comprehensive and integrated plan that relates the advantage of the firm and

Comprehensive and integrated plan that relates the

This preview shows page 28 - 30 out of 95 pages.

comprehensive and integrated plan that relates the advantage of the firm and challenges of the environment and that is designed to ensure the basic objectives of the enterprise are achieved through proper execution by the organization. Strategy is the response of the firm to external environment. Strategies create a fit among company’s activities. The success of a strategy depends on doing many things well - not just a few- and integrating them. If there is no fit among activities, there is no distinctive strategy and little sustainability. The company’s activities include its effective interaction with the environment in that these activities are geared towards serving external environment (Porter, 1998). Strategy is a large-scale, future oriented plan for interacting with the competitive environment to achieve company objectives. It is the company’s game plan (Pearce and Robinson, 2003). While it does not detail all future development of resources, it provides the framework for managerial decisions. A strategy reflects a company’s awareness of how, where and when it should compete and for what purposes it should compete. The underlying issue of this definition is that the main thrust of strategy is to achieve long-term sustainable advantage over the other competitors of the organization in every business in which it participates. It recognizes that competitive advantage results from a thorough understanding of the external forces that impact on the organization. The forces of external environment are so dynamic and interactive that their impact on any single element cannot be wholly disassociated from impact of other elements. Suave (2002) argued the environment is a critical factor of any organizations survival and 16
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success.. The impact of the general environmental forces tends to surface more in the immediate industry the organization is operating in. Johnson and Scholes (2003) defined the industry as a group of firms producing product or services that are close substitutes to each other. An organization has to understand the competitive forces acting within the industry it’s operating in. These forces are used to estimate the profit potential of a market segment and consequently determine the attractiveness of the industry and the way organization may those to operate. These form the basis to decision in the strategic process adopted to gain competitive advantage over players within the industry. The essence of formulating strategy is relating a company to its environment. Therefore analysis is crucial to the outcome of the total planning process and a major part in the diagnosis of the external environment (Swaan and Waalewijn, 2005). Several tools and techniques have been developed to assist planners in the evaluation and in particular the assessment of profit potential of the industry. Michael Porter’s competitive forces model by far is the most widely used framework. These forces constitute bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitutes, and competitors’ rivalry. A sixth force, namely ‘other stakeholders’ indeed exists. The
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