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Strategic Management Approaches

Executive Summary of The Impact of A Radical Innovation on Business Models

A business organisation of the 21st century needs a strong strategy to stand the waters of global competition. Businesses do survive in isolation- the business strategy of an organisation takes a comprehensive stance on its social political, economic and environmental grounds. In this essay we will analysing the effect of several strategic concepts related to strategic management when it comes to business operations.

Table Of Contents

Introduction

Incremental and iterative Approach

Emergent strategy

Resource Based View

conclusion

References

Introduction to The Impact of A Radical Innovation on Business Models

The operational planning for any company can only go further when there is strategy backing it. the role of strategy cannot be denied in this age and context where the level of competition gets layered with each passing business year. If careful development of strategies take place then the managers and the employees get a proper framework to operate with. Whether it is geographical areas or target audience- it is strategies that provide definite busines plans to organisations. The main objective of a strategy is to provide an organisation with a clear path that will help in bring about a level of organisational efficiency. This efficiency comes into the picture when strategic management provide individual and groups with clear job roles. It is of paramount importance that the developed plan has taken extra care regarding the market trends and competition so as to make an impact. it helps in creating a plan that enables the team to work toward one particular goal in alignment with the strategic plan. This following up is essential for consistency that will help the organisation become more successful. It makes the operation smooth practical and provides all team members and stakeholders extreme clarity about the company operations and aspirations.

Contemporary Strategic Management Approaches 

The whole idea of strengthening a company and directing it to compete with other companies is led by strategic management. By analysing the performances of previous years and the thorough assessment of the current market conditions, a business organisation can develop comprehensive management strategies that will help them succeed. Companies usually review their strategies only during the time of a crisis. Modern management strategies are a result of almost 5 decades of global research debate and inquiry. They include various patterns of through and creativity and planning that helps a company strategize as per their capabilities and external environment. In this part of the essay, we will be discussing three such strategic management approaches and analysing their impact (Cravens et al 1997).

1.Iterative and Incremental Development Strategy

History

In 1980, James Brien Quinn developed a new concept called the “logical incrementalism”- it is based on individual and small-scale decision making were creating, building designing a system and then testing it happens in small parts. Each increment then builds on top of what was done before. The basic idea is to learn through repeated cycles of time and then to implement them slowly in smaller segments. Quin suggested this decentralization of decision making in the organisation to create better business and the strategic approach lets the business adapt smoothly to changes and complexities. Quin wanted to elaborate on a more stimulating process for innovation and entrepreneurship. He suggested that the efficient strategies of most successful companies emerge from a step by step iterative processes that allow for the organisation to experiment and learn through each step by completely assimilating their learnings. It relies on the interaction of the subsystems that run the company and follows their timing, responses and movement to each change (Quinn, J. B. 1977).

 Benefits 

The reason why the incremental and iterative strategy of management works is well for companies is that by its very nature it is designed to harness its existing business model without immediately pushing for a change that they might not be able to adapt to. If one pays close attention, they will notice that all of the world’s biggest tech companies, most innovation is based on an incremental strategy of management. The advantage is immense, one that allows organisations to borrow immensely from their base of knowledge while slowly making significant changes that will help them adapt and ease into a radical breakthrough. By experimenting at this pace, they can make changes and study the effects more intensely (Bourreau, M et al 2012). The biggest advantage is the small-scale improvements that help them sustain the value of their existing products and services. The logic of the operational strategies is customised as per the specific political environmental, economical and technological conditions of the company.

Limitations 

This type of strategic management approach may be beneficial in the long run but it only goes to show how attentive and hands-on the management will have to be. The management complexity is more and there is no guarantee that the changes acquired through every term will be useful. This increase the operational costs and such expenditures may not be feasible for small to medium size business organisations. Because of the nature of management, much of the work will be reliant only on the risk analysis ability of the executives and analysts. The major disadvantages are the dependant nature of the projects and the unpredictability of the completion dates. To avoid such high costs and ambiguous scenarios; extremely specific planning and analysis are of paramount importance.

Example 

One of the best examples of the use of this strategy along with the integration of local strategies in a global context is – Gillette. They started with a single blade razor when the company began and slowly understood the consumer needs market trends to come with more innovation better design and an even bigger range of products. They started associating more and more products as time passed and based their integration and assimilation on thorough research and response to products (Kanter, R. M., & Dretler, T. D. 1998). They also tapped into their global power by combining forces with local firm thus acknowledging country differences across the globe to create products that would add to their universal appeal. This entailed strengthening of functions across all operational units and divisions. They added to their existing brand of products but brought in routine changes to their system-level thinking.

