Management concept has changed throughout the years as strategy and planning have become more complex and complicated. Theories on developing strategies on how to handle trends on organization management have been achieved through enterprise scholars. Each age and century management dynamics keep changing thus making the researchers and scientist take time to study the field of strategy development (Johnsen 2015, p. 7). The level of competition in the corporate world is intensifying thus making company’s leaders and managers come up with strategies that will give them a competitive advantage. Management is no longer seen as a departmental function is an enterprise, but it is considered to be an instrumental pillar that will dictate the performance of their institutions.
The strategy can be described as an overall, focused goal and plan aimed at achieving the general vision and goals of a given enterprise (Durand, Grant, & Madsen, 2017, p. 7). Strategically thinking involves an integration of an enterprise goal and objectives with external changing factors. These external factors are typically considered as the market and general external opportunities and threats posed. Under above understanding and definitions, strategic management would be described and explained as processes of incorporation of company primary objective of making profits while also considering internal factors such as financial abilities and also external factors that may affect the company in the present and immediate future. Strategic management can be classified under the following approaches.
The method attempts to understand the industry status by understanding the current competition level and how the industry is performing, hence assisting the institution to make a strategic decision. The approach aims to understand the competition in industry, Porter analysis of rivalry level, entry barriers, buyer and suppliers bargaining power in the market (Cable & O’Driscoll 2010, p. 5).
The approach will systematically explain profitability patterns thus assisting the respective organization in an allocation of resources. Its main subject is that a company performance solely depends on the environment it operates on including the market structures and competitor strategies. Therefore the approach can be summarized in these key areas
The aim of the above components is to ensure that profit maximization for the shareholder is achieved both in the long term, medium term and also on short term basis. To achieve these results, the approach can describe the following models
Game theory- this is a waiting game where one corporate makes a move and takes a decision while the other one waits to react. This kind of model is perfect in the market with two firms where if one decides to raise the price and high volume strategy then the other one may choose to react on the opposite and offer higher volume for a lower price.
Cournot theory- it is where two or more companies decide to offer the same price of the same product but differs on the quantity and quality of every business product (Tremblay, & Isariyawongse 2013, p. 7).
Stackelberg model- it simply means that a market leader will earn more because of entering the market earlier. The market leader enters the market first and produce a lot of goods and product and sells them before the next corporate enter the same market thus providing them with enough finances to compete.
Other models depend on the market structures such as oligopolies and monopolies and how to compete in these situations.
The industry key technical opportunities and threats are addressed while formulating the implementation process that includes the following 3stages.
Implementing this strategy may have an issue in a volatile market as rampant changes in that particular industry may bring inconsistency that would challenge both the long term and short term strategy formulation.
Among the benefits of this strategy, an approach would be a minimization of unnecessary costs that will be avoided through effective planning. The approach will also assist in an excellent manner in a maximization of profit as the corporate has all the relevant information before entering a certain market or before making a strategic decision. The approach will significantly assist any company to attain some competitive advantage while at the same time assist in risk analysis processes. Managers are also in a position to determine the market price of a product and the amount of individual product to manufacture.
The method was developed by Edward Freeman with the aim of showing the maximum benefits that an organization paid into considerations all the stakeholders around the business. His article in the early 1980s gave birth to this approach and theory that requires managers to uphold certain values and morals so to maintain and protect the reputation of the company and also promote the brand of the company through ethical practices and corporate social responsibility. The stakeholders include the following shareholders, customers, suppliers, surrounding societies, employees and their trade unions (Harrison & Wicks 2013, p. 5). Freeman explained that if a company practiced its activities while considering the above stakeholders, it would attain a competitive edge over all their competitors.
The primary aim of any team is to maximize shareholders equity and profits. However, each company has a responsibility of upholding their responsibilities to their stakeholders. The approach requires the company director to focus on the long-term objectives of the company rather than the short term goals that would affect the external environment of the business. The theory can be explained by Interest of the company meaning that the shareholder interest is the primary stakeholder interest and that the first objective would be to maximize their profits before continuing to other stakeholders (Kristen 2015, p. 2).
The process of this approach start by the company studying and understanding the environment surrounding the business and also the expected trends in that respecting industry. Secondly, the firm will use the research found to find ways to adapt itself so as to ensure that they consider all the players. The strategy is implemented through the following steps and stages
An obvious example of acompany that has adopted this approach a cosmetic and body fragrances company called Body shop. The company has a clear objective on the preservation of the environment hence promoting their brand name all over the industry (Lankoski & Van Wassenhove 2016, p. 32). It is known for multiple projects and campaigns on environment protection through recycling programs. The strategy has been used by many institutions that have understood the significance results that are yielded from practicing this method of brand promotion.
One of the most significant benefits that company might get from using this approach is the protection of its name and brand (Taylor & Taylor 2014, p. 89). Many institutions have been made extinct as they cannot be able to balance all expectations and demands from employees, suppliers, shareholders, and general community. The long-term relationships are also developed such as staff and suppliers who can serve the business for a long-term hence reducing the hiring and switching costs respectively.
Some of the serious issues and limitations in implementing this approach is that can discourage potential investors. Investors who feel a lot of resources is being used on corporate social responsibilities may feel discouraged to invest their capital. It may take a significant a lot of time to notice the benefits of investing in social responsibility and stakeholder promotion policies and programs.
