Ntroduce The Four Main Elements Of The Strategic Management Process.pdf

lOMoARcPSD|38594337 THE STATE BANK OF VIET NAM MEMBER HUỲNH THẾ DANH NGÔ NHƯ NGỌC HOÀNG ANH THƯ MAI NGỌC THÚY AN PHAN NGỌC UYÊN NHƯ TRẦN THANH HOÀNG PHƯỚC LECTURER PHẠM HƯƠNG DIÊN, Ph.D Downloaded by NGUYEN BAY (tailieuso.17@gmail.com) lOMoARcPSD|38594337 MINISTRY OF EDUCATION & TRAINING BANKING UNIVERSITY OF HO CHI MINH CITY INDEX 1 Introduce the four main elements of the strategic management process? .1 2 Explain why environmental analysis is an important activity for the strategy formulation process of an organization 3 3 GROUP ASSIGNMENT Explain the components of the external environment? .5 4 How does PESTEL analysis aid in the development of the strategy in a company? 7 5 How would you determine the level of competitive intensity in an industry? Take one example 11 HO CHI MINH CITY 09/2023 Downloaded by NGUYEN BAY (tailieuso.17@gmail.com) lOMoARcPSD|38594337 1 Introduce the four main elements of the strategic management process? Four basic elements to create a tactical strategic management plan includes; situational analysis, strategy development, strategy execution, and strategy evaluation Strategy evaluation is the process of analyzing a strategy to assess how well it's been implemented and executed A strategy evaluation is an internal analysis tool and should be used as part of a broader strategic analysis for the organization when making decisions about your strategy Strategy execution is the implementation of a strategic plan in an effort to reach organizational goals It comprises the daily structures, systems, and operational goals that set your team up for success Even the best strategic plans can fall flat without the right execution Situational analysis is the process of collecting, evaluating, and organizing information regarding an organization's internal and external environments It involves evaluating the business's strengths, weaknesses, opportunities, and threats (SWOT analysis) Strategy development is the process an organization uses to determine how it will allocate its resources and get maximum impact from its people to achieve its objectives It's the act a team will conduct to produce a measurable and specific action plan intended to help the business operate, innovate, and grow 2 Explain why environmental analysis is an important activity for the strategy formulation process of an organization Downloaded by NGUYEN BAY (tailieuso.17@gmail.com) lOMoARcPSD|38594337 An environmental analysis helps organizations identify internal and external elements that can either negatively or positively impact their business Learning about how to conduct an environmental analysis can help you prepare an effective strategy for your business There are several reasons why environmental analysis is important: Identifying Opportunities and Threats: Organizations can identify potential opportunities in the market This process helps them stay ahead of the competition and leverage favorable trends Additionally, it enables them to identify potential threats or challenges that the organization may face to the proactive development of strategies Understanding Market Dynamics: Environmental analysis provides customer preferences, buying behaviors, and emerging trends It helps organizations align their strategies with market demands and stay relevant in a rapidly changing business Assess The Competitive Landscape Environmental analysis helps organizations evaluate the competitive landscape by understanding their competitors' strategies, strengths, and weaknesses From there, develop strategies to gain competitive advantage Enhance Decision Making This knowledge helps reduce risk when implementing an informed decision-making strategy because strategies can be adjusted to suit market conditions, trends and customer preferences Improving Resource Allocation This analysis aids in resource allocation decisions, such as investing in areas that align with the organization's strategic objectives and divesting or improving areas with limited potential or competitive disadvantage 3 Explain the components of the external environment? What is the External Environment? An organization's external environment, also known as the business environment, consists of various factors, forces, and elements outside the organization that can significantly impact its operations, strategies, and performance Downloaded by NGUYEN BAY (tailieuso.17@gmail.com) lOMoARcPSD|38594337 Those are all factors beyond the reach of the organization, which can affect the operation of an enterprise Understanding the components of the external environment is crucial for organizations to adapt, make informed decisions, and remain competitive Why are external environmental factors important? External environmental factors are important because they can have direct and indirect effects on an organization's business operations, human resources and revenue The external environment of an organization or a company changes continuously over time, is always innovating and is beyond the control of the company But executives and managers can monitor and supervise these changes and minimize their consequences Important key elements of an organization's external environment includes: Natural Environment Environmental factors, including climate change, natural disasters, resource availability, can impact industries like agriculture, energy and manufacturing Organizations need to consider their environmental impact and sustainability practices Societal Environment The societal environment is mankind’s social system that includes general