Observing, Analysing And Evaluating An External Environment

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The aim of this essay is to observe, analyse and evaluate ACBT's external environment and identify the strategic strengths and weaknesses of ACBT to succeed or fail in the environment. This essay will consist of a significant evaluation of the strategic management processes, where different perspectives for viewing ACBT will be exposed. Important points of ACBT such as the strategic strengths and weaknesses and how these elements adopt the dynamic external environment in order to succeed of fail. Hence, in order for this introduction to give a better understanding about strategic management, its theories and the organization being observed must be mentioned about. Furthermore, due to the word limit most of the information required for the arguments and discussion are to be found in appendices in an illustrative manner.

In order for ACBT to succeed, ACBT needs to achieve a sustainable competitive advantage which cannot be imitated by its competitors. Determining how to develop a sustainable competitive advantage will be shown in this essay in terms of the strategic planning process.

Firstly, ACBT's business strategy will be identified along with its mission and vision. Then the external environment will be analysed. This analysis will show the macro environment and industry environment in which the organisation operates. The internal environment will then be analysed to identify ACBT's capabilities in order to succeed or fail. Also, all other relevant theories will be discussed in the latter part of the essay.

2.0 What is strategic management?

Strategic management consists of the decisions and actions used to formulate and implement strategies that will provide a competitively superior fit between the organization and it's environment, to enable it to achieve organizational objectives (Hannagan, 2002,p 3).

Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations (Johnson, Scholes & Whittington, 2005).

This definition shows that in order to formulate a strategy, both the internal (strengths and weaknesses) and external (opportunities and threats) environment need to be taken into consideration. Also, stakeholder expectations need to be considered when formulating a strategy.

Therefore to be thriving, organizations must appropriately recognize that strategic management is an existing and evolving process that does not end with the strategic plan. It is a process which requires continuous evaluation and improvement to survive in the rapidly changing world today, in order to gain a competitive advantage over fellow competitors

3.0 Characteristics and the purpose of the strategic management

It helps an organisation take a proactive approach rather than a reactive approach (David, 2003).

Provides a means to deal with rapid change inside and outside the organisation.

As the external environment is unpredictable, strategic management enables the assessment of the external environment so that action can be taken to respond to it

Characteristics of strategic management decisions are given in Appendix 1.

4.0 The strategic management process

The process of strategic management consists of strategic analysis, strategic direction, strategic choice, strategic implementation and strategic evaluation and control (Viljoen & Dann, 2000).

The process of strategic management includes four interrelated processes which consist of strategy analysis, strategic direction, strategy choice, and strategy implementation (appendix 2&3). Strategic management has been conventionally thought of as mainly a technical and rational process. This has been the principal approach in educating about strategy and how the strategy process emphasizes on the matter of how to analyze, choose and implement strategies. Therefore in every stage of the intellectual process it can either enhance or get in the way of the outcome.

In the strategic management process, it is always vital that the understanding of the organization and the implementation of the right strategy occurs. Various organizations use various strategies in order to achieve organizational success by achieving organizational goals and objectives. Usually the formation of a strategy rallies around the resources and capabilities of an organization and also the market in which the organization operates. An organization can use strategies to shape its environment so that the firm can gain an advantage on the trend of the environment.

4.1 Strategy analysis

"Strategic analysis requires managers to recognize all the major forces at play in their industry and to decide whether these represent opportunities or threats to the organization. These include environmental forces and the skills and resources of the organization." (Quinn, Mintzberg and James, 1998)

An internal and external environment analysis has to be conducted in order to deeply or thoroughly understand as to where the organization stands in the market currently. External analysis can once again be divided into macro environmental factor analysis and industrial analysis. Generally a macro environmental analysis is done in order to get a deeper view of the environment in which the firm operates. The analysis conducted in order to discover the macro environmental factors is called the PEST analysis. This is,

P- Political

E- Economic

S- Socio-cultural

T- Technological

PEST Analysis (External Environment)

Political

Environmental protection laws, tax laws, copyright laws, foreign trade regulation, stability of government, attitude towards foreign companies are evaluated under the political-legal analysis.

