Table of Contents 1.0Introduction 2.0Literature survey 2.1 Organisational Environment 2.1.1 External Environment 2.1.2 Internal Environment 2.1.

3 S.W.O.T Analysis / T.O.W.S Matrix 2.2Strategy 2.3The Nature of Strategic Management 2.3.1 5 Task of Strategy Management 2.4Organisational Visions and Objectives 2.4.1 Features of Strategic Management 2.4.2 S.M.A.R.T 2.4.3 Strategic Logic 3.0Application of theory to organisation 3.1Sun Chemicals Pte Ltd 3.2Application of theories in Sun Chemicals Pte Ltd 3.2.1 Organisational Environment 3.2.2 External factors influencing business management

3.2.3 Internal factors influencing position of organisation in the global market 3.2.4 S.W.O.T Analysis / T.O.W.S Matrix 4.0 Conclusion

Appendix Figure 1- Porters 5 forces model Figure 2- Matrix Structure of an Organisation

Figure 3 - Comparing T.O.W.S matrix and S.W.O.T. analysis

1.0Introduction Todays markets are complex and competitive. This report aims to analyse the implications for strategic management brought about by the external and internal factors associated with complex markets. In order to achieve good organisational performance, organisations have to remain competitive; in order to remain competitive, these factor analyses are necessary. They provide organisations with information on their competitive landscape and give them an idea of how to behave in the market. 2.0Literature survey 2.1 Organisational Environment Organisational environment is the key factor that influences the organisations business decisions and determines its structure. Organisational environment comprises environmental elements capable of influencing how organisation operates (Murphy PE & AE 2004, p. 58)1. Burns and Stalker (1961)2 proposed that organisational structure is reliant on environmental components and organisations with structures matched to environmental conditions have better performances. Organisational performance is greatly determined by how well strategies are made by organisations to cope with their organisational environment. 2.1.1 External Environment A subgroup of organisational environment is external environment, which organisations have to thoroughly analyse in strategic management. McGee, Thomas & Wilson (2005)3 stated that external environment generally includes customers, employees, supplier and competitors. Organisations contrive to have the right type of objective through the analysis of external environment for an overview of potential positions in the marketplace Strategies pertinent to organisational goals are only attainable when general environment is considered along with the external environment. General environment consists of six groups - demographic, economics political/legal, socio-cultural, technological and global (Hitt, Ireland & Hoskission 2007, p.37) 4.
1

MURPHY, P. E., & MURPHY, A. E. (2004). Strategic management for tourism communities: bridging the gaps. Clevedon, Channel View.
2

BURNS, T., & STALKER, G. M. (1961). The management of innovation. [London], Tavistock Publications.
3

MCGEE, J., THOMAS, H., & WILSON, D. C. (2005).Strategy: analysis & practice. London, McGraw-Hill Education.
4

Examining general environment provides a clear understanding of the environmental contexts which allow organisations to formulate necessary strategy alternatives when factors out of their reach are discerned. The study of external environment can be done through Porters proposed analytical framework where opportunities and threats are identified for business functions. Porter (1980)5 proposed five forces model (see figure 1) 6 which consists of bargaining power of suppliers, bargaining power of buyers, degree of rivalry from competitors, threat of new entrants and threat of substitutes. Porters framework assesses an organisations position in the market and provides insights for strategic management. 2.1.2 Internal Environment Internal environment should be analysed before the formulation of strategies. Internal environment consists of the organisations culture, employees and management (Daft 2010, p. 47)7. Culture underpins the visions and missions of the organisation which fundamentally influences how strategies are designed. Internal environment factors are usually reviewed during strategy evaluation for corrective action in strategic management. 2.1.3 S.W.O.T Analysis / T.O.W.S Matrix Organisations should scrutinise their organisational environment to identify factors that influence their business decisions before developing appropriate strategies. SWOT analysis is a method for organisations to assimilate their favourable and unfavourable organisational environment. Wheelan and Hunger (1998)8 recommended the SWOT analysis- Strengths, Weakness, Opportunities, and Threats when inquiring strategic management while Weihrich (1982) 9 first put this analysis into practice. When S.W.O.T analysis is put into practice, it can be referred as T.O.W.S matrix. By using Porters five forces model, external threats and opportunities are distinguished while internal strength and weakness are fathom out by managers. Organisations will be able to formulate sound strategies and essential knowledge for clear mission and vision insights when relationship between strength, weakness, opportunities and threats is identified.
HITT, M. A., IRELAND, R. D., & HOSKISSON, R. E. (2007). Strategic management: competitiveness and globalization . Mason, OH, Thomson/South-Western. 5 PORTER, M. E. (1980). Competitive strategy: techniques for analyzing industries and competitors. New York, Free Press.
6

Ruocco, P. & Proctor, T. 1994, "Strategic planning in practice: A creative approach", Marketing Intelligence & Planning, vol. 12, no. 9, pp. 24-24.
7

DAFT, R. L. (2010). Understanding management. Mason, OH, South-Western Cengage Learning.

