Strategic Management Process: Formulation and Analysis Report - BUS101

This report provides a comprehensive analysis of strategic management processes. It begins with an introduction to the PESTEL model for external environment analysis, followed by an examination of the five forces model to assess the industry environment. The report further delves into other industry factors such as consolidation, convergence, and strategic groups. It then explores internal analysis through value chain analysis and stakeholder analysis. Financial ratio analysis, including liquidity, solvency, efficiency, profitability, market prospect, financial leverage, and coverage ratios, is also discussed. The report then analyzes sustainable competitive advantage, examining resources, capabilities, core competencies, and competitive advantages. Finally, it covers strategy and strategies implementation at business, corporate, and international levels, along with 7S implementation analysis. The report is supported by references to relevant academic sources.

Running head:STRATEGIC MANAGEMENT PROCESS FORMULIZATION
STRATEGIC MANAGEMENT PROCESS FAMILIARIZATION

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I. GENERAL ENVIRONMENT ANALYSIS
A. PESTEL MODEL
This model describes the framework of the external analysis or external factors
while conducting a strategic analysis and while doing a market research and give
a brief of the overall factors that are considered. On the other hand, it can be said
that the result that is drawn by using the PESTEL Model further helpful in
evaluating the weaknesses and Threats of the business organizations. For
example, a large number of companies like PepsiCo, Apple Inc., and others
perform the internal or external environment analysis by using SWOT or PESTEL
Model analysis. This helps them in taking a good decision in favor of the
customers as well as the potential market.
Variables that built the PESTEL framework include:
Where,

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P stands for Political factors: Political Factors are the combination of different
factors which determine the extent to which a government can affect a certain
industry or the economy. For example, a new tax or duty scheme of Government.
E stands for Economic factors: The factors included in the Economic are main
determinants of an economy's performance that directly influence an organization
and have resonating long term effects such as the rise in the rate of inflation.
S stands for social factors: These are the factors that scrutinize the social
environment of the market and gauge determinants such as population analytics,
cultural trends, and demographics.
T stands for Technological factors: These are the factors that mainly related to
the innovations in technology. These factors have great potential of influencing
the operations of market and industry in positive or negative manner.
L stands for legal factors: The legal factors have mainly both internal and
external sides. Legal factors are a combination of different laws that influence the
business environment in a particular country while there are certain policies that
the organizations maintain for themselves.
E stands for environmental factors: The last and final component is
environmental factors. These factors mainly contain those that are determined or
influenced by the surrounding environment. For example, farming, tourism, and
agriculture.
It is basically the composition of all these factors.
FACTORS
 Risk factor adds to the major loss

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 Rise or fall in tax
 Level of corruption
 Environmental laws
 Compensation and company law
 Stability of the government
 Restrictions on import and export
 Intellectual property rights
 Stability of politics
II. INDUSTRY ENVIRONMENT ANALYSIS(Five forces)
It is the study done to assess the current industry environment. This exercise helps to
understand the various aspects and analyze the trends in the industry in the better
way. Basically, it is done through the external research agency or the external kind of
businesses itself. This five forces model is also known as porter five model. These
five forces include:
1. The rivalry of the industry: due to this force intense competition increases and
that leads to the profit reduction for the potential users in the same industry.
2. Threats of the substitutes: the availability of the substitute also affect the profits of
the company as consumer become indifferent among using any substitute.
3. Bargaining power of buyers: the buyers use to bargain so much as due to this the
company suffers loss as if the companies will not agree with that price then they
may shift to their competitors.

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4. Bargaining power of suppliers: suppliers demand the price that is lower to them
and tries to maximize the profit by reducing their cost.
5. Threats of new entrants: if there are any new entrants than the existing companies
suffer loss as the competition has been increased due to new entrants.
III. OTHER INDUSTRY FACTORS
CONSOLIDATION- it is the act of being consolidated, and it is the process of being
diluting the two or more companies and creating a single new creation.
CONVERGENCE-it is basically the shifting of industry perspectives like the industry
focus on their individual need or group needs, and then it starts focusing on the cross
industries, i.e., to the whole market.
STRATEGIC GROUP- it is a concept of strategic management in which the group
companies within in the industries combine with each other who have a similar kind
of nature or who are having the same combination.
IV. EXTERNAL ANALYSIS
A. VALUE CHAIN ANALYSIS
It is basically the value that is being added to its final product after getting support
from the primary and secondary activities. It represents the internal activities of a
firm which is engaged in primary and secondary activities.
AREA:
 LOGISTICS
 OPERATIONS
 MARKETING AND SALES
 SERVICES