2.Emergent Strategy

History

In 1987, when Mintzberg attempted to broadly define the role of strategies in helping a business organisation grow, they distinguished between many strategies. Out of this prescriptive and emergent strategies are much less developed. Emergent Strategy is based on trial, experimentation and discussion. The strategy utilizes numerous experimental approaches rather than one final objective. They mostly refer to a series of unplanned strategy that emerges as the result of reaction and response to the business environment and when they have a significant impact on the organisation, they become a part of their strategy.it has also been noted the more rapid the change of environment of a company the more emergent its strategies become (Downs, A et al (2003). The most important emphasis here is on not just the financial implications of the decision but also the response to the turbulent environment of the business and fostering quick business flexibility in reaction to competition can be categorized as an emergent strategy.

Benefits 

One of the most important aspects of this management strategy involves the immediacy of adaptation to the environment or competition. Emergent strategies use manipulation of the former strategic context to quickly combat the cha ging circumstances. History has shown that every business has had to discard its initial strategy it’s the strategies that emerged about changing times that helped them survive. In this regard, they help the company evolve from the flawed deliberate strategies that did not produce the desired result. The biggest advantage is the fact that thorough research can help the business deliver what the customers want instead of assuming and following the former deliberate strategy. The emergent theory allows a business to develop the flexibility to change when it manipulates older strategical context to push for innovation. The awareness of the need for innovation in all aspect of the organisation is an extremely crucial aspect of strategy development. It helps them understand the dynamic nature of competition as well as define the role of effective leadership. The radical breakthroughs brought about by strategy implementation, or developments based on ideas and suggestions of the company employees can affect the work culture positively and create a new wave of advancement that could empower the staff immensely (Jett, Q. R., & George, J. M. 2005).

Limitations 

The main purpose of a business strategy is to act a key driver that runs on the company objective and though emergent strategy might be useful as a response to the competition or in bringing about a transformational change they cannot by themselves become the central management strategy. Because they are the result of circumstantial response they can serve as a means to alter the already existent structural context, and cannot be planned just like that. They are extremely difficult to evaluate as there is no real basis for evaluation and may result in underperformance due to lack of an absolute objective in strategic planning. They are unpredictable because of lack of unidentifiable targets and are ongoing organisational activity. It is more of an afterthought (Burnes, B.2004). This is why they can be a genuine alternative to the traditional deliberate company business strategy. This can prove to be extremely reliable for small to medium-sized companies that operate on narrow margins.

Example

One of the best examples of emergent strategies is when Walmart started in 1960, it began in rural areas as the founder wanted to set up a departmental store. The discounts appealed to the sensibilities of the residents and eventually, the excellent customer strategies and low prices catapulted Walmart to the heights of success. After this success, Walmart’s foray into the global market was more of an emergent strategy than deliberate. And by providing value through economies of scope, Walmart was able to penetrate the global markets and capitalize this smoothly.

Another example of an emergent strategy is the tech company – Lenovo. Lenovo worked on its strategic vision by increasing its base knowledge over time. By responding to the economic reforms in China in 1970, firms like Lenovo were still able to dominate global markets eventually only because of their alacrity in devising strategies that respond to dynamic nature of consumer needs and technological innovation. The organisational evolution pattern of Lenovo also adapted itself as per the trial and error method where the management and the production department astutely responded to the changing global market needs (Shu, E. E. (2017).

3.Resource-Based View

History 

Resource-based views are one of the most favoured modern management strategies that base management objectives on the resources available at the disposal of the organisation. In the 1990s a 4-year longitudinal study revealed how 44 per cent of the company profitability could be explained with the help of individual company resources. Small business can genuinely leverage their resources in a way that will give them a competitive advantage.it goes on to emphasize the need for an efficient fit between the company resources and the external market for operational success.it also elaborates how the market position of the small to medium-size business can be strengthened by restructuring the strategic control involving company's assets, organizational processes, expertise and capabilities. The development of strategy (Mahoney, J. T., & Pandian, J. R. 1992).

Identifies the strategic resources that are the building blocks of any company and leverages them in a way that will help them sell their product and services better. For example, a product-driven business is inherently dependant on its human and intellectual resources and an emerging startup is reliant on its human, intellectual and financial capital for competitive advantage. Resource-based view as an approach helps the organisation align its key resources with its ultimate strategy management objective.

