MGMT490 California State University CH3 Evaluating a Companys Environment HW Read Chapters 3 Evaluating a Company’s Environment & Ch 4 Evaluating a company

MGMT490 California State University CH3 Evaluating a Companys Environment HW Read Chapters 3 Evaluating a Company’s Environment & Ch 4 Evaluating a company’s resources, capabilities, and competitivenessSelect two L.O.s from each chapter and discuss how the author succeeded with you – i.e. explain the learnings from your perspective (minimum 100 words per L.O.). Apply the concepts toward your final paper. AND Media Research – “Tell me something I don’t know” article that might affect the attractiveness of that market Select an article from any media source that might affect business using Ch 3 and Ch 4 concepts — company’s environment and company’s resources, capabilities, and competitiveness I have attached a file for one of my classmate’s work .. hopefully this is gonna work. Thompson’s Crafting &
Executing Strategy
Chapter 3 “Evaluating a Company’s External Environment”
Chapter 4 “Evaluating a Company’s Resources, Capabilities, and Competitiveness”
Nancy Romero
Management 490
April 28, 2020
Introduction
This essay will be discussing Thompson’s Crafting and Executing Strategy chapter 3 and
4. Chapter 3 “Evaluating a Company’s External Environment” explains the factors in a
company’s macro- environment and the tools we should use to analyze the competitive
conditions in a company’s industry. Chapter 4 “Evaluating a Company’s Resources, Capabilities,
and Competitiveness” explains how a company’s resources are important to give it a competitive
edge over its competitors. It also explains how to assess a company internally and externally
through a SWOT analysis.
Chapter 3​ “​Evaluating a Company’s Environment”
L.O. 1​ – How to Recognize the Factors in a Company’s Broad Macro -Environment that
may have Strategic Significance.
The macro-environment encompasses the broad environmental context in which a
company’s industry is situated that includes strategically relevant components over which the
company has no direct control. PESTEL analysis focuses on the six principal components of
strategic significance in the macro-environment: political, economic, social, technological,
environmental, and legal factors.
1. Economic Factors: These include the general economic climate and specific factors such
as: interest rates, exchange rates, inflations rates, unemployment rate, etc. They can also
include the market conditions for stocks and bonds. This is one factor of why Lush has
not expanded more rapidly to international markets. Rates for shipping their high quality
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ingredients to other places is quite costly and difficult to get the exact ingredients readily
available in specific geographic areas.
2. Social Factors: These include the societal values, attitudes, cultural influences and
lifestyles that impact the demand of a specific product. Demographic factors such as
population size, growth rate and age distribution are also included. Today more and more
people are demanding environmentally friendly products. All of Lush’s products are
100% vegetarian and are made with top quality ingredients. They are marketed as
high-end products for the younger , more health conscious target market. Their products
are targeted for people living environmentally friendly lifestyles.
3. Environmental Factors: These include ecological and environmental forces such as:
weather, climate, climate change, etc. These forces can directly impact industries like:
insurance, farming, energy production, and tourism. Today there are many more laws
protecting the environment. Lush cares a lot about being environmentally friendly which
is why their products have “naked” packaging and only use recycled paper bags to wrap
their products for the customers.
L.O. 2​ – How to Use Analytic Tools to Diagnose the Competitive Conditions in a
Company’s Industry
When assessing a company’s industry and competitive environment the company must
evaluate how strong the industry’s competitive forces are. ​The strongest of the five forces
determines the extent of the downward pressure on an industry’s profitability. The five
competitive forces are: competition from rival sellers, competition from potential new entrants,
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competition from producers of substitute products, supplier bargaining power, and customer
bargaining power.
1. Competition from rival sellers. One competitive pressure is whether the number of
competitors is increasing​ or they are becoming more equal in size and competitive
strength. Rivalry increases and becomes a stronger force when buyer costs to switch
brands is low. Some common “weapons” for competing with rivals are discounting
prices, offering coupons, holding clearance sales etc. Lush cosmetic’s top competitors are
The Body Shop, Bath and Body Works, and Natura and Co. However, Lush has
developed strong brand loyalty with its customers. As well as, more customers are now
switching to natural products and are more conscious of what they put on their body.
2. Competition from producers of substitute products. ​A substitute product is one that serves
the same purpose as another product in the market. ​Competitive pressures from
substitutes are stronger when good substitutes are readily available and attractively
priced. And when substitutes have comparable or better performance features. Some
examples of substitute products of Lush soaps are clay, mashed fruits and vegetables,
cleansing oil, and plants. Although there may be a few substitute products to Lush
Cosmetics many of them are not very practical. That is one advantage that Lush has
because it sells essential hygiene products that have limited substitute products.
