A PEST analysis is a way to analyze the general external environment of an organization. Every organization has an external environment. The external environment is quite important because it is the environment in which a company operates. PEST analysis is a useful tool for understanding the “big picture” of the environment in which industry is operating, and environmental understanding will bring the advantage of the opportunities and guide to minimize the threats. PEST components are Political, Economic, Social and Technological. The PEST analysis is used to identify forces in the macro-environment that are affecting the business at present and are likely to continue to affect the business in the future. Macro-environmental analysis is interested in factors in the wider environment that influence the demand for the product or service offered by a company; demand for the product or service; the manner in which the product or service is distributed; the Continue reading
Strategic Management Concepts
Porter’s Generic Strategies – Cost Leadership Strategy
Cost Leadership is the strategy that focuses on making the operations more efficient and cutting costs wherever possible. It may result from scale/scope efficiencies, tight overhead control, careful selection of customers, standardization and automation. Cost leadership aims at having the lowest costs in a market. This makes the company best placed to survive a price war and generates the highest margins if a price war does not occur. The largest retail chain in the world, Wal-Mart also believes in cost leadership. According to Michael Porter (1980), the low cost leadership strategy attempts to increase market share by emphasizing low cost relative to competitors. “gives the firm defense against rivalry from competitors because its lower cost means that it can still earn returns after competitors have competed away their profits through rivalry. A low cost position defends the firm against powerful buyers because buyers can exert power only to drive Continue reading
SWOT Analysis: Strengths, Weaknesses, Opportunities and Threats
SWOT which stands for an abbreviation of Strengths, Weaknesses, Opportunities and Threats; is an analysis that defined as method to examine organization’s internal factors dealing with strengths and weaknesses, and its environmental opportunities and also the threats. SWOT analysis usually use in the preliminary phase of decision making as a general tool which it designed for being antecedent to strategic planning in different case and applications. SWOT Analysis can be used as a model, process, technique or framework to provide information about those factors strengths, of an organization by having many applications with possibility of being used in all the levels of the organization. SWOT analysis is a part of the strategic planning process. Companies have some internal and external forces in the business environment. As a first step of a strategic planning system, the strategic factors that are related with the potential of the company, should be identified and Continue reading
External Expansion or Business Combination Strategies
External expansion refers to business combination where two or more concerns combines and expand their business activities. The ownership and control of the combined concerns may be undertaken by a single agency. Business combination is a method of economic organization by which a common control, of greater or lesser completeness is exercised over a number of firms which either is operating in competition or independently. This control may either be temporary or permanent, for all or only for some purposes. This control over the combining firm can be exercised by a number of methods which in turn give rise to various forms of combinations. In the process of combination, two or more units engage in similar business or in different related process or sages of the same business join with a view to carry on their activities or shape or shape their polices on common or coordinated basis for mutual Continue reading
Modes of Strategic Management
Modes of strategic management are the actual kinds of approaches taken by managers in formulating and implementing strategies. They address the issues of who has the major influence in the strategic management process and how the process is carried out. Research indicates that managers tend to use one of three major approaches to, or modes of strategic management: entrepreneurial, adaptive, and planning. The mode selected is likely to influence the degree of innovation that occurs within the organization. Innovation is particularly important in the context of strategic management, because organizations that do not continually incorporate new ideas are likely to fail behind competitively, particularly when the environment is changing rapidly. 1. Entrepreneurial Mode “Entrepreneurial mode is an approach in which strategy is formulated mainly by a strong visionary chief executive who actively searches for new opportunities, is heavily oriented toward growth, and is willing to make bold strategies rapidly” (Management, Continue reading
Mass Customization – Dynamic Stability Product/Process Matrix
Mass Customization Concept “It is the customer who determines what a business is” – Drucker, 1954 The concept of mass customization was coined by Stan Davis in 1987, in his book “Future Perfect”. In this book, he emphasizes that in traditional industrial production there is on the one hand mass production, using economies of scale to produce goods at low costs, but with nearly no variety or on the other hand individual production with a high degree of variety but in small volumes with high costs. Joseph Pine, an IBM-executive turned consultant and author who is the father of the mass customization concept, in his 1993 book “Mass Customization — A New Frontier in Business Competition”, outlines more about Mass Customization. “developing, producing, marketing and delivering affordable goods, and services with enough variety and customization that nearly everyone finds exactly what they want.” – Joseph Pine, 1993 “Mass customization is a system Continue reading