Strategic management has always been regarded as the art and sometimes, the science, of evaluating and formulating the cross-functional decisions which would help a company in achieving its objectives. Strategic management involves a systemic identification of specifying the objectives of the firm and nurturing its existing policies along with providing strategies for achieving the objectives. With the same, it also integrates the various activities of different functional sectors of business like sales, marketing and production in order to achieve the goals of an organisation. As per Helfat and Peteraf (2015), strategic management is the highest level of managerial activities which is imitated by the executive team of a company as well as its board of directors. It provides an overall direction for the organisation and allocates the proper amount of resources to several different parts of the business.
This paper will elaborate on presenting a brief analysis of the three different approaches to the strategic management and they are- the stakeholder approach, the dynamic capabilities and the sustainable approach. It would shed light on the viability of each of the approaches along with some suggested benefits of theirs and the issues that one might face in implementing them within the organisations. Furthermore, the paper shall also provide a brief on the limitations of all these three approaches as well.
The three different approaches to Strategic Management
The Stakeholder approach- Stakeholder theory is the theory that preaches ethical behaviour for gaining a competitive advantage for an organisation over the others. It strives to reach to a “win-win” outcomes (Amin-Chaudhry 2016). Hence, the companies that makes use of this approach tend to get a leg up within their industries upon their competitors. It is to note that this approach is used in many organisations and one of the best example of it is Coca cola. It was introduced in the year 1886 in United States by John Pemberton. It has a wide range of products in its portfolio and serves worldwide. Its products include Inca Kola, RC Cola, Cavan Cola, Pepsi, Kola Real, Postobon and Afri-Cola.
The dynamic capabilities- Dynamic capabilities refer to the ability of the firm for integrating, building and reconfiguring the internal and the external competencies for addressing the rapidly changing environments (Kim and Triche 2015). One of the examples of companies that make use of dynamic capabilities approach is Apple. The company was incorporated in the year 1977 by Steve Jobs and Steve Wozniak as manufacturer and designer of media devices and communication, computers and music players. Its segment comprise of Europe, Japan, America, China and the other Asia Pacific. It also sells and delivers digital applications and content. It has a really strong dynamic capabilities and core competencies.
The Sustainable approach- This approach considers the social, economic and the environmental issues in holistic, long lasting and balanced manner which benefit the present as well as future generation of the concerned stakeholders. In sustainable approach the businesses conduct their business while remaining cautious about their responsibilities towards all its stakeholders (Lins, Servaes and Tamayo 2017). The example of company that use sustainable approach for its business operation is Starbucks, the largest coffee retailers in the world. The company was founded in the year 1971 by Jerry Baldwin, Gordon Bowker and Zev Siegi. It is headquartered in United States and serves worldwide. It is specialised in smoothies, coffee beverages, sandwiches, tea and baked goods.
The Stakeholder approach
The Stakeholder approach does not depend on one overriding management objective for every decisions. It provides zero rivals to the traditional aim for “maximizing stakeholder wealth”. In contrast to this, the stakeholder framework rejects the idea of increasing a one-objective function as a beneficial way of thinking regarding the strategy of management. Instead, it is a never ending task that continuously balance and integrate various relationships and objectives (Ayuso et al. 2014)). It is to note that, to the pragmatists, the rejection of a single criteria for making a corporate decisions is very difficult. The directions occasionally face certain situations in which it is nearly impossible for advancing the interests of a single set of stakeholders as well as simultaneously protect the ones of the others. Hence, here a question arises- Whose interests shall they pursue while there is a presence of irreconcilable conflict?” It is very difficult for the board to make decisions without single guiding decision criteria. Hence, the viability of the stakeholder approach is low.
