Strategic Management - Innovation and Entrepreneurial Strategies - Coursework Example

Strategic Management Introduction The term strategic management deals with innovation, planning and execution of a long term or short term goal of a company. It is the strategic decision making by the top management of the company by aligning the resources and processes with the organizations’ mission and vision. These strategic plans are executed through the decision making process for achieving the desired results (Balanced Scorecard Institute, 2015). In this study, the researcher will attempt to justify the importance of innovation and an entrepreneurial approach in the formulation and implementation of a firm’s strategy. Innovation and Entrepreneurial strategies Innovation is the creation of strategies, generation of new ideas through the strategies, screening the plans and finally formulating the idea into a new product or service (Mintzberg, Ahlstrand and Lampel, 2009). Entrepreneurial strategies deal with businesses which are niche in the market. They face two kinds of problems, firstly insufficiency of resources in terms of finance and managerial facilities and secondly, relative invisibility as the business is unable to increase competition due to its newness (Johnson, et al., 2014). The higher managerial executives decide on the entrepreneurial strategy making which mainly depends on the new avenues of opportunities with a mission of higher growth. Innovation and Entrepreneurial strategies can be divided into three types which are imitation, invention and finally modernisation. Imitation: Creation of a new product or a service from a technology or idea which already existed or was formulated by another organization. Invention: Designing and developing a new concept of a product or service from an idea generation through experimentation and research. Modernisation: Improvising and implementing of a new design to create a much better and enhanced and superior product or service (Johnson, et al., 2014). Innovation dilemma Innovation dilemma occurs when a market player who is holding a considerable market share for a particular product or service trying to survive in a matured market is attacked by a new entrant inventing a concept, implementing it on an existing product or improvising a service and competing with the former market player. The following are the key aspects of innovation dilemma observed in the contemporary business environment. Technology push: it is a term used to synonymise the invention of technology, that is new to the market, done by the research and development team of an organization with the underlying aim of pushing product growth and development (Johnson, et al., 2014). Market pull: Innovation takes place due to user demand of a particular product or service with respect to the market need. Therefore, the new customer base with demand creation is considered as high importance. Product innovation: It is the process of pushing sales due to the continuous changing preference and demand on product innovations like upgrading product features, incorporating product development to gain market share and move the product to a higher level in the product life cycle. Organisations new to the market depends more on product innovation (Mintzberg, Ahlstrand and Lampel, 2009). Process innovation: It is the up-gradation of the vale chain model by improving the outbound and the inbound logistics, the operation processes, marketing and sales techniques and lastly, the service facilities with respect to the manufacturing infrastructure, manpower management, research and development of technology and resource acquiring facilities. Firms, at a matured level of the product life cycle favour more on process innovation. ‘Closed’ innovation: Innovation depends on conventional techniques with the use of organisations’ own resources and infrastructures like Research laboratories and sales and promotion departments. This approach is used to protect the company’s trademarks and patent rights and to avoid the threat of new entrants. Example: vehicle manufacturing companies like Honda, Hyundai, and BMW etc (Mintzberg, Ahlstrand and Lampel, 2009). ‘Open’ innovation: This approach is followed by software companies where exchange of ideas and techniques is considered important for the betterment of the service or product. Platform leadership: Larger firms with higher market shares raise smaller companies by inventing new technologies or ideas surrounding their technological base. Example: Apple incorporating Intel mother boards in their laptops or desktops (Mintzberg, Ahlstrand and Lampel, 2009). Business model innovation: It deals with reallocating all the fundamentals of the firm like production facilities and marketing processes into new sets to generate higher revenue. First movers Firms which are the earliest in the market have the advantage of leaving the market also at the earliest when they experience threat from competitors (Mintzberg, Ahlstrand and Lampel, 2009).The first movers have the benefit of the experience gathered over the period of time, low operating cost, goodwill, before hand knowledge of the market changes which acts as an advantage for them before exiting the market. Late movers Firms entering late in the growing market have the advantage of imitating the innovations made and also learning from the mistakes made by the first movers (Mintzberg, Ahlstrand and Lampel, 2009). Influencing the spread of innovation Innovation diffusion is the spread of modernization among the organisations existing in the market with respect to reach and pace. Figure 1: The diffusion S-curve (Source: Padel, 2001) In figure 1 above, the rise of the slope indicates the growth of the demand for the product or service, whereas, the downward slope indicates a sudden or more often slow decrease of the demand. Disruptive innovation Figure 2 below, explains the significant rise by providing new performance curve which even if is low standard than the present technological performance, but has the worth of rising to the highest level in the future. This kind of modernisation approach is also known as disruptive innovation (Mintzberg, Ahlstrand and Lampel, 2009). Figure 2: Disruptive innovation (Source: Shmilovici, 2012) Conclusion Through this research, we derive that entrepreneurial strategies incorporates a lot of innovation techniques. Entrepreneurship manages