reply to another students discussion board post 5
Please Draft a reply to another students discussion board post. It should have 3 references in the reply. Here is the original post you are replying to:
Introduction
The external environment creates additional concerns for the development of business strategy (Gable, Peteraf, & Thompson, 2019). The PESTEL analysis can help an organization determine the degree of influence that external factors have to create a competitive advantage (José Geraldo, Et. al., 2017). However, power and competitive advantage are only part of the consideration, value and the creation of demand play an important role (Rumelt, 2011).
Process: Evaluating the External Environment
The operational environment of an organization can be influential upon that organization’s strategy. External factors can be summed up in two categories, macro-environmental, and Industry/Competitive advantage (Gable, Peteraf, & Thompson, 2019). Industry factors and those relating to an organization’s competitive advantage can be discerned through looking at the five competitive forces, buying power, substitute products, supplier power, new entrants, and rivalry among sellers. A stringent examination of the five forces will give the organization a clear understanding of potential profitability or growth potential in a given space (Gamble, Peteraf, & Thompson, 2019).
The evaluation of the external macro-environment can be evaluated through the use of a PESTEL (Political, Economic, Sociocultural, Technological, Environmental and Legal factors) analysis (Gamble, Peteraf, & Thompson, 2019). The PESTEL analysis looks at macro-economic factors that would influence the business strategy and helps the organization define the degree to which each factor could influence the overall business strategy (Gamble, Peteraf, & Thompson, 2019). The need for the PESTEL analysis resulted from an observed need to define external factors that influence business behaviors (José Geraldo, Et. al., 2017).
The necessity of change in each market drive innovation and advancement of technologies. The identification of driving forces and key success factors in a given market are guideposts for which an organization can develop and guide their strategic thinking (Gamble, Peteraf, & Thompson, 2019). The organization must factor in these considerations in conjunction with a PESTEL analysis, and the impact of market forces (Gamble, Peteraf, & Thompson, 2019).
Strategic Thinking: Discussion of a Key source of Power / Weakness
A key source of power in business strategy is the concept of competitive advantage, specifically in the creation of value (Rumelt, 2011). While competitive advantage can increase profitability by increasing demand, it is not directly influential to customer buying habits but rather acts within the higher market dynamic. The competitive advantage seeks to create customer value (Rumelt, 2011). That value is created through:
- “Deepening advantageâ€
- “Broadening the extent of advantagesâ€
- “Creating higher demand for advantaged products or services orâ€
- Strengthening the isolating mechanisms that block easily replication and imitation by competitors†(Rumelt, 2011, Pg. 169).
The creation of demand requires a finite amount of resources to remain stable in the market, a scarce resource is the driving factor behind the ability to increase demand. Rumelt (2011) discusses the use of pomegranate trees and the heavy marketing applied to the use of pomegranate juice which at the time was a largely unknown crop. The engineering of demand through marketing the scarce resource as a health drink “POM†led to dramatic increases in demand and the expansion of the pomegranate fields. In this way a scarce resource was identified, and the demand created to generate a competitive advantage leading to increased profits and expansion.
Decision Model
The black swan model refers to the unlikely outcome of a variable. It looks at what could happen in terms of the unexpected and shows that events can occur outside the norms of cause and effect (Krogerus, & Tschäppeler, 2018). This is especially important to consider when looking at external factors of influence to business strategy, when an organization is unable to control external variables, they must be able to consider all available circumstances and outcomes, even the unlikely (Zweig, 2009. Another decision model that could be used is the buyer’s decision model to guide the decision of how to create competitive advantage by looking through the eyes of the consumer (Krogerus, & Tschäppeler, 2018). The buyer’s decision model takes into account research, lower expectations, the future consequences of the decision, and the option to let someone else decide (Krogerus, & Tschäppeler, 2018).
Conclusion
In conclusion, the external environment creates concerns for business strategy (Gable, Peteraf, & Thompson, 2019). The PESTEL analysis and other market analysis tools are able to define market conditions and aid in creating competitive advantage (José Geraldo, Et. al., 2017). Competitive advantage is only part of the consideration as the creation of value and demand through marketing strategy play an important role (Rumelt, 2011).