However, there are a wide range of benefits that this approach provides to the organisations that successfully implements them. This approach creates a competitive advantage by creating a relation in between the stakeholders and the firm itself. The company that follows stakeholder approach would get the details and information that are necessary for satisfying the needs and requirements of the stakeholders and hence, makes the development of expertise easier. It is also to note that the organisation that manages for stakeholders are much more able to attract high quality workers. The job satisfaction of the employees has an influence on the ability of the company to foster innovation. The workers who are satisfied with their job are more possibly to engage in the long lasting thinking as well as in generating the potentially important ideas. Such companies could make use of the information regarding the stakeholders in order to devise the new processes of satisfying them. With the same, reciprocity is an important aspect in this approach. This is because of the fact that when the stakeholders stand for benefitting, they are more possibly to reveal the information regarding their utility function. Hence, this is why the companies and the managers of the companies could meet the needs of the consumers in better ways by understanding their own suppliers and customers and by making use of the information flexibly and strategically.
Implementation of stakeholder approach within an organisations sometimes becomes a difficult task for the managers (Tyl et al. 2015). Often, there are employees who are against of following this approach and they quit to follow it in the initial stage of implementation. The implication of all the stakeholders might produce a divergent views and this makes it difficult for reaching consensus. Each of the stakeholders might care more regarding his own benefits and self-interests. Trying for satisfying the needs and requirements of a large number of players would complicate the governance. It could ultimately result in time consuming in involving all the parties.
One of the notable limitations of the stakeholder approach is that the model is being flawed due to its lacking of accounting sufficient “managerial sin” (Holzer et al., 2017). The absence of single decision making criterion enables the management in independently pursuing its own self-interest by means of playing the shareholders off against the non-shareholders. Furthermore, it is also to mention in this context that it is often suggested by most of the scholars that gaining information regarding the utility functions of the stakeholders might produce costs which could exceed the benefits (Tantalo and Priem 2016). Hence, in its intention for creating value and managing for the stakeholders could end up in allocating too many resources to the stakeholders.
The dynamic capabilities
It is to note that although the benefits of dynamic capabilities as one of the interpretive frameworks is recognised, it is often suggested that the concept of dynamic capabilities is not sufficient enough for addressing a specific context in which the public client organisations operate. Especially with the respect to the project-based characteristic of these companies and the problems in framing the things that comprise of “competitive advantage” for the public companies (Schilke 2014). Hence, the viability of dynamic capabilities is moderate.
This framework analyses the methods and the sources of wealth capturing and creation by the private organisations that operate in the environments of continuous technological changes. It provides an intellectual structure for the business people for start thinking in systematic order regarding why the companies fail or succeed. Dynamic capabilities are unique. As per Teece (2014), dynamic capabilities refers to “signature processes”. This process is often tied to the original business practices and models and hence, it make it difficult to imitate. It is the approach that enable creation, extension and at the same time, modification within a company (Birkinshaw, Zimmermann and Raisch 2016). This approach easily senses the prevailing opportunities and threats for the organisation and it seizes the new opportunities and the reconfigures the businesses’ capabilities of the company. It is an intangible resource that is basically built by means of continuous experiences and investments over time.
The organisations that make use of this approach operates in an environment that they themselves cannot fully understand. Hence, the action patters of an organisation inevitably involve selectivity, uncertainty and simplification and this leads to inherent the blind spots in each kind of strategic actions (Beske, Land and Seuring 2014). As the resulting insight, the completely flexible organisation capabilities could not be achieved and there would be a continuous adaptation of each type of environmental change that is not possible from the perspective of systems theory.
The sustainable approach
Sustainable approach helps in reducing the costs of compliance for an organisation and increasing the profitability of it (Baumgartner and Rauter 2017). With the same, it presents a greater environmental justice and a more living and surviving communities. It makes more effective use of the federal funds and keeps in mind the importance for sustenance for the future growth and development of the business and the communities. This approach is a viable approach due to the fact that there is none who would be against sustainability, be it in social life or business (Nicolini and Monteiro 2016). The green building could automatically produce higher opportunities for revenue for an organisation. They tend to be more profitable than the other standard construction. This is because of the fact that building with low power requirements not only have the advantage of lower utility bills, but at the same time, they also tend to attract a high end tenants for paying higher price for the rents. Sustainability has the true business benefits.
