Internal Forces Inner strengths and weaknesses that an organization exhibits.

Internal factors can strongly affect how well a company meets

its objectives, and they might be seen as strengths if they have a favorable impact on a business, but as weakness if they have a deleterious
effect on the business. Strengths and Weaknesses Strengths are the internal qualities of the business that render it better able to complete or
fulfill its desired objective in comparison to other businesses. For example, if a company that sells inventory to other businesses can produce
inventory cheaper than other companies doing the same, that is a strength of the company. In contrast, weaknesses are the internal qualities
of the business that render it less able to meet its aims. For example, if a business cannot secure loans due to past incidents of failing to make
payments on time, that is a weakness if that business needs a loan to expand its operations. How to Identify Strengths & Weaknesses in
a Business Plan Market Analysis A thorough analysis of your potential market is critical to creating a strong business plan. The plan should
explain the characteristics of your market and suggest how much of the market you hope to capture. A strong marketing analysis section also
shows why customers want to buy what you offer rather that the competition's products or services. A weak marketing analysis section does
not mention industry trends and the effect of those trends on your business. Regulatory trends are also important if they pertain to your
business idea; without them, your business plan seems unfinished and lacking information. Competition Your business plan needs to provide
full details about your competitors. Every business has competition, even if you're a small business competing with much larger companies.
Even the only bakery in town has competitors, including the local church that holds monthly bake sales, the grocery store and kids selling
cookies for fundraisers. A plan suggesting you have no competitors indicates a major weakness in understanding your market. Providing
detailed information about each of your competitors in regards to their market position, offerings, strengths and weaknesses shows you've
thoroughly examined the competition. Your analysis might conclude that gaining market share against your competitors will be difficult,
indicating a potentially weak business idea due to a saturated market. Marketing A solid marketing plan is always part of a good business plan.
The marketing plan explains your sales and marketing strategies for convincing prospects to become customers. A marketing plan broken
down by quarter that shows the activities you plan to use indicates a well-thought out plan. Smaller companies should not feel afraid to list the
exact activities they plan to use, such as advertising in a local newspaper, sending follow-up postcards to interested prospects and sending
thank you notes to customers. These potential efforts help convince funding sources you know what to do to get business. You also need to
explain your distribution channels if you plan to sell products. Management Providing detailed bios and background information about your
executive and management team is critical to a strong business plan. The plan should explain the experience and expertise of each person
and how that translates into productive management of your business. Even if you are a sole proprietor or the only executive among your
employees, you should explain your qualifications to handle the company's day-to-day management. If you or your team does not appear
qualified enough to a bath or investor, this is a potential sign of weakness that your company may not succeed in becoming a stable,
profitable company. Financials Strong business plans include all the financial documents needed to analyze and calculate your cash flow,
income projections and expenses. The documents should include financial statements and realistic operating budgets. If you're looking for
funding for a startup, your income and expense projections need to make sense. If it sounds like you've made them up, your plan looks weak,
and you're unlikely to get funding. Porter's Five Forces Model Business-level strategy refers to how a specific business will operate in order
to succeed in that specific marketplace. Porter's Five Forces model is a tool used to get an understanding of what forces determine the profits
in an industry. This model is based on Industrial organization economics which argues that all firms in a particular industry face forces within
their industry that significantly affect profitability. Bargaining power of buyers Buyer bargaining power refers to the pressure consumers can
exert on businesses to get them to provide higher quality products, better customer service, and lower prices. Buyers refer to individuals or
firms who actually purchase the output of industry. These can include consumers, distributors and industrial buyers. The characteristics that
determine if the bargaining power of buyers is high include concentration of buyers, ability to switch among different suppliers in the industry,
and Impact of goods from the industry on buyer's output Concentration of buyers- if buyers are more concentrated than seller (a small number
of buyers purchasing and large number of industry's output), then buyer power is high. Ability to switch among different suppliers: if a buyer
can switch from supplier A to supplier 8 easily, then the buyer's power is high. Impact of goods from the Industry on buyer's output -if it is
critical to the quality of what is produced, then the industry has power. Bargaining power of suppliers When suppliers have bargaining power,
