Analysis of a Firm's Strategic Position: Relative Merits of Environment and Strategic Capability Approaches

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“Compare and evaluate the relative merits of the environment and the strategic capability approaches to analysing a firm’s strategic position.”

Strategic Positioning is focused on impact of strategy of the external environment, the influence and expectations of stakeholders and the strategic capability. A firms understanding of how the environment is changing around them is key to strategy and strategic positioning. The most basic definition of strategy is ‘the long term direction of an organisation’. The relative merits of the environment in achieving strategic position can be obtained by Porters Five Forces. Porters Five Forces is one of the chief models used as it identifies the threats of entry and substitutes, the bargaining power of buyers and supplies and the threat of rivalry between competitors.’ Strategy can be viewed as building defences against the competitive forces or as finding positions in the industry where the forces are weakest.’ (Porter 1979) It is vital that managers analyse their environment in order to anticipate change and compete successfully with other firms. PESTEL analysis framework analyses a firm’s strategic position in the political, economic, social, technological, environmental and legal environments. PESTEL is used to determine the key drives of change and is key that managers monitor the drivers of change as it is likely to affect the structure of an industry sector or market. The strategic capability approach shifts the focus of strategy analysis from external to internal environment. Strategic capability outlines the resources and competences for an organisation in order to survive and prosper. Resources are intangible and tangible consisting of physical assets of an organisation like plant labour and finance and non-physical assets like knowledge, reputation and information. Core Competences adds sustainable competitive advantage through use of value, rarity, inimitability, substitution and dynamics....
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