The Issue of Strategic Fit - Report Example

Strategic Fit Table of Contents Introduction 3 What is meant by strategic ‘fit’ 3 Factors and issues that should be taken into account to achieve strategic ‘fit’ 4 A Critique of the concept of strategic ‘fit’ 6 References 8 Bibliography 9 Introduction In today’s competitive business environment success of an organization depends on how efficiently it is making strategies and strategic decisions. Business organizations are heavily depended on the strategies in order to gain sustainable competitive advantages over their competitors. The word strategy came from the word ‘Strategia’ and the concept of strategy came from the military (Grant, 2002). Earlier strategies were mainly adopted by the military people in order to win the war, but today business environment is so much competitive that organizations are almost in war with their competitors. As a result they have to make effective and efficient strategies to win their war. Several management terms regarding strategy have arrived in the past decade. One of the most talked about terms regarding strategy in the recent past is the ‘Strategic fit’. This paper provides a detail and clear idea about the term ‘strategic fit’. The report contains a proper definition of the term and its explanation. Furthermore the report also contains a discussion about all those factors and issues that an organization should consider in the process of achieving strategic fit. Lastly there is a critical analysis of the concept ‘strategic fit’ in the report. What is meant by strategic ‘fit’ In simple words strategic fit is referred to that situation in which a particular product or plan is suitable or properly aligned with the strategy of the organisation. Several definitions of the term are provided by the experts. According to Richard Lynch, the author of the book named ‘Corporate Strategy’ it is very important to have a proper match between the structure of the organisation and its strategy in order to become economically effective and this is the core concept of strategic fit (Lynch, 2009). In other words it can be said that if organisations’ strategies do not match with its structure or planning process then there will be wastage of valuable resources like money and time. The alignment between the strategies adopted by the organisation and its plan, program and structure is necessary in order to achieve several of its short term and long term strategic objectives. Moreover alignment is also required between the strategies of different functional areas in the organisation. For example, strategies regarding supply chain must be aligned with the strategies regarding product and finance in order to attain strategic fit. Since all the strategies are in regards of various resources of the organisation, concept of strategic fit can also be explained in terms of organisational resources. Factors and issues that should be taken into account to achieve strategic ‘fit’ There are several macro and micro economic factors that need to be taken care of by the organisations if they wish to achieve strategic fit. All these factors are available in the environment (inside and outside) of the organisation. These factors can be identified by the use of several strategic tools like SWOT and PESTEL. SWOT analysis would be effective in order to identify both internal and external factors that have impact over the organisational performance. SWOT stands for strength, weakness, opportunities and threats. Strengths and weaknesses of an organisation are the internal factors, whereas opportunities and threats are the external factors. It is very important to identify these factors in order to achieve strategic fit, because if the organisation can properly identify its strengths and weaknesses then it will have a clear idea about how its strategies are actually matching with the structure, culture, products and plans. Properly identified weaknesses will give a clear idea regarding those areas where strategies are not really matching up with plans and products. Once the strengths and weaknesses are identified, organisations would be able to make better strategic decisions. These decisions would be made keeping in mind the present organisational structure, culture and capabilities. If organisation makes decisions taking into account the current situations inside and outside of it, then there is high chance that these decisions would be aligned with present structure. As a result chance of attaining strategic fit would certainly be higher. Opportunities and threats will give an idea about what is needed to done in order to match the strategies and structure so that strategic fit can be achieved. As far as PESTEL analysis is concerned, it will provide a clear understanding regarding various external environment factors such as political factors, economical factors, social factors, technological factors and finally environmental factors. Findings of the analysis of these factors would enable the organisation to make better strategic decisions as they will be made considering present environmental factors. Since organisations’ decisions are heavily influenced by all the above mentioned factors, they will play an important role in the process of achieving strategic fit. For example customer is one of crucial aspects of any business, but needs and demands of customers are greatly influenced by several economic and