UNIT-2

STRATEGIC MANAGEMENT
 ENVIRONMENTAL SCANNING
• Environmental scanning is a process that systematically surveys and
interprets relevant data to identify external opportunities and threats that
could influence future decisions. It is closely related to a S.W.O.T. analysis
and should be used as part of the strategic planning process.
• Environmental scanning is the process of gathering and analyzing
information about the external environment to identify opportunities and
threats that may impact an organization’s strategic decisions and future
success. It helps organizations stay proactive and adapt to changes in their
surroundings.
 PESTEL ANALYSIS
• Political: Here, we’re keeping an eye on the political landscape. Government policies, trade regulations, and political
stability can all influence our business. We need to stay informed to navigate through any political waves adeptly.
• Economic: This involves monitoring the economic pulse. Inflation rates, economic growth, and currency fluctuations can
affect our bottom line. By staying tuned to economic trends, we can make informed financial decisions.
• Sociocultural: This is about understanding societal trends and cultural shifts. What are the changing preferences and
lifestyles of our target audience? We can align our offerings to resonate with our customers by tuning into the sociocultural
vibes.
• Technological: Here, we’re scouting for the latest tech advancements. Technology can be a game-changer, offering us tools
to innovate and streamline our operations. We need to be tech-savvy to leverage the benefits fully.
• Legal: This involves staying abreast of the legal landscape. New laws and regulations can impact our operations. By being
legally savvy, we can ensure compliance and avoid potential pitfalls.
• Environmental: This is about being eco-conscious. Environmental factors like climate change and sustainability are
becoming increasingly important. We need to adopt green practices to be a responsible and forward-thinking brand.
 INDUSTRIAL ORGANISATION
• Industrial organization is an analysis of factors, operational or otherwise,
that contribute to a firm's overall strategy and product placement. It
involves a study of different areas, from market power to product
differentiation to industrial policy, that affect a firm's operations.
 Types of Industrial Organization
• Industrial organization structure is the type of business structure that firms employ to
organize their operations.
• The main types of industrial organization are:
• Partnership Organization - Formed by two or more people who work together for profit-
making or profit-sharing.
• Sole Proprietorship - owned and controlled only by one person and not incorporated and
organized under civil law and not subject to company law or other legal entity law.
• Corporate Organization - Formed by a group of individuals who combine their financial
resources to buy a company with the goal of profit.
 STRUCTURED CONDUCT
PERFORMANCE(SCP)
• The structure–conduct–performance (SCP) paradigm, first published by
economists Edward Chamberlin and Joan Robinson in 1933, and
developed by Joe S. Bain is a model in Industrial Organization Economics
which offers a causal theoretical explanation for firm performance through
economic conduct on incomplete markets.
 3- elements or variables of SCP
• There are three elements or variables of market that are considered important as they influence
market behaviours exhibited by both buyers and sellers. These elements are structure, conduct and
performance.
• Structure - this refers to the construction, formation and the makeup of an industrial organization.
It also describes the kind of environment in which an organization or market operates.
• Conduct - this describes the behavior or comportment of buyers and sellers to the structure of a
market. It also refers to the way buyers and sellers interact with each other and the way they
behave.
• Performance - this refers to the achievement or accomplishment or results of a particular market
or industry. Performance variables that are considered in the market include product quantity,
product quality, and production efficiency.
 PORTERS 5 FORCES MODEL
• Porter's Five Forces is a model that identifies and analyzes five
competitive forces that shape every industry and helps determine an
industry's weaknesses and strengths. Five Forces analysis is frequently
used to identify an industry's structure to determine corporate strategy.
• Porter's model can be applied to any segment of the economy to
understand the level of competition within the industry and enhance a
company's long-term profitability. The Five Forces model is named after
Harvard Business School professor Michael E. Porter.
 Porter's 5 forces are:

1. Competition in the industry

2. Potential of new entrants into the industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products1
RESOURCE BASED VIEW ANALYSIS
(RBV)
• RBV is an approach to achieving sustained competitive advantage. The thinking around this
approach emerged in the 1980s and 1990s, following publications by Birger Wernerfelt , Prahalad
and Hamel, Barney, and others. The supporters of this view argue that organizations should look
inside the company to find the sources of competitive advantage, instead of looking at
the external competitive environment.
• According to RBV proponents, it is easier and more feasible to exploit external opportunities by
deploying existing resources in a new way. This approach is in contrast to acquiring new skills or
developing new capabilities for each different opportunity. According to the RBV model, resources
play a major role in organizations achieving higher performance. The two types of resources are:
• Tangible, and
• Intangible
 Tangible assets

• Tangible assets are physical things. Land, buildings, machinery,

equipment and capital – all these assets are tangible.
Organizations can easily purchase the physical resources in the
market. So, they confer little advantage to the companies in the
long run. This is because rivals can also acquire identical assets,
which delivers competitive parity.
 Intangible assets

• Intangible assets are assets that have no physical presence.

