Organisation and people Y4Q1
-book summary strategic management-
Chapter 3 – analysing the strategic environment
When an organisation is responding to elements of the environment that are changing, it will need to
adjusts its strategy.
- Prescriptive strategies will anticipate how the environment will change in the future in order
to meet future needs ahead of competing organisations
- Emergent strategies will be content with an understanding of the environment
Studying competitive environment is important because, the environment means everything and
everyone outside the organisation (competitors/ customers/ suppliers/ local, national government)
An understanding of the competitive environment is an essential element of the development of
strategic management. The 3 reasons why it is important to study are;
1. Most organisations compete against others, therefore a study of the environment will
provide information on the nature of competition as a step to developing sustainable
competitive advantage -> this is an advantage over competitor that cannot easily be imitated
2. Most organisations will perceive opportunities that might be explored and threats that need
to be contained. Such opportunities and threats may come not just from competitors but
also from government decisions / changes int technology and social developments
3. Opportunities for networks and other linkages, which lead to sustainable co-operation. Such
linkages with others may strengthen an organisation in its environment by providing mutual
support
There are also difficulties when an organisation wants to determine the connection between its
strategic management and the environment, such as;
- Prescriptive vs. emergent strategy = Problem arises from the fundamental disagreement
about the strategic management processes. Prescriptive strategies that the view that in spite
of uncertainties, the environment can usefully be predicted for many markets. Emergent
strategies believe that the environment is so turbulent and chaotic that prediction is likely to
be inaccurate and serve no useful purpose
- Uncertainty = all strategies regard the environment as uncertain. New strategies have te be
undertaken against a backdrop that cannot be guaranteed and this difficulty must be
addressed as strategies are developed
- Range of influence = every element of an organisation’s environment may influence strategic
management
Proactive outcomes as a result of an environmental analysis = identify positive opportunities or
negative threats. Organisation will develop proactive strategies to exploit or cope with the situation
Reactive outcomes = environmental analysis will highlight important strategic changes over which
the organisation has no control but to which , it will need to be able to react
Environmental analysis is important because it helps in developing sustainable competitive
advantage, identifies opportunities and threats and may provide opportunities for productive co-
operation with other organisations
Basic factors are needed for an environmental analysis, these basic areas are;
- Market definition and size
, - Market growth
- Market share
Special attention needs to be directed to the nature and strength of the forces driving
strategic change -> these are the dynamics of the environment
Environmental forces surrounding the organisation can be assessed according to 2 main measures;
1. Changeability = the degree to which the environment is likely to change
2. Predictability = the degree to which such changes can be predicted
PESTEL = the study of political / economic / socio-cultural / technological / environmental / legal
factors. It provides a useful starting point to any analysis of the general environment surrounding an
organisation. It is vital to select among the items from such generalised list and explore the chosen
areas in depth
Prescriptive and emergent strategies take different views on the merits of projecting forward the
main elements of the PESTEL checklist.
