BUS608 Study Guide
Unit 2: Management Strategies Analysis
2a. Examine the internal and external factors that affect a business and drive its strategies, such as available resources and organizational capabilities
- Think of a company you enjoy doing business with. How well do you think it leverages its resources?
- How might external demographic factors affect a business strategy?
- What recent events have occurred worldwide or in your country that could have been important to understanding a company's strategic direction?
To plan an organizational strategy, companies must look at internal and external factors to determine the best direction. Internal factors are characteristics of the company, such as capabilities, human resource factors, organizational design, and financial resources. A strategy will only work if the organization fully understands the internal resources it needs and the company's internal strengths. One such tool for the analysis of internal strengths is the VRIO model. This model asks the questions, before strategy formulation, that include, what value are we providing? How rare is our product or service? Is it easily imitated? Is the company organized in such a way that allows it to capture value?
External factors are those things that may impact the business but things the business does not have control over. This can include demographic, natural, economic, political, cultural, and technological factors. One major external factor to consider is the competition. In hypercompetitive markets, companies try to leverage competitive advantages in several ways, such as stakeholder satisfaction, positioning for speed, positioning for surprise, and leveraging the firm's capabilities to gain advantages.
Figure 2: External and internal factors
According to resource-based theory, organizations that own "strategic resources" have a significant competitive advantage over those that do not. Some resources, like assets such as cash and trucks, are not considered strategic resources because the organization's competitors can easily acquire them. Instead, resources are strategic in that they are valuable, scarce, difficult to imitate, and organized to unlock value. Figure 3 below illustrates how the VRIO framework can be used to evaluate an organization's resources.
Figure 3: VRIO framework
To review, see Understanding the Competitive Environment, D'Aveni's Framework, and The Internal Environment.
2b. Identify the components of well-written mission and vision statements
- Why do you think a mission statement is important to write before determining the organizational strategy?
- How do organizations tie ethics and social responsibility into their vision statements?
- What makes a good mission statement? A good vision statement?
Before companies formulate their strategy, they need to understand the importance of mission and vision statements. A mission statement describes what a firm does or wants to do now. The mission statement is more focused than a vision statement because it describes how an organization will accomplish its vision. Some characteristics of a good mission statement include conciseness, inclusiveness, and being outcome-oriented.
A vision statement is focused on being aspirational and describes what a company hopes to do in the future. A vision statement is broad and answers the question "why do we exist?" A good vision statement should be understood and shared by members of the community, broad enough to include a diverse variety of local perspectives, inspiring, uplifting, and easy to communicate.
Mission and vision statements serve three important roles. It communicates the organization's purpose to stakeholders, informs strategy development, and develops measurable goals and objectives against which the success of the organization's strategy can be measured. Figure 4 summarizes these interdependent and cascading roles and the relationships between them.
Figure 4: Roles of Mission and Vision Statements
To review, see Value of an Organizational Vision and Mission, The Difference between a Vision and a Mission, and Vision, Mission, and Goals.
Unit 2 Vocabulary
Be sure you understand these terms as you study for the final exam. Try to think of the reason why each term is included.
- external factors
- internal factors
- mission statement
- vision statement