Strategy is based on the unique relationship between an organisation's distinctive resources and capabilities and its environment. This relationship is defined as ‘strategic fit’ and is seen as a dynamic relationship where the organisation does not merely respond to its environment but seeks to shape it.
Organisations do not exist in a vacuum: they rely on and reflect the political, economic and social contexts within which they operate. These will include:
•a regulatory environment which constrains their activities
•an economic environment which determines how business is conducted