Strategic Management - The Main Purpose of an Environmental Analysis - Assignment Example

STRATEGIC MANAGEMENT al Affiliation) Environmental analysis is the study of the environment of an organization in order to find out the factors that affect the environment that influence its operations. To be able to understand the activities that go on inside and outside an organization, the management should perform environmental analysis to maximize the organizational strategies that help reflect the organizational behaviour and success. For organizations to prosper, the management should be able to anticipate and recognize the changes in the internal and external environment and be able to deal with the changes effectively (Mark, 2005). In addition, an environmental analysis plays an important role in pointing out the potential opportunities or threats that a company may face in its external environment. The examples of external environment include the technological, political, environmental, and sociological trends that affect the business operations directly or indirectly. The main purpose of an environmental analysis is to aid in the development of strategies that helps in decision making within an organization in regards to the external environment (Caratti, 2004). An environmental analysis involves the strengths, weaknesses, opportunities, and threats during the development of a strategic plan. It is important for managers to conduct environmental analysis after a certain period of time depending on the nature of the business and be able to identify conditions or events in the external environment that help achieve a competitive advantage (Hitt & Ireland, 1999). Walmart is a multinational retail corporation founded in 1962 by Sam Walton. Their focus is to make a difference in people’s lives by selling their products at a discount thus making them save money and live better. The objectives of Walmart are to meet the needs of their customers at a value and treating people with dignity and depend on the associate partners for success. The company has implemented some environmental measures to increase efficiency and has grown to be the world’s largest and emulated retailer. SWOT ANALYSIS A SWOT analysis represents an organizations core competency. Its framework is popular due to its ability and power to develop strategy. The analysis of the internal strengths and weaknesses of a company focuses on the internal factors that give it various advantages and disadvantages in meeting the needs of its target market. Strengths are the core competencies that provide a firm with the advantage of satisfying its customers. Analysis of an organizations strengths should focus on the customer and help to meet their needs. Weaknesses are the disadvantages that a company faces while implementing strategies. The external analysis of the environment is concerned with opportunities and threats that affect an organizations business activities. Opportunities are those conditions that are favourable to an organization that when leveraged properly produce rewards (David, 2005). On the other hand, threats are barriers that prevent an organization from achieving its set goals and objectives. Walmart uses the cost leadership and differentiation strategy to win its customers. They also provide a wide range of products and services with similar or better quality at a competitive price. PASTEL ANALYSIS Many organizations are coping with the many changes in the external environment. The rapid expansion of e-commerce being one of the changes that these companies are coming to terms with Moreover, organizations have little control over its environment but need to monitor the changes constantly (Hughees, 2006). In addition, the rapid technology advancement has greatly influenced the analysis of the external environment. One of the external factors that influence an organization includes competition in related industries dealing in similar products or services, their markets as well as the geographical locations. It is crucial to identify and know the organization’s competitors, their competitive advantage, and the marketing strategies they use to market their products as well as their developments. It also includes gathering information about the competitor and their capabilities (Hunger &Wheelen, 2010). Moreover, an organization should carry out competitor analysis that includes the future objectives of the competitors as well as the comparison of the competitor goals and the organizational goals. Walmart faces competition from local and international retailers. Some of competitors include Kmart, Target, and Mexicana. The biggest and direct competitor is Target that is the second largest retail store after Walmart. Target has an advantage over Walmart since it provides a variety of discounted goods at a higher quality to its customers. It is also important for organizations to anticipate the changes in customer taste and preferences and the emerging technology that can change how a product is used. There is rapid change in the customers’ preferences since they are the end users of products and services. Customers are the critical element in an organizations environment. They determine whether the business will exist in the future or not. Customers are the external elements that an organization can influence to purchase the organization’s products. In addition, the use of market research to determine the effectiveness of the marketing strategies used and the future marketing programs that are used to improve sales is important. Organizations should be careful about the changes in demographics. These include the population age, economic class, education level, and ethnicity. Customer analysis requires an organization to meet the needs of the customer. Therefore, organizations should be in a position to identify these changes that affect customer preferences and the market trends. The use of the internet and social network has made it easier for people to communicate effectively in an organization. Companies that operate internationally can have meetings via Skype or video conferencing, which is cost effective to organizations as travel, and accommodation costs are minimized. Moreover, employees can have instant chat messaging where they can communicate with other employees locally and internationally. In addition, the use of technology through both websites and social sites to market a company’s goods is one of the easiest ways to reach a huge number of people. This is because today, people use the internet more often including buying goods online. Organizations should be able to embrace these changes in technology since they have revolutionized the way organizations communicate and operate. The use of efficient suppliers in the provision of the required resources is also important. The creation of deep alliances with suppliers increases supply reliability (Sadler, 2003). While dealing with suppliers there needs to be attentive communication in regards to the specifications of the deliverable goods and the payment terms. Some of the forces that affect supply in the delivery of goods have a great impact on the companies that work with them. For example, scarcity of resources will have a great impact on the supplier and therefore will affect the organization dealing with the supplier in terms of pricing and the supply availability. Walmart has a successful supply chain management that aids in the implementation of the cost leadership strategy. They also have an effective just-in time inventory system that has led to reduction of costs. They also buy goods in large quantities to minimize costs. Additionally, organizations depend on external resources in its operations