they can apply pressure on a company by charging higher prices, adjusting the quality of the product or controlling availability and delivery
timelines. The factors that make suppliers powerful are demand for suppliers products, whether quality and performance of inputs are
differentiated, and ability of the Industry to vertically integrate. Demand for suppliers product- more demand drives the price of supplies up in
a market based system. Quality and performance Input are differentiated-greater uniqueness of an input allows a higher price to be charged
and decreases the ability of client firms in the industry to switch easily between suppliers. Ability of the industry to vertically integrate-threat
of backward integration (owning your own supply) will weaken the power of suppliers. Threat of new entrants Threat of new entrants refers to
the threat new competitors pose to existing competitors in an industry. A profitable industry will attract more competitors looking to achieve
profits. If it is easy for these new entrants to enter the market - if entry barriers are low - this poses a threat to the firms already competing in
that market. Ease of entry into an industry comes from the industry structure. The structural characteristics include: It is more efficient to build
or make products in large volumes, and a firm may have to enter at an unfeasibly large size to obtain economies of scale The relationship
between size and capital costs; more money it takes to get into the industry, the less likely firms will enter it. If an industry has many
differentiated products, or different products than customers are familiar with and loyal to, entry is discouraged. In many industries such as
retail, competition is strong that firms are hesitant to give shelf space to a new, untested product. This limitation on the access to distribution
channels limits entry into the industry. Patents and proprietary knowledge also limits entry because firms must spend time and effort building
the knowledge and resources needed. Threat substitute products Threat of substitute definition is the availability of a product that the
consumer can purchase instead of the industry's product. A substitute product is a product from another industry that offers similar benefits to
the consumer as the product produced by the firms within the industry. Factors impacting the power of substitutes include: Ability of
customers to compare quality, performance, and price of one product with another. If customers cannot compare, they will hesitant to switch.
Ability of a product to bring good-enough performance criteria to the customer. Some customers will switch to a lower qualify substitute
product when that substitute has become good enough for many customers. The cost of switching from one product to another similar
product. High switching costs lower power. Rivalry Rivalry among competitors in an industry refers to the extent to which firms within an
industry put pressure on one another and limit each others profit potential. If rivalry is fierce, competitors are trying to steal profit and market
share from one another. This reduces profit potential for all firms within the industry. The factors that affect rivalry include : Number of
competitors- more rivals increase the number of firms trying to attract the same number of customers. Growing demand for the product- if
demand is growing, there is lower rivalry because it easier to get new customers, and less need to fight for customers through price wars or
heavy promotion spending. Increasing payoff from successful strategic moves- an industry may below profit, but the hope is that one firm will
be the survivor, so there is a willingness to compete very aggressively. Existing an industry cost more than staying-this encourage firms to
stay in an industry and compete even if profits are low. Exit barriers keep firms in an industry and thus exert downward pressure on profits.
Complementors Complementors are products which sell well with another product or those that complement a product to make it easier to buy
or use. Complementors, can benefit or hurt the firms competing in an industry, depending on the circumstances. If business is booming for the
complementors, this could positively affect the business of the firms in the given industry. On the other hand, if business is slow for the
complementors, this could adversely affect the business of the firms in the given industry. E.g. A normal consumer prefers to eat a hotdog in a
hotdog bun. Rarely would a consumer purchase hotdogs without also purchasing hotdog buns, and rarely would a consumer purchase hotdog
buns without also purchasing hotdogs. Under the six forces model Porter coned, these two products are complementary. The Diamond Model
of National Competitive Focuses on why certain countries are especially competitive in certain industries and are able to generate wealth.
Is design for mature economies. Emphasize on creativity and the human capital necessary to carry on innovative processes. Factors of
production Represent those natural endowments that a nation possesses, such as land, labor, and capital. Traditionally, an abundance of land,
mineral resources, labor and capital were seen as the reasons that nations did well in international business. But Porter argues that these
assets are less responsible for economic success today in industrialized nations such as US. Example, Japan has neither extensive land nor
natural resources and situated at small rocky island. Yet Japan is the leading manufacturers of autos, machine tools and consumer electronics.