This method basically means that managers are devising plans that will adapt to the future events and situations. This approach typically depends on the leader’s ability to make future predictions and form strategies that will adapt to future trends (Luthans & Stewart 2007, p. 56). Most contingency plans in many organizations are based on disaster management that may affect production processes in an institution or pose a danger to the organization individuals. However, nowadays institutions have learned that a proper contingency plan should go beyond manufacturing processes and should also cover important factors such as economic changes and human resource changes.
This strategy essentially means an organization is prepared to deal with all unusual happenings in the future. The primary plan purpose is to ensure that all the operations resume to the usual way even if they are interrupted. This type of approach assist in the protection of assets and ensure that customer needs and wants are met promptly regardless of any happening. The strategy also expands to departments such as information technology department. The policy may include recovery and destruction of sensitive data about the organization. Security departments may also have their measures so as to ensure that everyone in a premise is safe regardless of what happens. It is the role of the managers and head of department to ensure this approach is well catered for. Providing for the finances and training of workers on those respective contingencies should be the role of those individual leaders (Olsen 2017, p. 8). Other organizations prefer to hire disaster management professionals so as to assist them in developing the measures and also in training.
Implementation hugely depends on strategic planning, where scenarios developed, the contingency plan for those situations are also explained. In the final stage of implementation, it would be waiting for that particular scenario time to arrive. The whole process would be described by the following steps
Having a contingency approach in a strategic management would have the following benefits.
Strategic management theories and approaches have considerably evolved over the years to handle the ever changing environments of industries. Among the proposals included include the industrial organization approach, stakeholders approach and contingency management theory (Schultz 2016, p. 8). Different companies may choose to follow these strategies depending on the environment that they operate in. Organization approach is used by corporations in complex market structures such as monopolies and oligopolies. An example of an oligopoly is an Australian supermarket industry where they are run by two major companies mainly Woolworths and Cole. These two companies use industrial organization approach to counteract each other. It includes studying the competitor price movement and changes hence reacting to those changes so as to compete. Woolworths may choose to use an offensive approach and go on to dictate the price while Cole uses defensive tactic and react to those movements.
Coca Cola is a classic example of a company that have extensively used the stakeholder approach where they have widely incorporated the structures of corporate social responsibility while at the same time maximizing their shareholder’s equity (Sorin-George & C?t?lin 2016, p. 76). This approach has a complicated procedure of implementation but also face a huge challenge from some of the investors who don’t feel or understand the impact of this approach on the maximization of their wealth. Electronic companies such as Nokia and Microsoft are known for having contingency plans for their products, and if their electronic system fails, then there is back plan for their systems.
Conclusion
The analysis and conclusion would derive several recommendations on those respective approaches. Institutions wishing to implement the organization approach must perform rigorous studies on the industries and market. Some of the industries are volatile and ever changing thus requiring them to understand them before making decisions such as price changes and the amount of produce to manufacture. The industrial organization will require any organization to understand their resource capability and available assets before attempting to compete with the big industry organization. Stakeholder approach is a sensitive strategy that will require enterprises to understand their financial capabilities before expanding to satisfy all stakeholders’ needs. Small and medium businesses who wish to perform corporate social responsibility will require them to analyses if they have the finances and resources to fulfil this responsibility. These enterprises should learn that it is their sole responsibility and primary objective to maximize their profits. Organizationsshould also learn that they have a responsibility to give back to the community and retain their relationship with their employees and suppliers. Every institution should learn that they need to predict the future and have back plans for their operations. Operation dangers and threats will always be available thus requiring corporates to come up with strategic contingency plans so as to minimize costs, losses and save time.
References
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Johnsen, Å 2015, ‘Strategic Management Thinking and Practice in the Public Sector: A Strategic Planning for All Seasons?’, Financial Accountability & Management, 31, 3, pp. 243-268, Business Source Premier, EBSCOhost, viewed 24 May 2017.
Harrison, J, & Wicks, A 2013, ‘Stakeholder Theory, Value, and Firm Performance’, Business Ethics Quarterly, 23, 1, pp. 97-124, Business Source Premier, EBSCOhost, viewed 24 May 2017.
Kristen, J 2015, ‘Stakeholders Theory- How They Influence The Business Policy’, Scholedge International Journal of Business Policy & Governance, 2, 4, pp. 14-17, Business Source Premier, EBSCOhost, viewed 24 May 2017.
Lankoski, & Van Wassenhove, L 2016, ‘Stakeholder Judgments of Value’, Business Ethics Quarterly, 26, 2, pp. 227-256, Business Source Premier, EBSCOhost, viewed 24 May 2011.
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Olsen 2017, ‘Political Stakeholder Theory: The State, Legitimacy, and the Ethics of Microfinance in Emerging Economies’, Business Ethics Quarterly, 27, 1, pp. 71-98, Business Source Premier, EBSCOhost, viewed 24 May 2017.
Schultz, B 2016, ‘Strategic Planning’, Defense AT&L, 45, 5, pp. 46-49, Business Source Premier, EBSCOhost, viewed 24 May 2017
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