way people spend their incomes. This has a large impact on B2C organisations in particular.

      Social Factors

      Also known as socio-cultural factors, are the areas that involve the shared belief and attitudes of the population. These factors include – population growth, age distribution, health consciousness, career attitudes and so on. These factors are of particular interest as they have a direct effect on how marketers understand customers and what drives them.

      Technological Factors

      We all know how fast the technological landscape changes and how this impacts the way we market our products. Technological factors affect marketing and the management thereof in three distinct ways:

    • New ways of producing goods and services
    • New ways of distributing goods and services
    • New ways of communicating with target markets

    • Legal Factors

      Legal factors include - health and safety, equal opportunities, advertising standards, consumer rights and laws, product labelling and product safety. It is clear that companies need to know what is and what is not legal in order to trade successfully. If an organisation trades globally this becomes a very tricky area to get right as each country has its own set of rules and regulations.

      Environmental Factors

      These factors have only really come to the forefront in the last fifteen years or so. They have become important due to the increasing scarcity of raw materials, polution targets, doing business as an ethical and sustainable company, carbon footprint targets set by governments (this is a good example were one factor could be classes as political and environmental at the same time). These are just some of the issues marketers are facing within this factor. More and more consumers are demanding that the products they buy are sourced ethically, and if possible from a sustainable source.

• How can the organization respond to these forces to better position itself?

  • ?PESTEL mode is useful for management to run an analysis on the micro-environment of the company. Such kind of analysis is very important so that management will take the various environmental factors into account when charting a business future strategic direction. In the second part, we deal with the Porter’s Five Forces model, which is powerful to analyze the industry context of a particular organization. We witness that the model is powerful in the sense that it illustrate the various sources of competitive forces in an industry. With such a model, under the industry structure, we can formulate better plan for the firm to achieve competitive advantage in the market place.

• Recommned a course of action for leadership based on your analysis.?

  • A course of action for leadership recommended based on the analysis would be 'Strategic leadership'. Strategic Leadership is the ability to influence others to voluntarily make decisions that enhance the prospects for the organisation's long-term success while maintaining long-term financial stability. It is a practice in which executives, using different styles of management, develop a vision for their organization that enables it to adapt to or remain competitive in a changing economic and technological climate. Strategic leaders are able to use this vision to motivate employees and departments, fostering among them a sense of unity and direction in order to implement change within their organization.