V

Strategic management refers to the art of planning your business at the highest
possible level. It is the duty of the company’s leader (or leaders). Strategic management
focuses on building a solid underlying structure to your business that

will subsequently be fleshed out through the combined efforts of every individual you
employ.
Strategic management hinges upon answering three key questions:

1. What are my business’s objectives?

2. What are the best ways to achieve those objectives?

3. What resources are required to make that happen?

Answering the first question requires serious thought about what your ultimate goals are
for the business. What are you trying to make happen? What are you attempting to
facilitate or enable? What is the best possible outcome your company can aspire to?

Drilling down to uncover a company’s core objectives can have several phases:

• Assessing the landscape within which the company will operate, and formulating
how the company sees its role within that landscape. This is commonly known as a
mission statement.

• Establishing objectives to answer some of the unmet needs, taking both a long- and
short-term view of what the company can offer. This is commonly known as a
vision statement.

• Stipulating the goals the company has for itself, both in terms of financial and
strategic objectives

• Once these steps have been taken, a strategic plan should begin to emerge —
effectively setting the stage for answering the second question above, or “How best
can we reach our goals?” Phase two of successful strategic management is
formulating a plan by which the company can accomplish what it sets out to do.
• Within this phase, a chain of command should be put in place, pairing individuals with
the right skills, knowledge, and experience with the business’s needs and objectives.
 From there, responsibilities for processes and tasks should be distributed across the
full chain of command, delegating work to teams and individuals so that they
company’s goals can be attained through the combined efforts of all employees. This
includes communicating responsibilities and deliverables (what needs to be done,
and how the results of those tasks will be measured).
• Finally, strategic management entails allocating the right amount of resources to the
different parts of your business so that those assigned to particular goals have what
they need to meet their objectives. This ranges from providing your workers with the
right supplies to enacting systems by which employees receive the necessary
training, all work processes are tested, and all information and data generated is
documented. To effectively manage your business strategically, every inch of your
company must have its needs met in these ways, so all parts can work together as a
seamless, highly functioning whole.
• A critical but often overlooked aspect of strategic management is the need for it to be
both planned and unplanned. Company leaders must take the initiative in setting out
how the company should function and operate, but they must also be dynamic in
responding to needs and requirements as they arise. Strategic management is not a
static process that can be limited to a linear process. Often, unforeseen results ensue
(which can be both positive and negative) and strategic managers must be able to
respond to occurrences that cannot be predicted.
• Effective strategic management is lithe and nimble, enabling companies to move
quickly in response to new challenges, and replace outmoded ideas and practices
with processes that can help meet new needs as they present themselves.

* Management process. Management process as relate to how strategies are created

and changed.
* Management decisions. The decisions must relate clearly to a solution of perceived
problems (how to avoid a threat; how to capitalize on an opportunity).
* Time scales. The strategic time horizon is long. However, it for company in real
trouble can be very short.
* Structure of the organization. An organization is managed by people within a
structure. The decisions which result from the way that managers work together
within the structure can result in strategic change.
* Activities of the organization. This is a potentially limitless area of study and we
normally shall centre upon all activities which affect the organization.
These all five themes are fundamental to a study of the strategic management field
and are discussed further in this chapter and other part of this thesis.
Dimensions Of Strategic

