STRATEGIC MANAGEMENT

Strategic Management

Strategic Management

Introduction

The main aim of this report is to analyze the effective strategies that impact positively in e-business. The paper examines the agency theory and its contribution to the strategic management in organizations as far as competitive advantage is concerned. Initially, the paper discusses the agency theory of strategic management and then its relationship with the e-busniess. The second part of the paper the competitiveness of the agency theory in strategic management amidst other competing theories in strategic management. Thirdly, the section evaluates the effective strategic management practice and it's implementations in e-toy corporation. Finally, the discussion will shed light on what organizations need to adapt theoretically, if they have to enjoy competitive advantage both locally and internationally.

Theoritical Framework

The agency theory proves superior to other theories of strategic management since they all depend on the agents in the entire process of strategic management in achieving organizational success. Chaffee (2003, pp. 32)contends that the Agency theory is indeed the critical element in strategy formulation since for all organizations the nature of strategy will be most contingently influenced by the agents who constitute the chief executives. He adds that these agent's personal skills and personality highly influence the nature of strategic planning. Ackermann further says that most important outcomes of strategy making for organizations is that of developing a way of better managing the link between the competing demands of different stakeholders. He concludes that stakeholders determine the ability of an organization to achieve its aspirations. Much as the above discussed theories do affect strategy formulation, implementation and evaluation, strategy formulation makes much use of the agency theory over other theories.

Competitive Advantage

According to Chandler (2002, p.19), a firm can achieve this through giving customers more benefits, the same at lower cost, access to cheaper raw materials, better staff, cheaper labour, better brand recognition and proprietary technology. Porter identified two basic types of competitive advantage: cost advantage and differentiation advantage. In the former competitive advantage exists when the firm benefits as competititors but at a lower cost. In the latter a firm delivers benefits that exceed those of competing products. Porter concludes that a competitive advantage enables the firm to create superior value for its customers and superior profits for itself. This paper observes that it is through the ability of the CEO who is the agent of the firm to creatively co-ordinate the firm's resources with good strategic management that competitive advantage is achieved.

The Agency Theory

Agency theory is a management approach where one individual (the agent) acts on behalf of another (the principal) and is supposed to advance the principal's goals (Deacon 2003, p.65). The agent therefore advances both the principals' interests and his own interests in the organization. A balance of these interests should be merged in order to arrive at the corporate objectives of the organization through the agent because he/she is in charge of the vast resources of the organization. Drucker (2004, pp. 65)contends that the agency theory of strategic Management ...