Lets begin with

In the Name of Allah, the Most Beneficent, the Most

Merciful.

1.All the praises and thanks be to Allah, the

Lord of the 'Alamin (mankind, jinns and all
that exists).
2.The Most Beneficent, the Most Merciful.
3.The Only Owner (and the Only Ruling
Judge) of the Day of Recompense (i.e. the
Day of Resurrection)
4.You (Alone) we worship, and You (Alone)
we ask for help (for each and everything).
5.Guide us to the Straight Way
6.The Way of those on whom You have
bestowed Your Grace,
7.Not (the way) of those who earned Your
Anger (such as the Jews), nor of those who
went astray (such as the Christians).

CHAPTER 3

EVALUATING A COMPANYS
EXTERNAL ENVIRONMENT

32

1.

LO 1

LO 2

How to recognize the factors in a

companys broad macro-environment
that may have strategic significance.
How to use analytic tools to diagnose
the competitive conditions in a
companys industry.

LO 3

How to map the market positions of

key groups of industry rivals.

LO 4

How to use multiple frameworks to

determine whether an industrys
outlook presents a company with
sufficiently attractive opportunities for
growth and profitability.

Tawhidic paradigm

2.
3.
4.

5.

6.

Explain the strategic management

process and discuss the essentials
of strategic management from
both the conventional perspectives
and the Islamic perspectives.
Use the relevant skills learnt from
principles in strategic management
for real-life application.
Cooperate with team members
and apply high ethical values in
corporate decision-making.
Develop communication skills with
people from various background
and displaying leadership qualities
in handling strategic issues.
Analyze real-life business cases
using quantitative and qualitative
information and theories and
demonstrate skillful problemsolving capabilities in business.
Apply managerial and
entrepreneurial skills in making
decisions at operational,
functional, business and corporate
levels.

33

FIGURE 3.1

From Thinking Strategically about the Companys Situation

to Choosing a Strategy
Tawhidic paradigm (by Ribie bin Amir): Allah has
raised us to rescue whoever he wills from the slavery
of (fellow) humans & to make them (devoted)
servants of Allah. And to deliver them from the cage of
materialism guiding them to the magnanimity of
spirituality. And to liberate them from tyranny of
[different religions & systems] leading them to the
equity of Islam.

Chapter 3
Thinking
strategically
about a firms
external
environment

Form a
strategic
vision of
where the
firm needs
to head

OPPORTUNITIES vs THREATS

Chapter 4
Thinking
strategically
about a firms
internal
environment
STRENGHTS vs WEAKNESSES

Identify
promising
strategic
options
for the firm

Select the
best strategy
and business
model for
the firm

Faith (iman) [Worship Allah]

Walk the faith (amal)
Goodness (Al-Solihat)
Tawwaassu bil haq enjoin with
truth
Watawa sau bis-sabr (enjoin
upon each other perseverance)
34

QUESTION 1: WHAT ARE THE

STRATEGICALLY RELEVANT FACTORS
IN THE MACRO-ENVIRONMENT?

PESTEL Analysis

Focuses on principal components of strategic

significance in the macro-environment:

Political factors

Economic conditions (local to worldwide)

Sociocultural forces

Technological factors

Environmental factors (the natural environment)

Legal/regulatory conditions
35

FIGURE 3.2

The Components of a Companys Macro-Environment

36

FIGURE 3.3
The Five-Forces Model
of Competition: A Key
Analytical Tool

37

TABLE 3.3

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

The Most Common Drivers of Industry Change

Changes in the long-term industry growth rate

Increasing globalization
Emerging new Internet capabilities and applications
Changes in who buys the product and how they use it
Technological change and manufacturing process innovation
Product and marketing innovation
Entry or exit of major firms
Diffusion of technical know-how across firms and countries
Changes in cost and efficiency
Reductions in uncertainty and business risk
Regulatory influences and government policy changes
Changing societal concerns, attitudes, and lifestyles

38

External Environment Evaluation

Tawhidic paradigm (by Ribie bin Amir): Allah has
raised us to rescue whoever he wills from the slavery
of (fellow) humans & to make them (devoted)
servants of Allah. And to deliver them from the cage of
materialism guiding them to the magnanimity of
spirituality. And to liberate them from tyranny of
[different religions & systems] leading them to the
equity of Islam.