Prescriptive favours the development of projections because they are often implied in major
strategic decisions in any event
Emergent strategies believe the turbulence of the environment makes projections of limited
value
In analysing the institutional environment -> 5P framework (people, power, pathways,
performance, productivity)= can form a useful structure for this purpose, the background factors
may form an important element of strategy
The industry life cycle is useful to identify the dynamic factors shaping the industry’s evolution
- About the 4 stages an organisation goes through (introduction / growth/ maturity/ decline)
- It also helps to specify the conventional view of the strategies that are appropriate to each
stage of the cycle, even if these are then changed
- Aspects of life cycle analysists, that have special consideration = advantages of early entry /
fragmentation of market share as markets mature / incidence of cyclicality and tis effect on
demand in mature markets
, Key factors for success in an industry are those resources, skills and attributes of the organisations in
an industry that are essential to deliver success in the market place
- When resources of capital / labour / time are scarce, it is important that they should be
concentrated on the key activities of the business, the ones most important to the delivery of
what the organisations sees as its success
- Key factors for success are factors that determine the relative competitive positions of
companies within an industry
Key factors are not only the resources of organisations in the industry but also the competitive
environment in which organisations operate, 3 principal areas need to be analysed;
1. Customers = what do they really want / segments in market place
2. Competition = how can the organisation beat or survive competition
3. Corporation = what resources does the company itself possess
The purpose of industry and competitive strategic analysis is to enable the organisation to develop
competitive advantage -> porters 5 forces can provide a useful starting point for this type of analysis
Four links model = the basic co-operative linkages between the organisation an its environment can
usefully be explored in 4 areas;
1. Informal co-operative links and networks
The occasions when organisations link together for mutual or common purpose without a
legally binding contractual relationship. When analysing it is the strength or weakness of the
relationship that matters
2. Formal co-operative links
Can take many business forms, but most often bound together by some form of legal
contract. Differ from networks that are formal, because formal links have a higher degree of
formality and permanence of the link with the organisation. Can be found in alliances, joint
ventures, joint shareholding
3. Complementors
Those companies whose products add more value to the products of the base organisation
than they would derive from their own products themselves
4. Government links and networks
Concern the relationship that many organisations have with a country’s national parliament,
regional assemblies and the associated government administrations. These can be vital in tax
and legal matters, such as the interpretation of competition law
Sustainable competitive advantage is an advantage over competitors that cannot easily be imitated.
Useful to undertake competitor profiling = a basic analysis of a leading competitor covering
its objectives / resources / market strength / current strategies
Main danger of competitive profiling is that it will be seen as essentially static
Competitive profiling process should be regarded as one of discovery and that never finishes
Environmental analysis needs to identify the competitive advantages of rival companies. This is
undertaken using competitor profiling, it will seek to identify the competitive advantages by focusing
on 1 or 2 rival companies in depth
Competitor profiling should be regarded as an ongoing task, its emergent nature is particularly
important in fast-moving markets
-book summary strategic management-
Chapter 3 – analysing the strategic environment
When an organisation is responding to elements of the environment that are changing, it will need to
adjusts its strategy.
- Prescriptive strategies will anticipate how the environment will change in the future in order
to meet future needs ahead of competing organisations
- Emergent strategies will be content with an understanding of the environment
Studying competitive environment is important because, the environment means everything and
everyone outside the organisation (competitors/ customers/ suppliers/ local, national government)
An understanding of the competitive environment is an essential element of the development of
strategic management. The 3 reasons why it is important to study are;
1. Most organisations compete against others, therefore a study of the environment will
provide information on the nature of competition as a step to developing sustainable
competitive advantage -> this is an advantage over competitor that cannot easily be imitated
2. Most organisations will perceive opportunities that might be explored and threats that need
to be contained. Such opportunities and threats may come not just from competitors but
also from government decisions / changes int technology and social developments
3. Opportunities for networks and other linkages, which lead to sustainable co-operation. Such
linkages with others may strengthen an organisation in its environment by providing mutual
support
There are also difficulties when an organisation wants to determine the connection between its
strategic management and the environment, such as;
- Prescriptive vs. emergent strategy = Problem arises from the fundamental disagreement
about the strategic management processes. Prescriptive strategies that the view that in spite
of uncertainties, the environment can usefully be predicted for many markets. Emergent
strategies believe that the environment is so turbulent and chaotic that prediction is likely to
be inaccurate and serve no useful purpose
- Uncertainty = all strategies regard the environment as uncertain. New strategies have te be
undertaken against a backdrop that cannot be guaranteed and this difficulty must be
addressed as strategies are developed
- Range of influence = every element of an organisation’s environment may influence strategic
management
Proactive outcomes as a result of an environmental analysis = identify positive opportunities or
negative threats. Organisation will develop proactive strategies to exploit or cope with the situation
Reactive outcomes = environmental analysis will highlight important strategic changes over which
the organisation has no control but to which , it will need to be able to react
Environmental analysis is important because it helps in developing sustainable competitive
advantage, identifies opportunities and threats and may provide opportunities for productive co-
operation with other organisations
Basic factors are needed for an environmental analysis, these basic areas are;
- Market definition and size
, - Market growth
- Market share
Special attention needs to be directed to the nature and strength of the forces driving
strategic change -> these are the dynamics of the environment
Environmental forces surrounding the organisation can be assessed according to 2 main measures;
1. Changeability = the degree to which the environment is likely to change
2. Predictability = the degree to which such changes can be predicted
PESTEL = the study of political / economic / socio-cultural / technological / environmental / legal
factors. It provides a useful starting point to any analysis of the general environment surrounding an
organisation. It is vital to select among the items from such generalised list and explore the chosen
areas in depth
Prescriptive and emergent strategies take different views on the merits of projecting forward the
main elements of the PESTEL checklist.
