Importance of Strategy in Business Environment

Environment is defined as something external to an individual or organization. From this angle, business environment refers to all external factors which will influence the activities of business. However, some experts have used the term “environment” in a broader sense. They defined business environment as external and internal factors that have direct or indirect influence on business or business activities. Business environment consists of all the factors that affect a company’s operations, actions and outcomes. It is comprised of macro environment and micro environment, the former includes legal and political environment, social environment, economic environment and technological environment, and the later includes customers, competitors, stakeholders, suppliers, banks and so on.

Strategy is a action plan designed to achieve a particular goal. It is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a changing environment, to meet the need of markets and to fulfill stakeholder expectation. Nowadays this is the competitive business environment in which we need to do planning in a large scale. The firm should be engaged in strategic planning which defines the objectives, progress and implementation of strategy and should make adjustments as to stay on track.

The SWOT analysis is an extremely useful tool for analyzing and understanding all sorts of business and organization’s terms and situations. The SWOT analysis stands for Strengths, Weaknesses, Opportunities and Threats. The SWOT analysis provides the framework to review the strategy, direction and position of the company or an organization, or any other idea. The SWOT analysis can be use for the business strategy, business planning, marketing, competitor’s evaluation, business and product development and research reports. The first two factors, Strength and Weaknesses are the internal factors and concerned with the organization and the other two factors, Opportunities and Threats are the external factors which are largely identified by the PESTEL analysis.

The organizations operate within a competitive business environment. In the organization, the business related people analyse its competitors not only enable the organization to identify the strengths, weakness, opportunities and threats of their own organization to compare their organization with their competitors to compete and analyse the situation of the business. SWOT analysis is the way of analysis to analyse the factors and the strategy or planning of the organisation.

The PESTEL analysis measures the business’s market according to the external factors; Political, Economical, Social and Technological, Environmental and Legal. The PESTEL analysis is more helpful and external factor as compare to the SWOT analysis. The PESTEL analysis is a useful measurement tool for understanding the external environment of the company and market growth or decline which shows the direction of the business whether it is growing or declining. PESTEL analysis provides the environmental factors to tackle the problems through public relations techniques which effecting the organization. This analysis helps to find out or identify the issues which affect the organization’s political, economic, social and environmental angles.

Michel Porter (1990) proposed a model that called the “National diamond” model. It identifies four characteristics related to the firm, its strategy and all the environment. Porter’s model has the proper way to describe how the company and it competitive have shapes and how they can cope with these. Among the countries , this analysis shows the differences in the system. These system may be environmental and can be business environment. Particularly, this model is based on the premise that government can play an active and constructive role to maximize the level and growth of the nation’s living standard. In which economic role of the company is idealistic. National characteristic divide into two factors macro-level and micro-level. Macro-level factors are institutions like the political, legel and market systems and government policies to support businesses. Micro-level factors have the ability of nation company to grow up and get the awareness of competencies and competitive strategies that how can make a strategy to achieve their goal successfully. The company’s best strategy and planning make the company successful and role model in the business world. This model has the significance effect on the business market. This framework helps the company to make the best plan and strategy to get better result to make a position in the market.

The basic thing of competition in an industry is affected by the Porter’s diamond four factors. However, these factor demonstrate that how firm cope in the market unless the structure of the company will also not play the affective and important role in the market. There is an economic theory which allocate the performance and structure of the company. In the organization, according to this model, would be expected to compete and make higher profits. However, as the researchers conclude that the important factor of competitive behavior is history and culture of the organisation.

The Porter’s model is to understand the strategy and it is a simple tool to analyse. The power of the business lies in a business situation and this model help to analyse the strength of a firm. The achievement of goal by having the access to meet all the requirements from the company.

Porter’s model also identify new products, services or business which have to be profitable. However, it also may help to understanding the basic level. It is important to understand that this model has limitations in market environment or relatively market structure. This strategic framework helps for the SWOT and PESTEL analysis. This approach can be used for every business model. Some issues of this model are very important for the organization to build long-term business strategy during implementation of this model.

There is no particular competitive strategy to achieve success at all times. Because sometimes the company have to face a lot of problems and competitors in the market. Risk attitudes also change and vary by business situations and environmental uncertainty and several internal and external conditions which may weak the business situations.

There are the main considering points which consider the strategy of the market. These point are four p points like product, place, price and promotions. These point may help to make decisions and to make the business strategy. It consult the customers demand. Price of the product consider in this strategy. Product design, model, shapes etc also consider and allocating the market product. In many organisation there should be shape, size and order processing which are important.

Pricing is the complex issue because it is related with the cost, volume and tradeoffs. Pricing policy changes to get the competitors response which is usually hard for all the participants.

Marketing has received a greater attention in the competitive business since modern era and marketing has concentrated on the modern types of strategy to promote their product selling. The old concepts carried out for the product and considered marketing to selling and promotion according to new style and demand of the customers to satisfy their customers and seek to earn more profit through customer satisfaction.

With the increase in the pressure of external threats, companies have to make clear strategies and implement them effectively so as to survive. There have been companies like Martin Burn, Jessops, etc that have completely become extinct and some companies which were not existing before they became the market leaders like Reliance, Infosys, etc. The basic factor responsible for differentiation has not been governmental policies, infrastructure or labor relations but the type of strategic thinking that different companies have shown in conducting the business

Strategy provides various benefits to its users:

  • Strategy helps an organization to take decisions on long range forecasts
  • It allows the firm to deal with a new trend and meet competition in an effective manner
  • With the help of strategy, the management becomes flexible to meet unanticipated changes
  • Efficient strategy formulation and implementation result into financial benefits to the organization in the form of increased profits
  • Strategy provides focus in terms of organizational objectives and thus provides clarity of direction  for achieving the objectives
  • Organizational effectiveness is ensured with effective implementation of the strategy
  • Strategy contributes towards organizational effectiveness by providing satisfaction to the personnel
  • It gets managers into the habit of thinking and thus makes them, proactive and more conscious of their environment
  • It provides motivation to employees as it paves the way for them to shape their work in the context of shared corporate goals and ultimately they work for the achievement of these goals
  • Strategy formulation and implementation gives an opportunity to the management to involve different levels of management in the process
  • It improves corporate communication, coordination and allocation of resources

With all the benefits listed above, it is quite clear that strategy forms an integral part of an organization and is the means to achieve the end in an efficient and effective manner.