Tawhidic paradigm
version?

Industry Analysis
Tawhidic paradigm (by Ribie bin Amir): Allah has
raised us to rescue whoever he wills from the slavery
of (fellow) humans & to make them (devoted)
servants of Allah. And to deliver them from the cage of
materialism guiding them to the magnanimity of
spirituality. And to liberate them from tyranny of
[different religions & systems] leading them to the
equity of Islam.

Tawhidic paradigm
version?

QUESTION 4: HOW ARE INDUSTRY

RIVALS POSITIONED IN THE MARKET?

Strategic Group

Consists of those industry members with similar

competitive approaches and positions in the market:

Having comparable product-line breadth

Emphasizing the same distribution channels

Depending on identical technological approaches

Offering the same product attributes to buyers

Offering similar services and technical assistance

311

TYPICAL VARIABLES USED IN

CREATING GROUP MAPS

Price/quality range (high, medium, low)

Geographic coverage (local, regional, national, global)

Product-line breadth (wide, narrow)

Degree of service offered (no frills, limited, full)

Distribution channels (retail, wholesale, Internet, multiple)

Degree of vertical integration (none, partial, full)

Degree of diversification into other industries (none,

some, considerable)

313

GUIDELINES FOR CREATING

GROUP MAPS
1. Variables selected as map axes should not be highly correlated.
2. Variables should reflect important (sizable) differences among
rival approaches.
3. Variables may be quantitative, continuous, discrete and\or
defined in terms of distinct classes and combinations.
4. Drawing group circles proportional to the combined sales of
firms in each group will reflect the relative sizes of each
strategic group.
5. Drawing maps using different pairs of variables will show the
different competitive positioning relationships present in the
industrys structure.

314

THE VALUE OF STRATEGIC

GROUP MAPS?

Maps are useful in identifying which industry

members are close rivals and which are distant
rivals.

Not all map positions are equally attractive:

1.

Prevailing competitive pressures from the

industrys five forces may cause the profit potential
of different strategic groups to vary.

2.

Industry driving forces may favor some strategic

groups and hurt others.

315

QUESTION 5: WHAT STRATEGIC MOVES

ARE RIVALS LIKELY TO MAKE NEXT?

Competitive Intelligence

Information about rivals that is useful in anticipating

their next strategic moves.

Signals of the Likelihood of Strategic Moves:

Rivals under pressure to improve financial

performance

Rivals seeking to increase market standing

Public statements of rivals intentions

Profiles developed by competitive intelligence units

316

USEFUL QUESTIONS TO HELP PREDICT THE

LIKELY ACTIONS OF IMPORTANT RIVALS

Which competitors strategies are achieving good results?

Which competitors are losing in the marketplace or badly

need to increase their unit sales and market share?

Which rivals are likely make major moves to enter new

geographic markets or to increase sales and market share
in a particular geographic region?

Which rivals can expand product offerings to enter new

product segments where they do not have a presence?

Which rivals can be acquired? Which rivals are financially

able and looking to make an acquisition?
317

A FRAMEWORK FOR
COMPETITOR ANALYSIS

Indicators of a rival firms likely

strategic moves and countermoves:

The rival firms current strategy

The rival firms objectives

The rival firms capabilities

The rival firms assumptions

about itself and its industry

318

FIGURE 3.9

A Framework for Competitor Analysis

319

QUESTION 6: WHAT ARE THE INDUSTRYS

KEY SUCCESS FACTORS?

Key Success Factors (KSFs)

Are the strategy elements, product and service

attributes, operational approaches, resources, and
competitive capabilities that are necessary for
competitive success by any and all firms in an
industry.

Vary from industry to industry, and over time within

the same industry, and in importance as drivers of
change and competitive conditions change.

