Internal and External Operational Environments - NAPCO - Case Study Example

STRATEGIC MANAGEMENT Student’s name Course &Code Professor’s name University City Date Introduction For the attainment of business goals and objectives, it is imperative to control the business operational environment {Quinet2004}. The environment includes both the internal and external operational environments which have both direct and indirect implications on the business outcomes {Wang2011}. Internal environment refers to the immediate operational environment within the entity’s operations including management procedures, staff interactions and various internal company policies {Powell2001}. On the other hand, external environment refers to factors such political, competition and other external trends that implicate on organizational performance {Aaltonen2011}. Controlling the business environments both external and internal is tantamount in achieving success in business operations. Most companies thus rely on intensive and in depth market research in order to understand the various external factors and their potential impacts on the organizations performance {Barney1991}. This research guides the strategic planning processes and measures involved in operations with the aim of improving and sustaining competitive advantage. As such, external environment analysis in recommending change processes necessary for outcome improvement. This prospective paper discusses the concepts of external environment analysis, five forces analysis and sustainable competitive advantage {Peteraf1993}. Additionally, these concepts are used in providing an analysis of their practical applications using two selected case studies. External Environment Analysis and Competitive Advantage External environment analysis refers to an indepth and detailed look into the external market forces that have implications on organizational outcome {Aaltonen2011}. Michael Porter designed the Porters Five Forces Analysis that stipulates five main market forces that are considered when analyzing the external environment. {Barney1991}. These five forces are the buyers’ bargaining power, suppliers bargaining power, new entrants’ threats, substitute products threats and industrial rivalry {Porter1985}. To survive negative impacts, competitive advantage is imperative which is achievable in various ways {Mason2008}. Firstly, response to customer needs achieve customer satisfaction by delivering products and services that meet their expectations hence earning customers loyalty and support {Peteraf1993}. Secondly, researching is key in designing developments {Powell2001}. Additionally, intellectual rights such as trade names, trademarks, patents and copyrights, when well exploited could offer entities competitive advantage {Claudiu2011}. Fourthly, holding distribution rights, within various territories imply that consumers would only get products through the right holders or distributors {Vorhies2005}. Where heavy machinery is needed, capital equipment ownership presents competitive advantage. Furthermore, producing in high volumes and reducing profit margins would increase volume sales and turnover {Durand2009}. Additionally, strategic market locations in consideration of economic factors may present competitive advantages to the organizations {Woodruff1997}. Manufacturing firms in India and China, for instance, enjoy favourable labor and start up overhead costs hence gaining competitive advantage over similar US industries {Claudiu2011}. Superior marketing strategies are essential in enhancing competitive advantage {Wang2011}. In industries such as telecommunication and banking, the speed and accuracy in data processing influence customer preferences hence attracting competitive advantage {Cockburn2000}. Working capital access, arguably, is among the strongest competitive advantage sources {Claudiu2011}. Additionally, an effective management and operations team harnesses opportunities hence enhancing business success by boosting its competitiveness {Powell1992}. Finally, monopoly and entry barriers reduce the new entrants’ threats especially in cases where circumstances limit new entries {Banham2010}. Case Study Analysis In the analysis of the external environment PESTLE analysis would vividly explain the dimensions. SSO, for instance enjoys massive federal government support in promoting its operations emanating from the government’s support for the classical genre. However, the company prides in making more profits through performances for sustenance rather than relying on government funding. Economically, Sydney, where the group is located has good per capita income. Nonetheless, also hit by the global economic crises, market participation in the promotion of the band through audiences may be limited. Socially, Sydney is viewed as one of the world’s cultural centre featuring among the top 10 ‘liveable cities’ in Monocle and The Economist magazines. Additionally, in a city with a lively population of approximately 4.5 million, the social support for the SSO is massive. Technologically, with increased numbers of music download through Pirate bay and other websites, the group’s market performance is affected due to fewer live audiences or direct purchase of performance videos. With strong government support and strict adherence to legal concerns, the group’s operations face less legal interferences. Additionally, the group faces minimal environmental implications on their operations. On the other hand, the NAPCO as a private entity experience minimal direct political influence. However, the company was significantly affected by World War II. Economically, the company has been a victim of economic fluctuations that has affected the Australian cattle industry over the last 15 years. However, under improved circumstance, the Australian cattle industry relies on exportations, mostly to Asian countries. Environmental conditions related to weather and climate such as drought cause operational uncertainities. Five