Q. 4: Justify the role of Environment Scanning in Strategic management process.
Course: Management Strategies in Educational Institutions (8615)
Semester: Spring, 2019
Assignment No.1
Answer:
Strategic
decisions are the decisions that are concerned with whole environment in which
the firm operates the entire resources and the people who form the company and
the interface between the two.
Benefits of Strategic Decisions
Strategic decisions have major
resource propositions for an organization. These decisions may be concerned
with possessing new resources, organizing others or reallocating others.
Strategic
decisions deal with harmonizing organizational resource capabilities with the
threats and opportunities. Strategic decisions deal with the range of
organizational activities. It is all about what they want the organization to
be like and to be about.
Strategic
decisions involve a change of major kind since an organization operates in
ever-changing environment. Strategic decisions are complex in nature.
Strategic
decisions are at the top most level, are uncertain as they deal with the
future, and involve lot risk. Strategic decisions are different from
administrative and operational decisions. Administrative decisions are routine
decisions which help or rather facilitate strategic decisions or operational
decisions. Operational decisions are technical decisions which help execution
of strategic decisions. To reduce cost is a strategic decision which is
achieved through operational decision of reducing the number of employees and
how we carry out these reductions will be administrative decision.
Concept of SWOT Analysis in Strategic
Management:
SWOT can be done by one person or a
group of members that are directly responsible for the situation Assessment in
the company. Basic Swot analysis is done fairly easily and comprises of only
few steps:
Step 1: Listing the firm’s key
strengths and weaknesses
Step 2: Identifying opportunities
and threats
Strengths and Weaknesses
Strengths
and weaknesses are the factors of the firm’s internal environment. When looking
for strengths, ask what do you do better or have more valuable than your
competitors have? In case of the weaknesses, ask what could you improve and at
least catch up with your competitors? Where to look for them?
Some
strengths or weaknesses can be recognized instantly without deeper studying of
the organization. But usually the process is harder and managers
have to look into the firm’s:
·
Resources: land, equipment, knowledge, brand equity,
intellectual property, etc.
·
Core competencies
·
Capabilities
·
Functional areas: management, operations, marketing,
finances, human resources and R&D
·
Organizational culture
·
Value chain activities
Strength or a weakness?
Often,
company’s internal factors are seen as both, strengths and weaknesses, at the
same time. It is also hard to tell if a characteristic is strength
(weakness) or not. For example, firm’s organizational structure can be strength
a weakness or neither! In such cases, you should rely on:
Clear
Definition
Very
often factors which are described too broadly may fit both strengths and
weaknesses. For example, “brand image” might be a weakness if the company has
poor brand image. However, it can also be strength if the company has the most
valuable brand in the market, valued at $100 billion. Therefore, it is easier
to identify if a factor is strength or a weakness when it’s defined precisely.
Benchmarking
The
key emphasize in doing swot is to identify the factors that are the strengths
or weaknesses in comparison to the competitors. For example, 17% profit margin
would be an excellent margin for many firms in most industries and it would be
considered as strength. But what if the average profit margin of your
competitors is 20%? Then company’s 17% profit margin would be considered as a
weakness.
VRIO Framework
A
resource can be seen as a strength if it exhibits VRIO (valuable, rare and
cannot be imitated) framework characteristics. Otherwise, it doesn’t provide
any strategic advantage for the company.
Opportunities and threats
Opportunities
and threats are the external uncontrollable factors that usually appear or
arise due to the changes in the macro environment, industry or
competitors’ actions. Opportunities represent the external situations that
bring a competitive advantage if seized upon. Threats may damage your company
so you would better avoid or defend against them.
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