Aligning Competitive Strategy With the

Aligning Competitive Strategy With the External Environment In his article on environmental scanning and its effect on competitive strategy and organizational performance in small firms, Beal (2000) completed a thorough literature review to serve as the theoretical foundation of primary research into the frequency and scope of environmental scanning completed by CEOs of both large and small organizations. The delineation of high and low rich information sources is also included in the analysis, in addition to twenty-three different items to measure the five dimensions of competitive strategy as well.

The two major hypotheses are that both the frequency and scope of environmental scanning will be positively related to environment and competitive strategy alignment. Results that emerge from the primary research and subsequent factor analysis however is at times contradictory and at the same time, intuitively obvious in that environmental scanning can provide a very accurate assessment of the stage an industry lifecycle is in as derived by competitors, consolidation market forces, and pricing strategies for example.

The analysis, while useful as a glimpse into external environmental scanning, does not however provide enough of a solid theoretical base to build broader conclusions on.

Critique of the Article In analyzing the role of environmental scanning practices from both a scope an d frequency perspective by size of company and relative richness of information, in addition to measuring the twenty-three items that were specifically created to measure the five dimensions of competitive strategy, Beal (2000) sets forth a theoretical foundation that captures on the one hand, findings that intuitively make sense yet also contradict the hypotheses of the study at the same time.

Organizing the twenty three factors into four main sources of differentiation including innovation, marketing, quality and service, when analyzed through factor analysis using Varimax rotation, shows that above all factors measured, the strategy of differentiating on quality and benchmarking best manufacturing processes in the industry (.863) are the most critical of all. In other words this analysis is saying that the ability to consistently produce high quality products is the greatest single differentiator over time.

Where Beal fails to bring greater value into this specific area of research however is in not delving deeper into which specific processes are those that are the most targeted for best manufacturing process definition and improvement. Critically analyzing this specific and highly significant result of the research, one could argue that the best manufacturing processes across industries vary significantly by size of manufacturer and that even in the sampling frame of this research there is wide variation.

To embrace best practices of manufacturing processes, which is the implication of this finding without guidance as to which processes to start with first is a major omission of this research. Second, the research points to the second most important factor being the improvement of existing customer services (.833), yet again Beal does not delve into which specific processes within customer service need to be improvement. This finding then is so generic it could apply to all industries at any point in their lifecycle.

Building differentiation through brand and company identification (.829) and R&D for new products (.827) follow the same logic and as a result are equally generic in their ability to be prescriptive to small manufacturers. The twenty three factors divided in four areas of differentiation yield findings need to be defined another level or two deeper in order to be relevant to small manufacturers.

The immediate issue of which manufacturing and services processes to target for improvement and the need for defining the severity of each is completely left unanswered in this research. That is not so much a contradiction of the research but a limitation of it in terms of applicability to practitioners running small manufacturing companies.

Critique of Environmental Scanning: Frequency and Scope Beal (2000) bases his methodology for assessing environmental scanning on twenty eight specific items that CEOs of 101 small manufacturing companies responded to as part of the research effort, and later analyzed them using factor analysis.

Using Varimax rotation in factor analysis to explain variances across the results, company's management capabilities and resources (.824) and company's financial capabilities and resources (.811) were found to be the greatest two factors across all twenty-eight measured in terms of explaining variations in environmental scanning resulting impact on related environment/competitive strategy alignment.

Scanning multiple situations or events occurring in an environmental sector will be positively related to environment-competitive strategy alignment, which is the second hypothesis of the research project (H2) looks at the effect of scope of scanning on external alignments by stage of the industry lifecycle. What emerges from this analysis, shown in Table 4 of the Beal (2000) article is that alignment of low cost ownership and the maturity stage have the highest mean square error (.56* followed by alignment of innovation differentiation during the growth phase (.502).

It is feasible to argue that these are tow two most visible aspects of an industry's lifecycle as well, and that even cursory external environmental scanning of an industry can delineate its relative growth through innovation, or its relative stagnant level of sales and the inevitable price competition markets that have matured begin to exhibit.

What is most surprising of all in this study however published by Beal (2000) is the statement "Third, the frequency at which CEOs of small manufacturing companies scan their environments may not be critical to aligning their firms' competitive strategies with the stage of the industry lifecycle in which the firms compete" (pg. 44) contradicts other findings, assumptions and research from the literature review of the entire published article. Isn't this the basis for the.