Principles of Strategic Management

Principles of strategic management: The strategic analysis include scanning of the external environment. it is also called as pest analysis. he market is segmented by the characteristics of consumer like lifestyle, location, customer size, and product and benefit segmentation. key factors include demographics, national and international economic conditions, industry and sector structure, markets, market segmentation. Entrepreneurial environment and attitude to risk, technology, social and cultural factors, environmentalism and the “green revolution”, the political and legislative environment. the external environments can also be analyzed in terms of degree of stability and the rate of change, perception and interpretation. to strategic planning the treats & opportunities should be identified and analysed.

Five competitive forces that shape the strategy: The configuration of industry differs by industry. The forces are threat of entry, The power of suppliers, the power of buyers, the threat of substitutes and the rivalry among existing competitors. There are seven major sources for entry. They are- Supply-side economies of scale, demand-side benefits of scale, customer switching costs, capital requirements, incumbency advantages independent of size, unequal access to distribution channels and restrictive government policy. Company should also consider factors like industry growth rate, technology and innovation, government, complementary products and services.

Competing on resources: Resources are necessary for every company to gain competitive advantage. Every company has competitive distinct resources which gain them a competitive advantage. RBV sees the internal factors( what the company is good at) and external factors( what market demand and competitors offer). For a resource to qualify as the basis for an effective strategy, it must pass a number of external market tests of its value. They are - The test of inimitability: Is