This chapter will introduced us to the world of strategic management. Strategic

management is a process which determine whether an organization excels, survives,
or dies.
All organizations engage in the strategic management process either formally or
informally. Strategic management is equally applicable to public, private, not-for-
profit, and religious organizations. An attempt is made in this thesis to show the
applicability of strategic management to all types of organizations, but the emphasis
is on private-enterprise organizations.
Organizations usually employ one of the three general decision-making processes:
1. Managers want to resolve current problems. Firms often face problems
resulting from falling sales, low profit rates, or production inefficiencies.
Managers try to identify the sources of those problems and resolve them as
best they can.
2. Managers want to solve current problems and prevent future problems. For
example, faced with rising production costs, managers may apply statistical
techniques to create an optimal solution.
3. Managers want to design or create a better relationship between the firm and
its operating and general environments. That involves the firm in strategic
decision making.
Three factors distinguish strategic decisions from other business considerations:
1. Strategic decisions deal with concerns that are central to the livelihood and
survival of the entire organization and usually involve a large portion of the
organization's resources.
2. Strategic decisions represent new activities or areas of concern and typically
address issues that are unusual for the organization rather than issues that lend
themselves to routine decision making.
3. Strategic decisions have repercussions for the way other, lower-level decisions
in the organization are made.
To summarize, there are two essential areas of management tasks: strategic
management and operating management. Operating management deals with the
ongoing, day-to day "operations" of the business. However, my concern here is with
the strategic management alone.
A number of reasons are given by authors to as why organizations should engage in
strategic management. Many research studies show both financial and nonfinancial
benefits which can be derived from a strategic-management approach to decision
making.
Financial Benefits
The question "Why should an organization engage in strategic management?" must be
answered by looking at the relationship between strategic management and
performance.
Research performed by Eastlack and McDonald (1970), Thune and House (1970),
Ansoff et. al. (1971), Karger and Malik (1975), and Hofer and Schendel (1978)
indicate that formalized strategic management (strategic planning) does result in
superior performance by organizations. Each of these studies was able to provide
conceiving evidence of the profitability of strategy formulation and implementation.
The formalized strategic management process does make a difference in the recorded
measurements of profits, sales, and return on assets. Organizations that adopt a
strategic management approach can expect that the news system will lead to
improved financial performance.
Nonfinancial Benefits
Regardless of the profitability of strategic management, several behavioral effects
can be expected to improve the welfare of the firm. Yoo and Digman emphasize that
strategic management is needed to cope with and manage uncertainty in decision
making. They present several benefits of strategic management:
1. It provides a way to anticipate future problems and opportunities.
2. It provides employees with clear objectives and directions for the future of the
organization.
3. It results in more effective and better performance compared to non-strategic
management organizations.
4. It increases employee satisfaction and motivation.
5. It results in faster and better decision making and
6. It results on cost savings.
Moreover, Greenley stresses that strategic management offers the following process
and personal benefits:
1. It allows for identification, prioritization, and exploitation of opportunities.
2. It provides an objective view of management problems.
3. It represents a framework for improved coordination and control of activities.
 4. It minimizes the effects of adverse conditions and changes.
5. It allows major decisions to better support established objectives.
6. It allows more effective allocation of time and resources to identified
opportunities.
7. It allows fewer resources and less time to be devoted to correcting erroneous
or ad hoc decisions.
8. It creates a framework for internal communication among personnel.
9. It helps to integrate the behavior of individuals into a total effort.
10.It provides a basic for the clarification of individual responsibilities.
11.It gives encouragement to forward thinking.
12.It provides a cooperative, integrated, and enthusiastic approach to tackling
problems and opportunities.
13.It encourages a favorable attitude towards change.
14.It gives a degree of discipline and formality to the management of a business.
These and other research studies have concluded that strategic management is an
integral and important function of organization life. However, successful
organizations are successful for many reasons: adequate resources, good products and
services, and so on. While not a panaceas, the strategic management process is only a
powerful tool. It value lies with executive and the ability to use this strategic
management tool in effectively managing the enterprise.

Purpose

The organization's purpose outlines why the organization exists; it includes a

description of its current and future business (Leslie W. Rue, and Loyd L. Byars) The
purpose of an organization is its primary role in society, a broadly defined aim (such
as manufacturing electronic equipment) that it may share with many other
organizations of its type.

Mission

The mission of an organization is the unique reason for its existence that sets it
apart from all others (A. James, F. Stoner, and Charles Wankel) The organization's
mission describes why the organization exists and guides what it should be doing.
Often, the organization's mission is defined in a formal, written mission statement.
Decisions on mission are the most important strategic decisions, because the mission
is meant to guide the entire organization. Although the terms "purpose" and "mission"
are often used interchangeably, to distinguish between them may help in
understanding organizational goals.

Goals

A goal is a desired future state that the organization attempts to realize (Amitai
Etzioni).

Objectives

The term objective is often used interchangeably with goal but usually refers to
specific targets for which measurable results can be obtained. Organizational
objectives are the end points of an organization's mission. Objectives refer to the
specific kinds of results the organizations seek to achieve through its existence
and operations (William F. Glueck, and Lawrence R. Jauch) Objective define what it
is the organization hopes to accomplish, both over the long and short term.
In this paper the terms "goals" and "objectives" are used interchangeably. Specifically,
where other works are being referred to and those authors have used the term goal as
opposed to objective, their terminology is retained.

Strategy

Strategies are the means by which long-term objectives will be achieved. "A strategy
is a unified, comprehensive, and integrated plan that relates the strategic
advantages of the firm to the challenges of the environment. It is designed to
ensure that the basic objectives of the enterprise are achieved through proper
execution by the organization" (William F. Glueck, and Lawrence R. Jauch). The role
of strategy is to identify the general approaches that the organization utilize to
achieve its organizational objectives. Therefore, the choice of strategy is so central
to the study and understanding of strategic management.

Tactics

In contrast, tactics are specifics actions the organization might undertake in carrying
its strategy.
Policy

In years past it was common practice to title courses and books in the strategic
management areas as "Business policy," if one wished to take up broader range of
organizations. In one sense, what has happened is that word strategy has replaced
policy. But there is another sense in which the term policy is used that differentiates
it from strategy, and from tactics as well. In this view, policies are the means by
which objectives will be achieved. "Policies are guide to action. They include how
resources are to be allocated and how tasks assigned to the organization might be
accomplished ... (William F. Glueck, and Lawrence R. Jauch "

Policies include guidelines, procedures, rules, programs, and budgets established to

support efforts to achieve stated objectives. Therefore, policies become important
management tools for implementing them.

