The General Environment

SUMMARY OF UNDERSTANDING STRATEGIC MANAGEMENT CHAPTER 2 The full common Environment The extraneous environment facing the arrangement consists of both a. A normal environment, often referred to as the macro-environment because changes that occur here testament get hold of an effect that transcends firms and specific industries. b. A competitive environment, consists of the industry and markets in which an organization competes. In order to s tramp and monitor their environment, firms require pawns of compendium that entrust allow them to f be knowor in the changes in the general environment and esteem their impact. unmatchable such approach involves scanning the environment to detect signals that will act as a signpost for next changes in the organizations industry. In addition, an organization must monitor its environment to discern precedents and trends that atomic number 18 beginning to form and try to forecast the future direction of these trends. a. examine the en vironment Scanning, therefore, is an opportunity for the organization to detect weak signals in the general environment before these have compoundd into a discernible conception which might affect its competitive environment. The first is that the organization may last to identify these signals.The second is that the organization may discern a pattern that is not there but is based on the assumptions and mental homunculuss that managers halt in their heads. b. Monitoring the environment * Monitoring can be seen as the activity that follows these initially disparate signals and tracks them as they grow into more distinctly discernible patterns. * Monitoring allows an organization to see how these general environment trends will impact on its competitive environment. * Monitoring uses a finer drag stroke. * There is no focus for an organizations monitoring activities. One way in which an organization might monitor weak signals is to roundabout thresholds such that any activit y which occurs above the threshold will be monitored. c. Forecasting changes in the environment Three main types of uncertainty (Van der Heijden, 1996) * Risks where former(prenominal) performance of similar e desegregatences allows us to estimate the probabilities of future outcomes. * Structural uncertainties where an howevert is unique enough not to offer evidence of such probabilities. * Unknowables where we cannot even imagine the event. Scenario planning is a disciplined method for imagining possible future.It is an internally accordant view of what the future might turn out to be (Porter 1985, p. 446). A scenario can be seen as a challenging, plausible, and internally consistent view of what the future might turn out to be. They are not forecasts in the sense that one is able to extrapolate using agone data. However, they do deal with the future and can a tool of analysis for the organization to structure the surfeit of information that is contained in the present. In p articular, scenarios serve organizations recognize the weak signals that signpost changes in its environment. The benefits of scenario planning for Shell have been More robust strategic finishs. * Better thinking about the future by a stretching mental model. * Enhancing corporate experience and recognizing events as a pattern (the recognition and monitoring of weak signals until they coalesce into a pattern is clearly important here). * Improving communication passim the company by providing a context for decisions. * A means to provide leadership to the organization. A process for developing scenarios is as follows * Define the scope. This involves background the time frame and the scope of analysis. * Identify the major stakeholders. Identify grassroots trends. * Identify key uncertainties. * Construct initial scenario themes. * Check for consistency and plausibility. * fetch learning scenarios. * Identify research needs. * Develop quantitative models. * Evolve towards dec ision scenarios. PEST abstract * PEST analysis is simply another tool to process the organization detect and monitor those weak signals in the bank of recognizing the discontinuities or fractures shaping the environment. * PEST analysis can be apply to help detect trends in the external environment that will last dress their way into the competitive environment.It provides a link between the general and competitive environments in that weak signals in the general environment can become key forces for change in the competitive environment. SWOT Analysis Scenario planning and PEST analysis can help to identify the external opportunities and threats (OT) facing an organization. The firms internal strengths and weaknesses (SW) can best be determined following an appraisal of its resources and capabilities. SWOT analysis allows an organization to prise its current strategy in light of its changing environment and to help turn potential threats into opportunities and weaknesses int o strengths.A key point to keep in brainiac is that it is the external analysis that precedes the internal analysis of a firms resources and capabilities. SUMMARY OF RM-6 Sustaining Competitive Advantage in the Global Petrochemical Industry A Saudi-Arabian Arabian Perspective From a spheric perspective, the competitiveness of nigh firms arises from macro-economic phenomena directed by exchange rates, deficit of the national budget or interest rates (Passemard and Kleiner, 2000). Competitiveness in any case arises from factors other than macro-economic, such as availability of raw materials, cheaper work force or technological superiority.Porter (1980) is ascribe with being the pioneer in identifying factors that contribute to national emolument. Porter (1985) make valuable contributions in identifying important factors that contribute to national advantage, that is the factor conditions of a nation, such as infrastructure and the availability of resources demand conditions in the groundwork country the presence or absence of related and supporting industries incumbent for being competitive in the global market the firms strategy, structure and rivalry with other ompanies that act upon how firms are established, organised and managed and the personality of the rivalry affects the competitive advantage of industries and nations (Porter, 1990). Saudi Arabia is well known passim the world as a leading producer and exporter of oil. For many days prior to the 1970s, a large volume of associated gas by products which were produced in the process of crude oil production, had been flared into the atmosphere.However, in the early 1970s the Saudi Arabian government initiated a plan to utilize these precious hydrocarbon and mineral resources for the production of various petrochemicals, fertilizers, iron and steel. Saudi Arabia accounts for a little more than 5% of the worlds petrochemicals production. However, Saudi Arabia is the largest producer of MTBE (Met hyl Tertiary Butyl Ether) with a global share of around 15%. It has also a epic market share in the production of methanol (around 12%) and ethylene glycol (14%). Domestic consumption in Saudi Arabia is low, due to the delicate size of the market.The industry in general has therefore pursued an export-orientated strategy, as a result of which more than 76% of its petrochemicals production is being exported. The two major markets for the Saudi petrochemical exports are the Middle Eastern and East Asiatic region. The strength & weakness of Saudi petrochemical industry * Strength Low salute due to economic of scale, initial cost, feed-stock, and utilities. Presence of efficient infrastructure * weakness Lack of management expertise, marketing approach, product development, and technology Main incommodeFrom those strength & weaknesses above, we could see that Saudi petrochemical industry was depending on the comparative advantage rather than the support of competitive advantage to sustain in global competition. Analysis Using Porters five force model above, we could analyze that * The entry of competitors raw materials controlled by many firms, new and elevated technology, large & complex operational, higher(prenominal) investment * The threat of substitutes concerns on biochemical substitution * The argaining power of buyers find alternative market, focus on municipal and foreign customers * The bargaining power of suppliers change the supplier with low cost, find reasonable price and obtaining credit facilities, no substitute of aluminum alkyls high threat * The rivalry among the existing players zero differentiation, see the competitor the like SABIC, Exxon, Shell, BASF, Dow, Mitsubishi in equal size and market power oversupplySolution * Improve tender-hearted resources department to develop the technical and managerial skills of local employees * Increase the causal agent in marketing, distribution Penetrated global market, and research & develop ment division to transform manufacturing process which safe for environment * Increase productivity and cut loss, merge small to medium firms to strengthen capital base. Lesson learned Based on analysis using Porters model, it is illustrate that Saudi petrochemical industry environment able to help other firms to formulate the strategy, not alone consider to the general environment and competitor analysis but also to the Porters model itself. * Realize that external factors will influence the firm, directly and indirectly. The firm also has to formulate their strategy based on the external factor (which couldnt be controlled), how to match the next consummation with their capacity.