Four Stages of Strategic Development since 1945 up to the Present Time - Coursework Example

B300 TMAO3 - Strategic Theories - Total Number of Words 305 Table of Contents I. Introduction …………………………………………………………….. 3 II. First Stage: 1945 to late 1960s …………………………………………. 3 III. Second Stage: 1960 to 1970s ……………………………………….….. 5 IV. Third Stage: late 1970 to 1990s …………………………………….….. 7 V. Fourth Stage: 1990 up to Present ………………………………………. 7 VI. Conclusion ………………………………………………………………. 8 References ………………………………………………………………………. 9 Introduction The high competition in the market makes strategic development crucial to the success of each business organization. The first modern business strategy theorist is Alfred Chandler. (Chandler, 1962; p. 13) Since then, a lot theorist have formulated and contributed to the endless list of business strategic theory that we have today. Some of these strategies have been successful and widely used in the business sector while others failed to get a good recognition from the side of the managers. Despite the long list of strategic theory, the creation of an effective strategy matters in enabling a business entity to open a new door for profit opportunity. Not the use of a single strategic theory alone could make a business organization profitable but the ability of the top management to combine the existing theories in order to come up with a more promising strategic plan better than the ones being formulated by the competitors. In line with the study, the author will examine the four stages of strategic development since 1945 up to the present time. The study will also determine the external factors that have contributed to the formation of these strategies. First Stage: 1945 to late 1960s The World War II (1939 to 1945) triggered the exhaustion in the level of production due to excessive destruction of the resources. This causes the demand for goods to be significantly greater than the available supply. Aiming to narrow down the gap between the supply and demand, the first two legendary books regarding strategic management were published in 1965. These books were written by Learned, Christensen, Andrews and Guth’s Business Policy: Text and Cases (1965); and Ansoff’s Corporate Strategy (1965). The first strategic model called the Basic Design School Model was created by Andrews was used by a lot of theorists as a practical guide in analyzing the complex internal and external business environment. Over the years, the Basic Design School Model was enhanced into the strength, weaknesses, opportunity, and threat (SWOT) model we have today. (See Figure I – The Basic Design School Model below) Ansoff developed his strategy by focusing on strategic planning by analyzing the nature and factors behind the development of long-term planning. At first, people were reluctant in using the strategic model. Eventually, strategic design became widely used. Figure I – The Basic Design School Model Source: Learned et al., 1965 Today, the study of the internal and external factors that affects the performance of business organizations is done with the use of SWOT analysis. The SW-OT model developed by Albert Humphrey in 1960s, is a tool managers commonly used in assessing and auditing the internal organization by identifying the company’s strength and weaknesses regarding the company culture, company image, organizational structure, key staff, access to natural resources, operational efficiency and capacity, brand awareness, market share, financial resources, exclusive contracts, patents and trade secrets, and position on the experience curve. (NetMBA, 2007) On the other hand, business external forces such as customers, competitors, market trends, suppliers, partners, social changes, new technology, economic environment, and political and regulatory environment can be examined using the opportunity and threat analysis. (NetMBA, 2007) Second Stage: 1960 to 1970s Between the years 1960s to late 1970s, changes in the business environment became very intensive. Almost all developed countries started taking advantage with the use of technology such as machineries and other related equipments. The gap between the demand and supply eventually narrowed down. The changes in the market environment wherein consumers became more concern with the quality of products they purchase makes the positioning of businesses more important. Since then, business strategy started to become more concern with directing good quality resources. During the early 1960s, businesses depended on the use of Classical Approach based on the military tradition. (Study Guide, n.d.) A classical approach combines the mind-set of a military strategist together with some aspects economic thinking. This allows managers to come up with a strategy based on a deliberate compromising, explicit, and rational analysis in order to maximize the company’s profitability. Eventually the classical approach was replaced by processual approach. (Study Guide, n.d.) This approach generally takes the view of the social realists by shifting the observer away from the economic rationality and profit maximization to the concept of using the market or leadership within the organization as more reliable. Since the gap between the supply and demand is wide during the early 1960s, manufacturers are the ones that dictate over what to sell in the market. Since the gap narrowed some time in mid- to late-1970s, consumers became more specific with the quality product they purchase. Competition among existing firms started to exist. Another factor that triggered the tight competition among the firms is due to the era of oil price shocks causing disturbance in the global business activities between mid-1970s to mid-1980s. This era contributed to the formation of debt crisis all over the world. Inflations rate increased while the economic growth rate slowed down. At this point, in order for businesses to preserve the profitability of the companies, the classical strategy focusing on maximizing profitability of the organization with the use of long-term planning became more applicable with the global economic situation. Thus, the study of Profit Impact of Marketing Strategies (PIMS) in dealing with the company’s size, growth, and portfolio theory became widely used during the late 1970s. (Study Guide, n.d.) Specifically the need to develop a good strategy in terms of allocating the available resources such as cash flows contributed in the development of competitive advantage. This gave rise to the focus of strategic study on the company’s portfolio of products and services including the nature of competitive behavior within the domestic markets. Eventually, the need to apply some strategic planning in business units, functional department – marketing, finance, etc. and corporate levels was highlighted. Third Stage: late 1970 to 1990s In late 1980s up to 1990s, the market was again disrupted with the changes in the revolution of the communication and information technology. The economic growth accelerated again while the unequal distribution of wealth started to widen between developed and developing countries. In fact, we have witness a lot of strategies like the practice of government deregulation in order to cope with the rapidly changing technology and demands in the markets. In 1980s, evolutionary approaches or the view of a typical economist in strategic development was heavily adapted. (Study Guide, n.d.) Managers at this point started to analyze, determine and study the marginal cost and revenue including the theories behind how marginal curve could enable the company to maximize its profitability. This was the time when the study of business strategies were dominated by Michael Porter with his Competitive Strategy (1980) including his other published theories such as the five forces of competition and the competitive diamond. Fourth Stage: 1990 up to Present In 1990s, the study of business strategy shifted its focus on the ‘Resource-Based View’ (RBV) or the internal resources of the company. (Study Guide, n.d.) RBV highlighted the importance of the firm’s capabilities, competencies, and the management of technology and other resources which some of the existing companies are still using today. The use of evolutionary approaches is no longer applicable today because of the changes in the economic environment since the 1990s. For this reason, the development of systemic approach or taking the view of social relativist has been adapted. This strategy reflects the combined social system such as attitudes, values, and behavioral patterns with relativist approach. This is primarily due to the fact that businesses today are focused on social and political relations. Conclusion Business Strategy evolves through historical events. Over time, the old strategic methods were never discarded. In fact, the old strategic methods were enhanced and developed into a more efficient and appropriate strategic model based on the changes within the global environmental markets. *** End *** References: 1 Ansoff, H.I. (1965) ‘Corporate Strategy’ McGraw-Hill, New York. 2 Chandler, A.D. (1962) ‘Strategy and Structure: Chapters in the History of the Industrial Enterprise’ MIT Press: Cambridge. p. 13 3 Learned, A.K., Christensen C.R., and Guth W. (1965) ‘Business Policy: Text and Cases’ Homewood, IL, Irwin. 4 NetMBA (2007) ‘SWOT Analysis’ Retrieved: June 30, 2007 < http://www.netmba.com/ > 5 Study Guide (n.d.) ‘TMA Summary’ 6 Porter, M.E. (1980) ‘Competitive Strategy: Techniques for Analyzing Industries and Competitors’ New York: The Free Press. Read More