1.3. Limitations of the Strategic Management Approach

...of a management. Secondly, strategic management could not be reduced to the set of routine
processes and outlines. It doesn’t have the description theory which instruct what and how to do in the
certain situation or during particular problems. Strategic management is more like a kind of philosophy or
ideology of business and management. And it is seen and realized differently from one manager to
another. Thirdly, this is a challengeable task for the companies to start the strategic management process
as it requires a lot of efforts and resources to be invested. Strategic plan is different from the long-term
plan. Strategic plan should be flexible, it should react on internal and external company’s changes, and
this is considered as a costly and difficult task. There should be appointed a responsible part within
organization that are constantly scanning the environment. Marketing department, Public Relation, etc
become a crucial magnitude and call for additional investments. Fourthly, during the strategic
management it is very often when the efforts are made on the planning aspect. However the most
important part of the strategic management is making of organization culture and structure which allows
implementation of the strategy. Thus, organization could not operate at the strategic level even if it has a
very constructive system of strategic planning but doesn’t have a system or opportunity for
implementation of the strategic decisions. Finally, there is a problem that the company usually does not
have enough information about internal situation and external environment to make strategic planning
effectively. Competence of the managers is very important – they should be able to develop and
implement strategy. Basically, the author of the thesis could summarize the concept ...
Knowledge-driven strategy
Most current approaches to business "strategy" focus on the mechanics of management -- e.g.,
Drucker's operational "strategies" -- and as such are not true business strategy. In a post-
industrial world these operationally focused business strategies hinge on conventional sources of
advantage have essentially been eliminated:
• Scale used to be very important. But now, with access to capital and a global
marketplace, scale is achievable by multiple organizations simultaneously. In
many cases, it can literally be rented.
• Process improvement or “best practices” were once a favored source of
advantage, but they were at best temporary, as they could be copied and
adapted by competitors.
• Owning the customer had always been thought of as an important form of
competitive advantage. Now, however, customer loyalty is far less important
and difficult to maintain as new brands and products emerge all the time.
In such a world, differentiation, as elicudated by Michael Porter, is the only way to maintain
economic or market superiority (i.e., comparative advantage) over competitors. A company must
OWN the thing that differentiates it from competitors. Without IP ownership and protection, any
product, process or scale advantage can be compromised or entirely lost. Competitors can copy
them without fear of economic or legal consequences, thereby eliminating the advantage.
(For an explanation and elucidation of the "post-industrial" worldview, see George Ritzer and
Daniel Bell.)

6. The psychology of strategic management

Several psychologists have conducted studies to determine the psychological patterns involved in
strategic management. Typically senior managers have been asked how they go about making
strategic decisions. A 1938 treatise by Chester Barnard, that was based on his own experience as
a business executive, sees the process as informal, intuitive, non-routinized, and involving
primarily oral, 2-way communications. Bernard says “The process is the sensing of the
organization as a whole and the total situation relevant to it. It transcends the capacity of merely
intellectual methods, and the techniques of discriminating the factors of the situation. The terms
pertinent to it are “feeling”, “judgement”, “sense”, “proportion”, “balance”, “appropriateness”. It
is a matter of art rather than science.” [87]
In 1973, Henry Mintzberg found that senior managers typically deal with unpredictable
situations so they strategize in ad hoc, flexible, dynamic, and implicit ways. . He says, “The job
breeds adaptive information-manipulators who prefer the live concrete situation. The manager
works in an environment of stimulous-response, and he develops in his work a clear preference
for live action.” [88]
In 1982, John Kotter studied the daily activities of 15 executives and concluded that they spent
most of their time developing and working a network of relationships from which they gained
general insights and specific details to be used in making strategic decisions. They tended to use
“mental road maps” rather than systematic planning techniques. [89]
Daniel Isenberg's 1984 study of senior managers found that their decisions were highly intuitive.
Executives often sensed what they were going to do before they could explain why. [90] He
claimed in 1986 that one of the reasons for this is the complexity of strategic decisions and the
resultant information uncertainty. [91]
Shoshana Zuboff (1988) claims that information technology is widening the divide between
senior managers (who typically make strategic decisions) and operational level managers (who
typically make routine decisions). She claims that prior to the widespread use of computer
systems, managers, even at the most senior level, engaged in both strategic decisions and routine
administration, but as computers facilitated (She called it “deskilled”) routine processes, these
activities were moved further down the hierarchy, leaving senior management free for strategic
decions making.
In 1977, Abraham Zaleznik identified a difference between leaders and managers. He describes
leadershipleaders as visionaries who inspire. They care about substance. Whereas managers are
claimed to care about process, plans, and form. [92] He also claimed in 1989 that the rise of the
manager was the main factor that caused the decline of American business in the 1970s and
80s.The main difference between leader and manager is that, leader has followers and manager
has subordinates. In capitalistic society leaders make decisions and manager usually follow or
execute. [93] Lack of leadership is most damaging at the level of strategic management where it
can paralyze an entire organization. [94]
According to Corner, Kinichi, and Keats, [95] strategic decision making in organizations occurs at
two levels: individual and aggregate. They have developed a model of parallel strategic decision
making. The model identifies two parallel processes both of which involve getting attention,
encoding information, storage and retrieval of information, strategic choice, strategic outcome,
and feedback. The individual and organizational processes are not independent however. They
interact at each stage of the process.

