Internal Environment and Its Influence on Organisational Strategy - Essay Example

What aspects of an organisation’s internal environment are critical to the success of an organisation’s strategy? Table of Contents Introduction 3 Strategy and business environments 3 Internal environment and its influence on organisational strategy 4 Companies that successfully deployed aspects of their internal environment 6 Conclusion 6 Reference 8 Introduction The present competitive market has compelled the companies to gain competitive position in the market, thereby instigating them to constantly modify their organisational strategy as per the demands of time. These organisational strategies are formulated after taking into account the prevailing external as well as internal environment, the changes taking place in the environment, the strategies adopted by the competitors and many such factors. Often after devising a strategy with the best interest in mind, it fails to achieve the desired goal and all the hard work as well as managerial time goes into vain. This essay will deal with certain vital facts related to internal environment and strategic management. The first few paragraphs are devoted in introducing the concept of organisational strategy and internal environment. In the latter part, an elaborate discussion is conducted on the various process by which internal environment of an organisation influences the organisational strategy. Some real life examples are also discussed to understand the manner in which few companies have modified their organisational strategy as per the internal environment to gain synergy and competitive edge in the market. Strategy and business environments Different authors have nurtured different views on the concept of strategy. In general it can be concluded that strategy assists in identifying objectives which will add competitive edge to the company over its market rivals (Sutton, 1980, p.1). Organisational strategy provides a vision or direction that organisation should strive to gain competitive position over its rivals. While developing any strategy, the management should keep in mind that the strategy should be aligned with the organisation’s market position, prevailing resources and capability possessed by it. Strategy provides the guideline for resource allocation and management policies (Walker, 2003, p.4). Performance of a business is directly influenced by its internal as well as external environment. External environmental factors are those factors which are not under the direct control of the company. These include economic, political, social, technological, legal and environmental factors. Since these factors lie beyond the reach of the company, they constitute the threats and opportunities of the business (Norton, 2008, p.10). On the other hand, the internal factors which directly or indirectly affect an organisation are financial resources, physical resources, objective of business, managerial policies, work environment, corporate image of the organisation, its relation with labours, technical and R&D capability and promoters’ vision (Pride, et al., p.485-486). All these factors together constitute the business environment and influence the organisational strategy adopted by the management. Internal environment and its influence on organisational strategy Before developing a strategy, the management at first needs to conduct an analysis of the internal environment with the help of certain management tools like Porter’s five force analysis and PESTLE analysis. These tools assist in collecting vital information regarding the external market condition. The management also takes into account the internal environment of the organisation after conducting the SWOT analysis. The management finds out the internal strengths and weaknesses prevailing in the organisation and threats as well as opportunities which exist due to external factors which are not in direct control of the management. After considering all these factors the management develops its organisational strategy to gain a competitive position in the market. However, success of this strategy greatly depends on the internal environment of the organisation. As for example, if the management develops a strategy of ensuring maximum customer satisfaction, the participation of the human resource is of paramount importance in the fulfilment of this strategy. If the human resource is highly motivated and committed, they will participate with the management to achieve higher customer satisfaction but if the human resource lacks motivation it will be very difficult to achieve this organisational strategy. The same can be implied for the supply chain of the company. If the management develops a strategy to achieve cost leadership, it will be required to cut down the cost of production. The management thereby will try hard to develop backward integration with the suppliers and forward integration with the distributors. However any hurdle in the functioning of supply chain can hinder the whole strategy and organisation may not be able to achieve its goal. The same is applicable for physical and finance resources because these are vital factors which play an important role in the fulfilment of an organisational strategy. Even, marketing and R&D department of the organisation assist the company to gain a leadership position and thus possess the capability to disorient the strategy if it feels so (Norton, 2008, p.16-18). Companies that successfully deployed aspects of their internal environment There are many such real life examples where companies have introduced change in their internal environment to fulfil their organisational strategy. Two such examples are Wal-Mart and Dell. Both these companies had adopted an organisational strategy of developing low cost model. The management of Wal-Mart developed an information system to distribute information of actual sale through the supply chain. This assisted the supply chain to take real time based proactive decisions. On the other hand, Dell pioneered in direct sales channels for personal selling of the computers. This method developed by Dell was labelled as “secret sauce” and many other companies tried hard to copy it. The change introduced by Dell in its marketing policy assisted the company to become world’s largest personal computer manufacturer (Ayers, 2006, p.216). Conclusion Companies adopt organisational strategy to enhance their competitive position in the local as well as in the international market. These strategies are influenced by both internal and external business environment. As the management has no control on the external factors hence not much option is left but to accept it. On the other hand the internal factors are under the direct control of the management, therefore the management needs to control them for smooth implementation of the organisational strategy. As discussed above, managerial negligence of internal environment can result in severe consequences to the extent of failure of the organisational strategy. There are many companies that have modified their internal environment and have successfully achieved the organisational strategy. Other companies should learn from them and introduce the required changes in their internal environment. Reference Ayers, J. B. 2006. Handbook of supply chain management. 2nd ed. CRC Press. Norton, A. 2008. Integrated Management. 5th ed. Butterworth-Heinemann. Pride, W. M., Hughes, R. J. & Kapoor, J. R. 2009. Business. 10th ed. Cengage Learning. Sutton, C. J. 1980. Economics and corporate strategy. CUP Archive. Walker, G. 2003. Modern Competitive Strategy. McGraw-Hill International. Read More