8

WHEELEN, T. L., & HUNGER, J. D. (1998). Strategic management and business policy. Reading, Mass, Addison-Wesley.
9

WEIHRICH, H. (1982). The TOWS matrixA tool for situational analysis. Long Range Planning. 15, 54-66.

2.2 Strategy It is said that the word strategy originates from the conception of strategy in the military and has been adapted for use in business. Mintzberg (1987)10 suggested that strategy has five major categories. However, in strategic management Mintzbergs reference of strategy being a plan or ploy will be sufficient. The theory of management strategy is a field of study concerned with the management of the total organisation with particular emphasis on its decisional behaviour (Richardson B & R 1992, p.8) 11 . In respect of strategic management, strategy is an array of guidelines to address various situations and planned accordingly so to be at the advantage of a competitor.

2.3 Nature of Strategic Management The performances of organisations are greatly affected by the job of strategy implementation and execution along with its environmental context. The purpose of an organisations strategy is to achieve favourable performance through constructing a series of moves and approaches. However, organisations may perform badly due to adverse external circumstances that are at times unpredictable. Therefore, strategic management includes the following: strategy formulation, implementation and control. Before the process of strategic management, an organisations goals for value creation and distribution should be imposed, followed by the construction of organisations in seeking their goals (Sanchez & Heene 2003, p. 4)12. Lastly, control is to review the organisations achievement in relation of the goals that were formerly designed (Greenly 1989, p.4)13. Strategic management revolves around devising business functions where the organisations plan for their future and is in essence in the work structure for operational managers that are below the hierarchy.
10

MINTZBERG, H. (1987). The strategy concept 1: five P's for strategy. Berkeley, U. of California.
11

RICHARDSON, B., & RICHARDSON, R. (1992).Business planning: an approach to strategic management. London, Pitman.
12

SANCHEZ, R., & HEENE, A. (2003). The new strategic management: organization, competition, and competence. New York, NY, Wiley.
13

GREENLEY, G. E. (1989). Strategic management. Prentice-Hall.

2.3.1 The Five Tasks of Strategy Management There are five main tasks in the formation of strategy where visions and missions preside over the organisations actions. Firstly by establishing the business conception and purpose then render those into missions and visions (Thompson & Strickland 1992, pp. 3-5)14. The established missions and visions are to be endeavoured within a certain period of time and achieved them through categorising as either long range or short range objectives. The next step would be constructing a strategy that is effective as well as efficient when administered, after which the strategy would be revised and appraised according to the problems encountered by the organisations (Thompson & Strickland 1992, pp. 3-5)15. All of the above are the strategic managers direct responsibility that includes delineating the missions and visions as well as achieving their proposed objectives.

2.4 Organisational Vision and Objectives Previously mentioned, visions preside over the actions of organisations, whereby visions serve as the base for developing missions, goals, objectives and strategies dedicated for the success of organisations. The critical role of visions is to provide framework for strategic plans to be formed and taken place (Stead, Stead & Straik 2004, p.40) 16. The importance of vision is to enable organisations to set objectives accordingly to portray their identity in the society that they deem desirable. Vision would also allow organisations to implement sustainable strategic management that endows the organisations in coping with the changing complexity of todays business environment. 2.4.1 Features of Strategic Management The complexity of business environment determines how organisations execute their preordained goals. In the establishment of the organisations direction and purposed visions and missions, there are three main features of strategic management which the organisations analyse before constructing their strategy. In the analysis of the complexity of business environment, organisations would consider their external features, internal features and system features. Each organisation will then carry out an environmental approach where it associates its external environment to the organisations current aptitude to face threats

14

THOMPSON, A. A., & STRICKLAND, A. J. (1992).Strategy formulation and implementation: tasks of the general manager . Homewood, IL, BPI/Irwin. 15 THOMPSON, A. A., & STRICKLAND, A. J. (1992).Strategy formulation and implementation: tasks of the general manager . Homewood, IL, BPI/Irwin.
16