and productivity. This includes the use of raw materials to manufacture its products. For example, the disruption or changes in supply affect greatly the cost of materials. It also includes the leased space that the organization uses as well as the transportation of the goods. The use of skilled labour can change dramatically in the organization after a period of time (Jones, 2005). When the demand for some skills reduces, so does the supply therefore it becomes hard to obtain new and skilled workers. Moreover, the financial resource is another tool that provides operational support. It includes venture capital, savings and available cash and the stock market and investors. Government rules and regulations play a significant role in product development, packaging goods, and shipping (Ahmed, 2008). This affects greatly the cost of doing business and the ability to expand into new markets. Moreover, all organizations have to abide by the new laws that are constantly changing due to the political and social changes. For example, if the government places new rules on a particular way of packaging goods for shipment, then an organization has to comply. This increases the unit cost and subsequently reduces the profit margins. While doing business internationally, organizations need to follow the laws to get the products into foreign markets (Daven, 2005). Walmart analyzes business related policies like the competition laws, labor laws, and taxation laws. Public opinion is also vital as any scandal can lead to the bad reputation of a business therefore damaging an organization’s image. The perception of the public towards an organization can either increase or reduce sales. Organizations may use professionals to release useful information about the positive activities of the organization. The prevailing economic condition of a nation determines the income and spending patterns of citizens. This may lead to increase in interest rates and high level of unemployment that may result in a decrease in the consumption of essential goods and services. For instance, when individuals experience financial challenges, they tend to spend less on sport and recreation activities and spend more on basic goods. Moreover, the use of media, which is undergoing rapid changes, is vital. Organizations should now use the modern ways of advertising and should let go of the traditional methods of advertising. The rise and use of the internet and technology is the key driver of this change. Before, newspapers used to carry many pages of job adverts, but today these businesses operate by the online recruitment agencies. Walmart has invested in technology by using a tracking inventory system that also checks on the available stock. This has made Walmart achieve economies of scale and reduction of costs. The internal environment has a relation to the human resource of an organization. The internal environment can change with planning and management processes. For organizations to be successful, the knowledge and experience are determining factors. Therefore, the management is responsible for the recruitment of qualified staff and engages in the training of employees to aid in building organizational capabilities (Rio, 2000). There is also the organizational culture, which distinguishes an organization from others and keeps members of the organization act in a manner that is accepted by the organization and the society. For example, the organizational values are the beliefs that define the success of employees in an organization. The company’s leadership role is an important factor in the success of an organization. The leadership style of an organization and that of other companies affect the organizational culture. The effectiveness of an organization depends on the communication and value for employees are some of the cultural impacts that result from leadership approaches. Moreover, when an organization has employees who are motivated and hardworking, they produce better results as compared to those who are not motivated. Therefore, the management should invest in a system that motivates employees. For example, if an employee performs well, they need to get rewards and the reward system should be fair to all employees. In addition, in a high performing work environment, employees work together as a team and collaborate on ideas and resolutions that can take the organization to a higher level. Moreover, the provision of accurate financial reports affects the decisions made in the organization. It is necessary for organizations to create financial reporting systems that include profit and loss statements, receivable and payable reports, as well as up to date balance sheet for making suitable decisions in the organization. To have a good structure within an organization is necessary as it shows how people should work and how employees should divide work. A good organization structure aids in quick decision-making. Lastly, all business environments change with time and competitors come and go. An environmental analysis is the act of surveying the opportunities and threats that help in the process of making a strategic business plan. To fail to respond to the conditions of the business environment can result in the failure of the business. An effective environmental analytical survey on all the forces that may affect the business operations as well as a forecast for the future event may alter the organizational effectiveness. The nature of the business should determine the factors of environmental analysis that should the organization should focus on (Therivel, 2004). In conclusion, it is important for organizations to review on the factors that affect the business operations. This is Walmart’s best way to deal with the changes that happen more often in the business environment. The review of the internal operations also helps to deal with emerging problems in the organization. This will help to maintain the awareness of the critical factors and help keep track of the organizational priorities. This will help in the achievement of the desired goals of the organization. References Ahmed, K. 2008. Strategic environmental assessment for policies an instrument for good governance. Washington, DC: World Bank.  Caratti, P. 2004. Analysing strategic environmental assessment towards better decision- making. Cheltenham, UK: Edward Elgar. Daven, F. 2005. Strategic management (4th ed.). New York: Macmillan ;. David, F. 2005. Strategic management: Concepts and cases (10th ed.). Upper Saddle River, N.J.: Pearson Prentice Hall. Fahey, L. 2009. On strategic management decision processes. Strategic Management Journal, 43-60. Hitt, M., & Ireland, R. 1999. Strategic management: Competitiveness and globalization (3rd ed.). Cincinnati: South-Western College Pub. Hughess, M. 2006. External environmental analysis. Ottawa: Canadian College of Health Service Executives. Top of Form Hunger, J., & Wheelen, T. 2010. Strategic management (5th ed.). Reading, MA: Addison- Wesley Pub. Jones, C. 2005. Strategic environmental assessment planning: An international evaluation. London: Mark, S. 2005. An internal and external environmental analysis. Hays, Kan.: Docking Institute of Public Affairs, Fort Hays State University. Sadler, P. 2003. Strategic management (2nd ed.). Sterling, VA: Kogan Page. Bottom of Form Schmidt, M. 2005. Implementing strategic environmental assessment. Berlin: Springer. Therivel, R. 2004. Strategic environmental assessment. London: Earthscan. Vecchiato, R. 2008. Strategic foresight: Matching environmental uncertainty. Technology Analysis & Strategic Management, 783-796. Rio, M. 2000. Perspectives on strategic environmental assessment. Boca Raton, Fla.: Lewis. Read More