Organisations External Relationships And Its Internal Capabilities Commerce Essay


Strategies are formulated and driven by senior management to whom we expect to set Strategic direction. Such strategies are then adopted by businesses in order to enable them to achieve their business objectives. By looking at the external and internal capabilities of the business a new level of sustainability have to be considered and 'businesses are embedding sustainability to their strategies.' (Mertins 2012) We will explore businesses strategies like Porter's (1985) generic competitive strategies which provide a sustainable industry. Barney's (1980) resource base view looks how this has improved the businesses sustainability. I will be applying this theory to real life organisations looking at Physical; Human; Technological and Organisational aspect of the business. Finally I will explore the external parts of the organisation with this theory and seeing what is valuable; rare and what makes them 'Imperfectly Imitable' (Barney 1980) as a business. Business Strategies that I will analyse are; Cost leadership (Porter, 1985) and Differentiation (Bowman and Faulkner, 1996). Thus incorporating Cost Leadership and differentiation and explaining how this affects the internal capabilities and external relationships within an organisation. Following on from this I will look at Corporate Social Responsibility (CSR) is a business strategy which involves the entire business, whereas the Porter (1985) and Bowman and Faulkner (1996) business strategy which only involves a section of a business. I have selected Microsoft as a leading example of Carroll (1991) theory on the 'the pyramid of corporate social responsibility, analysing how they have succeeded by fulfilling the four levels of the pyramid using this strategy. I will look how CSR affects 'Triple Bottom Line' (Elkington 2004) and the external relationships and the internal capabilities of Microsoft.

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Other strategies businesses can adopt are 'differentiation by brand; differentiation by design: differentiation by positioning; differentiation by technology and finally differentiation by innovation' (Baroto, 2012). I will focus on Apple's business strategy to set themselves apart from other competitors through technology. Furthermore Apple strategy to differentiate themselves you can argue that they are focusing on "Luxury good" market segment and particular types of audience. Apple created a new marketing niche by investing capital in research, which allowed them to have a unique technology advantage against competitors which is sustainable for the future. Firstly internal capabilities have improved and the technological advances have meant that Apple is able to have an automated production line to improve efficiency, which then improves the overall quality of the product. However the upfront cost in implementation is extremely high and the cost of setting quality control can be time consuming. This could affect the internal and external relationships with Apple employees and suppliers as the production is mainly automated this means that labour costs will be reduced and could result in job cuts for the businesses. One of Apples Core competencies is the unique technology that they adapt to their products this competence is well protected by patents which stop competitors using the technology that Apple has.

Apple does take a cost leadership (Porter 1985) approach. Buyer Power (Porter's Five Forces 1985) there is only two different suppliers of memory chips and the microprocessors and OS chips however for keyboards; disk drivers there are many different suppliers this means that suppliers will improve the quality of their products and lower their prices for Apple therefore leaving the supplier in a low supplier position. By keeping the suppliers cost down through Buyer power this means that Profit margins are maximised making Apple suppliers sustainable for the future.

Secondly the environment is a huge issue effecting Apple externally and focused on finding energy that is renewable. Apple is continually 'working towards the goal of achieving net zero energy programs for our corporate facilities worldwide'. (Apple Environment Report 2012) Apple is also working with the government to meet environment targets improving their External relationships. Apple has a requirement that all supplier s have to be environmentally friendly when producing raw materials. Apple utilises buyer power (Porter, 1985) to ensure that their suppliers are using eco-friendly processing procedures and in the transportation of the products to Apple. The supplier adheres to requests by Apple as they are major client.

I am now going to apply Barney's (1980) resource based view to look further in the internal and external aspects of the business. Apple is very financially stable and flourishing in their current market as profits year in and year out seem to increase. Apple is worldwide company and has factories that are based in Asia the beneficiaries of this is are; works out cheaper to transport the goods then base the factory in USA due to mainly of taxation rates and labour costs are higher in USA than Asia. Apple's human resource was Steve Jobs who innovated many of Apples finest idea's and made Apple successful. Steve Jobs was a priceless asset to the business. Furthermore Steve Jobs ideas boasted the Technological aspects of the business with new technological ideas in their products which helped them differentiate themselves against their competitors both in turn helped the internal capabilities of the business. Apple's most valuable asset is the iconic technology which they possess and they protect their advancements against their rivalry through patents. These technologies allowed them to implement their strategy which is to stand out in the luxury good market and creating a new marketing niche which helps them stand out against their competitors. By standing out it brings high returns to their shareholders improving the external relationships and Apple has done this through technology advancement making this rare (Barney 1980) aspect of the business. Branding of Apple is unique as they still see themselves as frontier in the technology industry. Apple brands themselves as a luxury good this is evident when recession occurred in 2008 and they didn't drop the prices as a result they would bare the loss however this didn't affect their brand image. I would consider Apple's brand image to be imperfectly imitable which makes Apple sustainable for the future.

