Different Approaches To Strategic Management Essay.

Different approaches to Strategic Management

Discuss about the Exploratory Investigation of Integrated Contingency.

Strategic Management is a field involving dynamic capabilities of the organization coupled with formation as well as implementation of major goals (Stacey, 2007). Strategies are generally made at the top level by senior level managers and leaders considering various resources, liabilities along with presence of internal and external conditions of the company. Strategic management involves studying of all analysis of internal and external conditions prevailing within the industry and then forming suitable strategies or plans which can be implemented accordingly. Strategies provide an overall direction to the company thereby encompassing the goals and objectives of the organization. These plans, policies as well as procedures formed for the organization are developed in accordance with resources and capabilities of the same. There are numerous models and theories that are developed in the field in order that organizations can formulate suitable strategies of their own. Ellen E. Chaffee (1985) have devised three explicit literature that categorizes strategies in three distinct groups as Model I, Linear Strategy, Model II, Adaptive Strategy and Model III Interpretive Strategy (Eden, 2013).     

Linear strategy approach of strategy is focused on planning which emphasizes on achievement of goals. This model of strategic management is based on Chandler’s definition of strategy, which encompasses strategic direction in order to guide organizations in order that they are able to achieve goals. This approach to strategic management is more focused on competitive strategies such that organization can achieve leadership position. In Adaptive strategic approach the notion of incrementalism is coherent. In this case strategies are formed in accordance to developing a viable match amongst the risks and opportunities that an organization is exposed to from its external environment (Hitt, 2012). Here, organizational strategy is aligned to consumer preferences hence are altered frequently. In case of an Interpretive Strategy, a cognitive map of the external environment helps manager’s link external threats to organizational opportunities. Though these models of strategy are not mutually exclusive yet, shortcoming of linear model involves persistence on long term planning. As primary aim of forming strategies is to extend capabilities of organizations, such long term planning might not render effectiveness. The scope of this report identifies various approaches to Strategic Management by stakeholder approach, dynamic capabilities and sustainable approach, viability and limitations for the same (Ansoff, 2007).

Strategies are developed and designed by organizations to extend their capabilities which emerge as core competency in the market. Such establishing of capabilities entail development of competitive advantage for the company (Hill et al., n.d.). While selecting an approach to strategic management choice, organizational leaders evaluate a number of factors. While an approach might not be mutually exclusive from another, but selecting an appropriate approach for the organizational lets develop a focus and draws attention thereupon. Hence, for every organization while selecting and in adopting a strategy it becomes pertinent to diagnose the primary or the important aspect for their organization. Amongst three different approaches, stakeholder approach, dynamic capabilities approach and sustainable approach while each aspect remains integral factor for organization it becomes pertinent to diagnose each one’s viability, suitability and adaptability to the situation such that appropriate results can be obtained (Chesbrough, 2007).

Stakeholder approach

Stakeholder approach or theory towards strategic management was identified way back by R. Edward Freeman (Freeman, 2010). The majority focus of this approach is on stakeholders, internal and external in nature. Stakeholders consist of individuals who have active interests and participate in the business of the organization. Internal stakeholders include those internal to the organization, as management, leaders, employees, shareholders, staffs, workers and so on. They take active role and play an integral part in decision making as well as routine functioning for the organization. External stakeholder includes stakeholders who are outside the organization as customers, suppliers, vendors, distributors, government, rating agencies, other agencies and so on. External stakeholders do not take active part in the business but are involved in day to day functioning for the same (Furrer, 2008).

In stakeholder approach it is recommended that an organization considers its stakeholders perspectives while forming or adopting a suitable strategy for itself. Stakeholders especially those who are shareholders of the company are owners and have vested interests in the functioning of the business. In this theory it is identified that a company needs to put stakeholder’s needs as a priority and it is their fiduciary responsibility. Stressing on the need of the stakeholders will help organizations increase the value for their organization overall (Cadez, 2008). The scope of this theory argues that stakeholders affect capacities of a business to perform, hence they needs to be given adequate importance.

Further stakeholder’s view for strategy lets an organization integrate resource based view along with market based approach along with socio-political levels. Stakeholders approach is extremely important as it stresses on the stakeholder’s thinking as well as their strategic contribution in functioning of the organization. This approach has gained immense importance in corporate social responsibility approach of the organization as well (Klein, 2009).    

