Strategic Management

Strategic Management

Strategic Management

Introduction

As the competition within markets increases, the challenges facing organizations not only involve the design of competitive strategies but also the rapid and effective implementation of them. Strategic management has increasingly been recognized as a vehicle for enhancing such capabilities; however, strategic management is a comparatively young discipline. Numerous studies have provided analytical frameworks, and there is considerable debate as to which approach managers should adopt in devising their strategies. McKiernan (1997) suggested that there were four well-established frameworks to strategic management:

the planned approach;

logical incrementalism;

outside-in analysis; and

inside-out analysis.

The “planned approach” places emphasis on a longterm, highly systematic and deterministic process of strategic planning and aims at achieving the best “fit” between the organization and its environment. However, business environments may change chaotically, and such an overly prescriptive approach based on incomplete information may result in flawed decision making. The “logical incrementalism” approach, proposed by Quinn (1978), suggested that the organization's strategies should evolve rationally in response to changes in the environment. Mintzberg (1987) further indicated that strategy is a combination of deliberate plans and emergent adjustments over time.

Discussion

Strategic management thinking in the 1980s was dominated by the work of Michael E. Porter of the Harvard Business School. The “five forces” model, “generic strategy”, and the “value chain” approach added considerable contributions to strategic management. The Porter approach can be referred to as an “outside-in analysis” as the focus is on the competitive environment rather than the resources of the organization. Nevertheless, much evidence indicates that the performance improvement made by strategies that were developed on the basis of industrial analysis ranged from only 8 to 15 per cent (Grant, 1991; Rumelt, 1991; Carr, 1993; Roquert et al., 1993). Furthermore, strategic business units usually focus on their existing and readily available resources, whilst neglecting the creation of an innovative vision; thus, many innovative opportunities remain underdeveloped. It is, therefore, apparent that such industrial analysis does not work well in a market where both competition and opportunities are dynamic.

Research in the late 1980s and early 1990s suggested that choice of industry was not a major factor in determining business profitability, and indeed that the core competence of the organization was of greater importance (Rumelt, 1991). For example, Prahalad and Hamel (1990) suggested that the root cause of American enterprises' loss of their competitive edge was not because of a disadvantaged external environment, but rather, because they had neglected to examine the organization's internal “core competences”. Core competences or distinctive capabilities, are combinations of resources and capabilities, which are both unique to a specific organization and responsible for generating its competitive advantage. Although every company has available resources and capabilities to do whatever it does, not every company can effectively distinguish the resources or capabilities, which it has developed internally or acquired externally. Therefore, if developed solely on the basis of available internal resources, their strategies seem to lack a solid competitive foundation.The first, and main, purpose of this paper is to strongly emphasize that an effective strategic management model ...