ALTERNATIVE APPROACHES TO STRATEGIC MANAGEMENT
In this report, most of the discussion revolved around various types of alternatives corresponding to the strategic management. The stakeholder’s approach emphasises on the interaction between the managers and other involved parties such as the employees and investors. Contradictorily, the sustainability approach is focused towards the preservation of environment and its peripherals. Alternatively, the dynamic capabilities are catalysts for the competitive advantages. After analysing the pros and cons, it is evident that the companies must try to implement various sustainability approaches, in order to yield the highest level of profitability.
Strategic Management’s background
Strategic management is referred to as the implementation and formulation of various initiatives and major goals, undertaken by the top management of an organisation (Mason and Simmons, 2014). It is mostly done in the lieu of owners. The decisions are based upon various assessmentsthat are related to the external as well as internal environment of the business. In fact, the resources are extremely important in this case. One must assess how efficiently a company allocates its resources to gain a competitive edge over its competitors.
It also provides a holistic sense of direction to the organisations, thereby involving different objectives of the company. Several plans and policies are designed to obtain these organisational goals. In order to understand the employees’ perspectives, it is crucial to incorporate the strategic management. Some of the well-known models used in this genre are SWOT, BCG, Competitor Analysis, and Porter’s Five Forces.
The three main approaches that will be analysed in this paper are stakeholder, dynamic capabilities, and sustainable practices approaches (Mason and Simmons, 2014). Stakeholder approach was first introduced in the 1980s’ later part. The main aspect revolving around this approach is theidentification of the exerted pressure created on various stakeholders and managers, by the intensity of change. On the other hand, dynamic capabilities imply the acquisition of various advantages of the competitive nature, in certain external business environments. The ever-changing business arena must be addressed regularly. Alternatively, the sustainability approach emphasises on the preservation of different natural resources and the nature (Mason and Simmons, 2014). A company should understand that it is high time to understand how it cannot survive anymore without concentrating on the natural resources. Merely, focusing on the profit is not going to work. In fact, the three main aspects which should be magnified by the business organisations are the profit, people and planet (Refer to Figure 1).
3 different Strategic Management approaches with examples
Procter and Gamble is often regarded as a prime example for deciphering the sustainable approach pertaining to the strategic management. It was first introduced with the concept of innovative and sustainable product manufacturing. The company’s sustainable services and products amounted to almost 11 percent of the organisation’s total sales, which increased from 2007 upto the end of 2012. Proctor and Gamble brought forward many sustainable products by reducing the energy and water usage (Hill, Jones and Schilling, 2014). The materials used for transportation and packaging were also biodegradable. Thus, the main concentration was on the use of various renewable resources of energy and resources. It was also a strategic approach because the same helped in reviving the company’ reputation and image, extensively. As a result, the company took the responsibility to change the environmental impacts by rolling out eco-friendly technology and sustainable business processes. Interestingly, innovation is possible in every step of doing a business (Hill, Jones and Schilling, 2014). On the contrary, the above-mentioned integration of both the strategic management and sustainable practices can serve the organisations with the appropriate measures. Thus, it is important to understand that oftentimes, the strategic management corresponds to the blue ocean strategy. Hence, it is another added advantage for a company, in this regard. Blue ocean strategic cuts the market competition lucidly (Hill, Jones and Schilling, 2014).
Figure 1: Triple Bottom Line
(Source: Vogel and Güttel, 2013)
Apple Inc. is a phenomenal example for exploiting the dynamic capabilities. For example, the company’s production and marketing strategies are designed in such a way that the complex competitive environment is addressed appropriately. The organisation incorporates experiential marketing (Hill, Jones and Schilling, 2014). It is quite different from the way other smartphone makers and sellers promote their products. However, it is possible only because of its superior technology, efficient staffs, and impressive showrooms. Apple’s strategy hardly endorses strategy focus. The dynamic capabilities are rather acquired by the company extensively (Eden and Ackermann, 2013). The dynamic capability’s perspective can be witnessed in several cases of Apple’s innovation, such as iPhone series, iPod, and iPad. They were marketed only by depending on the innovative and new features. Thus, this approach’s outcomes are quite clear. For example, the acquisition competencies of the capabilities should remain relevant to the company in question. In such a scenario, upgradation is also required. Flexibility is also crucial for the optimal utilisation of the resources. The term dynamic means something in motion. Similarly, continuously skills and other resources should be developed with the external business development. On the contrary, there are core three resources of an organisation such as the human, financial, and IT resources. All three of them are substantial for the reputational and productional improvement of any organisation.
