Major Issues Faced by Managers in the Context of Strategic Management - Essay Example

Strategic Entrepreneurship Contents Introduction 2 Discussion 3 Major issues faced by managers in context of strategic management 3 Conclusion 8 References 9 Introduction Entrepreneurship and strategic management are aligned towards creating wealth and value. Entrepreneurial approach contributes toward efforts of a firm in order to create wealth and value so as to explore opportunities in the industry. On the other hand strategic management contributes toward wealth and value creation that forms competitive advantage of a firm which helps to compete successfully in the industry. It can be stated that both the concepts are related to growth of the firm and creating customer value. Strategic entrepreneurship enables a firm to deal with dual challenges with the support of competencies possessed by a firm. This form of entrepreneurship encompasses advantage seeking and opportunity seeking behaviour which benefits an organization for long run. Collaborative innovation is a foundation for strategic entrepreneurship. In today’s competitive world it becomes important for firms to seek continuous innovation and generate new ideas. Sustainability in intense competitive industry makes it necessary for firms to give more importance to teamwork and promote collaborative innovation approach. However strategic management comprises of certain issues which are faced by managers in due course of adopting such concept. Discussion Major issues faced by managers in context of strategic management Corporate entrepreneurship and strategic entrepreneurship can be defined as an approach that helps to create wealth and value in organization. A typical example of such entrepreneurship can be observed in research and development department of an organization that creates value and supports functional department of a firm and even provides value to the end users. The major intention of such form of entrepreneurship is to create competitive advantages and then exploit them so as to stay competitive in the market place. Strategic entrepreneurship and corporate entrepreneurship as described by Hitt, Ireland, Sirmon, and Trahms (2011) enables a firm to utilize its capabilities and knowledge in the present environmental condition as well as exploring future opportunities through enhancing capabilities as well as application of new knowledge. Novelty and flexibility are considered to be the two most important elements that describe such form of entrepreneurship. This approach even states that there needs to be a balance between exploiting and exploring by a firm. It is partially dependent on the type of competitive environment of an organization. The input-output-process model of SE describes the resources required for strategic entrepreneurship along with its probable outcomes. Figure 1: Input Output Process Model of SE (Source: Hitt, Ireland, Sirmon and Trahms, 2011) As per figure 1, the inputs comprises of environmental factors, organizational resources and individual resources. The environmental factors majorly are associated with external forces that positive or negatively affect an organization. These forces can be related to industry or may be a part of external conditions which is linked with business operations. Organizational resources can be stated as financial, human or operational resources which help a firm to compete with other players in the industry. Leadership and culture can also be regarded as organizational resources which facilitates proper structuring of an organization. Individual resources consist of capabilities and knowledge possessed by an individual along with the financial arm so as to enhance smooth running of the business. The process factor of the model denotes resource orchestration which states actions taken by leaders in order to effectively manage overall resources. It can also be stated as a mechanism through which proper resource allocation is done to leverage capabilities and create high customer value. The output of strategic entrepreneurship is aligned towards developing competitive advantage and creating wealth as well as value for the firm. There are other benefits that are produced by strategic entrepreneurship such as societal benefits, organizational benefits and individual benefits. In societal context such entrepreneurial approach facilitates economic development and growth (Hitt, Ireland, Sirmon and Trahms, 2011). As strategic entrepreneurs and corporate entrepreneurs satisfy customers they even gain self-satisfaction which helps them to grow and enhance their qualities. In terms of organizational benefits such approach enables a firm to witness advanced technology and innovation that contribute towards long term sustainability of the organization. In global perspective the major challenge that is faced by managers is to develop strategies which can help to sustain business. Strategic management can be defined as a concept that enables a manager to set goals and objectives for the firm, design strategies so as to achieve those goals and allocation resources in a manner that it helps to implement strategic plans. The first major issue as defined by Rauch, Wiklund, Lumpkin and Frese (2009) that managers face is in relation to entrepreneurial orientation and business performance. In certain scenario it becomes difficult for managers to analyze best strategy for a particular situation and then measuring its performance level. Differentiation strategy that is applicable for business environment of a particular organization may be disastrous for another firm (Rauch, Wiklund, Lumpkin and Frese, 2009). This issue can be illustrated with a real world example of a multinational firm Coca-Cola. The company had adopted reformulated strategy in order to compete with Pepsi whose beverages were being preferred by consumer market. This strategy failed as management failed to analyze brand position of the two firms. It is often in the mindset of managers that a strategy which has made an organization successful would even prove to be fruitful for their own firms. Managers are even not able to determine the transition point in specific cases when they need to change their strategies. This results into major loss for the firm as it happened in the case of Coca Cola, in order to meet customer demand they compromised with their product composition which negatively