Week 2 of Social Media and Mobile Strategies continues to look at Strategy, both the Internal and External factors of a business and how that impacts development of a strategy for Social Media and Mobile Commerce. We also considered Risk and how it is a foundation of Strategy.
My lecturer, Matt Warren brought to light the importance of Risk in the formulation of strategy. He explained that it is an important consideration that was left out of the textbook and lecture materials. Matt made the point that strategy is generally developed in response to risks faced by an organisation.
The textbook (below) focuses mainly on the Internal and External factors which effect a business in the development of strategy.
The External factors to consider in strategy development are viewed through 2 models; the PESTEL and 5 Forces model.
The PESTEL model looks at the ‘Macro’ environment of a business which includes the political, economic, social, technological, environmental and legal factors which may influence a business. These can be used in SWOT analysis as the Opportunities and Threats to a business.
The 5 forces model examines the forces on an industry in terms of how competitive it is. These factors are the rivalry within the industry, the threat of substitutes to an industry, the power of buyers within the industry, the power of suppliers in an industry and the threat of new entrants. This model was developed by Michael Porter (1980) and is used extensively in strategy development. Analysis outcomes from the 5 Forces model can also form considerations within a SWOT analysis as strengths, weaknesses, opportunities or threats.
The internal factors of a business are often considered in terms of resources and capabilities. This can be understood as what a business has and what is is best at doing with it, which sets it aside from it’s competition. It is this competitive advantage gained through the combination of resources and capabilities which is primary to the capabilities view of a business. These make up the strength and weakness aspects of a SWOT analysis.
Systematic Strategy Development
The model tools offered in this component of the unit are useful for large organisations who wish to take a systematic approach to strategy development. Smaller businesses may take a more ad-hoc approach, or may find that a SWOT approach is great for getting some clearer thinking about some very confusing questions:
- Where do we operate? Which industry?
- Who are our competition?
- What do we do well? What do we do better than our competitors?
- Are there things we could move into doing which use our capabilities? Could these things set us apart?