Review strategic position

Review strategic position

Review strategic position

Resources, capabilities and core competences:

  • Resources – refers to anything a business has and this could include financial, tangible and intangible assets, management and culture.
  • Capabilities – a mix of the above resources in a process, a possibility to turn into core competences
  • Core competences - resources and capabilities to stay ahead of competitors, ie giving businesses competitive advantage.


  • Apple’s core competence is innovation in products such as iPhone and IOS systems.
  • McDonald’s core competencies are secret recipe and supply chain which helps economies of scale to reduce cost per meal.
  • Four season hotel’s core competence is the hotel’s architecture design.

SWOT analysis:

  • Strengths – Core competencies giving businesses competitive advantage
  • Weaknesses – areas that businesses are not good at
  • Opportunities – chances to take advantage of technology, government policy and social pattern changes.
  • Threats – chances that hinder business success.


SOWT analysis of Starbucks:


  • Strong brand name worth over $11.7 billion
  • Growth in stores from 1,886 stores to more than 30,000 stores from 1998 to 2019
  • Global supply chain with coffee beans sourced from Latin-America, Africa, and Asia-Pacific


  • High prices as they are generally more costly than McDonald’s coffee
  • Procurement practice – has been accused of breaking “Fair Coffee Trade” principles
  • Products recall, such as more than 200,000 coffee presses in 2019 which are in partnership with Bodum


  • Expansion in developing markets including India and China
  • Strengthen online sales channel
  • Strategic alliances with firm like using co-branding strategy – ‘Starbucks & Spotify’ where Spotify is taking over music in Starbucks


  • Compete with low cost coffee providers
  • Compete with large outlets such as McDonald’s
  • Products could be imitated by both new and old competitors

PESTEL Analysis:

Political considerations (relationship with government)

  • Tax
  • Tariffs
  • Political stability
  • Supports from government (such as policies and public speech)

Economic considerations (different areas of the economy)

  • GDP
  • Interest rates
  • Exchange rates
  • Inflation
  • Unemployment rates

Social considerations (cultural and demographic trends of society)

  • Cultural perceptions
  • Health consciousness
  • Populations growth rates
  • Age distribution

Technological considerations (industry and overall economy innovation)

  • R&D activity
  • Automation
  • Trend of new technology

Environmental considerations (environmental impacts on businesses)

  • Weather Conditions
  • Temperature
  • Climate Change
  • Pollution
  • Natural disasters

Legal considerations (any legal forces defining what a business can and cannot do)

  • Industry regulation
  • Licenses
  • Laws on labour, health and safety, environment, competition etc

Example: PESTEL analysis of Microsoft

Political considerations:

  • Political stability in most markets (opportunity)
  • Increasing governmental support for automation (opportunity)
  • Increasing international trade agreements (opportunity & threat – imitation from others)

Economic considerations:

  • Economic stability of most developed countries (opportunity)
  • High growth of developing countries (opportunity)
  • Growing middle class disposable income (opportunity)

Social considerations:

  • Stable attitudes about leisure (opportunity)
  • Increasing cultural diversity (opportunity & threat)
  • Stable demand for high quality customer service (opportunity)

Technological considerations:

  • Rapid adoption of mobile technology (opportunity & threat)
  • Increasing online transactions volume (opportunity & threat)
  • Increasing automation in businesses (opportunity)

Environmental considerations:

  • Increasing preference for green products (opportunity)
  • Increasing focus on business sustainability (opportunity)
  • Increasing availability of recyclable materials (opportunity)

Legal considerations:

  • Increasing electronic waste disposal regulations (opportunity & threat)
  • Improving patent laws (opportunity)
  • Energy consumption regulations (opportunity)

(Summary from

Exam rehearsal question – from March/June 2019

Background information

SmartWear is a long established clothing retailer in Noria, a highly-developed northern European country, which is currently in the middle of a deep economic recession. The country is also experiencing political uncertainty because of its coalition government, who many influential commentators believe will not last for its full term of office. These two factors have contributed to record high levels of unemployment, low business confidence and a steady decline in the standard of living of the general population. The company also operates in two other countries on the European continent, Southland and Centrum.

SmartWear has enjoyed long-term business success mainly due to the fact that it has carefully positioned itself towards the lower end of the clothing retail sector. It sources its products directly from suppliers in low-cost economies, and it has been able to target a mass market with consistently low prices. This has meant that during the recent economic downturn in Noria it has been able to profit from the growing number of price-sensitive consumers, who have switched from the more high-end of the clothing retail market to budget retailers like SmartWear – who are the market leader in this high volume market.

SmartWear’s long term strategy has always been based on a low cost – low price business model, which is described through its mission statement and strategic goals. However, following a prolonged period of expansion and growth, including successfully penetrating several other European markets, the company is for the first time experiencing a marked downturn in both its operational and financial performance. This appears to be in part due to economic pressure and the growing intensity of competition in all of its markets, both at home and abroad.

At a recent board meeting to discuss the latest set of disappointing financial results, it was proposed that an external consultant be appointed to investigate the deteriorating performance of SmartWear and propose the best way forward for the company.

You are the external consultant engaged by SmartWear, and you have gathered the following information to help you with your assignment: consultant.

It is apparent that the downturn in SmartWear’s performance can be in part attributed to external factors beyond the company’s direct control. A recent national newspaper article further confirms that the economic situation in Noria has made trading conditions tough for business. Therefore, a good understanding of those external environmental factors negatively affecting the SmartWear business model is essential so that action can be taken to remedy the current situation and improve the future prospects for the company and its investors.