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 TECHNICAL DEVELOPMENT
 HRM
 PROCUREMENT
B. STAKEHOLDERS ANALYSIS
Types of stakeholders can be:
 Employees and customers
 Board of directors
 Stockholders
 Partners
 Funders and donor
C. FINANCIAL RATIO ANALYSIS
There are seven main categories of ratios:
 Liquidity ratio: It analyzes the ability of the company to pay off the
current liabilities. The liquidity ratio is considered the most important and
common ratio that is also known as the current ratio. Liquidity ratio is
mainly the ratio of current assets to current liabilities. Higher the ratio
greater will be the safety cushion, and vice-versa.
 Solvency ratio: It compares debt level with the equity. The solvency ratio
mainly represents the financial stability because it evaluates an
organization debt relative to its equity and assets. The high level of debt
indicates that the company may not have the flexibility to use or manage
its cash flow if business conditions deteriorate, and interest rates rise.

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 Efficiency ratio: This ratio analyzes how well companies utilize their
assets to generate income. Generally, there are two important efficiency
ratios that are used by organizations. These are receivables turnover and
inventory turnover. Inventory turnover is mainly the ratio of cost of goods
sold to inventory, and the other is the ratio of credit sales to accounts
receivables.
 Profitability ratio: It shows income statements and ability to generate
profits from its operations. Some common profitability ratios that are
widely used by the companies to evaluate their profitability are operating
margin, gross margin, and net income margin. Combination of all these
rations jointly determines the profitability of an organization.
 Market prospect ratio: It shows what the investors should expect in return
from their investment. These ratios are mainly utilized to compare
publicly traded organizations stock prices with other financial measures
such as dividend rates, and earnings.
 Financial leverage ratios: It finds the value of equity by analyzing its debt
structure. These ratios are also known as the debt or equity ratios. These
rations either compare equity or debt to assets as well as shares
outstanding to evaluate the true value of equity in the business.
 Coverage ratio: It designed to Measure Company’s pay off liabilities. In
broad terms, the higher the coverage ratio, the better the ability of the
enterprise to fulfill its obligations to its lenders.
D. SUSTAINABLE COMPETITIVE ADVANTAGE ANALYSIS:

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1. RESOURCES AND CAPABILITIES: Low-cost provider, pricing power, and
powerful brands.
2. ACTIVITIES: value, rarity, the superiority of competition, brand recognition,
quality of the product, etc.
3. CORE COMPETENCIES: Relevance, the difficulty of coping up with the
competitors.
4. COMPETITIVE ADVANTAGES: they can achieve the advantage of external
and internal changes or even by the differentiation concept or cost advantage
5. SUSTAINABLE COMPETITIVE ADVANTAGE: Loyalty of the customers,
location is the critical factor, information and distribution system, unique
merchandising, relations with the vendor, customer service
V. STRATEGY AND STRATEGIES IMPLEMENTATION
A. BUSINESS LEVEL
1. TYPES:
 Cost leadership
 Porter's five forces model
 Differentiation
 Focused low cost
 Focused differentiation
 Differentiation strategy
B. CORPORATE LEVEL STRATEGY
1. TYPES
 Value creating strategy

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 Value neutral strategy
 Value reducing strategy
C. INTERNATIONAL LEVEL STRATEGY
1. TYPES
 Multidomestic strategy
 Global strategy
 Transnational strategy
D. COOPERATIVE
1. TYPES
 Strategic alliance
 Joint venture
 Equity strategic alliance
 Non-equity strategic alliance
 Business level cooperative strategies
 Complimentary strategic alliance
 Uncertainty reducing strategy
E. 7S IMPLEMENTATION ANALYSIS
1. AREAS
 strategy
 structure
 style
 staff
 systems

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 skills

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REFERENCES
Wheelen, T. L., & Hunger, J. D. (2017). Strategic management and business policy. Pearson.
Turker, D., & Altuntas, C. (2014). Sustainable supply chain management in the fast fashion
industry: An analysis of corporate reports. European Management Journal, 32(5), 837-849.
Schwaab, B., Koopman, S. J., & Lucas, A. (2017). Global credit risk: The World, country and
industry factors. Journal of Applied Econometrics, 32(2), 296-317.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an
integrated approach. Cengage Learning.
Peppard, J., & Ward, J. (2016). The strategic management of information systems: Building a
digital strategy. John Wiley & Sons.