In the real-life scenario, Coca-Cola is one of the companies to implement stakeholder approach in their strategic initiatives. According to the stakeholders’ theory, each and every available stakeholder is important for proper functioning of a business. For instance, a company cannot run without the investors’ financial capital. On the other hand, the management members cannot complete everything alone. They will need employees or human capital or resources for completing everything, efficiently. Hence, output of a company is dependent on the different resource availability (Wheelen, Hunger, Hoffman and Bamford, 2017). The chosen organisation, i.e., Coca-Cola assumes different formal as well as informal involvement approaches with its stakeholders. In fact, its association can be seen on multiple levels such as regional, national, and local. Others including consumers, bottlers, and suppliers connect with the company, intrinsically. On the other hand, Coca-Cola joined hands with the Global Compact of the United Nations and World Economic Forum to resolve varying types of global issues. Additionally, the proactive organisation’s involvement with different stakeholders facilitated the firm to converge passion and expertise of various organisations and individuals. The promising development pertaining to the company has helped to cater the environmental and social causes, largely. There are some prime interaction modes adopted by the company, such as the bottling partner projects and joint business planning.
Each approach’s viability
1.The financial results cannot be comprised while achieving the sustainable goals. It is one of the most applicable approaches in the strategic management (Wheelen, Hunger, Hoffman and Bamford, 2017). Alternatively, the mission statement of an organisation should be given prime focus because it indicates how the operations can suitably align with the stakeholders’ needs (Hitt, Irelandand Hoskisson, 2012). Thus, stakeholders are not the most substantial entities in this scenari
Figure 2: Sustainability approach
(Source: Meyer, Neck and Meeks, 2017)
In Figure 2, it can be witnessed how sustainability is not in an island. Thus, a proper organisational structure and stakeholder base are required to make the same viable. Even the Triple Bottom Line theory also demonstrates the same, to a large extent. Hence, the success of this approach relies on other peripheral aspects.
2. RBV is a well-known model in dynamic capabilities perspective. It seeks to describe the sustained competitive advantage of a firm. A company can achieve the desired competitive advantages only when it efficiently manages and acquires the capabilities that cannot be easily imitated and substituted (Wheelen, Hunger, Hoffman and Bamford, 2017). On the contrary,they must be quite rare and valuable as well. It is necessary to understand that the viability of this approach is comparatively more.
The above Figure 3 shows that the dynamic capabilities have extracted its essence from the RBV model itself. A firm’s ability is hidden in its capability to manage various resources.
3.Both the organisation and systems theory are interrelated with one another. The stakeholder management also states that the relationship with stakeholders can be both influenced and created. In strategic management, the Porter’s Five Forces paradigm is a stakeholder approach to it. For example, all the stakeholder such as customers, suppliers, competitors, government, and other involved parties are introduced to the audiences. On the contrary, a company cannot survive or improve without them. It is quite viable for analysing the environment affecting a business, largely.
The stakeholder’s theory is not satisfactory in nature because the same cannot address various managerial sins. Hence, the members of management can pursue their self-interests, at any point of time (Lasserre, 2017). For example, if the compensation structure of themanagement is tied to a company’s size then it is inviable to say that the same will never allow the firm to get downsized. The experts even claim that the management misconduct makes the shareholder prone to vulnerability. Below Figure 5 depicts the varying range of stakeholder who remain associated
Figure 3 takeholders of a company
(Source: Stead and Stead, 2014)
1. There are several benefits that can be derived from the sustainable approach. For instance, a large number of talented employees can be attracted from different parts of the world via the CSR technique. It also presents an opportunity to contribute greatly, by the management teams. Even multinational companies such as Coca-Cola, Unilever, and Google remain inclined towards the contribution or CSR activities. In the previous section, it has also been mentioned how the CSR and blue ocean framework are related with each other. The companies engaged in the manufacturing sector cannot differentiate their products easily. For example, the steel suppliers hardly have any difference in the features of their products.Thus, the blue ocean regime comes to the rescue, in these instances. Secondly, the operational efficiency is extremely important. It is not necessary for a business to sacrifice its high growth levels only due to the responsibilities undertaken via the CSR programmes. Sustainability processes and issues must be perceived as the natural parts in respect to the businesses. It enhances their overall practice of performance management. Shareholder value can be created by adding CSR activities in the business model and strategic plans. Other benefits include the savings of cost and time. The resources such as energy, water, and many more are safeguarded by the same process (Vogeland Güttel,2013). Alternatively, the increased brand reputation attracts more customers, investors, and employees, equally.