social factors. As a result it can be expected that organisational strategies that are made considering the needs and demands of customers, would be influenced by economic and social factors. Apart from all these factors, there are other issues that are likely to influence the process of attaining strategic fit. These issues would come up in regards to the customers, product life cycle, supply chain etc. Strategic fit is attained when there is proper alignment between the strategies of one organisational function with the strategies of other functional areas in the organisation. All the above mentioned issues are very much linked up with each other. For example a product goes through various phases in its entire life span, as a result supply chain strategies must be adopted considering the current phase of the product (The University of Tennessee, n.d.). Moreover the demand vary with the stages of the product, in the introduction phase demand is expected to be lower than it is in the growth phase. Supply chain strategies need to be adopted considering the changes of demand of the product. This actually means that strategies regarding supply chain need to be aligned with the strategies regarding the product. In order to achieve the strategic fit this alignment is crucial. As far as customers are concerned it is very important to have a clear understanding regarding the changing tastes of customers. A Critique of the concept of strategic ‘fit’ Present business environment is very much complicated as well as competitive in nature. Intensity of this competitiveness and complicacy has increased because changing nature of consumer demand, technology, political scenario etc. In such an environment it is very difficult to generalise any management concept that deals with the organisational strategy. A relevant concept in today’s environment might lose its relevancy in tomorrow’s business environment. The concept of strategic fit seems to be significant in the current business environment, but there no certainty that this significance will be same in the coming years. Moreover experts who come up with such unique management terms have not found to be provided enough analysis or logics behind it. Recently it has been found that the strategic fit concept is supplemented by an entirely new concept which named as ‘Strategic Stretch’. Strategic stretch is referred to the use of resources in a more creative way so that organisations can achieve objectives and goals that are even more challenging in nature (Hodgettes, Luthans, 2003). Concept of strategic fit is immensely influenced by various external and internal factors. A factor like technology which has been changing continually over the past few years has forced the experts to come up with new concepts or modify the existing one. A technology is effective today, might not be the same tomorrow. Moreover both individuals and organisational are very much dependent on the technology, as a result organisations need to cope up with this changing nature of technology. Consumers’ demand is also changing with the change in technology. If organisation needs to come up with a completely new product in order to cope up the changing demand, then a large portion of organisational structure might need to be changed. As a result new strategies are needed to be developed and the process of alignment between the strategies of different functions would need to be started again. Situations become more complicated when mergers and acquisition take place, as two organisations with different structures get combined. It is complicated but it is crucial too to have proper alignment between the structure and strategy (Wit, Meyer, 2005). This is a major challenge for today’s organisation. Another crucial factor is that the strategic fit concept mainly considers two aspects of organisation, strategy and structure. However there are several other aspects starting from selection to training are needed to be taken into account. Different organisations work with different business models. Strategies are adopted on the basis of these models. If an organisation makes such a decision that will help it to achieve strategic fit in the long term, but affects its current position then it would be difficult to continue with that strategy for a long time. So, it can be said that sometimes high risks would be associated with the decisions that are made to attain strategic fit. References Grant, R. 2002, Contemporary strategy analysis: concepts, techniques, applications, Wiley-Blackwell Hodgettes, R. M. Luthans, F. 2003, International Business: Culture, Strategy and Behavior, McGrowhill Lynch R, 2009, Corporate Strategy, Prentice Hall The University of Tennessee, No Date, Supply Chain Performance: Achieving Strategic Fit and Scope [Online] Available at: http://bus.utk.edu/davis/BA331/Classes/Class%203%20text.pdf [Accessed on March 09, 2010] Wit, B. D. Meyer, R. 2005, Strategy synthesis: resolving strategy paradoxes to create competitive advantage, Cengage Learning EMEA Bibliography Hitt, M. Ireland, D. and Hoskisson, R. 2003, Strategic Management, Thomson Johnson ,G. Scholes, K, 2005, Exploring Corporate Strategy, Prentice Hall Wheelen, T. L. Hunger, J. D. 2007, Strategic Management and Business Policy: Concepts and Cases, Prentice Hall Sánchez, R. Heene, A. 2004, The new strategic management: organization, competition, and competence, Wiley Read More