3. Customer bargaining power. Competitive pressures from buyers increase when they have
strong bargaining power and are price sensitive. Buyer bargaining power is stronger
when the industry’s products are standardized or undifferentiated. Also, when buyers are
well informed about the quality, prices and costs of sellers. Lush is a very transparent
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company and tells their customers all the ingredients that are in their products and where
they come from.
Chapter 4​ “Evaluating a Company’s Resources, Capabilities, and Competitiveness”
L.O. 1-​ Why a Company’s Resources and Capabilities are Centrally Important in Giving
the Company a Competitive Edge Over Rivals.
A resource is a competitive asset that is owned or controlled by a company. A capability
is the capacity of a company to perform an internal activity competently through deployment of a
company’s resources. A company’s resources and capabilities represent its competitive assets
and are determinants of its competitiveness and ability to succeed in the marketplace.
1. Resources. ​A productive input or competitive asset that is owned or controlled by a
company. There are two types of company resources: tangible and intangible. Tangible
resources include physical resources, financial resources, technological assets, and
organizational resources. Intangible resources include: human assets, brand and company
image and reputational assets, relationships, and company culture and incentive system.
2. Capabilities. ​The capacity of a company to perform some activity proficiently. When
identifying a company capability, you must ask if the company is knowledge-based,
residing in people and in a company’s intellectual capital or in its organizational
processes and systems. One large capability of Lush is that its very knowledge based
when it comes to fighting against animal testing and being environmentally friendly.
3. Competitiveness. ​Resource and capability analysis is a powerful tool for sizing up a
company’s competitive assets and determining if they can support a sustainable
competitive advantage over market rivals. There are four tests to determine a company’s
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resource’s competitive power. A company’s resources must be valuable and rare to have
competitive advantage. But for a company to have sustainable competitive advantage its
resources must be inimitable and non substitutable. A company requires a dynamically
evolving portfolio of resources and capabilities to sustain its competitiveness and help
drive improvements in its performance.
L.O. 2​- How to Assess the Company’s Strengths and Weaknesses in Light of Market
Opportunities and External Threats.
A SWOT analysis is a powerful tool for assessing a company’s internal strengths and
weaknesses, market opportunities, and external threats. ​Basing a company’s strategy on its most
competitively valuable strengths gives the company its best chance for market success.
1. Strengths. When identifying a company’s internal strengths there are 3 things to look at:
competence, core competence, and distinctive competence. A competence is an activity
that a firm has learned to perform with proficiency. ​A firm’s strengths represent its
competitive assets. The following are some strengths of Lush Cosmetics, its products are
not just different but also naturally scented and colorful to look at. The company makes
cosmetics with natural and organic ingredients which are safe to be used on all types of
skin.Lush is a highly sustainable brand making sure that everything that they sell is
completely organic.Lush Cosmetics has been riding on the popularity of the pop culture
and have many brand ambassadors from these categories like Jeffree Star, and Kylie
Jenner.
2. Weaknesses. The different types of weaknesses are:, inferior skills, expertise or
intellectual capital, deficiencies in physical, organizational, or intangible assets, and
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missing or competitively inferior capabilities in key areas. ​A firm’s weaknesses are
shortcomings that constitute competitive liabilities. The following are some of Lush
Cosmetics Weaknesses, The cost of retailing is growing as brands focus increasingly on
improving the in-store experience. Most of the Lush Cosmetics stores are located in the
malls in their regions. The mall traffic has started reducing and the ​pricing​ of the
company has been primarily catering to the premium segment.
3. Market opportunities and external threats. ​A company is well advised to pass on a
particular market opportunity unless it has or can acquire the competencies needed to
capture it. When looking at possible threats companies should evaluate what strategic
actions can be taken to neutralize or lessen their impact. One opportunity for Lush
Cosmetics is that The presence of chemicals in makeup, as well as allegations of
dangerous testing in animals like rats, have drawn the attention of activity. This is a huge
chance for environment-friendly and natural product companies like Lush Cosmetics to
capitalize on. A common threat to anyone is competition, the main competitors of Lush
Cosmetics are The Body Shop, Sephora, and Natura and Co.
Conclusion
In conclusion, from chapter 3 and 4, we can take away that the PESTLE is an important
analysis of a company’s macro environment that has significance in a companys’ strategy. There
are 5 forces when determining the competitive conditions in a company’s industry. Also, a
company’s resources and capabilities are centrally important in giving the company a
competitive edge over rivals. Lastly, the SWOT analysis is a strong tool for assessing a
company’s internal strengths and weaknesses, market opportunities, and external threats.
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Works Cited
Bhasin, Hitesh, and Rachel. “SWOT Analysis of Lush Cosmetics – Lush SWOT Analysis
Explained.” ​Marketing91,​ 1 Dec. 2018, ​www.marketing91.com/swot-analysis-of-lush/​.
Thompson, Arthur A., et al. ​Crafting and Executing Strategy: Concepts and Readings​.
McGraw-Hill/Irwin, 2015.
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