Assalamualaikum..
“Our greatest weakness lies in
giving up. The most certain way to succeed is always to try just one more time”
Today, I would like to continue
another posting relate with Strategic management and Operation subject. For the
past few weeks, we are learning about Strategic Planning Process: The External
Environmental Analysis. An external environment factor is referring to the
factors that are beyond the control of an organization. Which means, these
factors are influenced the organizations in decision making process. In external environment factors, it is
divided into two categories which are general environment and industry
environment.
PESTEL is simple acronyms that are
included in General environment factor.
P : Political factors
Employment laws and Consumer
protection laws
E : Economic factors
Unemployment rates and Inflation
rates
S : Socio-cultural factors
Demographic factors
T : Technological factors
Rate of technology transfer and
Energy use and cost
E : Ecological factors
Global Warming and sustainable
Economic Growth
L : Legal factors
Minimum wages and price control act
So, these 6 factors are taking into
consideration when a company making a decision. While, the industry environment
refers to the factors that directly affect the firm and its competitive
responses. These factors have the ability to affect the firm’s
probability. Michael Porte’s 5 Forces
Model is one of best known conceptual framework to assess the industry environment.
These are the elements in Porter’s 5 Forces Model:
Bargaining power of Buyers
Buyer groups have the power because
they are the main industry’s output. We have large buyers and they could switch
to another product in anytime because they did not involve in any significant
switching cost.
Bargaining power of Suppliers
A group of supplier also has their
power. The suppliers’ goods are critical to the buyers’ marketplace success.
Threat of new Entrants
For your information, new entrants
to an industry could raise the level of competition between the organizations.
Substitute Power
Substitute product can be a threat
when the buyers group are price sensitive and customer do have a little brand
loyalty. It also happens when the product itself is undifferentiated and
customer can easily switch away from one supplier to another supplier.
Rival among Competitors
The competitions between companies
cannot be avoided in the industry. If rivalry among the competitors is intense,
companies may earn less profit. Intense situation may happen if the products
offered by companies are undifferentiated and are viewed by customers as
commodities.
It is not an easy task in building
a successful company. We have to take many things into consideration. Obstacles
are those frightful things you see when you take your eyes off your goals. The
successful leader must plan his work and work his plan.
This is what I have learned in
Strategic management and operations subject for week 3.
Thank you for reading and till
then, wassalam.