Central to Japanese success is specialized labor with strong intellectual capital and knowledge. Thus, rather than focusing strictly on natural
resources or wages, country's major concern should be productivity and creativity. Japanese firm designed ways to cut labor costs by
mechanizing the process with minimum of human contact. The outcome was that Japanese consumer products were of better quality and were
produced more efficiently. Demand Traditionally, it was thought that a country had to be big to be economically successful. Japanese
leadership thought they would expand the territory under their control, thus increase the demand for their country's products. And it is thought
that small countries such as Netherlands could never be successful because of small domestic market. Porter argues that the concern should
not be the size of demand but the quality of the demand for those products in the nation. Example, white goods such as washing machines,
dryer, refrigerator. In Germany, the climate is cold and wet and environmental standards are strict. Thus require clothes washers to be
advanced -energy efficient with high spin rates (to dry clothes more quickly). This result in high demand of the product. In conducting an
analysis of demand, the demographics of the consumer such as average age, racial characteristics, religion, and income, should be
considered. Related and supporting industries : It is difficult for firms to be world-class producers if they do not nave industries that are not
also world class producers to supply inputs or use their products. Businesses need to know about new inputs and needs of the market before
their competitors. Example, the world's largest retailer, Wal-Mart, sells consumer goods from the leading firms around the world. Its suppliers
work on what new products or product modifications are needed by global consumers. This relationship pushed each other to be better.
Industry strategy and structure Refers to the nature of competition in an industry. Porter claims that it is necessary for firms to lace tough
competitors somewhere, hopefully in their home market. Because if firm have little or no competition, there will be little incentive to innovate.
Firms need both tough consumers and competitors to push them. Example, British Commonwealth countries, deregulated industry, cut
subsidies and switch from income to a consumption tax to allow free competition. Initially, this resulted in some pain to both consumers and
workers, but ultimately the economy grew to be one of the strongest in the world, with growth in Individual's Income and their businesses
becoming some of world's most efficient. A firm needs competitors that push it to improve. Example, India's national carrier have poor
customer service until competition shook up India's air-travel market. (Dun, customer service India's national carrier teruk, sampailah ada
competition, baru dia improve on dia punya customer service) Other country-level economic concerns in emerging and transitioning
economies A subset of emergent economies, called transitional economies, is moving from former central planning to a free market. In
analyzing economic variables in transitional economies, the role of government is significant. The ability to deal with government entities is
critical because of the selective use and enforcement of regulation. Managers doing business internationally also consider other key aspects of
a country such as education, transportation, and health status.

Generic Strategies Business-level strategy can viewed by using a two-by-two matrix, which describes four generic business-level
strategies. The generic-strategies matrix is useful for analyzing firms that are competing in the same product-market in a relevant
geographic domain. Cost and uniqueness Low-cost strategy is where a business seeks to sell a product at or near the lowest possible price in
the firm's chosen market segment. E.g. Ryanair airline does not fly into major airports, which are expensive because of landing-right charges
and other cost of operating. The airline has no first class seats, which maintains the simplicity of the operation, speeds the boarding process
and reduces turnaround time of the airplanes. Ryanair cuts cost in every way possible, and in turn, charges its customers some of the lowest
prices in its markets. Differentiation strategy provides some aspect of a product or service that differs from that of competitors, such as higher
quality, to increase the likelihood of customers paying a premium price for the product. E.g. Airline like Germany's Lufthansa will try to provide
a higher level of service in term of scheduling, coverage of major cities, reservation service, quality of first and business class, and even more
comfortable economy class seats. To maintain this level of service, Lufthansa must also charge higher fares. Competitive scope Competitive
scope is the breadth of the market a firm will target, such as the range of customers and/or distributors sold to, and the geographic region the
firm covers. The key to understanding competitive scope is, if a firm tries to serve a broad range of customers with a i)broad range of needs,
or ii)targets a particular distributor, customer group, or geographic regions. Broad-based approach, e.g. Toyota Corporation is active in all
major vehicle markets. It produces a range of automobiles from low end Echo to the mid-range Camry (the best-selling car in US) to the high
end Lexus. Narrow Scope, e.g. gang & Olufsen focuses on high-end, home entertainment systems. The firm focuses on innovation,
incorporating the latest and best technology into its system. The firm continues to manufacture its products only in Denmark, a high-wage
country, believing that if it outsourced its manufacturing, it will not be able to provide the hands-on supervision consistent with its