7. Reasons why strategic plans fail

There are many reasons why strategic plans fail, especially:
• Failure to understand the customer
○ Why do they buy
○ Is there a real need for the product
○ inadequate or incorrect marketing research
• Inability to predict environmental reaction
○ What will competitors do
 Fighting brands
 Price wars
○ Will government intervene
• Over-estimation of resource competence
○ Can the staff, equipment, and processes handle the new strategy
○ Failure to develop new employee and management skills
• Failure to coordinate
○ Reporting and control relationships not adequate
○ Organizational structure not flexible enough
 • Failure to obtain senior management commitment
○ Failure to get management involved right from the start
○ Failure to obtain sufficient company resources to accomplish task
• Failure to obtain employee commitment
○ New strategy not well explained to employees
○ No incentives given to workers to embrace the new strategy
• Under-estimation of time requirements
○ No critical path analysis done
• Failure to follow the plan
○ No follow through after initial planning
○ No tracking of progress against plan
○ No consequences for above
• Failure to manage change
○ Inadequate understanding of the internal resistance to change
○ Lack of vision on the relationships between processes, technology and
organization
• Poor communications
○ Insufficient information sharing among stakeholders
○ Exclusion of stakeholders and delegates

8. Limitations of strategic management

Although a sense of direction is important, it can also stifle creativity, especially if it is rigidly
enforced. In an uncertain and ambiguous world, fluidity can be more important than a finely
tuned strategic compass. When a strategy becomes internalized into a corporate culture, it can
lead to group think. It can also cause an organization to define itself too narrowly. An example of
this is marketing myopia.
Many theories of strategic management tend to undergo only brief periods of popularity. A
summary of these theories thus inevitably exhibits survivorship bias (itself an area of research in
strategic management). Many theories tend either to be too narrow in focus to build a complete
corporate strategy on, or too general and abstract to be applicable to specific situations. Populism
or faddishness can have an impact on a particular theory's life cycle and may see application in
inappropriate circumstances. See business philosophies and popular management theories for a
more critical view of management theories.
In 2000, Gary Hamel coined the term strategic convergence to explain the limited scope of the
strategies being used by rivals in greatly differing circumstances. He lamented that strategies
converge more than they should, because the more successful ones are imitated by firms that do
not understand that the strategic process involves designing a custom strategy for the specifics of
each situation. [51]
Ram Charan, aligning with a popular marketing tagline, believes that strategic planning must not
dominate action. "Just do it!", while not quite what he meant, is a phrase that nevertheless comes
to mind when combatting analysis paralysis.

