Inside-Out and Outside-In Schools of Strategic Management - Essay Example

?Strategic Leadership in a Changing World Table of Contents Table of Contents 2 Introduction 3 Theoretical explanation 3 Inside-Out Schools of Strategic Management 3 Outside-In Schools of Strategic Management 5 Critical Evaluation 5 Inside-Out Perspective Contribution to Organisation Success 6 Outside-In Perspective Contribution to Organisation Success 8 Conclusion 10 References 11 Introduction Managing an organisation in the competitive environment is certainly a very complex task. Among the many reasons, escalating complexities have become common in the business operations conducted in 21st century context. Subsequently, the contemporary organisations have been increasingly found as inclining towards greater strategic flexibility in order to fascinate change in a much efficient and productive manner. It is therefore important that managers think widely and wisely to ensure the sustainable competitive advantage. Based on the statement made by the researcher, it can be argued that to achieve a competitive benefit, organizational strategies have to be consistent with the internal as well as external environment. A concise literature review on strategic management explicates two primary themes that nurture inside-out and outside-in perspectives, also referred as prescriptive school (Dutton, 1983) and descriptive school (Bertin, 2000). This essay explores the theoretical bases of these two strategic management approaches often used in the contemporary business processes. The ultimate aim of this study is accordingly concentrated on the implications of the underpinnings suggested in these approaches in deriving organisational success in today’s unconventional scenario, where managerial operations are somewhat impossible to be bound within a defined framework. Theoretical explanation Inside-Out Schools of Strategic Management Barner (2006) elaborates that the inside-out approach of strategic management can be viewed as sensible characterisation of strategies in an organization where internal capabilities and strengths can be identified and developed (Barner, 2006). To put it in simple words, it can be affirmed that inside-out approach initiates with a focus on company’s internal capabilities and strengths. It commences with reviewing and assessing the qualities of individual resources sources by the organisation and its managerial understanding of growth needs. This approach then gradually expands outwards at inter-department or organisational levels, having belief on the notion that it is the inherent qualities of individuals (also can be signified as organisational management) to impose considerable impacts on their interpersonal relationships within team and eventually within the organization. With this approach, organisations are able to take into consideration its resources and endeavour at using those with more efficiency. Considering from a general point of view, the inside-out approach is based on the fact that if someone meaningfully wants to contribute to team members, it is important for the individuals (or organisations) to understand their personal strengths as well as weaknesses accurately (Johnson & et. al., 2002). As a matter of fact, it can be affirmed that an organization can never be able to deliver highest performance until and unless it is able to develop a commendable level of effectiveness of its resources, especially concerning its human resources. With respect to this perspective, the organization stretching its resources as well as capabilities to achieve a competitive advantage can produce new opportunities of growth, as assumed in this strategic management approach (Johnson & et. al. 2002). However, it is important to note that resources and capabilities can prove as threat if the organization cannot handle and maintain the resources properly and deep-root to changes required in a cost-efficient and time-effective manner (Thompson & et. al., 2005). This approach can be termed as product/service led owing to the fact that the approach starts with focussing on the organisation’s capabilities on the basis of its internal strengths as well as weaknesses (Hughes & et. al., n.d.). Outside-In Schools of Strategic Management The outside-in approach is also known as market driven strategy (Wit & et. al., 2010). As per this approach, after identifying opportunities and threats, organisations are required to prepare themselves for the external environment in order to optimize the opportunities and diminish the threats with effectiveness. This approach can be termed as consumer-led owing to the fact that this approach takes consumer value as its starting and end point. The strategic leaders following an outside-in approach thus believe that the strategies should be designed in accordance with the market needs and the understanding of the responses of the organisation to the external environment. According to this perspective, organisations are entitled to identify the opportunities from the external environment, then explore the firm’s competitive industry positioning and ultimately adapt its resources and capabilities to take the advantages of the competitive firms, termed as strategic fit (Johnson & et. al., 2008). Hence, this perspective ensures healthy and successful competition in the attractive industry context. It can be affirmed that in order to attain sustainability in the long run, dynamic capabilities are needed to be developed and alternatively, organisations should be finding options for strategic alliances with the firms having superior resources (Hughes & et. al., n. d.). Critical Evaluation As can be observed from the above discussion, the two theories are identified to be immensely different not only on the grounds of their constituting components but also in terms of their implications to justify conditions required for organisational success. Correspondingly, what distinguishes the inside-out approach of strategic management from the outside-in mechanism, involves analysis of many factors. To be precise, the former focuses more on company’s inner strengths and capabilities whereas in contrary, the latter is more customer-oriented and takes customers’ values as its starting and end point. Unlike the inside-out approach, the outside-in framework involves understanding of the competitive firm’s resources and technologies and strives to ensure a joint collaboration with the company having better strategies, huge resources and technology. Eventually, the aim of both the approaches is to achieve competitive advantages and solve irregularities in the market place (Louw, 2012). The differences in these models have been comprehensively presented in the diagram below. Source: (Louw, 2012) Inside-Out Perspective Contribution to Organisation Success The organisation following an inside-out strategy needs to examine its strengths and weaknesses, which signifies its potentiality to achieve success. After strengths have been identified, the organisation is entitled to develop its product/service oriented strategies and use heavy marketing to convince and attract more customers. Hence, inside-out strategy involves identifying organisation’s capabilities and then initiating the selling in the way that differentiate the organisation from its rival firms and therefore, contribute to its competitive advantages. Notably, it is often argued that this approach works smoothly in a well-developed market owing to the fact that in a well-developed market, the consumers’ needs and wants changes slowly (Hughes & et. al., n.d.). For