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BBA 4951, Business Policy and Strategy 1
Course Learning Outcomes for Unit III Upon completion of this unit, students should be able to:
3. Analyze external and internal audit processes.
9. Assess the strategy evaluation process.
Reading Assignment Chapter 3: The External Assessment Chapter 4: The Internal Assessment
Unit Lesson External Assessments During this unit, we will explore the factors that impact an internal and external assessment. Let us begin with the external assessment. To effectively develop a successful strategic plan, the organization must be aware and adapt to the external environments. These environments include identifying and incorporating trends affecting their stakeholders. These trends can shift and be affected by the economy, competition, tax burdens, and many other factors. Take a look at the “PetSmart Inc.” case study on the bottom of page 60 of your course textbook. PetSmart is a large pet retailer with numerous stores located across the country. You may have been to a PetSmart and even taken your dog or cat into PetSmart for one of the services they provide. This retailer could be described as a box store with a large amount of square footage (12,000 to 20,000 sq ft.). Please consider the sustainability of the large box store concept with the ever-competing Internet-based companies. Do you feel this type of store would be practical five years, 10 years, or 20 years from now? Would it behoove PetSmart to quickly increase its Internet presence? In 2013, PetSmart began allowing customers to make online appointments; do you think this will be enough for PetSmart to compete long-term? Let us also consider external assessments outside of the United States. What happens when a company has reached its fullest potential within the United States? Should they remain steady, or should they seek global opportunities? Many organizations to include retailers, fast food, and other entities have expanded internationally to grow their companies. Examples include Starbucks, McDonalds, and Walmart, which can be found in many different countries. In addition, you may notice outside companies expanding within the United States. A prime example is Ikea, who continuously grows their North American operations. Organizations also consider the economic outlook before proceeding with development in a country. For example, China has had a decade long economic boom, and many corporations have taken this opportunity to expand into new territories, thus increasing our overall reliance on a global-based community. Take a look at the chart located on page 65 of your textbook—Table 3-2 Advantages and Disadvantages of a Weak Dollar for Domestic Firms. Which do you think is more beneficial for a domestic organization? A strong or weak dollar? The video below explains how Subaru America has adapted to the changing external environment. Watch the video, and make note of the external environment and shifts made. Subaru America: The external environment. (2012). [Video file]. Retrieved from
http://media.pearsoncmg.com/pls/al/csu/1323590498/strat2012_subaru_external.html
UNIT III STUDY GUIDE
External and Internal Assessment
BBA 4951, Business Policy and Strategy 2
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The first external factor that you may notice is a change in the type of car that is popular. Subaru noticed an increase in SUV popularity and noted that consumers liked the SUV style but still wanted the drive to feel like a traditional car. So, Subaru’s response to this was to market cars that fit this style, such as the Subaru Outback, which fits that trend quite well. The second external factor you may notice is that customers are becoming more environmentally conscious. Subaru has noticed that customers expect more “green” products, and because Subaru has traditionally been a company that produces small cars, they know they can gain a competitive advantage by marketing cars with increased fuel economy. Subaru also noted that, while they study the daily external changes, they do not act on each one. Because trends can change rapidly, it is safer to focus on the long-term strategies. One external factor that has become increasingly important is social media. Customers want companies to be reachable and share information with them. For example, a Facebook page can not only promote upcoming sales but create a community feeling with customers. Subaru even noted that customers can help promote products; “Customers are your best advocates. They’ll do it for you, if you allow them (“Subaru America,” 2012, 6:29). Social media allows companies to connect with consumers on a level that was previously unattainable. Other external factors often affecting a corporation include political, governmental, and legal challenges both domestically and abroad. One issue with a clear divide is minimum wage and a living wage. The minimum wage is determined by the government, while a living wage can be influenced by the corporation and other competing factors. Another governmental external factor is the Healthcare Reform Act, which requires corporations to provide health insurance for their employees. This cost can be expensive to the company and is generally passed on to consumers and also may decrease the overall salary of the employee. Another challenge is deciphering whether to tax or not to tax Internet commerce. Many states feel they are losing out on needed revenue due to the tax free association with Internet sales. Some states have lobbied and passed bills to formally tax all Internet sales transactions. Amazon.com has been an opponent of taxation but must abide by the state requirements. As we have learned, the external assessment can be a very powerful tool if approached with the correct perspective. If the external assessment is used in a punitive way to restructure leadership or redesign the business structure, we have missed the boat on the real power of the external assessment. As leaders, we need to have a general understanding of the industry and be able to identify areas in which competitors are vulnerable and be able to predict potential moves that competitors might make that could be a threat to us. Successful businesses are constantly looking in the rear view mirror while, at the same time, looking well into the economic future (David & David, 2015). The key is to constantly be aware of the needs of the customer. “When customers are concentrated or large in number or in volume, their bargaining power represents a majority force affecting the intensity of completion in an industry” (David & David, 2015, p. 76), thus the external assessments utilized by the business need to be sensitive to the consumer. Internal Assessments There is not a one size fits all related to an internal assessment of an organization. There are multiple types of organizations to include colleges, hospitals, retailers, and government. These entities all function differently and often need a customized assessment to truly assess their performance. An internal audit is the organization’s self-evaluation of their strength and weaknesses. The audit can better illustrate how an organization’s departments are incorporated and how modifications and updates can be implemented. It is also just as important to ensure the organization properly communicates their intent and expectations of an audit to their employees. Every organization has an organizational culture. Let us use an example of the U.S. Armed Forces; the Army and Air Force have a very distinctive culture, even though they are both on the same side and work toward the same goals. An organizational culture is defined by a pattern of behavior that an organization has developed to handle a problem or external threat. New members coming into the organization will often be integrated into the organization’s culture, thus continuing the pattern of behavior. These examples include ceremonial, values, beliefs, and rituals.