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Corporate Social Responsibility (CSR) strategy like Carroll (1991) identifies 'the pyramid of corporate social responsibility'. There are 4 different levels which a business should go through to become a successful company. Microsoft is an example of a company that has completed the four levels of pyramids of social responsibility. Economic responsibility to extent shareholders should see a return on their investment like suppliers; customers and employees. Carroll (1991) believes that this is required in order to make a business a success on the other hand we have the Friedman's approach which some companies take as the neoclassical approach 'The business of business is business' (Friendman YEAR) and would only do any levels of the Carroll's (1991) Pyramid if it was to increase the company value with that particular company. Elkington (2004) theory on 'Triple Bottom Line' on sustainability an aspect being Economic growth which Microsoft has to consider. Microsoft with the new innovation of Windows 8 has improved the external aspect of the business and helps stimulate economic growth more importantly this new innovation has helped Microsoft internally as investors are more likely to invest because of the potential yield in market share. This is good risk management in that they have lowered risks for investors and will hopefully bring value for shareholders. Rubenstein stated (1994) 'If your rate of innovation likely to be competitive in the longer term' in short 'Are your profit margins sustainable' for Microsoft to be successful they will have adopt new wider concepts like Social capital and natural capital to grow as a business.

Microsoft does so when they create successful products and treat employees fairly.

The next level in the pyramid is known as legal responsibility where they take note and accept the different laws around the world. Microsoft is a great example as a global firm they have to reconsider the different levels of wages in different countries as well as the law and legislation in different countries. Microsoft are expected to follow law and legislation about keeping environment clean with Elkington (2004) theory about Triple Bottom Line it looks how Environment stewardship of a business and how this contributes to sustainability for the future. Microsoft has given customers information of what manufacturers do when customers want to scrap their old laptop and what schemes the manufacturer offers. Furthermore Microsoft has updates Windows 7 so that it designed to reduce power consumption which in turn improves the environment. Environment is a growing external factor that organisations have to consider with litigation and regulations.

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The third level to this pyramid is being ethically responsible meaning that beyond the law it should be 'expected' by a business. (Carroll, 1991) By being an ethical business this enables Microsoft to have repeated sales from their customers. Branding is another way in which Microsoft use and brand themselves as Socially Responsible or an ethical business and gain good public relations which could lead to increased sales and increased profits. Mintel (1994) 'demonstrates that customers are willing to pay more for ethical products.' Wilson (1997) says 'even during the recession there are customers who seek goods and services which have both been environmentally friendly and have been produced ethically.' This demonstrates that customers who know that the item has been branded ethically that they are more likely to purchase the product which Microsoft adopts within their policies.

Finally the final level of the pyramid is Philanthropy responsibility. Carroll (1991) deems this to be desirable which often leads to better quality of life of employees, it also includes donation such as charities and education causes. Microsoft founder Bill Gates has set up a foundation for Philanthropic causes; The proceeds of one have been used to assist Ghanian farming technology in order to make a sustainable resource. (Greene, 2009) Microsoft has fulfilled the Carroll (1991) Pyramid which strategy has been successful for Microsoft.

Elkington (2004) in triple bottom line talks about the Social progress of a company Microsoft has demonstrated that they are constantly working with people an example of this Bill Gates did take time to do Philanthropic activities to improve quality life and to give more opportunities to employees.

Lastly I am going to reflect on Corporate Social Responsibility strategy where the whole business is driven to success; the generic strategies that a business could undertake are cost leadership and differentiation where they focus on a business department like production and making their business a success. In conclusion a business should focus on a segment of their company or concentrating on the whole business to make the business a success. From the Porter (1995) generic strategies I have found that a business that has adopted any of the strategies have been successful provided the strategy has been implemented correctly which all these business examples did. It is important for a business to make a choice between the cost leadership strategy; differentiation or strategy as a business that is "stuck in the middle" is usually unsuccessful. (Baroto, 2012) The resource base view (Barney 1980) looks at a business external and internal aspects of the business and to follow on Apple is really is successful as resource based view has revealed that Apple has some rare and Imperfectly imitable which allows them to be successful and sustainable. Elkington (2004) theories incorporates triple bottom line to identify aspects of the business. I have to conclude that using this on Microsoft has brought out some key external relationships and internal capabilities more importantly shows that Microsoft is extremely sustainable and hence why Microsoft has been a successful business because their high sustainability. Using the CSR strategy can make a business successful by using the whole business to achieve their business aims which in turn improves the internal and external capabilities of the company. Carroll's (1991) approach states that the 'Pyramid of social responsibility' means a business should aim for Philanthropy responsibility as it is deemed to be desirable however some businesses will take the Friedman approach 'the business of business is business' REFERENCE and a business would only practice philanthropy responsibility if it were to improve their profits. All of these strategies have their advantages and disadvantages and all have improved aspects of internal and externals relationships of a business.

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