Module 2

Strategic Intent and

Environmental Appraisal
Strategic Intent
• Strategic intent refers to the purposes the organization strives for
• what the organization desires to attain in future
• Example of strategic intent is being a global leader in the line of
business
• Hamel and Prahalad coined the term ‘strategic intent’ which they
believe is an obsession with an organization, an obsession with having
ambitions that may even be out of proportion to their resources and
capabilities
Strategic Intent - concept
• focusing the organizations attention on the essence of winning,
• motivating people by communicating the value of the target,
• leaving room for individual and team contributions,
• sustaining enthusiasm by providing new operational definitions as
circumstances change and
• using intent consistently to guide resource allocations
Strategic Intent Hierarchy
Strategic Intent Vs Strategic Fit
• Strategic Fit - Positioning the firm by matching its organisational
resources to its environment.
• Companies bring in the fit between their current strengths and
opportunities
• Formulate strategies in those areas where they fit between strengths
and opportunities
Environmental Appraisal
• Environment refers to all external forces which have a bearing on the
functioning of business.
• Jauch and Gluecke has defined environment as “The environment
includes factors outside the firm which can lead to opportunities or a
threat to the firm. Although there are many factors the most
important of the sectors are socio-economic, technological, supplier,
competitor and govt.”
Importance of Business Environment
• Environment is Complex, Dynamic, multi –faceted
• It has a far-reaching impact
• Its impact on different firms with in the same industry differs
• It may be an opportunity as well as a threat to expansion
• Changes in the environment can change the competitive scenario
• developments are difficult to predict with any degree of accuracy
Components of Business Environment
Environmental Analysis
• Environmental Analysis /environmental scanning - process by which
strategists monitors and comprehends various environmental factors
and determines the opportunities and threats that are provided by
these factors
• General Environment
• Specific Environment
• Situation analysis - scrutinising the internal environment and
scanning the external environment, is used to develop the company’s
strategic intent and strategic mission.
Need of Environment Analysis
• Environmental factors are prime influences of strategy change
• forecast opportunities and to plan to respond aptly to these opportunities.
• Develop an early warning system to prevent threats to develop strategies.
• Determine what factors in the environment present threats to the organization’s present
strategy and objective accomplishments
• Determine what factors in the environment present opportunities for optimal utilization of
resources and achievement of objectives effectively
• Identifying the risks
• Predict the future- minimizes the time pressure of the managers on the unanticipated
events
• Helps the managers to achieve the organizational objectives effectively than other
organizations.
Sources of Environmental Scanning

1. Verbal and written information

2. Search and scanning

3. Spying

4. Forecasting
Techniques of Environmental Scanning

1. PESTEL analysis

2. SWOT analysis

3. ETOP
PESTEL analysis
SWOT analysis
Steps in SWOT Analysis

1. Identification

2. Conclusion

3. Translation
ETOP
Porter’s Five Force Analysis
Value Chain Analysis
• Every organisation consists of a chain of activities that link together to
develop the value of the business.
• They are basically purchasing of raw materials, manufacturing,
distribution, and marketing of goods and services. These activities
taken together form its value chain.
• Porter linked two areas together viz
 the added value that each part of the organisation contributes to the
whole organisation;
the contribution that each part makes to the competitive advantage of
the whole organisation
• According to Porter - customer value is derived from three basic
sources.
1. Activities that differentiate the product
2. Activities that lower its costs
3. Activities that meet the customer’s need quickly.
Conducting a Value Chain Analysis
• Identify Activities
• Allocate Costs
• Identify the Activities that Differentiate the Firm
• Examine the Value Chain
Value Chain Analysis-contd.
Cost Drivers
1. Economies of scale
2. Pattern of capacity utilization
3. Linkages between activities
4. Interrelationships
5. Geographical location
6. Policy choices
7. Institutional factors
Value Chain Analysis-contd.
Value Drivers
• Value drivers are similar to cost drivers, but they relate to other
features valued by buyers.
• Identifying value drivers comes from understanding customer
requirements, which may include:
1.Policy choices
2.Linkages between activities
• https://www.youtube.com/watch?v=CDTRTGYXz4Q
Internal analysis
• Meaning
• Importance:
1. To find where it stands in terms of its strengths and weaknesses
2. To exploit the opportunities that are in line with its capabilities
3. To correct important weaknesses
4. To defend against threats
5. To asses capability gaps and take steps to enhance its capabilities.
Organisational Capability Factors -
Resources

1. Physical resources

2. Financial resources

3. Human resources

4. Intellectual capital
Organisational Capability Factors-
Capabilities
• Resources are not very productive on their own. They need organisational
capabilities.
• Organisational capabilities are the skills that a firm employs to transform
inputs into outputs.
• They reflect the ability of the firm in combining assets, people and processes
to bring about the desired results..
• Capabilities are, therefore a function of the firm’s resources, their application
and organisation, internal systems and processes, and firm specific skill sets.
• Capabilities are rarely unique, and can be acquired by other firms as well in
that industry. Some of these capabilities may become “distinctive
competencies”, when a firm performs them better than its rivals.
Organisational Capability Factors - Core Competence

• Core competence refers to that set of competencies that provide a firm

with a sustainable source of competitive advantage.
• Emerge over time, and reflect the firm’s ability to deploy different
resources and capabilities in a variety of contexts to gain and sustain
competitive advantage
• critically required by an organisation to achieve competitive advantage
1. an activity or process that provides customer value in the product or
service features.
2. an activity or process that is significantly better than competitors.
3. an activity or process that is difficult for competitors to imitate.
• Competency : A competency is anything a business does well, and a business may have
numerous competencies.

• Core competency is a competency of the business that is essential or central to its overall
performance and success.

• Distinctive competency is any capability that distinguishes a company from its competitors

• Competitive AdvantageWhen a company possesses distinctive competencies, it can

transform these attributes into a competitive advantage. A company's competitive
advantage over similar businesses in its market or industry allows it to be more profitable
or capture more market share.
Organisational Capability Factors-
Competitive Advantage
Critical Success Factors / Key Success
Factors
• Critical Success Factors (CSFs) are defined as the resources, skills and
attributes of an organisation that are essential to deliver success in
the market place
• Generate CSFs
• Convert CSFs into objectives
• Set Performance standards