Strategic Management and Organizational Dynamics - Term Paper Example

Name Professor’s Name Course Date Strategic Management and Organizational Dynamics Businesses are faced with various challenges in the internal and external business environment. The management, therefore, needs to adopt various strategies to ensure that the business achieves its goals and objectives. Such strategies include making strategic decisions while taking various actions to attain the set goals. The paper will discuss various aspects of strategic management as well as organizational dynamics that determine the direction of businesses. Introduction to strategy Various studies have aimed at defining strategy in a business environment. According to Alfred Chandler, the strategy is the determination of the long-term goals and objectives of an organization, and the subsequent allocation of resources to enable execute the necessary activities to ensure the identified goals and objectives are achieved (Johnson et al. 2017). Strategies can take various forms and vary depending on the intended objective. Such include competitive strategy where a business may adopt various actions to help create a distinct combination of value to help the institution gain a competitive advantage over competitors. Others may be implemented to help the organization meet the expectations of the stakeholders or address changes in the business environment. Since the goal of every business is to increase its profit, it is essential for businesses to understand the strategic model and levels of strategies that provide benefits in various fronts thus increasing profitability. The first level is the corporate-level that deal with the jurisdiction of business and how to create value addition in the respective business units. Business level strategy deal with the ability of the organization to compete with other institutions in the same market whereas operational level strategy depicts how the various business units help in implementing the strategic actions through strategic management of the resources (Johnson et al. 2017). The achievement of the strategies requires the input of managers at all levels although other organizations use the input of strategy specialists. Such specialists may include independent strategic analysts and consultants. Top managers contribute through formulating the goals and objectives while the middle and lower level managers are strategically positioned to identify the various challenges in the implementation of actions (Johnson et al. 2017). Feedback and cooperation between the two are essential to ensure effective and efficient achievement of the strategic goals. When implementing a strategy, it is crucial to analyze it's the economic, social and psychology perspective. Such can be achieved by considering the context, content, and process of the strategy under study (Johnson et al. 2017). Strategic lenses can be used to carry out an effective analysis by gathering deeper insights into the issue. It views strategies as design, experience, variety and discourse. The exploring strategy model is split into three distinct factors that include strategic position, choices, and actions. Strategic position Understanding the strategic position of the business considers the environment, capability, purpose, and culture of the business. The position of the organization can be defined by understanding the various layers that make up the business environment. The strategic groups and marketing segments that influence the business are located in the inner layer, whereas industrial factors and the microenvironment are located in the middle and outer layers respectively (Johnson et al. 2017). Starting with the outer layer, factors in the macro-environment that determine either the success of failure of the business can be determined using the PESTEL analysis. PESTEL is made up of initials of the political, economic, social, technological, ecological and legal factors. Political factors influencing the strategy include the taxation rates, government regulations, subsidies and regulations to foreign trade through trading blocs (Johnson et al. 2017). Economic factors include the interest rate, rate of unemployment, and the exchange rates. Social factors that determine the success or failure of a strategy may include the age bracket, change in lifestyle and cultural determinants whereas technological elements include internet accessibility, use of machinery in production (Johnson et al. 2017). On the other hand, ecological factors include the production of waste, pollution, global warming and climate change. Lastly, legal factors include such elements as the employment law, and health and safety regulations (Johnson et al. 2017). Since change is unpredictable and unavoidable in a business environment, it is essential for managers to identify the key drivers for change. PESTEL analysis can be used to identify these drivers. They can also be used to create alternative scenarios depending on the key drivers. The Porter's Five Forces Framework can be employed to identify the attractiveness of an industry (Johnson et al. 2017). One of the forces is the existing rivalry between competitors where the higher the degree of rivalry, the more unattractive is the industry. Threats to new entrants, substitutes, bargaining power of buyers, are the other forces used to determine the attractiveness of a business. The applicability of the porter's five forces is limited in converging industries and complementary institutions. It is also challenging to define the right industry. Another tool that can be used to identify the strengths and weaknesses of an organization is the value net through locating opportunities as well as competition (Johnson et al. 2017). Strategic group analysis helps the organization to take advantage of opportunities in the inner business environment. It assesses the difference in characteristics including the activities and resources to help managers understand opportunities, competition, and barriers to changes in strategies in the industry. Market segmentation can also be used to identify new market opportunities. The capabilities of the strategies can also be used to identify the strategic positioning of an organization by assessing the resources and competencies at the disposal of the organization that contributes to the achievement of long-term goals or competitive advantage in the long run (Johnson et al. 2017). An organization requires dynamic capabilities