differentiation strategy. Connection low cost/differentiation and competitive edge Firms may choose to pursue either a low-cost or
differentiation strategy, employing a more narrow scope, sometimes also known as a "focus strategy." With a focused strategy, a firm will try
to serve a particular type of customer, a particular distribution channel, and a geographic region, often with only one product. Narrow
positioning can be adopted with either the low-cost or the differentiation strategy. Changing business strategy Changing the business level
strategy of a firm is difficult and should be done only with full consideration of the difficulties that can arise. Business-level strategy is often
easier to change when a firm faces a difficult competitive setting. Entering International Market 1. Export The most immediate to
internationalize a firm is to directly export goods to a market outside your home country. This occurs when a firm or person contracts with a
firm that is currently focused on as home market, the foreign firm then pays to ship the given goods to its home country. It is the most typical
form of internationalization because it requires the least commitment of resources. As a firm gains International experience, the business takes
the help of a representative or dealer to handle promotion and sales in their local country. A rep often handles several firms' products that
typically do not compete with each other. In a dealership, the relationship between two firms will be closer than with the manufacturer's
representative, a dealership could be an exclusive one, only selling one firm's products. The business does not have to establish an
international sales force of its own because the representative or dealer will handle promotion and sales in their local country. 2. Alliances A
firm moves into a market in association with other firms. The parties involved have less contra than if they were to own the firm outright but
they also have less risks, because now the 2 firms share the risks. - Types of alliances: (1) Informal Alliances Help emerging markets in trying
to penetrate environments where the rule of law is still developing. Allow a firm, as it begins to enter a market, to have connections with
individuals that will advise the firm and support its efforts This typically does not even have a signed documents, but is simply a statement by
one km to another along the lines of if you help me sell my product in your market, I will help you sell yours in my market." There is little
investment, and the least control by a firm, thus informal alliances would not involve equity investment by either party . (2) Licensing A more
formal type of alliance the: gill has limited financial commitments by a firm entering an international market is a licensing agreement.
Licensing agreement is an agreement where a company outside a particular country agrees to pay a firm within the country for the right to
either manufacture or sell its product. The firm selling the right to this product typically loses the right to control various aspect of the product
when manufactured or sold by the licensee. There is an alliance between 2 firms when there is licensing, but it tends to be much less
coordinated than in a joint venture or franchise. Can have strategic value to a firm as it seeks to enter a market . (3) Joint Venture Are formal
agreements between Iwo or more firms where a new separate entity is created for the purpose of producing or distributing goods and services.
- The level of commitment and risk is considerably higher than in informal alliances. . Firms can also enter into a short-term joint venture to
learn a specific process, technology, or market from their partner. (4) Franchising A type of alliance where a contract is established between
the parent (franchisor) and the individual who actually buys the business unit (franchisee) to sell a given product or conduct business under its
trademark. A franchisor provides the franchisee with extensive direction on how to operate the business. A franchise contract commonly sets
standards for behavior by the franchisee that, it not followed, can result in the loss of the franchise. The franchisor receives an initial fee and a
continuing royalty from the franchisee. 3. Merger and Acquisitions Transaction involving two or more corporations in which orgy one
permanent corporation survives. An acquisition is the purchase of a company that is completely absorbed as a subsidiary or division of the
acquiring firm. Not mere linkages between firms which is they create permanent changes to the structure of the firms involved. The control an
acquiring firm obtains in a merger and acquisitions is far greater than in an alliance because there are no partners that must be consulted It
can act as a turnkey operation which is the firm can enter the market immediately with a ready-made operation. 4. Greenfield Ventures A firm
may choose to establish itself Ma given country without the aid of a partner. This type of venture is the most difficult to pursue, but gives a
firm the greatest control because it is able to design every detail of the business. It is difficult to build a greenfield venture because a firm
must do everything on its own. The cost of development is quite high and the venture also has greater risk since it must enter a country and
build its brand and various stakeholder relationships. The keys to success for a Greenfield venture are patience and adequate support by a
corporation. The firm will have no one else to call on for support, and the building process will take time. Thus, the firm must have the
resources and the commitment necessary to bold a business over the long term. This approach will allow a firm to have strong control over a
venture and to establish the new business to precise specification. 5. Wholly Owned Subsidiary An organization form where the parent owns