In Stakeholder approach to Strategic Management an organization is likely to stretch its capabilities as well as resources in order to gain significant profits for its shareholders. This approach might be at the cost of the putting tremendous pressures on resources.

This approach to strategic management was devised by David Teece, Amy Shuen and Gary Pisano(1997) (Teece, 2009). The theory stresses on the concept of resource base of the organization in order that they are able to build, integrate internal capabilities to match external threats and opportunities. These capabilities of the organization help to cope with dynamic changing environment. There are various capabilities of every organization that acts as core competency for them and extends their competitive advantage in the market. The term dynamic capabilities relate to the idea of operational efficiency for the organization, such operational capabilities need to rapidly transform and respond to the changing environmental needs by operational effectiveness as well as resources. The central idea around this concept was adopted by Amy Shuen, wherein it was assumed that competencies within organizations create short-term competitive advantage which can be transformed into long-term advantages for the organization (Schot, 2008) (Johnson, 2013).     

Dynamic capabilities

Dynamic Capabilities Approach stresses its focus on capabilities within an organization. In such an instance there might be loss at a certain point incurring for the organization, in order to dynamically rearrange its resources to suit capabilities and meet needs.

Increasingly growing concern regarding various impacts and effects created organizations are becoming the central idea of their business leadership. Business leaders around the world in order to develop their sustainability are rapidly transforming their business and adopting norms that depict a positive branding for the organization. There are three aspects of sustainability namely, environment, future generations needs and economy (Ambrosini, 2009). An organization adopting this feature of sustainability approach develops strategies to thrive by maintaining the three aspects. Strategies are formed such that organizations are able to attend to scarce resource depletion, reduce wastages, reduce carbon footprints and other environmental impact along with creating a positive effect on the community or society in which it is operational (Kaplan, 2007). Strategies designed in accordance to these procedures entail that they adopt sustainable practices in each and every aspect of organizational procedures.    

Sustainability approach maintains ability for creating future sustainable generations on this planet. An organization adopting sustainable approach will generally tend to source its raw materials in a responsible manner from a replenishable source. Further it will try and reduce wastages or recycle them, avoiding unnecessary energy wastages or environmental impacts (Thompson, 2010). It will also try and create positive impact on the society or community in which it is present by way of giving back much more than it takes. Sustainable management practices are generally adopted in all spheres of environmental and sociological impact. In this technique an organization is not regarded as an entity formed for the sole purpose of reaping profits or for the sake of earning returns for its shareholders or owners. This approach covers a broader aspect that entails creating a wider impact in the minds of all stakeholders especially on customers (Holcomb, 2007). Customers have been found to be more inclined towards a responsible organization that adopts sustainable practices and policies compared to an organization that does not. Organizations that adopt this procedure and responsibilities often adopt sustainable practices in their marketing as well, and its central promotional strategy revolves around this concept. Thus, strategy for these type of organizations are formed by considering impacts from its various endeavors from manufacturing, to distribution, to marketing and so on (Wheelen & Hunger, 2011). Sustainability approach touches every sphere of strategy formation for the organization that adopts and pertains to this approach.  

Sustainable approach

According to Sustainability Approach, an organization puts immense pressure on creating a sustainable impact by its various actions. In this case stakeholders objectives or allocating of dynamic capabilities become secondary factors considering this approach.

Conclusions 

Strategic management entails adoption of various approaches and concepts that are used and applied across businesses. Each of the three approaches in strategic management stakeholders approach, dynamic capabilities and sustainability approach are viable in their own respect. While they cannot act as mutually exclusive they are found to often overlap with each other. In stakeholder’s approach it is assumed that organization will follow and form strategies that are in interests of all its stakeholders, easier said than applied. Various stakeholders of the organization can have various different prerogatives and objectives as well as vision for the organization. Hence, while similar objectives as growth and development, technological adaptation objectives might clash and be similar, other objectives especially employee leaves and other perspectives might clash. Thus, in order that this strategy is viable, organization needs to adopt and apply strategies that arise from popular perspectives avoiding those that might have a long-term negative impact on the organization. The possible benefit of this approach is active participation and motivation for various business stakeholders, especially internal ones. This strategy generally has minimum number of implementation issue as against other approaches as this type of strategy is generally designed from the organization by considering various stakeholder’s views.

