Opportunities: Positive external environmental factors.
Threats: Negative external environmental factors.
After analyzing and learning about the environment, management needs to evaluate what it has learned in terms of opportunities (strategic) that the organization can exploit and threats that the organizations faces. In simplistic way, opportunities are positive external environmental factors, and threats are negative.
Keep in mind, however, that the same environment can present opportunities to one organization and pose threats to another in the same or a similar industry because of their different resources or different focus. Take communications, for example. Telecommuting technologies have enabled organizations that sell computer modems, fax machines and the like to proper. But organizations such as the Indian Postal service and even International freight and transport companies like DHL have been adversely affected by this environmental change.
Next, we move from looking outside the organization to looking inside that is, we evaluate the organization’s internal resources. What skills and abilities do the organization’s employees have? What is the organization’s cash flow? Has it been successful at developing new and innovative products? How do customers perceive the image of the organizations and the quality of its products or services?
Strengths (Strategic): Internal resources that are available or things that an organization does well.
Core competency: Any of the strengths that represent unique skills or resources that can determine the organization’s competitive edge.
Weakness: Resources that an organization lacks or activities that it does not do well
This fourth step forces management to recognize that very organization, no matter how large and powerful, is constrained income way by its resources and the skills it has available. For example, in the mid 1980s hen the two wheeler market began to change in India, leading scooter manufacturer Bajaj auto could not start manufacturing motorcycles immediately simply because the management saw opportunities in that market. Bajaj auto did not have the resources in terms of manufacturing and engineering technology to successfully compete against the likes of Honda, Suzuki and Yamaha. The analysis should lead to a clear assessment of the organization’s internal resources, such as capital, worker skills, patents, and the like. It should also indicate organizational departmental abilities such as training and development, marketing, accounting human resources research and development and management information systems. Internal resources or thing that the organization does well are its strengths (strategic). And any of those strengths that represent unique kills or resources that can determine the organization’s competitive edge are its core competency – like Reliance Industries amazing strength in project management and the mobilization of lo cost finance, which contributed to Reliance maintaining a cost leadership in its main businesses. At L&T too, company leaders sold off their cement business so that they could return to their core business – engineering and high tech manufacturing. That’s because, in part they lacked certain resources. When an organization lacks resources or identifies activities that the firm does not do well, we label it a weakness.
An understanding of the organization’s culture and the strengths and weaknesses of its culture is a crucial part that has only recently been getting the attention it deserves. Specifically managers should be aware that string and weak cultures have different effects on strategy and that the content of a culture has a major effect on the content of the strategy.
In a strong culture, for instance, almost all employees will have a clear understanding of what the organization is about, and it should be easy for management to convey to new employees the organization’s core competency. A department store chain such as Nordstrom, which has a strong culture that embraces services and customer satisfaction, should be able to instill its cultural values in new employees in a much shorter time than can competitor with a weak culture. The negative side of a strong culture, of course is that it is difficult to change. A strong culture may act as a significant barrier to acceptance of a change in the organization’s strategies. In fact, the strong culture at Hindustan Uni Lever undoubtedly kept top management from perceiving the need to adopt a new corporate strategy in response to Nirma in the 1980s, which lead to severe downturn in its performance. Successful organizations with strong cultures can become prisoners of their own past successes.