However, a company can own these assets. Examples of intangible
assets are brand reputation, trademarks, intellectual property, etc.
Unlike tangible assets, companies take a long time to build
intangible assets. Hence, a company’s competitors cannot easily
buy these assets from the market. Usually, intangible assets usually
within a company. As a result, intangible assets play a significant
role in a company’s competitiveness. Often, intangible assets are
the main source of a company’s sustained competitive advantage.
 Importance of Resource-based View

• The resource-based view strategy aims to gain a sustainable competitive

advantage. An organization can sustain its competitive advantage only through
extensive resource analysis, resource allocation, and cross-functional resource
usage. Likewise, only when a company unleashes its workforce’s true potential
can it innovate better and stand out in the industry. An RBV strategy helps
organizations achieve:
• Visibility for efficient resource allocation
• Maintain competitive advantage
• Cross-functional resource usage
• Visibility for efficient resources
 VRIO FRAMEWORK
• VRIO is an acronym for a four-question framework focusing on value, rarity, imitability, and
organization, the criteria used to evaluate an organization's resources and capabilities
• The question of value: "Is the firm able to exploit an opportunity or neutralize an
external threat with the resource/capability?"
• The question of rarity: "Is control of the resource/capability in the hands of a relative
few?"
• The question of imitability: "Is it difficult to imitate, and will there be significant cost
disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?"
• The question of organization: "Is the firm organized, ready, and able to exploit the
resource/capability?" "Is the firm organized to capture value?"
 USING RESOURCES TO GAIN
COMPETITIVE ADVANTAGE
• Resource-based theory of competitive advantage argues
that innovations achieve sustainable competitive advantage by
accumulating and using resources to serve consumer interests in ways that
are hard to substitute for or imitate.
 VALUE CHAIN ANALYSIS
• Value chain analysis is a strategic process that can increase profit margins
and provide a competitive advantage for companies of all sizes. Within
this analysis, businesses identify areas where the value of specific
production and sales activities can be increased.
 Components of a Value Chain
• Porter splits a business's activities into two categories, "primary" and "support," whose
sample activities we list below. Specific activities in each category will vary according to the
industry.
• Primary Activities
• Primary activities consist of five components, and all are essential for adding value and
creating competitive advantage:
1. Inbound logistics include functions like receiving, warehousing, and managing inventory.
2. Operations include procedures for converting raw materials into a finished product.
3. Outbound logistics include activities to distribute a final product to a consumer.
4. Marketing and sales include strategies to enhance visibility and target appropriate
customers—such as advertising, promotion, and pricing.
5. Service includes programs to maintain products and enhance the consumer experience—like
customer service, maintenance, repair, refund, and exchange.
 Support Activities
The role of support activities is to help make the primary activities more efficient.
When you increase the efficiency of any of the four support activities, it benefits at
least one of the five primary activities. These support activities are generally denoted
as overhead costs on a company’s income statement:
1. Procurement concerns how a company obtains raw materials.
2. Technological development is used at a firm's research and development (R&D)
stage—like designing and developing manufacturing techniques and automating
processes.
3. Human resources (HR) management involves hiring and retaining employees who
will fulfill the firm's business strategy and help design, market, and sell the product.
4. Infrastructure includes company systems and the composition of its management
team—such as planning, accounting, finance, and quality control.
 Examples of Value Chains

*Starbucks Corporation
• Starbucks (SBUX) offers one of the most popular examples of a company that understands and successfully
implements the value-chain concept. There are numerous articles about how Starbucks incorporates the value
chain into its business model.
*Trader Joe's
• Another example is the privately held grocery store Trader Joe's, which also has received much press about its
tremendous value and competitive edge. Five primary activities of the value chain.
• 1. Inbound logistics.
• 2. Operations.
• 3. Outbound logistics
• 4. Marketing and sales.
• 5. Service