Dynamic capabilities approach is high viable and organization does need to rearrange their resources and capabilities such that they are able to adapt to changing times for the organization. Sustainability approach is increasingly getting prominence in multiple organizations and it’s highly viable. Information in regards to various impacts created by various different actions of the organization is raising curiosity amongst customers, who are concerned regarding the purchases that they make. Thus, it is viable as well as profitable for businesses to adopt and apply approaches of sustainable nature. 

Each approach has their own limitations along with their own benefits. While Stakeholder approach might be beneficial to the stakeholders, especially internal ones it might not act in the interests of the capabilities the organization possesses. One major limitation of this approach is in its underestimating of other factors of the organization especially in regards to capabilities. While Stakeholders Approach is a traditional approach and focuses on owners of the organization, hence it becomes the primary responsibility of such organizations to deliver profits to these owners. Thus, while delivering profits other aspects of the organization that might be crucial for the functioning of the same might get overlooked.             

Dynamic capabilities approach stresses immense importance on existing capabilities of the firm and hence overlooks the aspects of organizational capability expansion. While forming strategy according to this approach an organization might actually lag behind its competitors in rearranging its capabilities. Further this theory is incompetent in markets where sustainability or stakeholders as customers plays a central role.  

Sustainability approach to strategic management is a contemporary approach and is now getting adopted in various organizations. This aspect often burdens the organization with excessive costs that barely have any impact on profitability. Though this is a long ranged approach organizations adopting this strategy might be initially at a loss for various changes and processes that it needs to incorporate. Thus, it can be drawn from the above approaches and concepts that strategic management is a process and approach for which needs to be integrated such that organization is able to establish itself as a leader. The core aim of adopting strategic management concepts, theories and processes is that the organization can advance its competitive advantage by expanding core capabilities of the firm.

Reference Lists

Ambrosini, V. and Bowman, C., 2009. What are dynamic capabilities and are they a useful construct in strategic management?. International journal of management reviews, 11(1), pp.29-49.

Ansoff, H., 2007. Strategic management. Springer.

Cadez, S. and Guilding, C., 2008. An exploratory investigation of an integrated contingency model of strategic management accounting. Accounting, organizations and society, 33(7), pp.836-863.

Chesbrough, H.W. and Appleyard, M.M., 2007. Open innovation and strategy. California management review, 50(1), pp.57-76.

Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management. Sage.

Freeman, R.E., 2010. Strategic management: A stakeholder approach. Cambridge University Press

Furrer, O., Thomas, H. and Goussevskaia, A., 2008. The structure and evolution of the strategic management field: A content analysis of 26 years of strategic management research. International Journal of Management Reviews, 10(1), pp.1-23.

Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.

Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2012. Strategic management cases: competitiveness and globalization. Cengage Learning.

Johnson, G., Scholes, K. and Whittington, R., 2008. Exploring corporate strategy: text & cases. Pearson Education.

Holcomb, T.R. and Hitt, M.A., 2007. Toward a model of strategic outsourcing. Journal of operations management, 25(2), pp.464-481.

Kaplan, R.S. and Norton, D.P., 2007. Using the balanced scorecard as a strategic management system. Harvard business review, 85(7-8), pp.150-+.

Klein, D.A., 2009. The strategic management of intellectual capital. Routledge.

Schot, J. and Geels, F.W., 2008. Strategic niche management and sustainable innovation journeys: theory, findings, research agenda, and policy. Technology analysis & strategic management, 20(5), pp.537-554.

Stacey, R.D., 2007. Strategic management and organisational dynamics: The challenge of complexity to ways of thinking about organisations. Pearson education.

Teece, D.J., 2009. Dynamic capabilities and strategic management: Organizing for innovation and growth. Oxford University Press on Demand.

Thompson, J.L. and Martin, F., 2010. Strategic management: awareness & change. Cengage Learning EMEA.

Wheelen, T.L. and Hunger, J.D., 2011. Concepts in strategic management and business policy. Pearson Education India.