BBA 4951, Business Policy and Strategy 3
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Management and Marketing There are five main characteristics related to the activities of management. These include planning, organizing, motivating, staffing, and controlling.
Function Description Stage of Strategic
Management
Example
Planning Preparing for the future.
Strategy formulation
Planning for the next release of a product or service.
Organizing Job description, control and coordination.
Strategy implementation
Coordinating the efforts to release the product to include where and how.
Motivating Shaping human behaviors
Strategy implementation
Encouraging the company’s sales associates to become excited and motivated by the release of the new product. This excitement will trickle down to the consumer and other stakeholders.
Staffing Human resource management
Strategy implementation
Identifying the right personnel for the organization to include implementers, managers, and leaders.
Controlling Results oriented, rewards, sanctions
Strategy evaluation
Identifying goals and rewards for top sales person(s) for the new product release.
Marketing Marketing includes the process of creating and fulfilling a customer’s needs and wants for a particular service or product. Let us use an example of the energy drink “Red Bull.” Who are the commercials targeting for this beverage? The target audience can be a demographic of adventurous young adults who are seeking new challenges. The commercials promote that Red Bull “gives you wings,” thus you will feel a huge rush of energy and will have the ability to keep going well into the night. Red Bull must also consider pricing and distribution in an effort to remain relevant and profitable. For example, do you feel Red Bull would be a drink of choice at an affluent sushi bar, or would this drink be more appropriate at a sporting venue or a late night concert? Domino’s is a great example of how marketing can be used to a company’s advantage. Watch the video below, which explains how Domino’s changed their pizza and how they marketed the new change Domino's Pizza: Managing marketing information full. (2013). [Video file]. Retrieved from
http://media.pearsoncmg.com/pls/al/csu/1323590498/mktg2013_dominos_information_full.html Upon their internal assessment, Domino’s discovered that their pizza was not as well liked as they had thought. In fact, there were some pretty negative comments. Domino’s decided that they could use this feedback to their advantage by creating a new recipe and advertising strategy. Once the new recipe was created, Domino’s created a two-part advertising plan. First, they gave their original pizza to a test group and shared the truth about their pizza—that it was not very tasty. Although telling consumers the truth may seem risky, they were showing their audience that they care about their feedback and will use it to improve the recipe. Next, they decided to share their new pizza with the same test group and show their reactions. This was a success, and people loved the raw truth. This advertising plan combined with their new tag line, Oh yes we did, not only increased sales but also increased product perception. Domino’s not only improved their product but connected with customers. What other companies can you think of that have done something similar?
BBA 4951, Business Policy and Strategy 4
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References David, F. R., & David, F. R. (2015). Strategic management concepts and cases: A competitive advantage
approach [VitalSource Bookshelf version] (15th ed.). Retrieved from https://www.vitalsource.com/textbooks?term=9780133740356
Domino's Pizza: Managing marketing information full. (2013). [Video file]. Retrieved from
http://media.pearsoncmg.com/pls/al/csu/1323590498/mktg2013_dominos_information_full.html Subaru America: The external environment. (2012). [Video file]. Retrieved from
http://media.pearsoncmg.com/pls/al/csu/1323590498/strat2012_subaru_external.html
Suggested Reading The chapter presentations below will provide you with additional information on this unit’s concepts: Click here to access the PowerPoint version of the Chapter 3 presentation. Click here to access the PDF version of the Chapter 3 presentation. Click here to access the PowerPoint version of the Chapter 4 presentation. Click here to access the PDF version of the Chapter 4 presentation.
Learning Activities (Nongraded) Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit them. If you have questions, contact your instructor for further guidance and information. If you would like to practice applying external assessment measures, consider completing the simulation below. In this simulation, you act as Gerlack Publishing, a company selling textbooks to Colorado public schools, and you must consider how the schools are changing in order to create an action plan. You will receive feedback immediately, and you will then create a guideline on how you can improve your strategy: Simulation: The marketing environment. (n.d.). Retrieved from
http://econdip.pearsoncmg.com/atm_sims/mk_07.html