8. 1. The linearity trap

It is tempting to think that the elements of strategic management - (i) reaching consensus on
corporate objectives; (ii) developing a plan for achieving the objectives; and (iii) marshalling and
allocating the resources required to implement the plan - can be approached sequentially. It
would be convenient, in other words, if one could deal first with the noble question of ends, and
then address the mundane question of means.
But in the world in which strategies have to be implemented, the three elements are
interdependent. Means are as likely to determine ends as ends are to determine means. [96] The
objectives that an organization might wish to pursue are limited by the range of feasible
approaches to implementation. (There will usually be only a small number of approaches that
will not only be technically and administratively possible, but also satisfactory to the full range
of organizational stakeholders.) In turn, the range of feasible implementation approaches is
determined by the availability of resources.
And so, although participants in a typical “strategy session” may be asked to do “blue sky”
thinking where they pretend that the usual constraints - resources, acceptability to stakeholders ,
administrative feasibility - have been lifted, the fact is that it rarely makes sense to divorce
oneself from the environment in which a strategy will have to be implemented. It’s probably
impossible to think in any meaningful way about strategy in an unconstrained environment. Our
brains can’t process “boundless possibilities”, and the very idea of strategy only has meaning in
the context of challenges or obstacles to be overcome. It’s at least as plausible to argue that acute
awareness of constraints is the very thing that stimulates creativity by forcing us to constantly
reassess both means and ends in light of circumstances.
The key question, then, is, "How can individuals, organizations and societies cope as well as
possible with ... issues too complex to be fully understood, given the fact that actions initiated on
the basis of inadequate understanding may lead to significant regret?" [97]
The answer is that the process of developing organizational strategy must be iterative. It involves
toggling back and forth between questions about objectives, implementation planning and
resources. An initial idea about corporate objectives may have to be altered if there is no feasible
implementation plan that will meet with a sufficient level of acceptance among the full range of
stakeholders, or because the necessary resources are not available, or both.
Even the most talented manager would no doubt agree that "comprehensive analysis is
impossible" for complex problems [98] . Formulation and implementation of strategy must thus
occur side-by-side rather than sequentially, because strategies are built on assumptions which, in
the absence of perfect knowledge, will never be perfectly correct. Strategic management is
necessarily a "repetitive learning cycle [rather than] a linear progression towards a clearly
defined final destination." [99] While assumptions can and should be tested in advance, the
ultimate test is implementation. You will inevitably need to adjust corporate objectives and/or
your approach to pursuing outcomes and/or assumptions about required resources. Thus a
strategy will get remade during implementation because "humans rarely can proceed
satisfactorily except by learning from experience; and modest probes, serially modified on the
basis of feedback, usually are the best method for such learning." [100]
It serves little purpose (other than to provide a false aura of certainty sometimes demanded by
corporate strategists and planners) to pretend to anticipate every possible consequence of a
corporate decision, every possible constraining or enabling factor, and every possible point of
view. At the end of the day, what matters for the purposes of strategic management is having a
clear view - based on the best available evidence and on defensible assumptions - of what it
seems possible to accomplish within the constraints of a given set of circumstances. As the
situation changes, some opportunities for pursuing objectives will disappear and others arise.
Some implementation approaches will become impossible, while others, previously impossible
or unimagined, will become viable.
The essence of being “strategic” thus lies in a capacity for "intelligent trial-and error" [101] rather
than linear adherence to finally honed and detailed strategic plans. Strategic management will
add little value -- indeed, it may well do harm -- if organizational strategies are designed to be
used as a detailed blueprints for managers. Strategy should be seen, rather, as laying out the
general path - but not the precise steps - by which an organization intends to create value. [102]
Strategic management is a question of interpreting, and continuously reinterpreting, the
possibilities presented by shifting circumstances for advancing an organization's objectives.
Doing so requires strategists to think simultaneously about desired objectives, the best approach
for achieving them, and the resources implied by the chosen approach. It requires a frame of
mind

Introduction
In analyzing the macro-environment, it is important to identify the factors that might in turn affect a number of vital

variables that are likely to influence the organization’s supply and demand levels and its costs (Kotter and

Schlesinger, 1991; Johnson and Scholes, 1993). The "radical and ongoing changes occurring in society create an

uncertain environment and have an impact on the function of the whole organization" (Tsiakkiros, 2002). A number

of checklists have been developed as ways of cataloguing the vast number of possible issues that might affect an

industry. A PEST analysis is one of them that is merely a framework that categorizes environmental influences as

political, economic, social and technological forces. Sometimes two additional factors, environmental and legal, will

be added to make a PESTEL analysis, but these themes can easily be subsumed in the others. The analysis

examines the impact of each of these factors (and their interplay with each other) on the business. The results can

then be used to take advantage of opportunities and to make contingency plans for threats when preparing

business and strategic plans (Byars, 1991; Cooper, 2000).

Kotler (1998) claims that PEST analysis is a useful strategic tool for understanding market growth or decline,

business position, potential and direction for operations. The headings of PEST are a framework for reviewing a

situation, and can in addition to SWOT and Porter’s Five Forces models, be applied by companies to review a
strategic directions, including marketing proposition. The use of PEST analysis can be seen effective for business

and strategic planning, marketing planning, business and product development and research reports. PEST also

ensures that company’s performance is aligned positively with the powerful forces of change that are affecting

business environment (Porter, 1985). PEST is useful when a company decides to enter its business operations into

new markets and new countries. The use of PEST, in this case, helps to break free of unconscious assumptions,

and help to effectively adapt to the realities of the new environment.

Main Aspects of PEST Analysis

Economic conditions affect how easy or how difficult it is to be successful and profitable at any time because they

affect both capital availability and cost, and demand (Thompson, 2002). If demand is buyout, for example, and the

cost of capital is low, it will be attractive for firms to invest and grow with expectations of being profitable. In

opposite circumstances firms might find that profitability throughout the industry is low. The timing and relative

success of particular strategies can be influences by economic conditions. When the economy, as a whole or

certain sectors of the economy, are growing, demand may exist for a product or service which would not be in

demand in more depressed circumstances. Similarity, the opportunity to exploit a particular strategy successfully

may depend on demand which exists in growth conditions and does not in recession. Although a depressed

economy will generally be a treat which results in a number of organizations going out of business, it can provide

opportunities for some (Robinson and et al., 1978; Thompson, 2002).