Economical

Changes in Sri Lankan population, interest rates, tax laws, inflation, foreign trade law, and steadiness of the government in Sri Lanka are also crucial areas that ACBT needs to be aware of; as it has put in an amount of money and therefore needs to ensure that they get lucrative returns out of the investment made.

Socio-cultural

Growth rate of population, age distribution of population, regional shifts in population, lifestyle changes, birth rate, life expectancy, societal attitudes, ethnic distribution are considered under the socio-cultural analysis.

Technological

The technological point of view is one more area that ACBT needs to be attentive of in order generate a space between the present day technological systems and methods used in Sri Lanka to provide education and the more modern and improved systems and methods ACBT can provide in order to gain a competitive advantage.(Appendix 4&5)

Industry environment analysis

Porter's five forces model will enable ACBT to assess how profitability will be affected by the threat of new entrants, suppliers, buyers, substitutes and rivals. (Hubbard, Rice & Beamish, 2008). (Appendix 6)

Threat of new entrants

-Time & cost of entry

-Specialist knowledge

-Economies of scale

-Cost advantages

Bargaining power of customers

-Number of buyers

-Size of order

-Price sensitivity

Threat of substitutes

-Substitute performance

-Cost of change

Bargaining power of suppliers

-Number of buyers

-Size of order

-Price sensitivity

Rivalry among existing competitors

-Number of buyers

-Size of order

-Price sensitivity

Value chain analysis

Michael Porter's value chain analysis should be exploited to figure as to what processes in an organization creates value. The use of the value chain analysis helps an organization decide on what they are good and what they need to make developments on. It helps to form proper strategies to make use of their strengths and reduce their weaknesses. ( Appendix 7)

4.2 Strategy direction

In this stage of the process, each major opportunity and threat is taken into account, and from them strategic objectives are derived and established in light of the organization's mission (Viljoen and Dann, 2003, p.38).

In the strategic direction stage, with respect to the opportunities and threats, strategic objectives are established including organizational mission, vision, goals and objectives. To successful in the business, these objectives should have to focus on the areas of performance the organization will need to do well in order to achieve its objectives. (KRAs)

With regards to ACBT, their mission, vision and values refer (Appendix 8&9)

4.3 Strategy Choice

Viljoen and Dann (2003) state, that strategy choice builds on the phases of strategy analysis and direction setting and involves the generation, evaluation and choice of the strategy that best suites the needs of the organization.

Evaluation involves rating each according to its ability to exploit the environmental opportunities. And also it requires an assessment of the strengths and weaknesses of the company in terms of its ability to handle those issues effectively.

According to the ACBT's prospective, they have clearly identified the opportunity for need of education in Sri Lanka as well as Maldives and they are catering towards that need by using their internal skills and capabilities.

One good strategic choice that ACBT has recognized is the trimester or 3 semester fast track system. Where, students can become degree holders in 2 years, by taking 4 subjects per semester. Not a single of the major competitors of ACBT has this type of a strategy and ACBT and as a result ACBT has achieved a considerable competitive advantage as an effect of this.

4.4 Strategy Implementation

Considered as the final stage of the strategic management process, it is an important step of the strategic management process, as the success of it and the effectiveness depends on the implementation. Strategy implementation; "concerns the operational strategies and systems that must be used to put the strategy into practice" (Viljoen and Dann, 2003, p.38). It concerns the operational strategies and systems that must be used to put the strategy in to practice. It involves the capital budgeting to allocate resources to new projects and to the creation of new operating and administrative systems.

Considering of ACBT, to achieve their overall mission and vision they have implemented and maintain of a quality control program underpinned by the benchmark descriptors of both ECU and the Australian Qualifications Training Framework and also with regards to marketing and the promotional budget of ACBT, it has increased last few months in order to promote ACBT among its target market.

The ability of managers to conduct strategic management process correctly will determine the long term success of the organization. The failure to perform those functions will loose the competitive advantage and strength in their respective industries.

5.0 Strengths and Weaknesses of ACBT

Strength is an organizational capability based on resources and competencies of an organization which will provide a strategic competitive advantage to achieve organizational goals and objectives.