Benefits 

Resource-based views prove to be extremely efficient for businesses as all organisations need to have a clear strategy on the utility of these resources. They also need to focus on resources that cannot be substituted. The organisational culture of the company, the structure and process can be based on these very resources. The biggest advantage is that it provides a clear-cut strategy and direction for the firm’s management and it also acts up as the primary source of return for them. The resource-based view becomes extremely beneficial in another way where it helps in the enhancement and development of the distinctive resources of an organisation. This gives them an absolute competitive advantage in the market and helps them adapt adequately to the dynamic nature of market competition. The identification, and restructuring to create a value-adding strategy that has not yet been devised by other competitor helps the organisational learning of the company along with creating sources of sustainable competitive advantage (Helfat, C. E., & Peteraf, M. A. 2003).

Limitations

Due to the broad definition of resources, certain analysis can be subject to inaccuracy. Certain intelligible resources like the company’s reputation, organisational learning and knowledge can be extremely subjective and the fact that they cannot be quantified can lead to further confusion. The immobility of the resources can be a huge hindrance in daily operations. Keeping up with the technological evolution can also have its implications for the key resources of the company. Another critique is the fact that the value of key resources may not always provide exact insight for company strategy because of the unreliable and unpredictable nature of heterogeneity. For example, even if a company has the best possible software product, the market may still demand for an inferior product that costs less. Thus, assumption based on heterogeneity can sometimes be disadvantageous for the company (Cruz, A. M., & Haugan, G. L. 2019).

Example

Toyota motor corporation is one such company that utilises the resource-based approach to maintain its competitive advantage. Their key advantage is their lean production system model which cannot be imitated or recreated. The model is such that it helps them maintain low manufacturing costs to create greater profits. Superior quality service over the years has given them the leverage of market popularity and just-in-time inventory systems, self-managing teams, and reduced setup times for complex equipment help their operations immensely (Helfat, C. E., & Peteraf, M. A. 2003). Toyota utilizes high-tech performance features and this helps it compete with the luxury market car brands with its efficient supply chain management and low-cost assembly capabilities by producing Lexus models. It constantly keeps upgrading and improving its functionality. The constant innovation make sit stand it compared to its competitors.

Conclusion on The Impact of A Radical Innovation on Business Models

After analysing these various strategic management approaches, one can notice the significance of employing a strategy to enhance company performance. Whether it is based on the market environment needs or the internal resources of a company, a management strategy helps the company adapt to the market and respond to competition by defining a clear objective for itself. It helps them design a path for their operations in alignment with their vision.

References for The Impact of A Radical Innovation on Business Models

Kanter, R. M., & Dretler, T. D. (1998). “Global strategy” and its impact on local operations: Lessons from Gillette Singapore. Academy of Management Perspectives, 12(4), 60-68.

Quinn, J. B. (1977). Strategic goals: Process and politics. Sloan Management Review (pre-1986), 19(1), 21.

Bourreau, M., Gensollen, M., & Moreau, F. (2012). The impact of a radical innovation on business models: Incremental adjustments or big bang?. Industry and Innovation, 19(5), 415-435.

Cravens, D. W., Greenley, G., Piercy, N. F., & Slater, S. (1997). Integrating contemporary strategic management perspectives. Long Range Planning, 30(4), 474-506.

Downs, A., Durant, R., & Carr, A. N. (2003). Emergent strategy development for organizations. Emergence, 5(2), 5-28.

Burnes, B. (2004). Emergent change and planned change–competitors or allies?. International Journal of Operations & Production Management.

Jett, Q. R., & George, J. M. (2005). Emergent strategies and their consequences: a process study of competition and complex decision making. Advances in Strategic Management, 22, 387-411.

Shu, E. E. (2017). Emergent strategy in an entrepreneurial firm: the case of Lenovo in its formative years. International Journal of Emerging Markets.

Cruz, A. M., & Haugan, G. L. (2019). Determinants of maintenance performance: A resource-based view and agency theory approach. Journal of Engineering and Technology Management, 51, 33-47.

Mahoney, J. T., & Pandian, J. R. (1992). The resource‐based view within the conversation of strategic management. Strategic management journal, 13(5), 363-380.

Wright, P. M., Dunford, B. B., & Snell, S. A. (2001). Human resources and the resource based view of the firm. Journal of management, 27(6), 701-721.

Helfat, C. E., & Peteraf, M. A. (2003). The dynamic resource‐based view: Capability lifecycles. Strategic management journal, 24(10), 997-1010.

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