forces that do not directly touch on the short-run activities of the organization, but that can influence its long-term decisions These factors affect multiple industries as follows:  Economic forces that regulate the exchange of materials, money, energy and information  Sociocultural forces that regulate the values, mores and customs of society  Technological forces that generate problem-solving inventions  Political–legal forces that allocate power, provide constraining, protecting laws and regulations Economic Environment This component includes economic factors such as inflation rates, interest rates, exchange rates, economic growth or recession and overall economic stability Changes in these factors can affect an organization's costs, pricing, demand for products or services, and financial health Technological Environment Downloaded by NGUYEN BAY (tailieuso.17@gmail.com) lOMoARcPSD|38594337 Advances in technology have a profound impact on businesses This includes innovations, new technologies, automation, and digitalization Organizations need to adapt to technological changes to stay competitive and efficient Political and Legal Environment The political and legal environment includes government policies, regulations, taxation, trade laws, and political stability Changes in these areas can have a significant impact on an organization's operations, compliance requirements, and market access Social and Cultural Environment This component relates to the societal and cultural factors that influence consumer behavior, preferences, values, and lifestyles Understanding these factors helps organizations tailor their products, marketing strategies, and convey information to the target audience Typically demographic which affects the population For example, an increase in population size will likely lead to an increase in demand for goods and services as there are more potential consumers 4 How does PESTEL (STEEP) analysis aid in the development of the strategy in a company? What is PESTEL (STEEP) analysis? PESTEL analysis is a method used to evaluate prices and analyze external factors affecting a business or business environment PESTEL is an acronym for important factors including: Political (Politics), Economic (Economy), Social (Society), Technological (Technology), Environmental (Environmental) and French Law (Law) PESTEL analysis helps businesses better understand external factors that may affect their business operations This allows a business to assess risks and baselines from the surrounding environment and adjust its business strategy accordingly and to help the business make smart decisions and prepare for the future The word PESTLE (STEEP) is made up of the initials of the following six macro- environment factors: Downloaded by NGUYEN BAY (tailieuso.17@gmail.com) lOMoARcPSD|38594337 Political Factors The Political developments can highly influence individuals and organizations It is important to be aware of likely upcoming shifts in power Political developments can affect environmental, antitrust, financial markets, trade, and other kinds of laws Factors to be considered include political stability, regulation of monopolies, tax policies, price regulations consumer protection, jurisdiction and trade unions Economic Factors The direct impact on the economy and its performance which involves economic factors strongly affects profitability and the company in general This factor includes growth rates, interest rates, employment rates, foreign exchange rates,… For instance, if the value of the US dollar increases compared to the Chinese yuan, it means that Chinese buyers will need more yuan to purchase one dollar As a result, this makes US exports like Boeing aircraft and Intel chips more expensive for Chinese buyers, leading to a decrease in demand for US exports in general Social Factors Social factors include cultural norms and expectations, health consciousness, population growth rates, age distribution, career attitudes, health, and safety These factors are helpful for companies to better plan their marketing analytics and strategy For example, the Indian market generally witnesses a surge in demands for vehicles during the last months of the year, due to marriage and the festive season Downloaded by NGUYEN BAY (tailieuso.17@gmail.com) lOMoARcPSD|38594337 These factors are particularly significant for marketers as they target certain customers Additionally, they also highlight the local workforce and its zeal to operate under certain circumstances Technological Factors: Technological factors mean the innovations and developments in technologies These factors impact an organization’s operations Several new developments like Artificial Intelligence, IoT, Machine Learning, Deep Learning, are being made in the technology field and if a company fails to match up the trend it may lose its position in the market A few of the technological factors which are included in the PESTLE analysis include the rate of technological change, the evolution of infrastructure, and any government or institutional research Environmental Factors The environmental analysis looks at the physical environment as well as climate change policies or directives from governmental entities, energy availability or related pricing trends (e.g., scarcity of oil could create rising gas prices), animal-related laws impacting specific product categories, etc The same example with Social Factors, people in society begin to realize the importance of the environment To reduce the harm to the environment, most companies switch to developing sustainability, which is good for the environment, society