Strategy is conceptualized as the coordinated and integrated set of actions and commitments that are designed to exploit the core competency level of the firm and achieve the competitive advantage. Each of the firm pays attention to the successful formulation and implementation of the value creation strategy to attract more customer base (Hill et al. 2014). It is notable that the competitive advantage is formulated when a firm creates the superior value for the customers and the rivals in the external market fail to replicate such strategies. However, the current business scenario has been experiencing drastic changes due to the technological advancements and the changing customer demands. Therefore, the business marketers require replacing the traditional strategic implementation process by undertaking the better business model development method. The study would thus explore the significance of using the innovative business model by presenting the limitation of the traditional strategic approaches. Furthermore, with the help of theoretical framework, the study would also discuss the recent approaches of strategic approaches that are complimenting the business model.
According to Karadag and Hande (2015), strategy is formulated to present the long term concept of the enterprise development that determines the methods and objectives of achieving the corporate goals. The business organisations observe the external market influence and scenario to determine the formulation and implementation of the appropriate strategic steps. On the other hand, Husted et al. (2015) explained that the business model represents the successful operational process of a firm by identifying the revenue sources and intentions of selecting a particular customer base. The business model clarifies the detailed analysis of the products that are to be offered to the potential clients and determines the necessary finance to be invested to receive better outcome. Current business scenario is much challenging due to the continuous development in the technological fields. Recent business scenario is much competitive due to which each of the business companies seeks better strategic implementation and more advanced methods. The business model innovations quench such needs by developing the systematic business procedures that feed the external market needs and provides the better outcomes (Dameron et al. 2015). The further section of the study would thus explore the factors to be considered in implementing a strategy. The major limitations would be analyzed accordingly.
Business marketers keep their focus on developing capitalization by utilizing the market opportunities. However, some of the external factors increase the competitive scenario much significantly. The major factors to be considered in such regards are:
Every firm requires identifying the changing needs of the firm within which it operates. In order to foster dynamic capabilities, it is essential for the managers to adopt two critical tasks. First, they need to sense the changes taking place in the external market and utilize the opportunities for the betterment of the firm’s position (Dayan et al. 2017). Second, it is essential to identify the threats in the external market and work on the practices that require more improvements. It is noted that the firms that fail to address the macro-environmental trends end up losing their competitive advantage. Market opportunity is considered as the condition of the general environment and exploring opportunity would help the firm to achieve competitive advantage. For example, Procter and Gamble has identified the opportunity to re-orient the beauty product to gather better responses from women and men (Bohari et al. 2017). On the other hand, market threats are conceptualized as the environment that hinders the efforts of an organisation to gain competitive advantage. For example, Microsoft has been experiencing enormous threats by launching the smart phones that failed to achieve the competitive advantage.
Michael Porter’s Five Force model is one of the macro-environmental frameworks that help a firm to recognize the external market. The model specifies the following aspects:
Figure 1: Porter’s Five Forces
(Source: E. Dobbs 2014)
Porter’s five forces model expresses the macro-environmental trends that have the clear impact on a firm’s strategy. Identification of the external threats from the business rivals and the influences of the customers can be recognized by applying this theoretical model. The explanation of the components associated with this theoretical framework would help the business marketers to gather knowledge about the external opportunities and threats to ensure strategic formulation.
Each of the firm requires gathering the sufficient data to anticipate the strategies, objectives, capabilities, and assumptions of the business competitors (Jin et al. 2014). On the other hand, it is also essential to gather the legal and ethical information as well to gain insights regarding:
Addressing these specifications would be helpful enough in developing the firm’s functionalities to gain better position in the competitive market.
Firms require identifying the types of resources, which can be either tangible or intangible to achieve the competitive advantage. The capabilities of a firm are judged by ensuring the method undertaken by the firm to develop the necessary activities to add value to the products. It is also essential for the firm to build the following core competencies:
According to Mahoney, Joseph and Yasemin Y (2015) value chain analysis depends on the activities that create value for the customers and develop the supportive functions.
