Strategic Management
Module 2
Environment Analysis
Environment Analysis
The purpose of environmental analysis is to find out existing and
prospective strengths and threats, weaknesses and opportunities of
a business. Such a process helps an organization to formulate
appropriate strategies to tackle such issues in the future.
General Environment: The general
environment largely consists of the macro
(external) environment of a business
• Economic and Social
• Political and Legal
• Technological and Natural
• International
Operating Environment: The operating Environment includes
the task/micro components of a business. These are:
• Customers
• Creditors
• Suppliers
• Labour
• Publics
• Financers
• Intermediaries
Internal Environment
• Objectives
• Internal power relationships
• Human resource capabilities
• Marketing Capabilities
• Physical assets
• Research and Development
• Brand equity
• Brand image
Competitive Advantage
Competitive advantage refers to
the ways that a company can
produce goods or deliver services
better than its competitors. It
allows a company to achieve
superior margins and generate
value for the company and its
shareholders.
Building Blocks of Competitive
Advantage
Superior Efficiency
Superior Innovation
Superior Quality
Superior Responsiveness to
customers
Where does the competitive advantage come from?
• Distinctive Competencies
• Resources
• Intangible resources
• Capabilities
Diversification
Business diversification refers to the
strategic expansion of a company
into new products, services, or
markets to reduce risk, capture new
opportunities, and enhance overall
business resilience.
Diversification and its importance
Diversification Example
Why is diversification important in business?
• The company wants more revenue
• The company wants less economic risk
• The company’s core business is in decline
• The company wants to exploit potential synergies
Advantages and Disadvantages of Diversification
Related and Unrelated
diversification
Video Example
• [Link]
Mergers and Acquisitions Strategy
Difference between Merger and
Acquisition
Examples
Reasons for M&A
Benefits of Mergers and Acquisitions
(M&A)
Mergers and acquisitions (M&A) can provide numerous advantages to organisations,
stakeholders, and the business environment at large. Several significant benefits are
associated with M&A
• Economies of Scale
• Enhanced Market Share
• Diversification
• New Markets Accessibility
• Cooperation
• Improved Research and Development (R&D)
• Financial Strength
• Strategic Positioning
• Tax Advantages
Integration Strategies in Strategic Management
Integration strategies involve
a company expanding its
business by gaining control
over its distribution channels,
suppliers, or competitors.
There are three main types of
integration strategies:
• Vertical Integration
• Horizontal Integration
• Conglomerate Integration
Executing Integration Strategies
• Identifying integration opportunities that align with company goals
• Conducting due diligence to assess the strategic fit and value
• Developing an integration plan with clear objectives and timelines
• Communicating the vision to all stakeholders
• Executing the integration plan and tracking progress against
milestones
• Realizing synergies and capturing the expected value
What are Strategic Alliances
Reasons for Strategic Alliances
What is value creation in business?
[Link]
Value Creation Essentials
• Sustainable business success
• Customer satisfaction
• Competitive advantage
• Stakeholder engagement
• Financial performance
• Innovation and adaptability
Understanding the challenges faced by firms in
their strategic alliances
• Alignment of goals
• Cultural fit
• Operational integration
• Competitive dynamics
• Innovation and learning
• Exit strategy
Thank You