and economy, and produce eco-friendly products/services like electric cars, canvas bags instead of plastic/nylon bags,… Legal Factors Every incorporation must understand the law in the country they operate in They also must be aware of any change in legislation and the impact, this may have an effect on their company They must know what is legal and be allowed to adjust conformably their behaviors and activities Under US law, especially Copyright Laws, YouTube has developed an automated system that scans for copyrighted materials and either blocks them from being uploaded or puts advertisements before playing them to generate revenue for the original creator of the video content What is PESTEL (STEEP) analysis used for? Downloaded by NGUYEN BAY (tailieuso.17@gmail.com) lOMoARcPSD|38594337 By auditing the external environment, a PESTLE analysis can detect and understand broad, long-term trends This can support a range of business planning situations, such as: Strategic business planning A PESTLE analysis provides contextual information about the business direction, its brand positioning, growth targets, and risks (such as another pandemic) to productivity It can help determine the validity of existing products and services and define new product development Human resources strategy: A PESTEL analysis can find disruptive changes to business models that may affect the future employment strategy It will identify skills gaps, new job roles, job reductions or displacements Marketing strategy: Information used for planning marketing strategy is often taken from social factors analysis activities This information may include customer’s attitude changes, changes in lifestyle,… It can help the marketing department create more marketing campaigns and prioritize business activities to accomplish specific marketing objectives within a set timeframe Product development: By monitoring external activity, a PESTEL analysis can help inform whether to enter or leave a route to market, determine if a product or service still fulfills a need in the marketplace, or when to launch a new product People strategies, reports and projects A PESTLE analysis can be used as a framework to look outside the organization to hypothesize what may happen in future and what should be further explored It can ensure that some basic factors are not overlooked or ignored when aligning people strategies to the broader organization strategy Companies can use a PESTLE analysis in financial analysis, risk analysis and strategic planning For example, if a company has outsourced its production to a region that may experience inflation, awareness of this economic factor can help the parent company in adjusting its revenue projections Similarly, a business that imports goods from a region that is susceptible to hurricanes can use awareness of the environmental factor to plan for potential supply chain delays Downloaded by NGUYEN BAY (tailieuso.17@gmail.com) lOMoARcPSD|38594337 Businesses may also consider pairing the PESTLE analysis with another type of analysis, like the SWOT analysis Conducting these regular assessments can better equip organizations to identify and plan for challenges while generating high profits 5 How would you determine the level of competitive intensity in an industry? Take one example Porter’s 5 Forces Analysis To assess the level of competitiveness in an industry, one can employ Michael Porter's Five Forces model which was created by M Porter in 1979 This model aids in the analysis of factors influencing a company's profitability and competitive position within an industry The Five Competitive Forces include: Competitive Rivalry: this involves evaluating the competitive rivalry among existing firms in the industry Factors such as the number of competitors, market concentration, differentiation, and industry growth rates affect rivalry A higher rivalry suggests increased competitive intensity Downloaded by NGUYEN BAY (tailieuso.17@gmail.com) lOMoARcPSD|38594337 Threat of New Entrants: this refers to the assessment of entry barriers such as economies of scale, capital requirements, or government regulations The more significant these barriers, the less competitive the industry is, as it becomes harder for new entrants to break into the market Bargaining Power of Suppliers: this involves evaluating the influence suppliers wield over the industry Elements like supplier concentration, substitute availability, and switching costs impact their bargaining power A higher supplier power suggests a more competitive industry Bargaining Power of Buyers: this involves examining the influence buyers have on the industry Factors to consider include buyer concentration, price sensitivity, and the presence of alternatives A stronger buyer power amplifies competition Threat of Substitute Products or Services: this involves scrutinizing the availability and appeal of substitute products or services If substitutes are easily accessible and offer similar benefits at a lower price, competition within the industry escalates Strategic groups mapping Downloaded by NGUYEN BAY (tailieuso.17@gmail.com) lOMoARcPSD|38594337 To explain what strategic groups are, we think the best way is to do it with Michael Porter's definition: “the set of companies in an industry that follow the same or a similar strategy in all strategic dimensions” For Porter, a strategic group is a subset of companies, within the set that makes up an industry, with a strongly similar “profile” of all strategic dimensions A map of strategic groups is a beneficial technique for analyzing and making decisions in sectors with