Introduction
It is important for an organization to evaluate their internal environment to identify the strengths and weaknesses that influence its ability to achieve strategic objectives. The internal environment of an organization includes the resources, capabilities, processes and culture of an organization. When an organization understands these components, it helps the organization to develop strategies that align with their competitive advantages, in the evaluation process there must assess of both tangible assets, such as financial resources, and intangible resources, such as brand reputation and intellectual property (Gamble, & et al, 2021). These steps are essential for identifying the major competencies, which are the firm’s areas of expertise, and distinctive competencies, which provide a competitive advantage.
Process: Business Strategy Development
Developing a business strategy is a complete process that requires the evaluation of an organization’s internal environment, external environment and available opportunities. The steps involved in this process are conducting an internal audit to identify strengths and weaknesses, focusing on resources, capabilities, and processes. This process is followed by an external analysis that displays the industry landscape, market conditions, market conditions, and competitive threats. Tools such as SWOT analysis are used by organizations to assist in developing strategic options. The last step is the process of selecting a strategy that aligns with the company’s long-term objectives, leveraging its strengths, and addressing its weaknesses. An example of this process is a company can use their brand reputation (strength) to capture new markets or invest in workforce training to address skill gaps (weakness) (Gamble, Peteraf, & Thompson, 2021). Another important tool for strategy development is value chain analysis, this allows organizations to analyze value-creating activities and identify inefficiencies. When examining primary activities like operations and support activities such human resources, organizations can make informed decisions about resource allocation, improving overall performance.
Strategic Thinking: Key Decisions
When it comes to strategic thinking it requires a focus on key decisions which shape the direction of the organization. One step in critical decision making involves determining where the company can leverage its core competencies to gain a competitive advantage. This is critical because it allows organizations to focus their resources on areas where they have an edge over competitors. Resource allocation is an important key decision, this is where businesses decide how to allocate financial, human, and technological resources to achieve their objectives. An organization that has an effective resource allocation puts them in a position to capitalize on opportunities and overcome challenges (Rumelt, 2011). Strategy development is necessary as it assists in decisions about employee management and organizational culture. A company with a strong foundation and innovative culture will probably enjoy sustained competitive advantage because the employees are engaged and motivated, however employees that are unmotivated and are part of a toxic work environment can lead to high turnover and inefficiency (Rumelt, 2011).
Decision Model
A key decision model that aids in the strategy development process is the rational decision-making model. This model is a step-by-step approach to problem-solving; it makes sure that the decisions are data-driven, and alternatives are considered before making the final decision. This model is effective in a more structured environment, the data is readily available and clear objectives can be set. It also has limitations in dynamic and uncertain environments where flexibility is required. When an organization faces a rapid change in market conditions, the decision-making model is more suitable. This model assists with small manageable steps in the decision-making process, which reduces the risk of major missteps and enabling continuous adaptation to new information. This model assists with the strategy development process that provides a structured framework for decision-making while allowing for adaptability (Keller, 2013).
Conclusion
In an effort to have a effective business strategy development having an internal environment evaluation, strategic thinking, and decision models are essential. The analysis of internal resources and capabilities, making informed decisions on resource allocation and human resource management, and using the correct decision model, organizations can develop strategies that align with their long-term goals. In a structured environment the Rational Decision-Making Model is useful, however it may need to be complemented by more adaptive models in volatile markets. Finally, with the ongoing process of strategic development it requires a balance of data-driven decision-making and flexibility.
References
Gamble, J. E., Peteraf, M. A., & Thompson, A. A. (2021). Essentials of Strategic Management: The Quest for Competitive Advantage. McGraw-Hill Education.
Keller, K.L. (2013). Strategic Brand Management: Building, Measuring, and Managing Brand Equity. Pearson Education Limited.
Rumelt, R. P. (2011). Good Strategy Bad Strategy: The Difference and Why it Matters. Crown Business.
Discussion Reply: Internal Environment, Power / Weakness, and Decision Models
