Elements Affecting Corporate Strategy
Corporate marketing strategies should be derived from the analysis of three elements:
- environmental problems and opportunities,
- corporate objectives, and
- resources and competencies.
A corporate strategy should be consistent with a company’s objectives and achievable with existing (or anticipated) resources. It also needs to take into account prospective problems and opportunities in the working environment of the organisation.
Environmental Problems and Opportunities
All organisations operate in dynamic environments which can create a variety of problems or opportunities in the firm’s existing or potential markets. Specifically, managers should be aware of the possible impact of six major environmental forces.
Six major environmental forces
1. Demographic characteristics, such as the age distribution of the population, birth rates, population growth, regional population shifts, and the percentage of two-worker households.
2. Social and cultural values, such as attitudes toward health and nutrition, the need for self-expression, materialism, ecological concerns, product safety.
3. Economic factors, including inflation and unemployment rates, economic growth, raw material scarcities, energy costs, interest rates, import duties, and excise taxes.
4. Technology, particularly developing and anticipated changes that have an impact on the kinds of products available in a market and the kinds of processes (such as automation for the use of synthetic materials) used to produce these products.
5. Legal and regulatory actions, including such factors as regulations, (and deregulation) regarding the type of advertising available to a product, product labelling and testing requirements, limitations regarding product contents, pollution control, restrictions or incentives with respect to imports or exports.
6. Competition, which to a large extent is a function of the other environmental forces. Specifically, both the identity of competitors and the type or focus (for example, price-oriented versus technology-oriented) of competition may change because of:
- The entry of new firms (especially foreign firms)
- The acquisition of a small competitor by a large, well-financed organisation
- Deregulation, changing economic conditions, or new production processes which foster increased price competition.
- Changing social and cultural values or new technology which causes buyers to purchase products or services which previously were considered non competitive.
Analysing the Organisation’s Internal Environment
In developing a corporate strategy, management should also analyse the resources that will be available to the organisation. In the broadest sense, resources include
- Financial resources, such as cash reserves
- Labour and managerial skills, such as the ability to produce high- technology products or to manage promotional budgets
- Production capacity and the efficiency of equipment
- Research and development skills, and patents
- Control over key raw materials, as in the ownership of energy resources
- Size and expertise of the sales force or distribution system
Too often firms limit their evaluation of resources to the more tangible ones, such as cash and facilities. Yet management and marketing capabilities are often more important.
The idea of relying on a firm’s strongest resources is generally referred to as using a distinctive competency, and in selecting from potential corporate strategies, a firm should usually rely on its distinctive competencies or on competencies that it can acquire.
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