The goodwill that ACBT has built up in the past 10 years goes on to serve them fine, and will do so too in the near future. ACBT came to the limelight just as the demand for foreign education was thriving. ACBT gave students the opportunity of a foreign education at 1/4 of the cost at the same time as not having to stay away from family and friends. This has been a sustainable competitive advantage (SCA) for ACBT.

It is important to note that ACBT's customers are not the consumers for the undergrad program. Parents who want their children to receive a foreign education consider ACBT as an alternative due to the cost benefit, the fast track option, and also the fact that Australia is considered by many as one of the best education destinations in terms of quality of education, second only to the UK, in the world.

Diversifying into other aspects of education such as IELTS and MBA, with probability for a doctorate program to be initiated very soon, ACBT has somewhat spread its random risk. It can be argued that its only education on offer but the target markets are to some extent unique and large enough for them to be sustainable in the long run.(Appendix 10)

Weakness is defined as incapability due to non availability or lack of resources and competencies in an organization that will hinder or obstruct achieving a strategic advantage to achieve organizations goals and objectives.

The biggest concern for most students and potential students is the frequency and size of fee increments. Over the past 2 years fees have been revised on a biannual basis by large amounts. This not only detracts potential customers but also existing customers as well.

Furthermore, the lack of course choices is another concern. ACBT solely offers Degrees in business and computing, where as competitors have diversified into numerous of courses such as psychology, advertising, finance, chemical science, aeronautics etc. this is a severe disadvantage as there is a solid demand for such courses among the current cohort who wish to expand their horizons and not jus stick to the usual.

The lack of facilities in relation to extra and co curricular activities at ACBT adds to the above problem as consumers and customers demand for more value for money. Comparatively their competitors offer extra and co-curricular activities. (Appendix 10)

6.0 Opportunities and Threats of ACBT in relation to its strengths and weaknesses

Opportunity is defined as a positive trend in the organizations external environment that will be an advantage to the organization in achieving its goals and objectives.

Threat is defined as a negative trend in the organizational external environment that will obstruct or harm achievement of the goals and objectives of the organizations by not allowing it to achieve an advantage.(Appendix 10)

ACBT will have to use their strengths to capitalise on the opportunities available in the dynamic external environment. Also, the weaknesses can be reduced whereas the threats can be avoided on being identified.In relation to determine the strategic options available to ACBT, the strengths and weaknesses from the internal environment together with the opportunities and threats from the external environment need to be analysed.

ACBT can take advantage of their strength of having an established brand name to offer degrees in other areas such as accountancy, psychology and various other courses. Correspondingly, ACBT should seek to avoid weaknesses such as fading to identify student's problems in a methodical manner because of the threat of high student turnover due to ever-increasing unit fees. In order to build up a strategic capability, ACBT can exploit the opportunity of students by introducing the online library service, also introducing more recreation facilities, sports, gathering etc. This strategy will also reinforce the mission and vision of ACBT to providing an atmosphere which is supportive and well resourced enabling students to maximize their full education potential.

7.0 Major competitors of ACBT

American National College (ANC)

Asia Pacific Institute of Information Technology (APIIT)

American College of Higher Education (ACHE)

International College of Business and Technology (ICBT) (Appendix 11)

8.0 Conclusion

From the above information it could be said that ACBT should consider its strengths and weaknesses against the dynamic external environment in which it operates. Since competitors of ACBT such as ANC, ICBT, APIIT etc providing high superior service with well recognized education system ACBT should bring new innovations in order to gain a competitive advantage. In order to ACBT to succeed ACBT should do a PEST analysis along with the competitor analysis as a part of scanning the external environment. Internal analysis should also be considered and ACBT should minimize their weaknesses and should try to increase their strengths and at the same time activities that can add value to its products should be identified by the value chain analysis.

ACBT can gain a competitive advantage by using Michael Porter's 2 major generic strategies, which is lower cost and differentiation. ACBT should not forget the ongoing world crisis as people are not willing to spend money. So ACBT should lower their cost than the competitors and should add value to its facilities such as sports and recreation and also better library facilities.

Looking at the present situation ACBT should adjust or develop new strategies in order to succeed.

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