What are the factors that shape a companys strategy?

Answer 1

The Factors That Shape Strategy

Organizations do not exist in a vacuum. Many factors enter into the forming of a company's strategy. Each exists within a complex network of environmental forces.

These forces, conditions, situations, events, and relationships over which the organization has little control are referred to collectively as the organization's environment.

In general terms, environment can be broken down into three areas:

1. the macroenvironment, or general environment (remote environment) - that is, economic, social, political and legal systems in the country;
2. operating environment - that is, competitors, markets, customers, regulatory agencies, and stakeholders; and
3. the internal environment - that is, employees, managers, union, and board directors.

In formulating a strategy, the strategic decision makers must analyze conditions internal to the organization as well as conditions in the external environment, which are described in the following sections.

FACTORS SHAPING THE CHOICE OF STRATEGY

Competitive Conditions and Overall Industry Attractiveness

An industry's competitive conditions and overall attractiveness are big strategy-determining factors. A company's strategy has to be tailored to the nature and mix of competitive factors in play : price, product quality, performance features, service, warranties, and so on. When competitive conditions intensify significantly, a company must respond with strategic actions to protect its position.

The Company's Market Opportunities and External Threats

The particular business opportunities open to a company and the threatening external developments that it faces are key influences on strategy. Both point to the need for strategic action. A company's strategy needs to be deliberately aimed at capturing its best growth opportunities, especially the ones that hold the most promise for building sustainable competitive advantage and enhancing profitability. Likewise, strategy should provide a defense against external threats to the company's well-being and future performance.

Company Resource Strengths, Competencies, and Competitive Capabilities

One of the most pivotal strategy-shaping internal considerations is whether a company has or can acquire the resources, competencies, and capabilities needed to execute a strategy proficiently. These are the factors that can enable an enterprise to capitalize on a particular opportunity, give the firm a competitive edge in the marketplace, and become a cornerstone of the enterprise's strategy.

The Personal Ambitions, Business Philosophies, and Ethical Beliefs of Managers

Managers do not dispassionately assess what strategic course to steer. Their choices are typically influenced by their own vision of how to compete and how to position the enterprise and by what image and standing they want the company to have. Both casual observation and formal studies indicate that managers' ambitions, values, business philosophies, attitudes toward risk, and ethical beliefs have important influences on strategy.

The Influence of Shared Values and Company Culture on Strategy

An organization's policies, practices, traditions, philosophical beliefs, and ways of doing things combine to create a distinctive culture. Typically, the stronger a company's culture, the more that culture is likely to shape the company's strategic actions, sometimes even dominating the choice of strategic moves. This is because culture-related values and beliefs are so embedded in management's strategic thinking and actions that they condition how the enterprise does business and responds to external events.