Introduction
Business success hinges on having a well-thought-out strategy, necessitating analysis of the external market and the company’s internal operations. Experts disagree on which factors should be used to determine a company’s course of action, with some saying the external market and others saying the company’s resources and capabilities. Unique chances to gain an edge in the marketplace and boost revenue exist in the company’s internal and external settings. Although most firms favor the external market, the internal environment should be the basis for strategy formulation.
Internal Environment
The internal environment should be the primary basis for strategy formulation. To gain a competitive edge, a company must develop and maximize its unique resources and capabilities. Apple is an example of a company whose strategy is based on a set of capabilities. Apple’s core competencies consist of its design and innovation skills. These competencies have been nurtured and honed over several years and are now the foundation of Apple’s business strategy (Bocken & Geradts, 2020). Apple’s innovative and creative capabilities have enabled the company to create functional and aesthetically pleasing products, making them highly desirable among consumers. For instance, Apple’s products are renowned for their streamlined appearance, user-friendly interface, and high-quality hardware components (Grant, 2019). Apple has utilized its design and innovation skills to establish a distinct brand identity and product differentiation. The company’s products are synonymous with high quality and innovation and are easily identifiable. Apple’s branding strategy has been so effective that it has cultivated a customer base willing to pay a premium for its products.
External Market
When formulating corporate policy, outside factors can be taken into account, in addition to internal resources. This setting has several factors, such as market tendencies, rivalry, regulatory worries, and potential dangers. One company that has effectively modified its approach in reaction to external variables is Netflix. In response to shifting consumer preferences, the company pivoted from DVD rentals to subscription streaming services (Daidj & Egert, 2019). Netflix’s long-term success and sustainability can largely be attributed to the company’s ability to recognize and adapt to shifts in its external environment. Netflix has identified opportunities and challenges, responded to competition, address regulatory concerns, and managed risks by analyzing market trends, competition, and regulatory concerns (Grant, 2019). As a result of this strategy, the company has not only persisted but thrived in the increasingly competitive streaming market. Cebeci et al. (2019) states that data and analytics play a key role in Netflix’s ability to respond to changes in the external environment. The business collects consumer feedback to tailor its material to its users’ tastes.
Sustainable Competitive Advantage
The external market and the internal environment provide sustainable competitive advantages and generate profits depending on their utilization. The external market can provide a company with a sustainable competitive advantage if it is adaptable and responsive to market changes. A company that can recognize and adapt to shifts in its market can generate profits and remain competitive. For instance, Netflix’s transition to streaming services allowed the company to remain competitive and generate substantial profits (Tekic & Koroteev, 2019). Similarly, an organization’s internal environment can provide a sustainable competitive advantage if it capitalizes on its unique resources and capabilities. A company that cultivates and leverages its core competencies can create a distinctive brand identity, product differentiation, and cost leadership, resulting in a sustainable competitive advantage and substantial profits. For instance, Apple’s design and innovation capabilities have enabled the company to establish a distinct brand identity, product diversification, and cost leadership, contributing to its ability to generate high profits and a sustainable competitive advantage.
Conclusion
Business experts have long debated whether the external market or the internal environment should be the primary basis for formulating strategy. The external market and the internal environment offer long-term competitive advantages and generate profits depending on how they are utilized. However, the internal environment is the best choice for formulating strategies since it allows product differentiation and a strong identity. Additionally, business’s resources help create a strong customer base who can pay for premium products like Apple.
References
Bocken, N. M., & Geradts, T. H. (2020). Barriers and drivers to sustainable business model innovation: Organization design and dynamic capabilities. Long Range Planning, 53(4), 101950. Web.
Cebeci, U., Ince, O., & Turkcan, H. (2019). Understanding the intention to use Netflix: An extended technology acceptance model approach. International Review of Management and Marketing, 9(6), 152-157. Web.
Daidj, N., & Egert, C. (2019). Towards new coopetition-based business models? The case of Netflix in the French market. Journal of Research in Marketing and Entrepreneurship, 20(1), 99-120. Web.
Grant, R. M. (2019). Contemporary strategy analysis (10th ed.). John Wiley & Sons.
Tekic, Z., & Koroteev, D. (2019). From disruptively digital to proudly analog: A holistic typology of digital transformation strategies. Business Horizons, 62(6), 683-693. Web.