Business Strategy and the environment - Part 1

Business strategy


Understanding of Business

Business is defined as all activities organized by people working in the field of commerce (producers, traders, consumers, and industries in which the company is located) in order to improve their standards and quality of life.

Understanding the strategy there are several kinds as stated by experts in their respective workbooks. Stephanie K. Marrus said the strategy is defined as a process of determining the plans of top leaders who focus on the long-term goals of the organization, accompanied by a compilation of ways or efforts on how to achieve these goals.

Hamel and Prahalad also said the strategy is an action that is incremental, always increasing and continuous, and is carried out based on the perspective of what is expected by customers in the future. Thus, the strategy almost always starts from what can happen and not starts from what happens. The occurrence of new market innovation speeds and changes in consumer patterns requires core competencies. Companies need to look for competencies to find core competencies in the business they do. According to Fred R. David, the strategy is a tool to achieve long-term goals.

Strategy Management



Strategy management is the art and science of preparing, implementing and evaluating cross-functional decisions that can enable a company to achieve its goals.

Strategy management is the process of setting organizational goals, developing policies and planning to achieve these goals, as well as allocating resources to implement policies and plan the achievement of organizational goals.

Read >>> Business Strategy Part 2

Strategy management combines the activities of various functional parts of a business to achieve organizational goals. The strategy is an action that is incremental (constantly increasing) and continuously, and is carried out based on the perspective of what is expected by the customer in the future.

Thus, the strategy almost always starts from what can happen and not starts from what happens. The occurrence of new market innovation speeds and changes in consumer patterns requires core competencies. Companies need to find core competencies in the business they do.

The first activity carried out was to formulate the company's vision and mission statement. The vision that is owned by the company is ideal about the future situation that is desired to be realized by all company personnel, starting from the top to the bottom.

The ideals of the future that are in the minds of the founders who roughly represent all members of the company are called Vision. The mission is a written translation of the vision so that the vision is easily understood for all company staff.

The next step is to analyze the company's external and internal environment. The act of knowing and analyzing the external environment becomes very important because in essence, the conditions of the external environment are beyond the control of the organization.

In addition to understanding the external environmental conditions, a broad and in-depth understanding of the company's internal environment needs to be done. Therefore, the strategies made need to be consistent and realistic in accordance with the situation and conditions.

So that before the management applies a strategy that is suitable for the course of the company in the future, they must first analyze the company's current position, both seen from the position of competition with similar businesses and from the company's own conditions.

Efforts to achieve company goals are a continuous process that requires staging. To determine whether a stage has been reached or not yet needed a benchmark, for example, the time period and the results to be achieved are clearly formulated.

The next step is the preparation and selection of strategies the company must carry out in order to compete with other competitors.

Stages of Strategy Formulation

Application to determine the main strategy based on Fred R. David's concept is done through the use of several matrices with three stages of implementation. The following are the various matrices and the three stages referred to again.

Stage I: The Input Stage

At the input stage, all basic information regarding the company's internal and external factors needed in formulating the strategy is summarized by the strategy maker. This can be done using two strategy formulation techniques, namely:

1. Matrix of External Factor Evaluation (EFE)
The EFE matrix is ​​used to evaluate the company's external factors.

External data is collected to analyze matters relating to economic, social, cultural, environmental, political, government, legal, technological, competitive issues in the industrial market where the company is located.

This is important because external factors directly or indirectly affect the company.

The steps of the EFE Matrix work stages are as follows:

a. Make a list of critical success factors (CSF) for external aspects that include opportunities (threats) and threats (threats) for the company.

b. Determine the weight (weight) of CSF earlier with a higher scale for high achievers and vice versa. The sum of all weights must be 1.0.

c. Determine the rating of each CSF between 1 and 4, where
1 = Major weakness;
2 = minor weaknesses;
3 = small strength;
4 = Main Strength.

Ratings are determined based on the effectiveness of the company's strategy. Thus, the value is based on the condition of the company.

d. Multiply the weight value by the rating value to get the scores for all CSFs.

e. Add up all the scores to get the total score for the company being assessed. A total score of 4.0 indicates that the company responds in an extraordinary way to opportunities and avoids threats in the industrial market.
Meanwhile, a total score of 1.0 indicates that the company did not take advantage of existing opportunities or did not avoid external threats.

2. Internal Factor Evaluation (IFE) Matrix
The IFE matrix is ​​used to determine the company's internal factors related to the strengths and weaknesses that are considered important.

Data and information on the company's internal aspects can be extracted from several functional companies, for example from aspects of management, finance, HR, marketing. In principle, the working stages of the IFE matrix are the same as the EFE matrix.

Read >>> Business Strategy Part 2


The steps of the IFE Matrix work stages are as follows:

a. Make a list of critical success factors (CSF) for internal aspects that include Strengths and Weaknesses for the company.

b. Determine the weight (weight) of CSF earlier with a higher scale for high achievers and vice versa. The sum of all weights must be 1.0.

c. Determine the rating of each CSF between 1 and 4, where
1 = Major weakness;
2 = minor weaknesses;
3 = small strength;
4 = Main Strength.

Ratings are determined based on the effectiveness of the company's strategy. Thus, the value is based on the condition of the company.

d. Multiply the weight value by the rating value to get the scores for all CSFs.

e. Add up all the scores to get the total score for the company being assessed. The total score of 4.0

Stage II: The Matching Stage

At the matching stage, the strategy maker identifies a number of alternative strategies by matching input information in the form of external and internal factors obtained at the input stage.

At this matching stage, the authors identified only by using the SWOT matrix (Strengths, Weaknesses, Opportunities, and Threat).

The steps of the TOWS / SWOT work stages are as follows:

1. Make a list of the company's external opportunities.
2. Make a list of the company's external threats.
3. Make a list of the company's internal key strengths.
4. List the company's internal key weaknesses.
5. Match internal strengths and external opportunities and record the results in the SO strategy cell.
6. Match internal weaknesses and external opportunities and record the results in the WO strategy cell.
7. Match internal forces and external threats and record the results in the ST strategy cell.
8. Match internal weaknesses and external threats and record the results in the WT strategy cell.


The Threats-Opportunities-Weaknesses-Strengths (TOWS) matrix is ​​an important matching tool to help managers develop four types of strategies. The four strategies in question are:

a. Strengths - Opportunities (SO), i.e. by developing a strategy in utilizing the strength (S) to take advantage of the opportunities (O) that exist.
b. Weaknesses - Opportunities (WO), namely by developing a strategy in utilizing opportunities (O) to overcome existing weaknesses (W).
c. Strengths - Threats (ST), namely by developing a strategy in utilizing strength to avoid threats (T).
d. Weaknesses - Threats (WT), namely by developing a strategy to reduce weakness (W) and avoid threats (T).

Business Strategy Part 2, read more>>>

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