Forces Analysis SSO being an Orchestra group relies on instrument supplies or event organization equipments which with the target of quality presents stipulates high suppliers bargaining power. However, being the most popular orchestra group in Australia including offering one free annual event, the buyers bargaining power and the implications on the group’s performance is relatively low. Adhering to their core value and specializing in orchestra performance, the substitute products threat for the company is low. Furthermore, in the current market position of the group, setting up a similar orchestra group to effectively compete with SSO would be costly, hence, minimizing the new entrants’ threats. Finally, there being a number of orchestra groups and performances in Australia, some of which may offer cheaper rates, the group faces high industrial rivalry both locally and internationally. On the other hand, NAPCO experience high suppliers bargaining power with the aim of having quality cattle and delivering the best beef quality in market. Additionally, with local small scale farmers also available and selling to the markets, the buyers bargaining power is relatively high. However, setting up a well and fully structured industry like NAPCO would be a rather costly venture for most investors, hence, facing low new entrants’ threats. The company has for a long time focused on dealing with cattle and beef products thus facing low threats of substitute products. Finally, industrial rivalry in the sector is high with competition increasing in the exportation markets such as America. As such, NAPCO operates in a highly competitive environment. Competitive Advantage Sources To effectively compete in the highly competitive operational sectors, these entities have strategized on various techniques. To begin with, the companies strategically use high production. SSO, for example holds a number of events each year in Australia, including the free annual mega concert in Sydney. As highlighted in the study, attending their events is relatively cheaper hence affordable. As such, the group strategizes in holding multiple events in order to improve turnover and profitability. NAPCO on the other hand by increasing the number of stations and strategizing on population increase of cattle and fattening, the company aimed at increasing the production volumes. Due to high production meeting readily available markets, the company earned adequate profits from the increased sales. Secondly, customer support for both entities is evident. SSO is said to receive massive federal government support. Additionally, the group benefits from customer loyalty and a huge fan base who not only attend and pay for their events but also offer voluntary financial supports to the group to boost their operations. NAPCO despite high market competition strategizes on delivery of high products. Through establishment of a fattening station, the company aims at improving the meat quality produced with the aim of gaining customer support and subsequent competitive advantage. Evidently, effective management is key in effective market competition. Under effective patronage, the SSO group prides in the strategic recruitment of the best players in Orchestra. As such, the team prides of a formidable alliance of highly talented players who use their skills, talents and expertise to win over the audience, which in the entertainment industry grants competitive advantage. Through effective and strategic management, NAPCO benefits from effective decision making processes, which as evidenced in the study have seen the company rise from crises situations into profitability. The strategic decisions in establishment stations establishment, breeding and fattening, aim at improving product quality and delivery for competitive advantage purposes. Finally, monopoly and entry barriers are evident in the companies’ industry. In both cases, new entrants’ threats are low. This is due to the amount of time and financial capital required in setting up the structures and organizations necessary to support effective competition with these entities. As a result, the companies benefit by gaining sustainable competitive advantage. Conclusion Conclusively, external environment analysis is key in understanding the various external forces that implicate on entities market performance. With most entities targeting to earn profits and increase benefits over production costs, implementing measures that attract competitive advantage is essential {Aaltonen, 2011}. To earn competitive advantage in highly competitive sectors require strategic external market analysis and expert research in order to note the current trends with the aim of recommending and implementing changes to respond to the various market forces impacting on its operations. Additionally, companies use various strategic competitive advantage sources depending on the company’s financial positions and abilities so as to improve their market positions and performance {Claudiu2011}. PESTLE analysis framework model and the Porters five forces are various frameworks through which the external environment could be analyzed and comparisons drawn with the aim of improving organizational performance and strategic planning of management and operations. Against these frameworks, companies are able to identify their strengths and weaknesses hence suggesting various change processes and improvements, especially in highly competitive sectors. Therefore, external environment analysis is not only seen necessary for existing companies but also companies that are planning to start venturing into various markets. In this way, companies understand their market trends and what they stand up against in operation. Reference List Aaltonen, K. (2011). Project stakeholder analysis as an environmental interpretation process. International Journal of Project Management, 29(2), 165–183. doi:10.1016/j.ijproman.2010.02.001 Banham, H. C. (2010). 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