Economic conditions are influenced by political and government policy, being a major influence affecting

government decisions. The issue of whether European countries join, or remain outside, the single European

currency is a case in point. At any one time either exported or imported goods can seem expensive or inexpensive,

dependent upon currency exchange rates. There are many other ways, however, in which government decisions

will affect organizations both directly and indirectly, as they provide both opportunities and threats.

While economic conditions and government policy are closely related, they both influence a number of other

environmental forces that can affect organizations. Capital markets determine the conditions for alternative types of

funding for organizations. They tend to be a subject to government controls, and they will be guided by the

prevailing economic conditions. The rate of interest charged for loans will be affected by inflation and by

international economics and, although the determining rate may be fixed by a central bank, as it is the case with the

Bank of England, that will also be influenced by stated government priorities. According to Thompson (2002),

government spending can increase the money supply and make capital markets more buoyant . The expectations

of shareholders with regard to company performance, their willingness to provide more equity funding or their

willingness to sell their shares will also be affected.

The labour market reflects the availability of particular skills at national and regional levels; this is affected by

training, which is influenced by government and other regional agencies. Labour costs will be influenced by inflation

and by general trends in other industries, and by the role ad power of trade unions.

The sociocultural environment encapsulates demand and tastes, which vary with fashion, disposable income, and

general changes can again provide both opportunities and threats for particular companies (Thompson, 2002;

Pearce and Robinson, 2005). Over-time most products change from being a novelty to a situation of market

saturation, and as this happens pricing and promotion strategies have to change. Similarly, some products and

services will sell around the world with little variation, but these are relatively unusual. Organizations should be

aware of demographics changes as the structure of the population by ages, affluence, regions, numbers working

and so on can have an important bearing on demand as a whole and on demand for particular products and

services. Threats to existing products might be increasing: opportunities for differentiation and market segmentation

might be emerging.

Technology is widely recognised by various literature on strategic management (Capron and Glazer, 1987; Johnson

and Scholes, 1993; Jan, 2002), as part of the organization and the industry part of the model as it is used for the

creation of competitive advantage. However, technology external to the industry can also be captured and used,

and this again can be influenced by government support and encouragement. Technological breakthroughs can

create new industries which might prove a threat to existing organizations whose products or services might be

rendered redundant, and those firms which might be affected in this way should be alert to the possibility. Equally,

new technology could provide a useful input, in both manufacturing and service industries, but in turn its purchase

will require funding and possibly employee training before it can be used.

How to Write a Good PEST Analysis

As it was discussed above, PEST analysis incorporates four perspectives, which give a logical structure, providing

clear presentation for further discussions and proactive decision-makings. In writing a good PEST, subject should

be a clear definition of the market being addressed, which might include the following issues of:

• a company looking at its market

• a product looking at its market

• a brand in relation to its market

• a local business unit

• a strategic option, such as entering a new market or launching a new product

• a potential acquisition
 • a potential partnership

• an investment opportunity

It is crucial to describe the subject for the PEST analysis clearly so that people, contributing to the analysis, and

those interpreting the results from PEST analysis, could understand the purpose of the PEST assessment and its

implications (Jan, 2002).

Before producing a good PEST analysis, it is of primary importance to, firstly, brainstorm the relevant factors that

apply to the company or to its business environment. Second requirement is to identify the information that applies

to these factors; and thirdly, to draw conclusions from this information. It is, however, necessary not only to

describe factors, but to think through what they mean and how to they impact the business. PEST analysis is only a

strategic starting point, and has its own limitations, emphasizing the need to test the conclusions and findings

against the reality.

In conducting PEST analysis, it is required to consider each PEST factor as they all play a part in determining the

overall business environment. Some examples of topics include the following:

Political: (includes legal and regulatory): elections, employment law, consumer protection, environmental
regulations, industry-specific regulations, competitive regulations, inter-country relationships/attitudes, war,

terrorism, political trends, governmental leadership, taxes, and government structures.

Economic: economic growth trends (various countries), taxation, government spending levels, disposable
income, job growth/unemployment, exchange rates, tariffs, inflation, consumer confidence index, import/export

ratios, and production levels.

Social: demographics (age, gender, race, family size, etc.), lifestyle changes, population shifts, education, trends,
fads, diversity, immigration/emigration, health, living standards, housing trends, fashion, attitudes to work, leisure

activities, occupations, and earning capacity.

Technological: inventions, new discoveries, research, energy uses/sources/fuels, communications, rates of

obsolescence, health (pharmaceutical, equipment, etc.), manufacturing advances, information technology, internet,

transportation, bio-tech, genetics, agri-tech, waste removal/recycling, and so on.

After the key trends have been identified, the next step is to analyze the potential each trend has to disrupt the way

the company does business. The company is able to determine the changes needed to exploit the opportunities,

and blunt the threats (Pearce and Robinson, 2005).