Prescriptive favours the development of projections because they are often implied in major
strategic decisions in any event
Emergent strategies believe the turbulence of the environment makes projections of limited
value
In analysing the institutional environment -> 5P framework (people, power, pathways,
performance, productivity)= can form a useful structure for this purpose, the background factors
may form an important element of strategy
The industry life cycle is useful to identify the dynamic factors shaping the industry’s evolution
- About the 4 stages an organisation goes through (introduction / growth/ maturity/ decline)
- It also helps to specify the conventional view of the strategies that are appropriate to each
stage of the cycle, even if these are then changed
- Aspects of life cycle analysists, that have special consideration = advantages of early entry /
fragmentation of market share as markets mature / incidence of cyclicality and tis effect on
demand in mature markets
, Key factors for success in an industry are those resources, skills and attributes of the organisations in
an industry that are essential to deliver success in the market place
- When resources of capital / labour / time are scarce, it is important that they should be
concentrated on the key activities of the business, the ones most important to the delivery of
what the organisations sees as its success
- Key factors for success are factors that determine the relative competitive positions of
companies within an industry
Key factors are not only the resources of organisations in the industry but also the competitive
environment in which organisations operate, 3 principal areas need to be analysed;
1. Customers = what do they really want / segments in market place
2. Competition = how can the organisation beat or survive competition
3. Corporation = what resources does the company itself possess
The purpose of industry and competitive strategic analysis is to enable the organisation to develop
competitive advantage -> porters 5 forces can provide a useful starting point for this type of analysis
Four links model = the basic co-operative linkages between the organisation an its environment can
usefully be explored in 4 areas;
1. Informal co-operative links and networks
The occasions when organisations link together for mutual or common purpose without a
legally binding contractual relationship. When analysing it is the strength or weakness of the
relationship that matters
2. Formal co-operative links
Can take many business forms, but most often bound together by some form of legal
contract. Differ from networks that are formal, because formal links have a higher degree of
formality and permanence of the link with the organisation. Can be found in alliances, joint
ventures, joint shareholding
3. Complementors
Those companies whose products add more value to the products of the base organisation
than they would derive from their own products themselves
4. Government links and networks
Concern the relationship that many organisations have with a country’s national parliament,
regional assemblies and the associated government administrations. These can be vital in tax
and legal matters, such as the interpretation of competition law
Sustainable competitive advantage is an advantage over competitors that cannot easily be imitated.
Useful to undertake competitor profiling = a basic analysis of a leading competitor covering
its objectives / resources / market strength / current strategies
Main danger of competitive profiling is that it will be seen as essentially static
Competitive profiling process should be regarded as one of discovery and that never finishes
Environmental analysis needs to identify the competitive advantages of rival companies. This is
undertaken using competitor profiling, it will seek to identify the competitive advantages by focusing
on 1 or 2 rival companies in depth
Competitor profiling should be regarded as an ongoing task, its emergent nature is particularly
important in fast-moving markets