example, Maple Leafs has been involved in manufacturing a wide range of food items including poultry, beef, sugar and flour as majors. Being categorised in the developed basic food items market, the consumer demand and buying behaviour shifts for those items are witnessed to be considerable slow. Therefore, the company focuses on applying new technologies that allow it to safely manufacture these food items faster and cheaper, differentiating itself from the performing rival firms (Murphy, 2013). However, when evaluating critically, it can be observed that the inside-out approach to strategic management is likely to raise noteworthy challenges and obstructions for the company’s success, if it is too much internally focussed resulting into overestimation of its capabilities and therefore, creating a gap between the customer wants and the applied business strategies. This may also raise competitive challenges for the company, inhibiting its performance efficiencies in comparison to the rival firms (Thompson & et. al., 2005). For example, Rim and Nokia, renowned as two of the informational technology giants in the global realm, were observed as focussed heavily on improving their functional abilities and reliability of the products. Eventually, they failed to understand the changing needs of their customers. As a result, both the companies lost their competitive foothold being unable to counter the changing market trends and as a result their main rivals Samsung, HTC, Micromax and Apple began to dominate the global marketplace. Another best example in this context would be Apple. Few years ago, Apple was leading the mobile sector, but with the demise and following succession of its co-founder Steve Joes, the company became somewhat reluctant to use the customer surveys results in order to understand the customers’ changing demands. As a result, its main rival firm, Samsung grabbed the mobile market with the introduction of big screen smartphones that runs on Android platform taking the advantage of Apple’s non-performance to counter its competitors’ strategies (Silcoff & et. al. 2013). Outside-In Perspective Contribution to Organisation Success The basic aim of the outside-in strategy is to identify the competitors, identify their qualities and respond to their rivalry attributes to gain market efficiency. In the contemporary business scenario, competitors can be classified as the emergent market players along with the already existing ones. To sustain in the emerging market, an in-depth knowledge of competitors is required by the organizations as this approach assumes that the external world scenario is quite likely to impose significant influences on the company performances and therefore, act as a determinant to their competition response efficiencies. It can be apparently noted that leading players who had dominated the past barely survive today. Everyday new organisations are entering in the market with new strategies. Therefore, an organisation must know about the key strengths of their competitors to ensure the next move, which justifies the application of this approach in contemporary strategic management initiatives (Cengage Learning, Inc, 2009). Outside-in strategy mainly emphasises the amount of the risks the organisation wants to take owing to the fact that every risk has a potential opportunity. Arguably, theorists supporting this approach noted that organisations in need to grow, survive and flourish in the long run adopt an outside-in strategic management model (Wit & et. al., 2010). In agreement with the implications of the model to define organisational success, it can be affirmed that the market periphery today is changing continually, which further necessitates modern organisations to reinvent themselves in an efficient manner. For example, MacDonald’s and Kellogg’s have transformed themselves before entering in the Indian market. Initially, MacDonald’s failed to understand the Indian people’s tastes and preferences, but the inclusion of few traditional snacks preferred by Indian customers in addition with some well-renowned western food items to suffice the need of globalising Indian society, helped the company to penetrate the Indian market in a more productive manner (Relph, 2012). Certainly, it is important to understand the customers’ needs and wants to meet their demands in addition with the understanding of the competitor’s key strengths and weaknesses. To justify this notion presented in the outside-in approach of strategic management, it is noteworthy that the management and executives may not want to apply the outside-in strategy as they sometimes are confident about their internal strengths and decipher limited significance to long-run efficacies and sustainability of the company. According to the survey made by the core group of Volunteers on behalf of CMA Magazine, inside-out strategy is found to be the better organisational strategy when asked to the members of the Pulse group. About 56% of the members supported inside-out strategy giving greater significance to their internal strengths and weaknesses; while only 44% of the members supported the outside-in strategy (Civichino, 2012). Based on the above discussion it can be apparently noted that a process of self-discovery is required before an organisation takes either inside-out or outside-in strategy. The combination of two approaches or perspective is therefore required for modern organisations in developing and sustaining as a strong and differentiated brand. Moreover, to be successful in the future, the contemporary firms need greater agility, better collaboration and enhanced collective learning. One of the reasons that justify the importance of both the inside-out or outside-in approaches to transformation, is sound and coherent leadership strategy, which must contribute in the successful transformation of the organisation. It is important to mention in this context that a successful strategy is founded on the grounds of combining the available and sourced resources in the most productive way. The competitive and the resource based school of strategy are not mutually exclusive, but when applied with an insight it is complementary and synergistic. It is thus arguable that a simultaneous balanced approach, involving both these models, holds the key for the strategic success (Louw, 2012). Conclusion The field of the strategic management is critical for the survival of the organisation. Many evidences assessed in the above discussion revealed that successful organisation world-wide engages the strategic management framework. The strategic framework also drives the organisational resources in a particular direction wherein, an efficient and productive strategic direction ensures that organisations’ resources are effectively and efficiently used to yield greater productivity. Based on the above discussion, it has been found that inside-out strategy functions well or comparatively better in comparison to the outside-in approach in an established and stable market context; while on the other hand, the outside-in approach focuses on the competitors and the amount of the risks that the organisation wants to take so as to determine its success potentials. As both these paradigms are essential to organisational success and must be given almost equal significance based on the circumstantial aspects, both these frameworks can be regarded as important in the ever-changing business environment of the contemporary era to reward organisational success. References Barner, R., 2006. 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