When carrying out a PEST analysis it is important to show how and how much the factors that the firm picks out

influence the nature of competition. It is this appraisal of the impact of each factor that distinguishes an analysis

from a mere list. A common error is to try and devise a single analysis to try and cover the entire history of a firm
and an industry. Therefore, the company must keep the analysis of past developments separate from that of the

present situation and future trends. When analyzing PEST factors in the present, it is required to make it plain why

the present is different from the past, and how the industry may need to change. There is no need to agonise too

long over whether a particular item is political, economic, social and technological in nature. Many important factors

transcend the simple PEST categories. The advent of the microprocessor is a technological event that has had a

broad economic and social impact. The "green" movement my have started as a social-cultural phenomenon, but it

has been translated into legislation and has stimulated technological change (Byars, 1991). It is perfectly legitimate

when using a checklist like PEST to leave some categories empty. If there are no important political/legal influences

on a particular industry, those conducting PEST analysis do not need to waste time trying to find factors that do not

exist. There should be a limit to relevant factors.

Thompson (2002) states that for any organization certain environmental influences will constitute powerful forces

which affect decision making significantly. For some manufacturing and service businesses the most powerful force

will be customers; for other it may be competition. In some situations suppliers can be crucial. In the case of some

small businesses external forces can dictate whether the business stays solvent or not. A major problem for these

businesses concerns the management of cash flow, being able to pay bills when they are due for payment and

being strong enough to persuade customers to pay their invoices on time.

Finding Information for PEST Analysis

To understand what kind of environment the company may compete in the near future, it requires understanding of

the forces that will shape the change. For a PEST analysis, that means conducting a scan of the external events

outside of the company, such as potential regulatory issues, demographic trends, political upheaval, and cutting-

edge technology that could move mainstream. In conducting the analysis it may be essential to look at periodicals,

analyst reports, demographics, and anything that will give the exposure to new trends and possibilities. Any reliable

secondary data source of current events and projected future trends will provide information for the PEST analysis,

including:

• Newspapers, periodicals, current books

• Trade organizations

• Government agencies

• Industry analysts

• Financial analysts

One of the potential disadvantages collecting from the secondary sources is derived from issues of validity,

reliability and relevance. The limitation could be present in the nature of market forces that reduce the applicability
of the information sources to present situations. The problem could arise based on the past data past events being

collected within past environmental conditions. Therefore, the data has to be checked and be applied to the current

business conditions.

Conclusion
PEST analysis looks at the external business environment and is an appropriate strategic tool for understanding the

"big picture" of the environment in which business operates, enabling to take the advantage of the opportunities and

minimize the threats faced by company’s business activities. When strategic planning is done correctly, it provides

a solid plan for your company to grow into the future.

With a PEST analysis, the company can see a longer horizon of time, and be able to clarify strategic opportunities

and threats that the company faces. By looking to the outside environment to see the potential forces of change

looming on the horizon, firms can take the strategic planning process out of the arena of today and into the horizon

of tomorrow.

PEST is not a set of rigid compartments into which ideas need to be sorted. It is better thought of as a set of hooks

that can be used to fish for important facts. Once the factors have been "fished out", it does not matter which hook

they were attached to. When it comes to writing up the analysis, there is no need to mention the PEST labels at all.

If you found this article useful please have a look at the other articles we have written: Ansoff analysis, Porter's 5

Forces analysis, SWOT analysis, BCG Growth-Share Matrix, Porter's Generic Strategies, Scenario Planning, Value

chain analysis,

BALANCED SCORECARD, Competitor Analysis, Critical Success Factors, Industry Lifecycle, Marketing Mix,

McKinsey 7S Framework and Product Life Cycle.

What are the Levels of

strategy?
In: Science, Business and Finance [Edit
categories]
[Improve]

INTRODUCTION: - To understand the process of strategic management the concept

should be understood and controlled. The term strategy is derived from the Greek
word Generalship. The actual direction of military force, as distinct◊“STRATEGOS”
from governing its deployment. The word strategy means “ THE ART OF GENERAL ”.
Based on the studies and views by various experts and management gurus Strategy
in business has taken various connotations.