2. The dynamic capabilities are instrumental in the creation of robust competitive advantage. Organisations such as Oracle, Microsoft, and IBM pursue various resource-based strategy so as to build habitually shielded and useful technology assets (Hörisch, Freeman and Schaltegger, 2014). However, it is not to continue with this strategy for a long-term. Adaptability and fastness in product innovation help in reorganising the competencies. The competitive advantage that a firm enjoys often diminishes over a time period. There are primarily two main causes of this reduction of capabilities. The first one is imitability. Other firms can easily replicate non-unique products. Thus, the dynamic capabilities need continuous sharpening.
3. The stakeholder approach is quite advantageous for the organisations. It enhances the flexibility and quality of different resources. On the contrary, the knowledge base of several stakeholders can be applied in the larger picture, especially when the international arena is concerned. Secondly, the organisation is compelled to think in terms of future (Alkhafaji and Nelson, 2013). It also starts looking up to the customers more. On the contrary, the future cash flow provides a proper long-term financial view on the strategic decisions. A company is able to establish trust via the formal and informal communication processes. It also enhances the commitment of organisations so as to sponsor agencies. Sometimes, the company’s management are over-confident of them and that is why introducing lateral thinking patterns by other or external stakeholders can lead to a better environment for brainstorming.
1.Sustainability issues are comparatively easier to implement. However, people may become suspicious about the aspect that some heinous crimes are being hidden under the veils of the benevolent CSR activities.
2. When the dynamic capability approach is implemented companies may have to transform all their existing assets. It can be done by the local autonomy, decentralisation, and strategic alliance (Weiss, 2014). However, decentralisation may create chaos in the organisations. Hence, more robust steps are requiredto deal with the same.
3. The organisations may face issue with the complicated governance structure while implementing the stakeholder regime. It is due to the fact that multiplayers exist in the network.
1. The measurement used for gauging reputation or loyalty is not at all transparent. Corporations and people should develop the concept of holistic thinking. Even the systems theory proclaims the same. A form of thinking that is sustainable can be perceived as the best possible way of thinking that can be developed effectively, systematically, and efficiently (Asif, Searcy, Zutshiand Fisscher, 2013). On the other hand, the systems thinking also entails one ability to grasp more situation, interactions, and relations, which are complex. Hence, measurement is a big issue in this approach.
2. On the other hand, dynamic capabilities also have some blind spots. For example, the system must eliminate the complexityof theenvironment to act successfully. Hence, a simplified and selective actions patterns are selected for the same. If the changes are abrupt in nature then the organisations may suddenly find all its blind spots more relevant. Thus, the capabilities of the organisations cannot be completely flexible. Only a partial flexibility can be expected. The core capabilities are more of the main rigidities possessed by a company. On the contrary, the core capabilities may turn out to be the major adaptation barriers. For example, the company can face a structural inertia or past resource commitment (Eden and Ackermann, 2013). It was evident during the introduction of computers in various organisations. The older employees retaliated the same development.
3. At times, the advantages enjoyed by the shareholders may lead to deprival of the third parties’ welfare. A clear measure pertaining to any social issue such as environmental issues, employment, and ethical business practices. The customers as stakeholder derive the maximum losses. Even the short-term focus pertaining to the stakeholders may prove to be detrimental for the stakeholders’ value that is of long term. The approach itself is not for the long-haul. Interestingly, the organisational success may also be undermined, greatly (Minoja, 2012). Business ethics may not be maintained by the internal stakeholders. Balancing act is not always possible for the stakeholders. They cannot be compromised as well. Market economy is also not followed by the supporters of this approach.
It can be inferred from the above-paper that the strategies of an organisationcannot be implemented successful without the elaborate analysis of the business environment. Even the internal strength and weakness of the companies should be reviewed, as well. On the other hand, the three approaches are described in this study such as the stakeholder, sustainability practice as well as dynamic capabilities approaches. Out of these three, it is easier to implement the sustainability practices because it is milder in nature. Hence, a large number of customers, other stakeholders, and employees are enticing by this approach. Moreover, it is more innovative in nature and thus prefers inclusion of all the stakeholders’ wellbeing.
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