STEAD, W. E., STEAD, J. G., & STARIK, M. (2004).Sustainable strategic management. Armonk, N.Y., M.E. Sharpe.

and opportunities (Rowe, Mason & Dickel 1986, pp. 30- 41) 17. Aaker (1984)18 has identified market orientation, market understanding, information inputs, empirical research and international business as the subgroups of the external features. These are to be considered as part of the analysis of the environment before establishing the organisations missions and visions. On the other hand, establishing the organisations objectives requires the organisation to decide on its business direction and ideal identity. Hence, the internal features of strategic management would allow organisations to plan their directions and create new benchmarks that bring them closer to their visions and missions. The internal features comprises proactive strategies, multiple strategies, interdisciplinary features, implementation and resource utilisation (Aaker 1984, pp. 13-22) 19.All managers are assigned with specific objectives that may be short range or long range and each unit in the organisation are supposed to accomplish the given objectives. Lastly, systems feature of strategic management is related to the nature of strategic management which the concept of controlling is to review the organisations achievements. In the systems features, decision making, entrepreneurial thrusts, longer time horizons and methodological development are the subgroups (Aaker 1984, pp. 13-22)20. These are utilised to evaluate the achieved objectives and revise the objectives made that were planned previously. Aakers 14 features of strategic management is a method for organisations to approach to decision making that in the process, the organisation environment is being taken into account such that an effective and efficient strategy can be introduced.

2.4.2 S.M.A.R.T Analysis Besides Askers 14 features of strategic management, Doran has introduced another decision-making approach to attain goals, objectives including visions and missions. Doran (1981)21 was the first to come out with the S.M.A.R.T analysis, the main function is to attain a set of goals which would allow organisations to clearly identify their objectives and future directions. The first term represents Specific, in which the goal has to be clearly defined. Next Measurable, refers to goals being measurable so as to know the organisations progress in achieving their visions or missions. Relevant should always be accomplished so that goals are Attainable, which this third term of the mnemonic emphasis on the importance of goals being obtainable so that the goals set are not far beyond the capability of the organisations. When goals are relevant and achievable, organisations will be closer to their visions and missions. Lastly, Time-bounded, it should enable organisations to have a clear
17

ROWE, A. J., MASON, R. O., & DICKEL, K. E. (1986). Strategic management: a methodological approach. Reading, Mass, Addison-Wesley Pub. Co.
18

AAKER, D. A. (1984). Strategic market management. New York, Wiley. 19 AAKER, D. A. (1984). Strategic market management. New York, Wiley. 20 AAKER, D. A. (1984). Strategic market management. New York, Wiley. 21 Doran, G. T. (1981). There's a S.M.A.R.T. way to write management's goals and objectives. Management Review, Volume 70, Issue 11(AMA FORUM), pp. 35-36.

perspective of their goals and having a timeline enable organisations to review on their goals along with goal corrections. Briefly summarising, the S.M.A.R.T analysis along with the Aaskers 14 features of strategic management are different approaches to decision making but the similarity is that the strategic manager would be able to propose relevant strategies to attain the desired objectives, goals as well as missions and visions. Both focus on the analysis of organisations environment to the construction of relevant goals and objectives for the organisation to arrive at their visions and missions. 2.4.3 Strategic Logic Mentioned earlier, organisations should enforce goals for value creation and distribution to be a sustainable organisation through strategic management. The reason for such goals is to provide an open system management of the organisation to have continuous flow of resources between stakeholders. Strategic logic is defined as an organisations operative rationale for achieving its goals through coordinated deployment of resources (Sanchez & Heene 2003, p. 5)22. The organisation will be effective in seeking its goals when the organisation monitors its environment. Strategic logic includes activities that oversee stakeholders along with the organisations external and internal environment. Hence, stakeholders having certain impact on the strategic management decisions may also influence organisational missions.

3.0Application of theory in Sun Chemicals Pte Ltd

3.1 Details of Sun Chemicals Pte Ltd Sun Chemicals Pte Ltd (Sun Chemicals) is an organisation established in 1973 with pervasive involvement in marketing and distribution. The organisation has a matrix structure that comprised the following business divisions: Fine Chemicals, Performance Chemicals and Materials; Animal Health and Nutrition; Human Pharmaceuticals and Nutraceuticals. The company also has a diverse team of professionals in the Research and Development department. The company is the
22

SANCHEZ, R., & HEENE, A. (2003). The new strategic management: organization, competition, and competence. New York, NY, Wiley.

sole distributor for raw materials and chemical products in the target industries for each of its business divisions. It represents more than 40 multi-national companies mainly in the Southeast Asian, Chinese and Swiss markets. The organisation values innovation and integration of science and technology to impart high quality products and services.

