Question:
Discuss About The Strategic And Business Policy Management?
Strategic management refers to efficient management of organization’s resources in order to fulfill the strategic objectives of the business. Strategic management involves setting objectives, allocating resources to these objectives, devising an action plan and ensuring that the management rolls out strategies across the organization (Wheelen & Hunger, 2017). Strategic management differs from traditional approaches to management owing to its tactical nature. Decision makers of leading organizations consider external as well as internal environment while strategizing the plan for the firm.
The essential purpose of strategic management is to ensure that companies are competitive and stand out in the industry of operation (Rothaermel, 2015). This also involves internal and external communications of the business so as to ensure transparent flow of information. The advent of strategic management is seen in various aspects of different businesses. With the increasing globalization, digitization and changing scenarios, it is important the organizations also adapt themselves to the environment. Therefore the change in the strategic decisions of the firm was imperative and largely recommended.
This discipline was originated in 1950s and among various contributors to the same, Peter Drucker, Alfred Chandler and Igor Ansoff have played important roles (Grant, 2016). Over a period of time, strategic management has grown and developed into a separate field of study. Managers today are conducting various processes and adopting various strategies in order to enhance their performance and market power. Businesses conduct SWOT analysis to analyze their internal and external environment, PESTLE analysis is conducted to gain a deeper insight about the operating industry of the business and similarly Michel Porter’s five force model enables companies to gauge the competitiveness of the market. All these tools which are widely used today are all gifts of strategic management. This has changed the face of organizational management and has led to various organizations growing leaps and bounds and making a significant mark on the industry of operation.
This report throws light on the importance of strategic management as well as three approaches of the same. The approaches covered in this report are stakeholder approach, industry organization approach as well as dynamic capabilities approach to strategic management. The benefits, limitations, viability as well as implementation issues for all of them are discussed for deeper understanding. Examples have been provided as and when required.
There are various approaches to strategic management and different companies adopt different approaches. This is due to the different nature of businesses in different industries. No single approach can be used for all the organizations due to the difference of resources, leadership and culture of the business. The three important approaches to strategic management are as below:
Freeman (1984) has been largely credited behind this theory and its inception. Stakeholder management approach was also given by Ian Mitroff in his book ‘Stakeholders of the organizational mind’ published in 1983. As the name denotes, this particular approach to strategic management keeps all the stakeholders of the business in the center. Stakeholders of any business includes all the people who are directly or indirectly related to the business. These include customers, employees, investors, media personnel, government bodies as well as unions.
This approach ensures that the strategy development as well as performance assessment of any business revolve around its’ stakeholder expectations (Tantalo & Priem, 2016). There are various businesses who follow this approach and they believe that the success of any organization depends on their stakeholders. If all the stakeholders of the business are truly satisfied and their needs are appropriately fulfilled, then the growth and development of the business is inevitable. The first step in this approach is to identify the exact needs of all the stakeholders, followed by analyzing and strategizing how the business can work towards fulfilling those expectations (Johnson, 2017).
Viability of the approach: The approach is currently adopted by various businesses and has proved to be successful. However, it is difficult for the approach to be viable for every business especially those with clashing stakeholder interests.
Suggested benefits: This approach has proved to be largely beneficial and effective for various leading organizations today. Such an approach by any business enhances the goodwill and the brand positioning of the firm. When the organization values its stakeholders then it builds a relationship of mutual respect and the stakeholders in turn work for the benefit of the organization.
Secondly, in the process of identifying the needs of the stakeholders and defining objectives of the firm, communication among stakeholders improves and leads to transparency, effective flow of information as well as trust (Weiss, 2014).
Lastly, a stakeholder approach to strategic management keeps the firm well aware in a 360 degree perspective and hence prevents the possibility of an unwanted or unforeseen risk to the firm.
Implementation issues: Implementing any strategic management approach is largely difficult. Stakeholder approach may be faced with the following issues:
Limitations: The limitations associated with stakeholder theory are as below:
The industrial organizational approach of strategic management is based on economic theory. This theory asserts that the external environment and factors affecting the firm are more important than internal ones (Waldmen & Jensen, 2016). This is specifically true with the objective of gaining competitive advantage in the industry. This approach asserts that the organizational performance largely depends on the industry variables and those should be kept in mind while devising organizational strategies. This approach helps firms in gaining a 360 degree status of their external environment and strategies their future actions by keeping that in mind.
Such an approach is expected to help organizations maximize their revenues by gaining a deeper insight on the industrial environment (Gupta, 2013). This approach is largely adopted by pharmaceutical companies. For example, Glaxo Welcome produces a drug Zantac which is used for treating ulcers and heartburn. The drug is sold at a significantly higher price as compared to its manufacturing cost. This has been possible because Glaxo owns a large number of patents that exhibits other pharmaceutical companies from manufacturing a similar drug. This approach adopted by the company by taking advantage of the available information of its external environment has helped the business increase generated revenues as well as earn a market leadership.