a lot of competition It takes two dimensions that are not directly related to each other (linearly independent), uses them to construct two Cartesian axes, and includes the “subset of companies” in this graph Its location will be according to where they score according to the chosen dimensions, and they are graphed in the form of circles, in a size that reflects the size of the company Downloaded by NGUYEN BAY (tailieuso.17@gmail.com) lOMoARcPSD|38594337 Example STARBUCKS Background of Starbucks Starbucks was founded in 1971 in the US, expanded under Howard Schultz’s vision after his Milan trip Known for its unique coffee and third-place experience, it offers over 200 drink combinations and diverse food items It now has over 30,000 stores in 83 markets Starbucks Porter's Five Forces Analysis of Existing Competitors Starbucks has arguably secured the title of coffee king However, there are a few competitors that have given Starbucks some staunch competition, including Dunkin’ and McDonald’s Dunkin’ and Starbucks have coexisted in the market for quite some time Dunkin’ transitioned much of its emphasis on coffee to donuts in the late 1990s By the 2000s, the company introduced its first specialty coffee line and emerged as a coffee shop competitor However, Dunkin’s revenues fall significantly shorter than Starbucks’ Also, the Seattle-based coffee chain has a larger market share with over 30,000 locations worldwide while Dunkin’ has around 11,300 worldwide locations Starbucks has a much larger global footprint than Starbucks, too Nearly 25 percent of Starbucks’ revenues are generated from outside the United States Also, Starbucks positions itself as an upscale coffee experience while Dunkin is viewed as an All-American brand Another fast-food restaurant that has joined the battle is McDonald’s McDonald’s has a diverse menu and is very affordable and convenient for its target audience Analysis of New Entrants The coffee and baked goods industry has certainly expanded within the past couple of years.The number of smaller coffee shops has increased exponentially especially as the new coffee consumers are becoming choosier, more health-conscious, and want faster Wifi Customers like a more personalized and premium coffee experience Unfortunately, for many small coffee shops, this industry is somewhat oversaturated Analysis of Substitute Products Several substitute products pose a significant threat to Starbucks including tea, juices, soft drinks, water, and energy drinks The low switching cost only threatens Starbucks products because they are more affordable and cost less Another potential threat to Starbucks is that many consumers can attempt to make Starbucks drinks at home During lock-downs, consumers have bought their espresso machines or learned how to craft their coffees to satiate their caffeine kick Analysis of Suppliers Suppliers help determine the price of the product and the quality of your final product Starbucks works alongside a wide variety of suppliers worldwide to Downloaded by NGUYEN BAY (tailieuso.17@gmail.com) lOMoARcPSD|38594337 meet the massive supply demands The switching cost for Starbucks is quite low due to the abundant supply of coffee farmers The suppliers can’t bargainto attempt to influence its prices However, this summer, Starbucks announced a price jump in its prices this past year due to a drought in Brazil, a major arabica producer, that has consequently caused supply to plummet thus creating a price increase Analysis of the Buyer Starbucks is known for targeting affluent or high-income individuals who make around $90,000 Their target market is between 22-60 years old Starbucks is known for building cafes that are located within middle-income neighborhoods This is because the middle-class has more disposable income and is willing to spend more money on premium coffee drinks Another description of Starbucks' target audience is urban or “on-the-go” consumers A common trait among consumers is that they’re busy people who are constantly moving Starbucks’ customers value a nice studying or working ambiance Starbucks’ customers are also eager to adopt new technologies that make their lives easier In 2015, the store launched an app for its mobile order app payments that were a huge success Starbucks consumers are also socially conscious, which aligns with many of Starbucks’ green initiatives and efforts Downloaded by NGUYEN BAY (tailieuso.17@gmail.com) lOMoARcPSD|38594337 REFERENCE SOURCES 1 Onyshchenko,S., Maslii O., Ivaniuk B The Impact of External Threats to the Economic Security of the Business 7th International Conference on Modeling, Development and Strategic Management of Economic System: Collection of scientific articles Atlantis Press, Paris, France, 2019 С.156–160 2 Onyshchenko, S., Maslii, O., & Ivaniuk, B (2020) The impact of the external environment on the economic security of Ukrainian business Науковий журнал «Економіка і регіон», (1 (76)), 22-29 3 Khan, M., & Khalique, M (2014) Strategic planning and reality of external environment of organizations in contemporary business environments Business Management and Strategy, 5(2) 4 Musonera, E (2021) Strategic marketing case analysis: Starbucks Journal of Business and Social Science Review, 2(11), 12-22 5 Porter, M E (1980) Competitive strategy: Techniques for analyzing industries and competitors New York: Free Press 6 Rastogi, N I T A N K., & Trivedi, M K (2016) PESTLE technique–a tool to identify external risks in construction projects International Research Journal of Engineering and Technology (IRJET), 3(1), 384-388 Downloaded by NGUYEN BAY (tailieuso.17@gmail.com)