that can help it adapt to the changing market rather than redundant capabilities that inhibit change as the industry grows. Such can be attained by sensing or exploring, seizing and reconfiguring or renewal of capabilities. They need to meet the minimum requirements to compete in a given market by containing threshold resources and competences. After the identification of capabilities, they are evaluated on their contribution to competitive advantage by evaluating their distinctive resources and competencies. One assessment is based on their value, rarity, inimitability and organizational support (VRIO) (Johnson et al. 2017). They are diagnosed using various means such as VRIO analysis, activity mapping, SWOT analysis and value chain analysis to identify their strengths, weaknesses and value creation (Johnson et al. 2017). The managers learn various ways that they can employ to develop the strategic capabilities either through internal or external capability development. The other step in strategic positioning is expressing the purpose of the organization through the mission statement, vision statement, values, and objectives (Johnson et al. 2017). The purpose of the business depends on the stakeholder's interests. The corporate governance structure can be used to understand the influence the stakeholders has on the organization. There are two types of structures that include the shareholder model and the stakeholder model. Stakeholder mapping can be used to not only identify the interest of the stakeholders to a company but also measure their power. Sources of power within the organization include hierarchy, influences, control of a strategic resource and the possession of knowledge and skills (Johnson et al. 2017). For the external stakeholders, sources of power include internal links within the organization, their involvement in the processes of the organization and the control of a strategic resource such as money. Some of the common issues relating to the purpose of the business include the corporate social responsibility and the ethics of employees and managers. Strategic choices Strategic choices are made by considering the business strategy, strategic decisions, and strategy methods. The business strategy focuses on the position of the business in relation to competitors by assessing the generic and interactive strategies in the strategic business units. The business units can be identified on the basis of the market, in instances where they target similar customers, use same channels or even face same competitors, or on the basis of capabilities (Johnson et al. 2017). Generic strategies evaluate how businesses create additional value for the consumers in the various strategic business units when compared to the one offered by business units of a competitor. Ways through which organizations can employ generic strategies include cost leadership, differentiation, focus and hybrid strategies. Cost leadership involves an organization incurring the lowest cost and can be enhanced through low costs of inputs, using products design and taking advantage of economies of scale (Johnson et al. 2017). Differentiation focuses on making the product or service unique comparing them to those offered by the company. Focus strategies customize its products or services to meet the need of an identified segment. Interactive strategies involve reacting to changes implemented by the competitors in terms of the price and perceived quality. Such actions do not necessarily translate to price wars but rather differentiation, mergers, and acquisitions. Organizations can employ interactive strategies through hyper-competition where the market is viewed as a continuous disequilibrium, cooperation with competitors or game theory, where the competitors' actions and impacts are considered in devising the business strategy (Johnson et al. 2017). Strategy in action After the strategy is implemented, it is important to assess whether the strategy serves the intended purpose. Such an assessment of the outcomes can be done in terms of economic outcomes and the organizational effectiveness. Measurement of the economic performance can use three main dimensions that include market of the products, profitability and the financial market. The market of the product can be done by assessing the growth in the sales or the change in the market share whereas the profitability can be evaluated by analyzing the return on capital employed and profit margin (Johnson et al. 2017). The performance of the financial market can be assessed using such tools as the price of the shares. On the other hand, organizational effectiveness measures the efficiency of the internal operations adopted by the organization and may be employed using such tools as the balanced scorecard. It evaluates such crucial aspects of an organization such as the growth in sales or profitability and the change in performance over time. Once the performance is measured, a gap analysis is done to compare the outcomes with the desired performance. The process is crucial since it helps identify challenges in the performance as well as offering direction to the changes of strategy required to steer the organization towards achieving the set goals (Johnson et al. 2017). The bigger the gap the bigger the extent of change is needed such as transformational changes. The strategic options available to steer the organization towards achieving its desired goals are evaluated on the basis of suitability, acceptability, and feasibility to deal with the complexities associated with performance analysis. Suitability assesses the threats and opportunities facing the organization by using such techniques as ranking, decision trees, life-cycle analysis and screening through scenarios (Johnson et al. 2017). Acceptability assesses the perception of the stakeholders towards the performance outcomes considering whether it addresses their expectations. Elements that determine the acceptability include risk, returns and stakeholders reactions. Feasibility assesses the applicability of strategy and whether the business has the capabilities to ensure its implementation. Feasibility takes into consideration the financial and human resources and how they can be integrated to achieve the desired objectives (Johnson et al. 2017). Works Cited Johnson, Gerry, Richard Whittington, Kevan Scholes, Duncan Angwin, and Patrick Regner. Exploring Strategy: Text and Cases. Harlow, England: Pearson, 2017. Print. Bottom of Form Read More