3.2 Application of theories in Sun Chemicals Pte Ltd 3.2.1 Organisational Environment Being a multinational organisation, with Singapore as the Asian headquarters and having operations in other parts of region such as Malaysia, China and Vietnam, the management adopts a matrix structure ( see Figure 2)23. This matrix enables Sun Chemicals to identify key issues which they deem influential to business functions. The identified key issues stated are categorised into external and internal factors. 3.2.1.1 External Factors influencing business management The challenges faced by the organisation include reliance on the rights of distribution, rise in cost of raw materials and high barriers to entry in new markets. These are external factors that vary in each region, hence the regional division in the matrix structure enables appropriate strategies to correspond to the severity differences in different regions. The right strategies can be planned when Porters five forces model is applied. By researching on each regions bargaining power of suppliers, Sun Chemicals will be able to have extensive knowledge to strategise against the rising of raw material cost. In this case, analysing of external factors allows relevant objectives to be made, for example, Sun Chemicals engages in innovation with funds dedicated to research and development. This particular strategy made would allow the company to be at the advantage when the cost of raw material suppresses the new alternative raw material developed by the team. A link can be drawn between the issues that the company faces with regards to reliance on rights of distribution and two of Porters five forces: degree of rivalry from competitors and threat of new entrants. It is stated that Sun Chemicals prices itself competitively, hence by looking at the degree of rivalry and threat of new entrants, the organisation will be able formulate necessary strategy alternatives in time to remain in the competitive market subject to any price wars. Similarly, Aakers external features of strategic management framework provides in depth market understanding and orientation where organisations can respond to market conditions and customers. Relating this back to Sun Chemicals, during strategy planning they can reckon with their competitors regarding the rights of
23

Chi, T. & Nystrom, P. 1998, "An Economic Analysis of Matrix Structure, Using Multinational Corporations as an Illustration", Managerial and Decision Economics (19861998), vol. 19, no. 3, pp. 141-141.

distribution. This will put the organisation at an advantage in the unpredictable market. For the pressing issue of having high entry barriers in a new market identified by the organisation is related to the general environment which organisations are usually incapable of resolving. The issues of high entry barriers and with regards to rights of distribution are subtly connected and are definitely a weakness of the organisation when seen in the socio-political perspective. This is because these impose constraints on the way they can operate. However, this particular weakness can be seen as a strength with regards to the degree of rivalry and threat of new entrants. Given that all organisations are operating based on the same legislation (commercial rules and regulations), they have the same restrictions, which means that organisations could not possibly do much to make an edge over each other in this respect. With regards to threat of new entrants, due to the strict regulations, not many new entrants would be interested to enter this industry. Hence, by investigating these seemly disadvantageous external factors, if Sun Chemicals is able to formulate strategy alternatives that leverage its competitive strengths and proven track records achieved in other countries, they will be able to enter the new markets. 3.2.1.2 Internal Factors influencing position of organisation in the global market Organisational culture commonly arrays organisations visions and missions that superintend performance of organisations. As mentioned earlier, visions provide the framework for strategic planning and implementation. Relating back to Sun Chemicals, goals are set accordingly in different regions to portray their desired identity in the society. The goals set in the Singapore division were to obtain greater network distribution through high quality products and services as to build up strong corporate brand name and reputation. While the other divisions from the matrix structure focuses on delivering products and services that respective regional locals are able to recognise. It is done through incorporating culture observed in each region into strategic formulation and implementation. There are common objectives that Sun Chemicals retains throughout the whole matrix structure - product and service excellence; innovation culture; hire locally as part of localisation; compliance to corporate policies and procedures regardless of the locations. The matrix structure enables coordination among products, functions and geographical regions that facilitates the process of strategic management. This example proves that organisations can look into their internal environment to evaluate on implemented strategies to cope with the globalising world. One way through which Sun Chemicals has been able to successfully do is the importance that the management places on localisation. They started off by hiring locally, so as to gain input from the locals themselves---people who are probably the most knowledgeable of the needs of the local market. Incorporating their (local employees) input can enhance strategies to an optimum, which when implemented by the company, effectively and efficiently caters to the local

