Discussion Reply: External Environment, Power / Weakness, and Decision Models

Shannon M. Evans

Liberty University

BUSI 770 – Strategy Formulation & Strategic Thinking

June 2, 2024

Author Note

Shannon M. Evans

I have no known conflict of interest to disclose. Correspondence concerning this article should be addressed to Shannon M. Evans.

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 Introduction

            This third week of discussion underscores the practical significance of a company's external environment. With diverse sources of power and weakness, the economic and industry environments shape a company’s strategic direction and decision-making and influence its overall success. Therefore, evaluating decision models and considering their impact on strategy development is not just important but crucial. This discourse focuses on practical aspects of external environment assessment, strategic thinking about strengths and limitations, and decision-making tactics.

Process: Evaluating the External Environment

           Evaluating the external environment is a complex yet vital analytical business process. It involves understanding the dynamic environmental factors crucial for a firm’s leadership to consider when making decisions. The environment can provide a firm with opportunities to procure the necessary resources for productivity to increase internal capabilities. A healthy firm results from expanding or extending capabilities that give it a superior offering (Rumelt, 2011). Conversely, negative influences from the external environment can threaten to impair organizational performance. These threats must be uncovered before they turn into weaknesses. The information acquired from analyzing the collective and competitive landscapes is invaluable to strategic formulation. This process often involves a PESTEL analysis, which assesses the strategic relevancy of political, economic, sociocultural, technological, environmental, and legal or regulatory facets within the firm’s operating location (Gamble et al., 2024). Identifying and diagnosing critical factors with the potential to impact the firm is essential for revealing threats and opportunities that can adversely affect or advance the organization. Indeed, understanding the economic conditions where the company operates is vital. Equally crucial is industry knowledge. Competitive pressures are created from existing and new entrant rivals stemming from market positioning moves for increased competitive advantage, supplier-buyer cooperative negotiations, and the imitative ancillary offerings from peripheral industries (Gamble et al., 2024). The power of these immediate and bordering competitive pressures can make companies vulnerable. Therefore, gaining as much analytical data as possible can prevent challenges or help leadership prepare for potential problems.

Strategic Thinking: Key Source of Power/Weakness

            Suggestive sources that bring power or create weakness are distinct to the organization and relative to immediate and adjacent industries. An organization’s identity is significant in strategic planning because it is distinctive to the business vision and purpose driving strategic thinking. Its internal capabilities are vital as a power source for organizational growth. The ability of a firm to harness its environmental resources is significant for progress. On the contrary, weaknesses can be averted if the organization knows of impending events that could threaten the firm. Rumelt (2011) points out that a firm’s understanding of its rival's inertia has near equal significance to knowledge of its strengths – citing examples of Netflix pushing beyond Blockbuster, who refused to abandon brick-and-mortar storefronts, and Microsoft’s slow software improvements to mobile phones creating openings for Apple and Google to emerge. Moreover, Bereznoy (2019) adds how Blockbuster’s delayed action to the internet upsurge forced the billion-dollar revenue corporation into bankruptcy. In contrast, Netflix embraced digital advancements and was rewarded with an increased customer base and subscriber revenues (Bereznoy, 2019). Likewise, undoing the impact of entropy is a related task that leaders must diagnose and affect change to fix disorder from ineffective management across the organization (Rumelt, 2011). This exemplifies the crucial nature of competitive flexibility. However, Galpin (2023) argues that the critical power source today is strategic execution.

Decision Model

            Different decision models exist to provide scenario-based responses relevant to various situations. Decisions can be based on rational or logical data and intuition from experiences or inner impressions. According to Rumelt (2011), the key is understanding past patterns to perceive the path to future transformation, anticipate changes, and make associated adjustments proactively rather than reactively. The SWOT analysis approach is an evaluation exercise that depicts a firm's internal strengths and weaknesses and external opportunities and threats (Krogerus et al., 2018). The purpose is to develop the best solutions to protect the company against risk and exploit chances to develop. This approach is practical, but other models help evaluate the external environment. For instance, Galpin (2023) emphasizes research results indicating that companies' strategic priorities focus on new market entry, innovation, increased saturation in standing markets, and cost constraints. To support these new focal points, Bereznoy (2019) explains how a business model innovation method centers around visionary approaches to market infiltration, examining the environment for assistive technology, executing strength and weakness testing as a mode of customer value creation, and assisting the company in a radical change in dynamic environments. The current customer-centric marketplace demands business model methods that solutionize value-added customer-company interactions (Bereznoy, 2019). Choosing the most appropriate decision paradigms is best coordinated with the unique business model and the socio-economic needs of the marketplace.