relationship with other companies which help them seek funds from the firms which deal in corporate venturing. They foresee market growth and acquire small business units which has been dissolved by bigger organisations and this technique is known as spin offs. An entrepreneurship firm seeks help by connecting with suppliers, agents, distributors, franchisees, technology entrepreneurs and makers of complementary products for higher growth. Decision Making Introduction Decision making is an important part of strategy making. It can sometime be dispersed and confusing and it is completely based on the type of difficulty faced (Teale, et al., 2003). It deals with a lot of dedication, performance, mental activity such as thinking, reasoning, learning and perceiving and is influenced by external and internal factors like surroundings, society, beliefs and politics. Factors Influencing Decision Making Information on the nature of problem: it is very important to have sufficient and proper knowledge on the subject and circumstances based on which decision is to be taken. The person making decision has to have a controlled mind regarding the amount of information to be considered and should have a rational mind to perceive and judge the information as authentic. Too much of wrong information or too less of right information, both are dangerous and complicates the process of decision making. The right amount of proper knowledge is needed to right decision or solution to a problem (Teale, et al., 2003). Biasness: A person needs to be unbiased in order to make rational decision. Preconceived notions and perceptions may lead to decision making process where the information get highly confused and indistinct and the person tends to evaluate and judge on the basis of what he thinks as right or wrong. Ambiguity increases decision taking time decreasing the quality of decision (Teale, et al., 2003). Cognitive activity: it is the activity of an individual mind which has the ability to generate ideas and has the power to judge, assess, invent but on the contrary has a limited capacity to take information and process it at a particular time frame. Therefore, it is impossible to remember and evaluate huge information, calculation, do a comparative study and come up with decision with the conviction of being correct all the time. So, there would always be a sense of insecurity and dilemma until the outcome of the decision is realised. Risk taking attitude: The attitude of risk taking depends on the personal viewpoints of an individual and the organizational policies he works in. If an organization has the rule of penalising for wrong decision making which leads to greater loss, then a manager would never make choices on alternatives and would go for ideas which are main-stream and yield stereotypic results. The amount of risk taking depends on factors as follows: - Individual’s intelligence factor: managers having traditional perspective would depend on conservative decision making which leads to lower risk. Whereas, individuals might only take higher risk if they are rewarded for taking chances in decision making (Teale, et al., 2003). Limitation of time: It is an important factor in decision making as an individual if has a greater time period to research, evaluate options and then give a judgement on a particular topic proposed, would be more relaxed and rational with his decision. Whereas, if there is a time constraint he would avoid alternative and give judge based on only what is available to him with lesser mind work. Ethical and social factors: Our society structure, culture, faith, belief and education also play a huge role in decision making process. For example, a leather company making strategic decision on procurement of leather by slaughtering cows for their skin might affect the decision of a manager with religious beliefs which are against killing animals (Nooraie, 2012). Impact of strategic planning on management Incorporation of proper strategic planning leads to a better working of an organization. Managers if rewarded takes risk in evaluating alternative in the decision making process which leads to a better growth of the firm. Proper strategic management leads to greater efficiency in work at the managerial levels. It helps the organisation to gain a competitive edge over its competitors and better customer satisfaction. Companies with a good strategic planning framework has a greater market growth and the profitability graph rises high (Salkić, 2014). Conclusion Strategic management is a very important process for the betterment of the organisation and managerial efforts should be taken to upgrade the strategies both from within as well as outside business environment. Organisational growth, work efficiency and high profit yield depends mainly on good planning strategies and decision making expertise. All firms irrespective of its dimension and reach of operations have the liberty to improve its decision making and strategic management process. Management should implement the necessity for strategic planning in their business processes and come up with guidelines and financial plan for reaching target goals and further would achieve company’s vision and mission. Reference list Balanced Scorecard Institute, 2014. What is Strategic Planning?. [online] Available at: [Accessed 29 April 2015]. Johnson, G., Whittington, R., Angwin, D., Scholes, K. and Regnér, P., 2014. Exploring strategy: text & cases. 10th edn. Harlow: Pearson Education Limited. Mintzberg, H., Ahlstrand, B. W. and Lampel, J., 2009. Strategy safari: the complete guide through the wilds of strategic management. Harlow: Financial Times Prentice Hall. Nooraie, M., 2012. Factors Influencing Strategic Decision-Making Processes. International Journal of Academic Research in Business and Social Sciences, 2(7), pp. 405-429. Padel, S., 2001. Conversion to organic farming: a typical example of the diffusion of an innovation?. Sociologia ruralis, 41(1), pp. 40-61. Salkić, I., 2014. Impact of strategic planning on management of public organizations in bosnia and Herzegovina. Interdisciplinary Description of Complex Systems, 12(1), pp. 61-77 Shmilovici, U., 2012. Strategy For Startups: The Innovator’s Dilemma. [online] Available at: [Accessed 29 April 2015] Teale, M., Dispenza, V., Flynn, J. and Currie, D., 2003. Management decision making: towards an integrated approach. New York: Pearson. Read More