Module Introduction
Dr Emma Gardner
By the end of this module you
should be able to…
• Review the models and frameworks for the strategic analysis of
international businesses.
• Apply relevant tools, theories and concepts to identify
contemporary strategic issues in international business.
• Appraise the external and internal environments of international
firms to determine appropriate strategies.
• Demonstrate an understanding of strategy in the context of
diverse global environments and within different types of
organisations.
• Develop strategic decision-making and cross-cultural skills for
organisations operating in different areas of the world.
Topics
• Introduction to strategy
• Macro-environmental analysis
• Internal analysis and the resource-based view
• Corporate strategy
• International Strategy
• Mergers and acquisitions
• Innovation
• Responsible strategy
Assessments
• 8 minute group visual presentation (30%) (18th
October)
• 2500 word individual assignment (70%) (4th
November)
Key reading
• Whittington, R., Regnér, P., Angwin, D., Johnson, G.,
Scholes, K. (2020). Exploring Strategy: Text &
Cases. 12th Edition. Harlow: Pearson.
• https://rl.talis.com/3/bham/lists/E44BC551-9A89-
FB74-8F3D-FAA58AD01DE7.html
Introduction to Strategy
Dr Emma Gardner
Learning outcomes
Understand the concept of strategy
Understand basis of competitive advantage
Understand how macro environmental forces impact
upon firm strategy
What is strategy?
• Strategy is the pattern of objectives, purposes, or goals and the major policies and plans for
achieving these goals, stated in such a way as to define what business the company is in or
is to be in and the kind of company it is or is to be.
—Kenneth Andrews, The Concept of Corporate Strategy (Irwin, 1971)
• The determination of the long-run goals and objectives of an enterprise, and the adoption of
courses of action and the allocation of resources necessary for carrying out these goals.
—Alfred Chandler, Strategy and Structure (MIT Press, 1962)
• A firm’s theory about how to gain competitive advantage.
—Peter Drucker, ‘The theory of business’ (Harvard Business Review, 1994)
• Competitive strategy is about being different. It means deliberately choosing a different set of
activities to deliver a unique mix of value.
—Michael Porter, ‘What is strategy?’ (Harvard Business Review, 1996)
The nature of strategy
Strategy is about:
• The long-term direction of an organisation
• Gaining advantage over competitors
• Addressing changes in the business environment
• Building on resources and competences (capability)
Slide 2.10
PESTEL
• PESTEL analysis highlights six environmental factors
in particular: political, economic, social,
technological, ecological and legal.
•
• Organisations need to consider:
• The market environment (e.g. suppliers,
customers and competitors).
• The non-market environment (e.g. NGOs,
Government, media and campaign groups).
Political factors
• The role of the state e.g. as an owner, customer or
supplier of businesses.
• Government policies.
• Taxation changes.
• Foreign trade regulations.
• Political risk in foreign markets.
• Changes in trade blocks (e.g. BREXIT).
• Exposure to civil society organisations
(e.g. lobbyists, campaign groups, social media).
Economic factors
• Business cycles.
• Interest rates.
• Personal disposable income.
• Exchange rates.
• Unemployment rates.
• Differential growth rates around the world.
Social factors
• Changing cultures and demographics (e.g. ageing
population in Western societies).
• Income distribution.
• Lifestyle changes.
• Consumerism.
• Changes in culture and fashion.
• Social networks within an organisational field
(e.g. with regulators, campaign groups, trade unions).
Technological Factors
• New discoveries and technology developments.
• Examples include developments on the internet, nano-
technology or the rise of new composite materials.
Environmental Factors
• factors): This refers to ‘green’ or
(Ecological
environmental issues, such as pollution, waste and
climate change.
• Environmental protection regulations
• energy problems
• global warming
• waste disposal and recycling.
Legal Factors
• Labour, environmental and consumer regulations.
• Taxation and reporting requirements.
• Rules on ownership.
• Competition regulations.
• Regulation of corporate governance.
Drivers of change
• Key drivers for change are environmental factors that
are likely to have a high impact on industries and
sectors, and impact on the success or failure of
strategies within them.
• Typically key drivers vary by industry or market.
• For example, retailers are concerned with social
changes and customer behaviour which have driven
a move to ‘out-of-town’ shopping. Personal
disposable income also drives demand for retailers.
Using the PESTEL framework
• Apply selectively –identify specific factors which
impact on the industry, market and organisation in
question.
• Identify factors which are important currently but also
consider which will become more important in the
next few years.
• Use data to support the points and analyse trends
using up to date information
• Identify opportunities and threats – the main point of
the exercise!
Political
• Global instability raised potential threats to oil supply
and distribution. Tensions in oil-producing regions
e.g. Middle East, Russia, and oil-consuming regions
e.g. South China Sea
• Saudi Arabian policy to maintain output despite
declining demand meant a depression in prices
Economic
• Declining economic growth in 2014-2015, small
upturn in 2016.
• Opportunities in Africa and India
• Western oil companies reduced their costs through
mergers
Social
• In the West, car usage declining. Car passenger
miles decreased by more than 10% between 2007-
2017
• Eco-conscious consumers
Technological
• More fuel efficient cars
• Electric vehicles
• Opportunity to reduce costs in production
Environmental
• Climate change results in indirect threats
• Extreme weather events can potentially cause
disruptions to supply.
• Global warming affects demand
Legal
• Higher legal penalties for pollution
• In 2015, for the Deepwater Horizon disaster, BP had
to pay $18.7 billion in fines
• 2015 Paris Climate Conference – increasing
measures to promote decarbonisation
PESTEL opportunities and threats for
the oil industry
Task
• In light of this PESTEL analysis, what would you
advise a Western oil producer, such as Shell, to do?
• Have the opportunities and threats changed since
2016? How so?
Forecasting
• All strategic decisions involve forecasts about future
conditions and outcomes.
• PESTEL factors will feed into these forecasts.
• Accurate forecasting is notoriously difficult as
organisations are frequently trying to surprise their
competitors.
• Forecasting takes three fundamental approaches
based on varying degrees of certainty:
─ Single-point.
─ Range.
─ Multiple-futures forecasting.
Forecasting Approaches
• Single-point forecasting is where organisations have such
confidence about the future that they will provide just one
forecast number
• Range forecasting is where organisations have less certainty,
suggesting a range of possible outcomes with different degrees
of probability and a central projection identified as the most
probable
• Alternative futures forecasting typically involves even less
certainty, focusing on a set of possible yet distinct futures with
radically different outcomes. Alternative futures can be fed into
scenario analyses though not as simple forecasts.
Forecasting Approaches
Summary
• The macro-environment can be analysed in terms of
the PESTEL factors, from which key drivers of
change can be identified. Alternative scenarios about
the future can be constructed according to how the
key drivers develop.
Activity
• Choose a country that you are familiar with
• Look up the political risk as assessed by:
• Aon https://www.riskmaps.aon.co.uk/PoliticalRisk/Map
• WTW https://www.wtwco.com/en-sg/insights/2023/11/political-
risk-index-autumn-winter-2023
• Allianz https://www.allianz-trade.com/en_US/resources/country-
reports.html
• Do you agree with the assessment? Why/why not?