the local firm completely, typically the organization would focus only on the country in which it had entered. A firm may look to other economic
concerns in making its decision about the nations to choose from. The economic concerns : *Transportation costs -Transportation requires the
presence of an infrastructure so that a firm can ship products produced from an international facility. *Taxes and government incentives
-Government often offers not only hard assets but also concession such as tax reduction, if a firm locates in that nation. This is because
attracting a new firm will create rob opportunities for their citizen. *Labor quality -In selecting a location, a firm must understand the true
qualifications of a country's workforce and whether the labor supply will be sufficient *Organizational learning -Firms may want to locate in a
country or region from which they can learn from excellent suppliers or demanding customers. The selection of a country in which to locate is
a balancing of a firm's various concern. The difficulty in ensuring the firm makes a through and complete analysis of the tradeoffs involved and
matches them with the firm's goals. In conducting the analysis, the firms need to recognize that its bargaining power to obtain any benefits
from the government, such as training of employees or tax abatements, areal peak levels when the firm is thinking of locating there. Problem
of Small Medium Enterprise 1. Lack of capital to start a business The capital consists of land, machinery and labor. Most of the industry is
facing difficulties to raise capital from private banks because lending conditions tight and require collateral. Examples of assistance vary
between entrepreneurs chili sauce with Nestle. Indeed, government help and advice needed by SMEs . 2. Lack of IT support IT personnel are in
high demand and are often attracted to bigger companies and MNCs. It is very difficult for SMEs to attract good IT personnel. It is even more
difficult to retain them. Moreover, good IT personnel are expensive and may not be affordable by most SMEs . 3. Lack of Formal Procedure and
Discipline Most SMEs do not have formal procedure or often these are not documented. Furthermore, there is tendency for these procedures to
change frequently. This makes it difficult for third party and newcomer to understand the existing business practices and match them with the
IT process 4. Lack of human resource Implementations of some bigger scale IT project especially those that involve business process across
different departments or require large amount of initial data entries require human resource during the implementation. Some SMEs are often
in the stage of frequent fire fighting and shortage of manpower. This makes it very difficult for them to allocate time to carry out
implementation. Furthermore, there is always a conflict between getting the daily routing work going and to do the "Extra" IT implementation.
5. Lack of financial resources As a SME, financial resources are often limited. This often forces company to select a solution, which appear to
be cheap initially. However, the hidden costs will start to emerge during implementation. This sometime causes the project to be abandoned or
sometime sent the company into further financial crisis. 6. Lack of management skills As company grows, new managers are often introduced
into the company. There will also be old managers who are promoted from the rank and file. Some of these managers may not been trained in
the leadership and management skill. These uneven skill among the managers often caused conflicts during the implementation. Theory of
Comparative Advantage & Competitive Advantage Comparative Advantage David Ricardo explains why it can be beneficial for two
countries to trade, even though one of them may be able to produce all goods necessary. A country will reap gains from specializing in
products that it is best at producing and trade those products to other countries - even if one country (e.g: China) were the lowest-cost
producer of all goods. China focuses on products that it is best at producing rather than trying to produce everything so as to maximize its
comparative advantage. Heckscher-Ohlin theorem states that a country has a comparative advantage in the production of a product if the
country is relatively well endowed (gifted) with inputs that are used intensively in producing the product. (E.g: Malaysia can cultivate
agriculture, Africa can't, therefore Msia have comparative advantage) Competitive Advantage An advantage that a firm has over its
competitors, allowing it to generate greater sales or margins and/or retain more customers than its competition. There can be many types of
competitive advantages including the firm's cost structure, product offerings, distribution network and customer support. Comparative
Advantage & Competitive advantage Assume that there are industries - say software development - which both countries can pursue. In
Country A, software development costs $1Y but in Country B they can only produce it at $4Y because of the lower skill level of its workforce. In
competitive advantage, Country B is in a hopeless situation - they simply can't compete with Country A at any level, or in any industry. But
taking the principle of comparative advantage, there's a way for both countries to actually benefit. Because Country A is so much better at
software development compared to steel making, it can maximise the return on its use of resources by concentrating on software
development rather than steel making. Country 13 on the other hand can utilise what it resources it has to make steel where it has a
"comparative advantage. The countries then can trade their production of the respective goods -both countries benefit as they've utilized their
scarce resources to maximum benefit, despite Country B being relatively less efficient and less productive at everything.