19 CHAPTER 2 LITERATURE REVIEW 2.1. Theoretical basis 2.1.1. Strategic Strategies are structured basically to form a 'response' to relevant external changes of an organization. Of course, these external changes will be answered by considering the internal capabilities of an organization. To what extent an organization can take advantage of opportunities and minimize external threats to obtain maximum benefits take advantage of the organization's current strengths. (Sudiantini, 2022:2) The strategy that is implemented first needs to be managed so that it is carried out properly. As with other management sciences, strategic management also plays a very important role because every element of management is synergized to achieve goals. For this reason, this chapter will discuss fundamentally what is meant by strategic management, as well as discussing the differences between operational management and strategic management. (Prasojo, 2018:10) Strategy is defined by managers as their large-scale and future-oriented plans for interacting with the competitive environment in order to achieve company goals. Strategy is a "Main" plan of a company. (Sembiring & Fatihudin, 2019:2) Michael Porter in his article entitled Competitive Strategy in the Harvard Business Review (1996), states that strategy is a set of different actions or activities to deliver unique value. Meanwhile, Thompson and Strikcland (2001) emphasized that strategy consists of activities that are full of competitiveness and business approaches to achieve satisfactory performance (on target) (Anwar, 2020:2) Strategies about how the organization should have long-term direction that can benefit the organization. Through strategy, organizations can adapt to environmental dynamics or in business concepts can meet market and stakeholder needs. Strategy can be seen through the policies that form the basis for the actions taken in the organization to achieve profit for the organization. (As'ad, 2020:6). 20 2.1.2. Strategic Management Strategic management is a series of managerial actions that determine the company's performance in the long term. Strategic management includes environmental monitoring, strategy formulation, (strategic planning or long-term planning), strategy implementation, and evaluation and control. environmental threats by looking at the company's strengths and weaknesses. Originally called business policy, strategic management includes long-term planning and strategy. (Sudiantini, 2022:1) Strategic management consists of the decisions and actions used to organize and implement strategies that will provide a superior competitive fit between an organization and its environment, to enable it to achieve organizational goals. It can also be described as the management processes required to enable an organization to move from where it is now to where it wants to be in the future. It is about a sense of direction and alignment with organizational goals. (Prasojo, 2018:11) Making managerial decisions and actions for long-term organizational success. Based on environmental analysis, formulation and implementation of the right strategy, evaluation and monitoring are also planned. According to them, the implementation of strategic management lies in careful assessment of environmental problems to study existing threats and opportunities that allow for organizational progress based on the strengths and weaknesses of the organization. (Nazarudin, 2020:4) The benefits of using a Strategic management plan, managers at all levels interact in planning and implementation. In effect, the behavioral consequences of Strategic management are similar to the behavioral consequences of participatory decision making. (Sembiring & Fatihudin, 2019:6) 2.1.3. External Analysis An external analysis involves the identification and evaluation of trends and events that are outside the influence of a particular company (David, 2023:3). These may include factors like heightened international competition, population migration towards coastal regions, an aging population, and the impact of social media. An external analysis identifies significant opportunities and dangers that an organization faces. By conducting an external assessment, CarbonEthics are able to develop plans that capitalize on the possibilities and mitigate or minimize the effects of the threats. 21 2.1.3.1. PESTEL analysis External environmental factors in the world of strategic management are known as PEST or PESTLE for the external environment (political, economic, socio-cultural, technological, legal, & environmental). As for the internal environment, they are familiar with the term PRIMO-F (people, resources, innovation, marketing, operations, & finance). Some call it the external environment, the macro environment, industrial environment, remote environment, some abbreviate PESTEL and PESTL. (Yasin, 2020:2) All organizations need to identify external factors in their environment that could impact their operations. Many of these will be things that the organization has no control over, but the implications of which need to be understood. A popular tool for identifying these external factors is the PESTLE Analysis, which can be used to help you consider Political, Economic, Social, Technological, Legal, and Environmental-mental issues. The identification process should involve different disciplines across your organization so that a complete picture of these external factors can be built. These factors can then be fully researched and analyzed. As organizations become more globalized, expanding their existing boundaries, PESTLE engineering ensures that they really question each of these factors and consider their impact. PESTLE analysis provides you with a framework that allows you to investigate the external environment by asking questions for each factor and discussing possible implications. These are the types of questions you will be asked. (FME, 2013:6) PESTEL analysis is a risk management method used in order to be able to evaluate the company's external environment. This analysis is carried out by dividing opportunities and risks into the factors below. (Prasojo, 2018:35) 22 Figure 2-1 Framework PESTEL (Sources: Prasojo, 2018) PESTEL analysis supports a company's strategic planning by providing insight into the external environment in which a company operates. By analyzing political, economic, social, technological, legal, and environmental aspects, companies gain a comprehensive picture of the status and trends of important factors that are outside their control but impact their business. (Public, 2017:12) 2.1.3.2.