market. Moreover, hiring locals also give the local community a higher level of acceptance of foreign companies operating in their territory. Furthermore, the evaluation of strategies is done when looking into the organisations internal environment. Relating to Sun Chemicals, we can see that strategies are made to cater to the needs of the local market or at least be adaptable to it. An example of which is the inclusion of a team of marketing specialists that allowed them to design the right marketing strategies to deal with the social and cultural needs of each region, such as repackaging their products in the local language. This demonstrates how the company proceeds in strategy evaluations to remain competitive in the market. 3.2.2 S.W.O.T Analysis / T.O.W.S Matrix To cope with the changing complexity of todays business environment, organisation has to consider its organisational environment to remain competitive in the global market. This can be done through the S.W.O.T analysis (see figure 3)24 and in summary, Sun Chemicals mentioned briefly about their strength, weaknesses, opportunity and threats. When the S.W.O.T analysis is put into practice, it can be referred as T.O.W.S matrix which we had identified the relationship between the four factors. As mentioned, the threat faced by the organisation is the high entry barriers, the competitive market for distribution and reliance of the rights of distribution. Another potential threat is the global forces that are unpredictable. For example, financial crisis would affect organisations in their business functions. Sun Chemicals indicated in the survey response that they evaluate potential customers before initiating any business transactions. The company demands to the potential customers to producer Letter of Credit from reputable bank before the start of any transaction or goods are released. This strategy helps to minimise financial losses, especially in view of current financial crisis where credits are tight, and banks are less willing to lend to businesses with no strong financial track record. On the other hand, opportunities described by the company are the extensive team of employees along with the technology asset. Sun Chemicals uses enterprise resource planning (ERP) that facilitates the process of stocks and accounts. This ensures the company with a robust warehouse logistic management that gives it a competitive advantage over other organisations in the market. As a distributor of many chemical products, the company needs to be well stocked for the numerous manufacturers it represents in Asia. Well managed warehouse logistics ensures efficiency in stock management and delivery process. This in turn, will help to keep its cost down and increase productivity of the team. One of the weakness displayed is the over reliance of distribution rights. Like any goods and services distributors, this means that company can lose its agency rights anytime its principal manufacturers decide to terminate the contract. This may result in a loss of income, and may require a review of its
24

Valentin, E.K. 2001, "SWOT analysis from a resource-based view", Journal of Marketing Theory and Practice, vol. 9, no. 2, pp. 54-54-69.

business strategy or processes that have been set up to support the particular business products that it lost the rights to distribute. The strengths of the company are supported by the long term view which the management adopts for its business, and the diversity of its products and services, as well as the locations it operates in. This suggests that the company is not over reliance on any particular product or market. If it were to lose the product distribution rights of any one products, its business is still strongly supported by its many portfolios of products. If it were to exit a market due to competitive reason, or local political issues, the business will not suffer because the companys presence in other geographical locations will continue to support or sustain the growth of the business.

4.0 Conclusion This report clearly shows the importance of organisational environments in strategic management. In general, the S.W.O.T analysis, S.M.A.R.T analysis, Aakers 14 features of strategic management and Porters five forces models are used to identify the organisations direction, advantages and disadvantages in the market. The S.M.A.R.T analysis ensures that the organisations objectives and goals are appropriate while the other three help to place the organisation accurately in the competitive global market. In particular, Sun Chemicals demonstrates proficient strategic management, a product of thorough analysis of its organisational environment. However, it remains uncertain if the company will be able to cope with unpredictable global forces. This shows the limitations of these analytical tools in coping with indeterminate external environments. Furthermore, due to human errors and imperfect market knowledge, it will always be unclear if the strategic formulation and implementation by the organisation is fast enough. In conclusion, although Sun Chemical has a proven business model with sound strategies, it remains susceptible to the forces of the globalised business environment.

Appendix
Figure1: Porters 5 forces model

Ruocco, P. & Proctor, T. 1994, "Strategic planning in practice: A creative approach", Marketing Intelligence & Planning, vol. 12, no. 9, pp. 24-24.

Figure 2: Matrix structure of an organisation

Chi, T. & Nystrom, P. 1998, "An Economic Analysis of Matrix Structure, Using Multinational Corporations as an Illustration", Managerial and Decision Economics (19861998), vol. 19, no. 3, pp. 141-141.

Figure 3: Comparing T.O.W.S matrix and S.W.O.T. analysis

Ruocco, P. & Proctor, T. 1994, "Strategic planning in practice: A creative approach", Marketing Intelligence & Planning, vol. 12, no. 9, pp. 24-24. Valentin, E.K. 2001, "SWOT analysis from a resource-based view", Journal of Marketing Theory and Practice, vol. 9, no. 2, pp. 54-54-69.