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There are two kind of environments that an organization has to deal with, one internal environment and other external environment, both of these environment has their influence on different aspects of the business, for global organization to operate successfully in the international market it is very important to understand the external business environment, since these environmental factor vary from region to region they increases the uncertainty for decision making, that is why it has been recommended that organizations should examine the environment before making any strategic decision, let us see what decision are that are to be examined and evaluated before making of any decision(Aaker, 2008).
Development of corporate guidelines and business philosophy is the most important decision that an organization can make, this decision should be made after the careful study of the market, these studies can be done in house or third party researchers can also be hired, however the business philosophy is influenced by several environmental factors like economy, competition, regulations and customer profile, for global organization all these factors are variables and organizational philosophy can be customized according to the requirements of the organization, moreover organizational strategies should also be flexible and adaptive enough to mold their selves according to change in the external environment, there are several business strategies that can be employed and here we see that what DELL has done and how its strategy is influenced(Aaker, 2008) .
Options for Business Strategies
First we shall see that are the options for the management for making the business strategy, then we shall see that what strategy DELL has employed, we have strategies like Cost Leadership, Differentiation and Focus, these strategies can be used with the other business strategies that are Retrenchment, Stability and Growth.
We see that employment of any of the strategies is dependent on the overall market situation, large organization can opt for growth strategy when there are good economic conditions overall, and when there is uncertainty in the market then organizations can go for stability strategy, however, when economic conditions and other factors are not supportive then organizations go for retrenchment strategy(Aaker, 2008).
Selection of these strategy is also coupled with the strategy selection from cost leadership, differentiation or focus, most of large organization like DELL which are also the market leader in the industry go for cost leadership strategy, DELL has been successful in deploying their growth throughout the globe and also they have been able to achieve the cost leadership with their efficient operations.
External Environment & Value Chain
External environment has the direct influence on the value chain of any organization, regardless of the nature of the business and industry value chain has been influenced by the factors in external environment, in case of DELL we see that they have efficiently manage their entire value chain keeping in mind the external factors, for example, they have different vendors providing them various inputs to their products, these differentiation of input providers has saved them cost and increased the power of organization over suppliers, as they are more in number organization is not dependent on any of them in term of influence(Aaker, 2008).
Finally we also see that DELL has direct selling model, this model is perfectly in line with dynamic and changing business environment, now customer are more aware there was a need to have direct consumer contact in order to better understand their needs and want and to serve them on affordable rates, this direct selling model has provided the organization with the flexibility which was the need of the time, they are able to serve each and every consumer with their customized products, DELL also have other channel members that are also playing their role in organizational growth but organizational shift is to make consumer empowered so that there is no barrier between organization and consumer(Hrebiniak, 2006).
One point of view that organizations are and should be monitoring their own activities and they should themselves be able to make sure that stakeholder friendly practices should be encourages and other practices should be stopped, however even if this point of may be right but we have observed that organization's role and corporate citizen is highly dependent upon the factors presented in environment and their role in realizing their responsibilities.
These factors are governmental policies, official authorities that make the rules are regulation about environment friendliness and make sure that these rules are followed and implemented and stakeholder rights are observed, however in recent years we have also observed that independent bodies for human rights and environmental control are more active than ever and they have also influential in making legal official to make policies accordingly and also their influence is observed over organizational decision making(Hrebiniak, 2006).
There are certain drivers that make the competitive environment of the any industry, these driver are main factors that are taken care while making business decisions, so we can say that these drivers have a great influence over managerial decision making important drivers are given below.
Consumer Buying Power
Buying power of consumer is also the main driver of the industry, when consumer have more choices related to products or services and there is less complexity involved in decision making or product is of basis need type, then consumer have more power in buying process, they can choose between various options and brands, they can have more alternative to satisfy the same need, in this situation organization have less power and consumer have more power, and consumer buying and choice patterns have direct influence over organization's decisions(Aaker, 2008).
Product Life Cycle
Position of product life cycle have main influence on the managerial decision making, market have different competitive situation at different stages of product life cycle and the each stage and market situation at that stage have direct influence on the company's strategies and tactics, managers should take a good care and closely observe the product life cycle before making any decision because every stage of this cycle requires different approach and strategies regarding marketing mix and strategic directions(Aaker, 2008).
Pace of Change
Pace of change is one of the key elements that make the overall competitiveness, the pace of change can be related to technology employed for doing business or it can also be change and in core products and service in the form of innovation. The more the pace of change the more competitive and dynamic the industry would be, for more fast industries organization require quick and timely decision making and more information is required to make decision, however quick change of organization can also create uncertainty within the managerial decision making. Most of the time high tech industries like the one in which DELL is operating are victim of the change, this fast pace of industry is also a barrier to entry for the other organizations(Aaker, 2008).
Ways and means of reaching customer are also important driver that also form the competitive situation of any industry, here we see that more strong the channel of distribution is the more organization is in power to outdo the competition, however there are certain organizations that have direct selling model that DELL have employed that this model keeps the organization independent of the influence of intermediaries.
Channel of distribution is one of the tools employed by the organization to create entry barrier for other organization, having strong relationships with resellers, can make the industry unattractive for other player from entering, in this way channel member become more powerful and can influence customer's buying decision(Aaker, 2008).
Governmental policies, rules and regulation are also other factors that have shaped the industry for years, industries in which rules and governmental policies are more flexible and friendly organizations feel save to invest in, and on the other hand if governmental policies are not friendly then organizations will not be able to feel secure about it.
Political stability is another factor that shape the global business environment, if host courtiers are politically stable and their policies are made on long term basis them organizations feel more attractive to do business and feel safe(Hrebiniak, 2006).
Supplier power is another factor that make any industry attractive or unattractive for any other player, supplier power also have the influence over managerial decision making, the industries where input are limited and supplier are few organization have to have good relationships with them and vendors can influence have on their business(Aaker, 2008).
Hrebiniak, L.G. (2006). â€žObstacles to Effective Strategy Implementationâ€Ÿ. Organizational Dynamics.
David A. Aaker, 2008, Strategic Marketing Management: 7th Edition