 Conclusion

           Developing an appropriate business strategy involves a comprehensive analysis. Part of this process involves surveying the external environment. This includes the immediate industry in which the firm operates and the peripheral industries. Leaders should institute varied decision models specific to the situation and the firm. This can reduce poor decision-making and ensure the company stays the course toward fulfilling goals. These models help business leaders and managers make executive decisions to progress the organization toward meeting objectives. Advancing in the modern marketplace, which is highly competitive, demands that organizations focus on the formulation, execution, and evaluation of strategic initiatives.  

Annotated Bibliography

Bereznoy, A. (2019). Changing competitive landscape through business model innovation: The new imperative for corporate market strategy. Journal of the Knowledge Economy, 10(4), 1362–1383.  https://doi.org/10.1007/s13132-015-0324-xLinks to an external site.

In this modern scholarly article, Bereznoy (2019) contributes strategic business research that emphasizes the significance of the business model. Moreover, the author emphasizes the current demands for flexibility from the marketplace. This includes both the competitive and consumer landscapes. Bereznoy (2019) recognizes the need for organizations to undertake business model reworks in response to disruptive changes in industry revolutions on a global scale. The forward-thinking perspective of the author contributes to the novel notion of fundamental business architecture adaptation. The author argues that the innovative capacity of the business model creates the most solid competitive advantage.

           The reputable Springer professional educational research group published this peer-reviewed scholarly article by Bereznoy (2019). The quality of the article is reflected in the rigorous evaluation and editing process conducted by the publisher. Likewise, the peer-reviewed classification depicts the enhanced appraisal of the work by educated expert peers from the industry. This specific article by Bereznoy (2019) has been cited twenty-three times in other academic publications. The author has seven more peer-reviewed scholarly publications and is an accomplished researcher and expert in strategic foresight and innovation.

           Bereznoy (2019) contribute an article that contains valuable and innovative knowledge on the external environment and strategic decisions. The research provides relevant methods for modern leaders to consider. The work entails an outside-the-box perspective that encourages today’s leadership executives to approach the business model as a flexible, valuable element in strategic decisions. The methodology invokes a unique dimension that unites the main components of successful business models with the current marketplace demands. Ultimately, the author concludes how companies can create changes that positively impact the firm’s competitive advantage. These are all relevant ideas that bring value to the current discussion topics.   

Galpin, T. J. (2023). The strategist’s view needs to extend beyond planning to execution. Strategy & Leadership, 51(4), 3-11.  https://doi.org/10.1108/SL-04-2023-0038Links to an external site.

This scholarly article from Galpin (2023) offers a comprehensive view of the current strategic landscape across industries and geographies. The author also gathered data from 167 managers and leading executives associated with the sample groupings by researching the strategic processes of firms represented by twenty-six industries and thirty countries. The research results revealed that many modern firms struggled with properly executing strategies. However, they excelled in the areas of measurement and evaluation. The findings implicated practical ideas to enhance a firm’s strategic implementation beyond the planning and formulation process. The author's conclusions indicate the crucial need for modern leaders to enhance their ability to effectively implement strategic initiatives to enhance the firm’s success in market entry and value creation.

           Gaplin (2023) was published by the Emerald Group, which is respected worldwide for its portfolio of academic journals and books focused on management and social sciences. The work was published in the Journal of Strategy and Leadership, which supports the author’s credentialed expertise in these areas. Gaplin (2023) has also published twenty additional peer-reviewed journals on business strategy and entrepreneurship, concentrating on management practices. These are all indicators of the quality of the publication and the author.

           As an expert in business strategy, Gaplin (2023) provides an excellent perspective on contemporary practices. This is a solid addition to the discussion focused on strategic analysis of the constantly changing external environment. The research from Gaplin (2023) contributes current data on the strategic celebrations and downfalls experienced by managers and executives across varied international industries. This knowledge is helpful in the discourse surrounding the evaluation of an organization’s strengths and weaknesses and how it can remain competitive in a dynamic environment full of threats and opportunities.

References

Bereznoy, A. (2019). Changing competitive landscape through business model innovation: The new imperative for corporate market strategy. Journal of the Knowledge Economy, 10(4), 1362–1383.  https://doi.org/10.1007/s13132-015-0324-xLinks to an external site.

Galpin, T. J. (2023). The strategist’s view needs to extend beyond planning to execution. Strategy & Leadership, 51(4), 3-11.  https://doi.org/10.1108/SL-04-2023-0038Links to an external site.

Gamble, J.E., Peteraf, M.A., & Thompson, A.A. (2024). Essentials of Strategic Management: The quest for competitive advantage (8th ed.). McGraw Hill.

Krogerus, M., Tschäppeler, R., & Piening, J. (2018). The decision book: Fifty models for strategic thinking (New, fully revised ed.). W.W. Norton & Company.

Rumelt, R. P. (2011). Good strategy, bad strategy: The difference and why it matters (1st ed.). Crown Business.