Business Strategy DP

Both internal and external factors tend to influence business success significantly. A business's success highly depends on identifying internal and external environmental factors affecting the business. Internal environmental factors are those that tend to affect the business from within. They involve components of the business environment comprising various elements that affect or get affected by the decisions, activities, and choices the organization management takes. Essentially, the internal environment is the organization's events, factors, culture, and members capable of influencing its overall decisions (Sherman, 2019). In particular, the most affected element is typically the human resource which plays a crucial role in the organization's internal factors. On the other hand, external factors include aspects that are beyond a business's control (Sherman, 2019). It is the environmental factors found within the business's surroundings and those that demand the business to work around rather than striving to change them. The paper will be focusing on both internal and external environmental factors and how they influence and shape organizational strategies.

               The framework of AFI strategic planning is a model that connects three interdependent tasks of strategic management. These include analysis, formulation, and implementation. In essence, the organization should be in the position of working or combining the three tasks to improve the company's performance and result in its competitive advantage in the long term. The analysis will help the company understand its performance status under external environmental factors such as macro-level environment, industry environment, and competitive environment (Nonthanathorn, 2021). Besides, it will enable the company leadership through VRIO analysis to understand its internal analysis, including identification of capabilities, competencies, and resources and identification of value chain primary and support activities.  

               Based on the analysis value, the organization has adequate and potential resources to win its competitive advantage over a long-term perspective. The company maintains quality production of its products and services, thereby enhancing customer satisfaction and numbers to its stores. However, its products are not rare since competitors produce or sell similar items. It has a strong brand name that increases its sales regardless of having stiff competition from its major rivals. Moreover, the company's products are imitable, meaning other organizations can easily imitate them to make similar sales to the same customers (Nonthanathorn, 2021). In essence, this can hurt the organization's sales in the future due to the shared number of customers across the market. The organization management is subdivided into three levels: top-level managers, middle-level managers, and low-level managers. This is essential as it allows efficiency and effectiveness in the flow of information and directives from the top senior executives to their subordinates and vice-versa.

               The organization effectively leverages its strengths in executing the AFI strategy framework. It differentiates its products from its competitors through a differentiation strategy by collecting adequate data from its potential markets. With its recognized brand, the company's differentiation strategy helps it win premium customers with the preference of quality over price. It heavily invests in its research and development to ensure it achieves accuracy, which is essential for the decision-making process (Goggin, 2021). It takes loans from banking institutions to finance the process of research and development as well as for financing its assets. Furthermore, the organization structure is designed in such a way that each employee is allocated to their respective responsibilities following their specialization. Besides, its management system is based on democratic whereby all stakeholders, including the employees, are often involved in the decision-making processes. This makes the employees satisfied, thus improving their performance and productivity level.     

               Political: this is one of the significant external factors that significantly affect the organization's operations and activities. Some of these factors include leadership, internal political issues and trends, government policies and regulations, and tax policy. Changes in state business regulations and policies, for instance, tend to influence the pricing strategy of its products.

               Economic Factors: Current and projected economic growth, interest rates, and inflation also affect the organization's business operations and activities. Unemployment and job growth also tend to impact the company's labor cost. Globalization also affects the organization's sales by determining the consumers' disposable income and spending power.

               Social Factors: factors such as population demography influence the location of its business settings. For instance, it tends to target the middle-class age because most of its products are designed to fit the desire of people between the ages of 18 – 35 years old. Also, it focuses its marketing strategy on high-class living standards who prefer quality over price.

               Technology: the company is driven by advanced technology in its operations. Particularly in the production sector, the organization has invested significantly in advanced equipment, thereby increasing its production rate while maintaining the desired quality.

               Legal: the company ensures it abides by the employer and employee laws and regulations to avoid lawsuits and other factors that may result in significant losses. For instance, it offers equal opportunities to all its employees regardless of their race, ethnicity, and gender. It also ensures that its workforce members are paid appropriate wages and benefits allowance as stated by the state or federal laws and regulations.

               Supplier Power: the company has good communication with its suppliers. This is essential because it enables the company to control the cost of raw materials by negotiating prices.

               Buyer Power: the company tends to control its buyers' prices for its products by improving their quality. This, in turn, helps it to meet the premium customers' demands to satisfaction.

               Competitive Rivalry: the market in which the company operates is highly competitive since it shares similar products and customers. However, its differentiation strategy can distinguish its products and services to a certain group of potential customers.

               The Threat of Substitution: the company also experiences the challenges of dealing with alternative products from other related industries. This makes it possible for customers to switch to alternative items in response to high prices, thereby reducing its customers' number.

               The threat of New Entry: profitable markets are typically attractive to new entrants. The organization market is highly profitable, attracting more new entities to join the industry. As a result, the rate of competition increases, which reduces the number of employees visiting its stores.

To respond to the forces, the company can continue improving its differentiation approach to ensure its products remain to be distinctive from its major rivals. It should also improve its quality products to keep and increase its premium customers.

               Effective leaders perform the primary assignments in strategic making and execution. They have a role in developing strategic vision and mission, setting objectives, and the overall organizational goal. Moreover, they play the role of crafting and executing the strategies and evaluating the process performance over the long term (Jabbar, 2015). They are responsible for ensuring the organization's plan focuses not only on its interests but also on the interest of all stakeholders involved. They are also responsible for involving the organization workforce in the decision-making processes, especially those that entail their workplace improvement (Rothaermel, 2021). This is to ensure the organization's processes and communication are conducted transparently.  

References

Goggin M. (2021). Explaining The VRIO Framework (With A Real-Life Example). Retrieved from;

https://www.clearpointstrategy.com/vrio-framework/

Jabbar A A, Hussein A M. (2015). Role of leadership in the strategic planning process. Retrieved from;