Strategic Business Analysis: External Forces, Internal Functions, and Marketing
External Forces and Audit
Key external forces include economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive factors.
An external audit identifies and evaluates trends and events beyond a single company’s control, revealing opportunities and threats to inform strategy formulation.
Internal Functions
Key internal functions of a company or business include:
- Sales
- Administration
- Human Resources (HR)
- Production
- Marketing
- Logistics Management
- Finance/Accounting
- Research & Development (R&D)
- Computer Information Systems
Strategic Process Functions
Planning Process
Leaders organize objectives and actions over time, aiming for significant market and cultural changes.
Human Factor
The most productive factor, behavior is determined by remuneration, and it is the main component of the company.
Control
Monitors external environment changes and deviations during implementation.
Marketing Functions
Marketing functions include:
- Market Research: Studies to gather information for marketing practices, such as identifying customers, their characteristics, needs, desires, and purchase predispositions.
- Product Decisions: Designing products in terms of variety, quality, design, brand, packaging, and features to meet target market needs.
- Pricing Decisions: Setting prices that are suitable for both the target market and the organization.
- Distribution (Place): Establishing how the product reaches the consumer, directly or indirectly.
- Promotion: Presenting the product to the target market, persuading acquisition, and reminding consumers of existing products. Tools include personal selling, advertising, sales promotion, public relations, and direct marketing.
- Sales: Activities driving customers to exchange, leveraging previous marketing efforts.
- Aftersales: Activities after the sale to ensure customer satisfaction, aiming for market retention.
Explanation of Three Marketing Functions
Market research involves studies to obtain information that facilitates marketing practices, such as identifying potential customers and their needs.
Product decisions relate to product design, ensuring it meets the target market’s needs and desires.
Pricing decisions involve setting prices that are beneficial for both the target market and the company.
Porter’s Five Forces Model
Threat of New Entrants: Market attractiveness depends on entry barriers and the potential for new competitors with resources to capture market share.
Rivalry Among Competitors: Competition is tougher when competitors are well-positioned, numerous, and fixed costs are high, leading to price wars and aggressive marketing.
Bargaining Power of Suppliers: A market is less attractive when suppliers are organized, resourceful, and can dictate terms, prices, and order sizes.
Bargaining Power of Buyers: A market is less attractive when customers are organized, have substitutes available, or the product is undifferentiated, allowing them to demand lower prices and better quality. This is critical when buyers strategically integrate backward (see The Process of Evolution of Traditional Strategic Planning for more information).
Threat of Substitute Products: A market is unattractive if there are actual or potential substitutes, especially if they are technologically advanced or lower-priced, reducing profit margins.
Acronyms:
- VBN: Rivalry between competing firms
- NED: Opportunity analysis
- NOP: Marketing
- YUP: Assumptions
- BAD: Competitive advantages
- MLN: Published sources do not
- TRE: Developing internal evaluation process
- ENO: Porter’s 5 forces model
- DER: Forecasts
- ADB: EFE Matrix
- HUB: Vendor negotiation capacity
- ERT: Competitive profile matrix
- LMN: Production and operations
- ZAX: Administration
- ASE: Consumer negotiation capacity