320

IDENTIFICATION OF
KEY SUCCESS FACTORS
1. On what basis do buyers of the industrys product
choose between the competing brands of sellers?
That is, what product attributes and service
characteristics are crucial to competitive success?
2. Given the nature of competitive rivalry prevailing in
the marketplace, what resources and competitive
capabilities must a firm have to be competitively
successful?
3. What shortcomings are almost certain to put a firm
at a significant competitive disadvantage?

321

QUESTION 7: IS THE INDUSTRY OUTLOOK

CONDUCIVE TO GOOD PROFITABILITY?

The anticipated industry environment is

fundamentally attractive if it presents a
company with good opportunity for aboveaverage profitability.

The industry outlook is fundamentally

unattractive if a firms profit prospects are
unappealingly low.

322

FACTORS TO CONSIDER IN ASSESSING

INDUSTRY ATTRACTIVENESS

The industrys growth potential.

Whether and to what degree industry profitability will be

favorably or unfavorably affected by the prevailing
driving forces.

The anticipated strength of competitive forcesthe

overriding issue here is whether competitive forces
seem likely to intensify and squeeze industry profitability
to subpar levels or whether the company should be able
to earn good profits despite the expected strength of
competitive forces.

323

FACTORS TO CONSIDER IN ASSESSING

INDUSTRY ATTRACTIVENESS (contd)

Whether the company is strongly or weakly positioned

on the industrys strategic group map.

How well the companys strategy, product offering, and

capabilities stack up against industry KSFs.

The degrees of risk and uncertainty in the industrys

future and whether the industry confronts severe
problems relating to regulatory or environmental issues,
stagnating buyer demand, industry overcapacity, and so
on.

324

WHAT SHOULD A CURRENT COMPETITOR

DECIDE ABOUT ITS INDUSTRY?

When a competitor decides an industry is attractive, it

should invest aggressively to capture the opportunities it
sees and to improve its long-term competitive position
in the business.

When a strong competitor concludes its industry is

relatively unattractive and lacking in opportunity, it may
elect to protect its present position, investing cautiously
if at all and looking for opportunities in other industries.

A competitively weak company in an unattractive

industry may see its best option as finding a buyer,
perhaps a rival, to acquire its business.

325

Group Activity

Tawhidic paradigm (by Ribie bin Amir): Allah has

raised us to rescue whoever he wills from the slavery
of (fellow) humans & to make them (devoted)
servants of Allah. And to deliver them from the cage of
materialism guiding them to the magnanimity of
spirituality. And to liberate them from tyranny of
[different religions & systems] leading them to the
equity of Islam.

Identify a real company and

answer the following
questions.
Your
company

QUESTION 1
How strong are the competitive forces confronting YOUR COMPANY
in the market for YOUR COMPANY PRODUCTS/SERVICES? Do a fiveforces analysis and Tawhidic paradigm evaluation to support your
answer.
QUESTION 2
Draw a strategic group map to show how the performance YOUR
PRODUCT AND ITS INDUSTRY? Is YOUR COMPANY well positioned?
Justify your answer with three (3) reasons. Include an Islamic
perspective evaluation from Tawhidic paradigm.
QUESTION 3
Identify and explain three (3) key success factors for YOUR
PRODUCTS/SERVICES? Evaluate your answer from Tawhidic
paradigm.

TH Travel Sdn Bhd

IIUM Holdings Sdn Bhd
Bank Ummah Corporation
Haroun Corporation

External Evaluation Form

Key External Factors

Weight

Opportunities

Threats

TOTAL

1.00

Rating

Weighted
Score

Tawhidic paradigm, PESTEL, Industry

Analysis (5-forces), and KSFs

Tawhidic approach
A Sahabi, Ribi bin Amir (Radiallahu Anhu) who said in the court of the Persian
warlord, Rustam:

. .
Allah has raised us to rescue whoever he wills from the slavery of (fellow)
humans & to make them (devoted) servants of Allah. And to deliver them from
the cage of materialism guiding them to the magnanimity of spirituality. And to
liberate them from tyranny of [different religions & systems] leading them to the
equity of Islam.
(Al-Bidaya wal Nihaya 7/46)