Definition: William Glueck, a Management Professor defined it as “A unified, comprehensive

and integrated plan designed to assure that the basic objectives of the enterprise are achieved”.
Alfred Chandler defined Strategy as:- “The determination of the basic long term goals and
objectives of an enterprise and the adoption of the courses of action and the allocation of
resources necessary for carrying out these goals”. Thus strategy is: - a. A plan / course of action
leading to a direction. b. It is related to company’s activities. c. It deals with uncertain future. d.
It depends on vision / mission of the company to reach its current position.
STRATEGY:
1. Before making a decision managers have to look into the course of deciding since Strategy
involves situations like: -
a) How to face the competition. b) Whether to undertake expansions/diversification c) To be
focused/ broad based d) How to chart a turn around e) Ensuring stability/should we go in for
disinvestments etc
2. An establishment and successful company would start to face new threats in the environment.
This is due to its success and emergence of new competitors. It has to rethink the course of
action it has been following. This is called strategy. 3. With such rethinking and environment
analysis, new opportunities may emerge and be identified.
4. To make use of these opportunities, the company might fundamentally rethink and reason the
ways and means, the actions it had been following in the past. These are called “ strategies “.
5. For a company to survive and to be successful strategy is one of the most significant concepts
to emerge in the field of management. According to Alfred chandler the determination of basic
long-term goals and objectives of an enterprise and the adoption of the course of action and the
allocation of resources for carrying out these goals. William Glueck defines strategy as “a
unified, comprehension and integrated plan designed to assure that the basic objectives of the
enterprises are achieved”.
6. Michael Porter views strategy as the “ core of general management is strategy”. Managers
must make companies flexible, respond rapidly, benchmark the best practices, outsource
aggressively, develop core competencies; infact should know how to play new roles everyday.
Hyper competition is a common phenomenon that rivals copy very fast.
7. Companies can outperform rivals only if it can establish a difference it can preserve and
deliver greater value at a reasonable cost.
8. Strategy rests on unique activities –“ The essence of strategy is in the activities – choosing to
perform things differently and to perform different activities than rivals”.
9. Strategy is long term. If company focus is only on operational effectiveness. It can become
good and not better. Overemphasis on growth leads to the dilutions of strategy. Growth is
achieved by deepening strategy.
10. Strategy is the future plan of action, which relates to the companies activities and its
mission/vision i.e. when it would like to reach from its current position.
11. It is concerned with the resource available today and those that will be required for the future
plan of action. It is about the trade off between its different activities and creating a fit among
these activities.
LEVELS OF STRATEGY:
1. When a company performs different business/ has portfolio of products, the company will
organize itself in the form of strategic business units (SBU’s).
2. In order to segregate different units each performing a common set of activities, many
companies are organized on the basis of operating divisions/decisions. These are known as
strategic business units.
CORPORATE LEVEL
FUNCTIONAL LEVEL STRTEGIES [CORPORATE]
SBU1 SBU2 SBU3 (SBU LEVEL)
FUNCTIONAL LEVEL STRATEGIES
SBU levelϖ Corporate level ϖ 3) Strategies are looked at
4) There exists a difference at functional levels like marketing, finance, productions etc.
Functional level strategies exist at both corporate and SBU level. It has to be aligned and
integrated.
5) CORPORATE LEVEL STRATEGY: It’s a broad level strategy and all its plan of actions is at
corporate level i.e. what the company as a whole. It covers the various strategies performed by
different SBU’s. Strategies needs should be in align with the company objective.
6) Resources should be allocated to each SBU and broad level functional strategies. To ensure
things there would need to have co-ordination of different business of the SBU’s.
7) For most companies strategies plans are made at 3 levels.
a) FUNCTIONAL STRATEGY b) SOCIETAL STRATEGY c) OPERATIONAL STRATEGY
FUNCTIONAL STRATEGY:
As the SBU level deals with a relatively. Smaller area that provides objectives for a specific
function in that SBU environment are marketing, finance, production, operation etc.
SOCIETAL STRATEGY:
Larger Companies like conglomerates with multiple business in different countries needs larger
level strategy.
1) A relatively smaller company may require a strategy at a level higher than corporate level.
2) It’s how the company perceives itself in its role towards the society/ even countries in terms of
vision/ mission statement/ a set of needs that strives to fulfill corporate level strategies are then
derived from the societal strategy.
OPERATIONAL LEVEL STRATEGY:
In the dynamic environment & due to the complexities of business strategies are needed to be set
at lower levels i.e. one step down the functional level, operational level strategies. There are
more specific & has a defined scope. E.g. Marketing Strategy could be subdivided into sales
Strategies for different segments & markets, pricing, distribution etc. Some of them may be
common & some unique to the target markets. It should contribute to the functional objectives of
marketing function. These are interlinked with other strategies at functional level like those of
finance, production etc
MISSION/VISION LEVEL
CORPORATE LEVEL
FUNCTIONAL LEVEL STRTEGIES [CORPORATE]
SBU1 SBU2 SBU3 (SBU LEVEL)
FUNCTIONAL LEVEL STRATEGIES
OPERATIONAL LEVEL
Corporate level is divided from the societal level strategy of a corporation S.B.U Level are put in
to action under the corporate level strategy. Functional Strategies operate under SBU Level.
Operational Level is derived from functional level strategies
Conclusion:
These are the levels at which strategies are formulated. Strategy is a plan or an action leading to
a particular direction. We have corporate level Strategy and Strategic Business Unit level to
fulfill the objectives of the company.