The board of SmartWear wants to fully understand how the general environment is impacting on the company, as this will directly influence its ability to enable the business to succeed and prosper. The board has asked you to brief the board on this issue for their next board meeting.


Prepare a briefing paper to be presented at the next board meeting, which:

(a) Analyses the environment in which SmartWear operates and consider how this might impact its business model, mission and strategic goals.

(10 marks)

Exhibit 1: Briefing notes prepared by the business development department for the consultant:

SmartWear Mission Statement: Our mission is to make the widest range of good quality fashion, which is responsibly sourced, available to everyone at affordable prices.

To achieve the mission, the Board has agreed the following strategic goals:

1. Continued investment in all of our core markets that continue to offer significant growth opportunities to satisfy the

needs and demands for low cost products and services of all our customers.

2. Develop strong, long-term relationships with our key suppliers based on mutual respect and serving each other’s


3. Function with the highest ethical standards of social responsibility, expecting the same from all business partners.

4. Maintain a successful and viable company that delivers healthy financial returns to our investors.

5. Be a responsible custodian and user of natural resources which are managed in a sustainable way

Governance arrangements

SmartWear has a balanced board of directors, most of whom have been with the company for more than a decade and whose responsibilities cover all of its core business functions. The five Non-Executive Directors [NEDs] ensure that the board and the company remain fully compliant with the Noria Code of Corporate Governance; a listing requirement for all companies on the Noria Stock Exchange.

The NEDs, being part of the unitary board, discharge their duties and responsibilities through a number of sub-committees [e.g. the audit committee] with expressed authority to challenge and scrutinise the executive members of the board.

Business development

Since it was listed on the Noria Stock Exchange five years ago, SmartWear has enjoyed meteoric success. At that time, it had only 40 retail outlets in Noria, but since then through careful and planned investment, the company has achieved sustained growth and become a substantial multi-national business with over 100 outlets in Noria and a similar total number of stores in several other European countries.

Industry analysts have remarked that SmartWear has never exploited e-commerce opportunities, when there have been several new entrants into the market in the past few years who only sell online. The convenience and quality of service that these e-retailers provide has proven to be very appealing to many of SmartWear’s traditional customers, who have shifted their shopping patterns and loyalty. The absence of detailed customer data has prevented SmartWear from mitigating the risks presented to its market share from e-commerce.

Suggested Answer:

(a) Briefing paper: Environmental analysis


The operating environment that SmartWear has been experiencing has been very challenging and could explain in part the reasons for the recent downturn in its business fortunes. Although competition will undoubtedly have a significant part to play, all businesses will have been exposed to the same general environmental conditions. So, gaining a better understanding of the environment will help the board to decide how best to successfully adapt the current operations of SmartWear, and take advantage of opportunities emerging from the external environment.

Political issues

The precarious situation of the coalition government in Noria has created a sense of uncertainty within the business community. Without confidence in political continuity, investors are less inclined to risk their money. This will make it more difficult for companies, like SmartWear, to raise the necessary finance to grow the business further, or even sustain its current position. The high levels of growth which had been previously achieved no longer appear to be achievable, so the SmartWear board may need to reconsider the company’s strategic goals and focus on consolidating the company’s position in the market during this difficult and uncertain political period.

Economic factors

The current record high levels of unemployment, high price inflation and a resultant deep recession does not help the retail sector in Noria. However, it is reasonable to assume that with less disposable income, consumers would be more inclined to purchase their clothing needs from value retailers like SmartWear. Indeed, the company has benefited from this economically‑driven behavioural shift.

Should an economic recovery start next year, as suggested by the Finance Minister, then this would improve business prospects for all retailers in Noria. With rising employment and lower inflation, consumers may decide to return to more upmarket clothing retailers and away from low‑end companies like SmartWear. The board should consider its international portfolio of businesses in order to manage the risk associated with diverse national economies, since currently inflation and unemployment in Southland is much lower than in Noria. Therefore, any planned strategic expansion should be in international markets rather than domestically.

Social developments

The demand from consumers for cheaper clothing has required these items to be sourced from low cost economies. There has become an expectation that clothing will remain low priced, which limits how companies like SmartWear can compete. This could increase the number of new entrants into the low end of the market and suggests that only those companies who are able to sustain high volume sales will succeed in the long run. The board needs to bear all of this in mind when it is considering its growth plans and deciding how best to satisfy consumer demands going forward.

Technological influences

The growth of e‑commerce in the general retail sector has completely altered the competitive dynamic. Once developed, any online platform can be extended to include a variety of products, therefore new clothing e‑retailers can emerge from previously non‑competing businesses who have simply broadened their product offering. The resultant increased supply of clothing goods to the market with potentially contracting demand will put downward pressure on prices, squeezing the margins of all companies including SmartWear. The board is advised to consider the opportunities presented to SmartWear from developing and operating its own e‑commerce platform, as this could allow for substantial revenue growth without the need to establish a costly network of retail outlets and would allow a rationalisation of the portfolio of physical retail outlets, to release funds and reduce operating costs.

Marking Scheme

Up to 2 marks for each well-developed aspect of general environmental analysis such as the suitable use of PEST, or PESTLE, SWOT. (Up to a maximum of 10 marks)

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Categories: : Strategic Business Leader (SBL)