Annotated Bibliography
José Geraldo, L. L., Luiz Carlos Brasil de,Brito Mello, João Carlos Correia Baptista Soares,de Mello, Eduardo Picanço Cruz, & Carlos, N. F. (2017). Using the MACBETH method to improve the scenario analysis tool PESTEL in large civil construction projects. Dyna, 84(203), 322-327. doi:http://dx.doi.org.ezproxy.liberty.edu/10.15446/dyn…
This article discusses in depth the PESTEL analysis in terms of business strategy. PESTEL is an acronym for Political, Economic, Social, Technological, Environmental, and Legal, referring to the methods of external influencers on the market. The application of PESTEL through the use of computer software “MACBETH†aids in the logical analysis of market conditions pertaining to civil engineering based upon the expected influence of each variable and its impact on the decision. The author discusses the application of PESTEL to strategic development and the differences between a PESTEL analysis and SWOT (Strengths, Weaknesses, Opportunities, and Threats).
While the direct application of strategy development in this article is specific to civil engineering the principals and application of PESTEL are the same in business strategy development. The author discusses the development of PESTEL as a result of a conference in Brussels on the concept of Multiple Criteria Decision Making.
This article was published by the National University of Columbia in DYNA an engineering and mining publication that has been in print since 2011. The publication references nineteen other works and is supported by much of the Rumelt (2011), and Gamble (2019) readings. The authors have published twenty-five other scholarly journal entries in total.
Due to the depth that the authors go into regarding the PESTEL analysis, this article is supportive of looking at external factors to business strategy. The author references the application of PESTEL to strategy and strategic development. This article provided an in depth look at the concepts provided by PESTEL and the application of them in a different but similar situation as business strategy development.
Zweig, J. (2009, Jan 29). The intelligent investor: Why stock-market predictions keep missing the mark — ‘black swans’ are impossible to foresee, but professors try to develop a method to chart future results. The Wall Street Journal Asia Retrieved from http://ezproxy.liberty.edu/login?url=https://searc…
This article looks at the importance of understanding black swans which the author defines as hugely important but rare, unpredictable and only explainable after the fact. The author discusses that the identification of a black swan event is difficult to define due to the fact that they are unpredictable and sudden. The application of the black swan event in this text specifically refers to the stock market and investing. While the decision model refers to the black swan as a decision-making tool, this article refers to the black swan in terms of an event. The application of the black swan as an event and as a planning a preparation tool are essentially the same school of thought, to prepare or expect the unexpected.
This article was published in The Wall Street Journal Asia, in 2009, which has been in publication since 1991. The author has 1,944 separate publications listed on ProQuest, many of which are in the Wall Street Journal Asia, some of which are in Money Magazine, and Forbes Magazine. This lends huge credibility to the author.
This article fits into the discussion through the application of the black swan principal. The article expands upon the Black Swan principal as a decision-making tool that is referenced in the Krogerus and Tschäppeler text (2018). It lends more depth to the discussion and application of Black Swan in terms of stock market volatility.
References
Gamble, J., Peteraf, M., & Thompson, A. (2019), Essentials of strategic management, McGraw – Hill Higher Education (6th ed.), New York, NY. ISBN: 9781259927638.
José Geraldo, L. L., Luiz Carlos Brasil de,Brito Mello, João Carlos Correia Baptista Soares,de Mello, Eduardo Picanço Cruz, & Carlos, N. F. (2017). Using the MACBETH method to improve the scenario analysis tool PESTEL in large civil construction projects. Dyna, 84(203), 322-327. doi:http://dx.doi.org.ezproxy.liberty.edu/10.15446/dyn…
Krogerus, M., & Tschäppeler, R. (2018), The decision book: 50 models for strategic thinking., W. Norton & Company, Inc. (Revised ed.), New York, NY. ISBN: 9780393652376.
Rumelt, R. (2011), Good strategy/bad strategy: The difference and why it matters., Crown Business, New York, NY. ISBN: 9780307886231.
Zweig, J. (2009, Jan 29). The intelligent investor: Why stock-market predictions keep missing the mark — ‘black swans’ are impossible to foresee, but professors try to develop a method to chart future results. The Wall Street Journal Asia Retrieved from http://ezproxy.liberty.edu/login?url=https://searc…