Figure 2: Value Chain Analysis
(Source: Mudambi, Ram, and Jonas 2016)
The value chain model indicates that the firm needs to identify the specific value added services that are needed to be implemented. Accordingly, it is essential to plan the capital amount for the operational process. The human resource would be associated to perform the activities and develop the systematic value chain process.
The traditional approaches to formulate the specific strategies are as follows:
Bocken et al. (2016) opined that the design approach to the strategic management determines the top-down approach that is designed by the higher management level in a firm. It generally relies on the external threats and opportunities and other market influences. On the other hand, the planning approach determines the formulation of the strategy by depending on the specialized planners within the organisation. The top management provides the opportunities to these specialized planners to utilize their innovative skills to formulate the innovative strategy and achieve the competitive advantage (Johanson, Jan, and Lars-Gunnar 2015). Finally, the positioning approaches are concerned with the position of the firm in the overall market. Porter’s five force model provides the clear ideas about the specific positioning of the firm by analyzing the major factors. For instance, the bargaining power of the suppliers and purchasers, threats of the new entrants, rivalries in the market, and the threats of the product substitutes decide the position of the firm within a business market.
It is noted that these traditional approaches are quite simple and easy to recognize. These simple perspectives are sometimes become disadvantageous for the firms as these may not provide the accurate information of the actual problematic scenario. Moreover, Lin, Yini, and Lei-Yu (2014) argued that the current business market is rapidly changing and the traditional strategic approaches are not suitable enough to analyze this dynamic business market. In fact, these approaches are heavily relying on the in-depth analysis. Gathering the detailed information and critically analyzing it take much time and much slower in pace. Lonial, Subhash and Robert (2015) presented a view on the shrinking focus of these traditional approaches of the strategic decisions. The future is harder to predict and it hinders the strategic planning process due to such shrinkages (Rosemann, Michael, and Jan 2015). These shifting views are thus quite difficult for the business marketers to suggest the better strategic approach. Another most prominent limitation was found in the advancements of the technological approaches. It becomes much challenging for the business marketers to adopt the changes take place due to the rapidly changing technological solutions (Johanson, Jan, and Lars-Gunnar 2015). The changes in the technological field create more innovative approaches that are limiting this traditional method of strategic formulation.
Business Model innovations are the newer approaches that are undertaken by the business management to address the limitations found in the traditional approaches of strategic formulation. It is notable that the business model pays attention to both the internal and external market in a detailed way. It recognizes the narrower form of the market to improvise the internal operations. Formulation of tow specific models develops the strategic business model that can eliminate the limitations identified in the traditional approaches of strategic formulation. The first is External Industrial Organisation Model (IO), which presents the assumptions of the constraints and pressures received from the external environment (Herrera and Maria Elena Baltazar 2015). Majority of the firms tend to control the similar strategic resources and make the decisions based on the best interests of the firms. On the other hand, development of the Resource Based Model identifies the performance parameter of the firm across time and by utilizing the resources and capabilities (Rosemann, Michael, and Jan 2015). Business model identifies the opportunities and threats within the firm and develops the considerable solution by acquiring the continuous improvement of the organisational operations.
Considering the limitations of the traditional approaches of the strategic formulation, it is essential for the firms to undertake some of the recent approaches that complement the business models. These approaches as follows:
These approaches would be beneficial for a firm to re-organize the strategic direction and achieve the strengthened position in a competitive scenario.
Conclusion
The study develops the understanding of the traditional approaches of strategic formulation within a firm. It is noticed that each of the firms recognizes the market opportunities and threats to develop the organizational operations. Undertaking the right approaches help the organisation to build the competitive advantage. However, the simple assumptions of the external market potentiality may take more time and limit these traditional approaches. The business model on the other hand, helps in identifying the detailed information of the external market and focuses on developing the internal competency level as well. Clarified industrial foresights and development of core technologies as well as competencies would thus help in developing the better approaches for the current dynamic market. Firms would also be able to achieve the competitive advantage in this complex business scenario.
References
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