It is to note that being a sustainable business is directly related to the improved brand image and increased competitive advantage. “Doing good” always improved the brand image and brand awareness for an organisation and it is the primary base of becoming a pillar of the advertising campaigns. Furthermore, it also helps the companies that follow it to enhance their ability for increasing their potential to comply with the rules and regulations. With all of the discussions related to energy resources, climate change as well as the environmental impact, it is of no surprise that the federal and the state government agencies are enacting the regulations for protecting the environment (Brunel and Levinson 2016). Integration of sustainability into the business would help in positioning it for meeting the continuously changing regulation in timely way. Furthermore, it also helps in attracting more number of investors and employees for the business as because of the fact that people always like to get associated with the productive and positive works. No one would like to get engaged with the companies that are highly implicated in the social welfare scandals and ecological disasters. Furthermore, in the process of implementation of sustainable development, most of the companies have undergone organisational renewal. The maximised participation of the employees not only creates the practical ideas, in fact it also increases the enthusiasm and energy for the programme. Most of the employees and customers enjoy being one of the part of their organisations that are committed towards operating in socially responsible way.
Implementation of sustainable development objectives would more or less require the managers to change their behaviour and attitudes and this might be achieved after retraining (Meichenbaum 2017). For instance, some of the executives might feel that their core responsibility is to increase the wealth of the owners of the enterprise (Bryson, Crosby and Stone 2015). Due to this, they might have problem in understanding the concept of sustainable development as well as in accepting it as their legitimate business objectives. Some of the managers might not be used to with identifying the requirements for the non-efficient practices like recycling and energy efficiency. Some might never have the explicitly regarded of their action on any of the groups of stakeholders other than the shareholders. The others might resist the manner in which their performance is measured. The managers of the multinational corporations might not think it to be appropriate for redesigning their programmes for ensuring that contribute to the sustainable development in the poorer countries (Wilhelm et al., 2016). It is to note that effective communication is important. At first, every level of management along with all the employees should understand the objectives and policies which have been created.
One of the major issues in the global aspect of sustainability is that in finding out the different approaches that the companies have taken for maintaining the sustainability as well as for spreading the good practices in global context, one attain an indepth understanding of the issues that are faced by several types of companies like the MNCs, the international governmental organizations (IGOs) and the non-governmental organizations (NGOs). A global level of focus is included for considering the vital challenge that globalizing organisations face during spreading sustainability practices to the subsidiaries as well as regard the practices of the partner organizations (Park and Ghauri 2015). The challenge is threatening on a global level, if not tough enough at the domestic or the national level. This particular problem aims at being of interest to the scholars who study the challenges which the internationally intertwined world undergoes in respect of enhancing the sustainable behaviour of the company. This holds vitality in light of the very recent Rio+20 United Nations conference which saw a comparatively lower level of international enthusiasm for its aims than in the earlier decades. The next issue is of identifying antecedents of sustainability adoption. For example- the key attributes of companies, their contexts, as well as the management that seek towards facilitating the corporate adoption of sustainability. However, it is to note that in this particular issue, the focus is on the things that these attributes are for sustaining sustainability in companies instead of examining the factors that affect the initial adoption. There are two empirical studies in this subject suggest that a firm-internal perspective takes theoretical lens, the one is of using the RBV (resource-based view) of the company and the other is the notion of dynamic capabilities.
Conclusion
Hence, from the above discussion it is clear that there is no really optimum strategy that an organisation could pursue. All of them has their own benefits and limitations. Still, it is the responsibility of the organisation to choose which to follow and which one goes well its organisational structure and business model. With the same, a very careful planning and preparation is important before an organisation choose to follow certain strategy. Or else, they might be risking and losing the substantial resources. Moreover, it is also to note that the resourced based view and the market based view have their own merits and demerits, with a combination of two being probably the most optimum process. Once the market power has been achieved, the members of the corporate level could then begin to filter down the objectives and aims which could be achieved by the operational and the business strategies. The strategic choice makes use of high integration all through the different levels of the business. This is due to the fact that strategies could be implemented by a wide number of different department, all of which has their own benefits for achieving the aims and objectives of the company.
References
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