Viability of the approach: This approach however is not entirely viable in the longer run. In the above example also, it must be noted that Novopharma has won the permission from the US federal court to manufacture a generic version of the drug. Therefore, it is important that organizations weigh the benefits of the approach as well as its long term viability while industrially approaching strategic decision making.
Suggested benefits: There are various benefits that are associated with the adoption of this approach to strategic management.
Implementation issues: In the process of adopting industrial organization approach to strategic management, there are various issues that may be faced by the company. Firstly, it will be difficult for the company to gather all the required information in order to be so deeply aware of the industry and secondly it may not always be possible for businesses to possess all the necessary resources to gain the competitive advantage after having all the information.
Dynamic capabilities approach of any business is based on the idea that the firm is capable to build, integrate and reconfigure its external as well as internal competencies in order to address its changing environment (Teece, 2012). This approach underlines that a firm must be adaptive to the ever changing business, economic, social or political environment that the business operates in. The strategies adopted by the firm change with the change in the environment and hence the organization becomes better prepared for unforeseen circumstances.
In the vividly changing scenario of the world, it is important that businesses can also become flexible with their approaches. Hence such a strategy will enable the company to be prepared at all times. No doubt, in order to accomplish the same, the business needs additional resources and improved competencies. However, such an approach is largely adopted and recommended by leading businesses. The two big examples of companies demonstrating dynamic capabilities are Apple and IBM. They are both technological innovators and have consistently worked upon improving their offering to suit the changing consumer needs.
Viability of the approach: The dynamic capability approach is largely viable and highly effective in the changing business scenarios that exist today. The approach in fact is sure to lead the organization to success in the future.
Suggested benefits: Given the speed with which the business environment changes, it is largely beneficial to adopt and implement an approach which provides the firm with the needed flexibility to suit the changing environment (Beske, 2012). The benefits of this approach are as below:
Implementation issues: The biggest issue faced by the organization while implementing this approach is the lack of resources. It is not always possible for the firm to obtain, sustain or possess enough financial, technological or human resources so as to be able to consistently adapt to the changing environment. The second issue faced is the inability or the inefficiency of the firm to predict all the changes in the environment that is expected to impact the firm.
Limitations: the limitations associated with dynamic capabilities approach of strategic management are as below:
Conclusion
Strategic management is the most empowering as well as disrupting change brought about in the business world. It refers to the idea of tactically defining the company strategies in order to accomplish well thought of objectives. Leading businesses today are adopting strategic management approaches to improve performance, maximize revenues, enhance brand value and ensure effective stakeholder returns (Hill, Jones & Schilling, 2014). Strategies are being adopted in different functional segments of the business. These include human resource management, operations management, financial management, risk management and stakeholder management.
The strategic nature of the policies and objectives adopted by the company are giving them an advantage in the face of increasing competition in all leading industries. Every company adopts a different strategy as it may deem useful. This report has explained the three leading approaches to strategic management, their benefits, limitations as well as implementation issues.
References
Beske, P., 2012. Dynamic capabilities and sustainable supply chain management. International Journal of Physical Distribution & Logistics Management, 42(4), pp.372-387.
Campbell, B.A., Coff, R. and Kryscynski, D., 2012. Rethinking sustained competitive advantage from human capital. Academy of Management Review, 37(3), pp.376-395.
Freeman, R.E. (1984) Strategic Management: A Stakeholder Approach, Pitman, Boston
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Gupta, A., 2013. Environmental and pest analysis: An approach to external business environment. Merit Research Journal of Art, Social Science and Humanities, 1(2), pp.13-17.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.
Johnson, G., 2017. Exploring strategy: text and cases. Pearson.
Minoja, M., 2012. Stakeholder management theory, firm strategy, and ambidexterity. Journal of Business Ethics, 109(1), pp.67-82.
Peteraf, M., Di Stefano, G. and Verona, G., 2013. The elephant in the room of dynamic capabilities: Bringing two diverging conversations together. Strategic management journal, 34(12), pp.1389-1410.
Rothaermel, F.T., 2015. Strategic management. India. McGraw-Hill Education.
Shabanova, L.B., Ismagilova, G.N., 2015. PEST-Analysis and SWOT-Analysis as the most important tools to strengthen the competitive advantages of commercial enterprises. Mediterranean Journal of Social Sciences, 6(3), p.705.
Tantalo, C. and Priem, R.L., 2016. Value creation through stakeholder synergy. Strategic Management Journal, 37(2), pp.314-329.
Teece, D.J., 2012. Dynamic capabilities: Routines versus entrepreneurial action. Journal of Management Studies, 49(8), pp.1395-1401.
Verbeke, A. and Tung, V., 2013. The future of stakeholder management theory: A temporal perspective. Journal of Business Ethics, 112(3), pp.529-543…
Waldman, D. and Jensen, E., 2016. Industrial organization: theory and practice. Routledge.
Weiss, J.W., 2014. Business ethics: A stakeholder and issues management approach. Berrett-Koehler Publishers.
Wheelen, T.L. and Hunger, J.D., 2017. Strategic management and business policy. London. Pears
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