impacted their brand image. In strategic management process there is always change associated with the process. This change is often a big issue for the managers as they are not able to effectively involve all the team members to accept such change (Morris, Kuratko and Covin, 2010). The change management process requires managers to be patient and visionary. Collaborative innovation according to Ketchen, Ireland and Snow (2007) which is related to innovation creation across boundaries of a firm in terms of sharing of expertise, ideas, opportunities and knowledge to some extent becomes impossible for managers to achieve due to such change in the system. Even in the current scenario in organizations the issue remains to align all the employees with the strategic change process (Ketchen, Ireland and Snow, 2007). The other concept that is generally used by managers in strategic management approach is diversification. Often companies like Tata group in order to earn above average returns adopt diversification strategy that may be related to business or unrelated to current business. Like for instance Tata group is in different business segments such as consumer products, automobiles, financial services, etc. The diverse business portfolio enables the firm to acquire high profit margins as well as it suffers loss in certain segment. There arises an issue for managers regarding whether to expand into different business areas or to concentrate on single one. In most cases if appropriate decision is not taken in this context then it results into failure of business operations (Wickham, 2006). Organizations are often faced with various challenges and in such scenario it is duty of managers to strike a balance between information gathering capability (IGC) and information processing capability (IPC) of the firm. The firms which possess low IPC in comparison to IGC as per Sleptsov and Anand (2008) are not able to take effective decisions in terms of exploring opportunities or mitigating risks (Sleptsov and Anand, 2008). This has been observed in case of a famous retail chain Morrison’s which faced huge loses as it was not able to cope up with the changing conditions of the industry. The company was able to gather information regarding new trends in the retail industry or strategies that were being implemented by other players but was not able to utilize information for future strategy formulation. This is an issue that is being faced by managers as they often possess sufficient information but are not able to analyze that information appropriately to develop solutions for external challenges (Bornstein, 2007). Lack in communication also creates problem for managers. As strategy management requires participation at all levels that is either through top down approach or bottom up approach. This in turn demands for two way communication so that organizational members can clearly understand the need for strategy modification or strategy change. When a common goal is established it becomes easier for managers to communicate action plan with the team and indulge all of them towards achieving common goal. However in certain cases this communication platform is not built between managers and employees. It is a major issue for managers as setting strategies is not their ultimate goal but they need to encourage team members to participate in this innovation. This form of participation can only be enhanced through incorporating two-way communication approach where opinions and views of team members are given equal importance. These set of issues as stated by Baron (2007) majorly arises as managers at times are not able to expand their cognitive and behavioral scope. There is no such proper alignment established between the two distant factors which make it difficult for managers to handle situations evolving in strategic business. Apart from all the above mentioned issues there is another critical aspect that affects operation of a manager that is proper allocation of resources. In strategic management it becomes essential to allocate resources properly so as to maximize the returns. However resource allocation is not an easy task as a firm undertakes various operations and possesses limited resources. At times financial resources are the major constraint that is witnessed by managers due to which best strategies cannot be implemented in the system (Baron, 2007). In context of manufacturing industries lack of operational resources restricts a firm to outperform in the industry. This resource deficiency differs from one business to another but creates an issue for the managers as they are not able to give their organization a strategic direction. These issues are in relation to real world companies that affect business growth and even bound managers to perform well. Conclusion As per the above discussion it can be stated that strategic entrepreneurship is a concept that allows creating wealth and value for an organization. The real time companies included in the discussion illustrates some major issue that has been faced by management in handling strategic issues. Managers are often subjected to wide range of issues in context of strategic management. These issues are at times related to team members or are external to the firm which cannot be controlled by managers. However the major issue that they experience is encouraging all team members to facilitate collaborative innovation in order to reach common goal. IGC and IPC are two essential elements that disrupt work process of managers. At certain scenario handling team as well as maintaining balance between IPC and IGC seems to be impossible for management. This eventually leads to failures or inappropriate strategic development. In highly competitive world it becomes important to incorporate strategic entrepreneurship as it helps a firm to make decisions on the basis of external environmental conditions. References Baron, R.A., 2007. Behavioural and Cognitive Factors in Entrepreneurship: Entrepreneurs as the Active Element in New Venture Creation. Strategic Entrepreneurship Journal, 1, pp.167-182. Bornstein, D., 2007. How to Change the World: Entrepreneurs and the Power of New Ideas, Updated Edition. New York: Oxford University Press. Hitt, M.A., Ireland, R.D., Sirmon, D.G., and Trahms, C. A., 2011. Strategic Entrepreneurship: Creating values for individuals, organizations and society. Academy of Management Perspectives, 1, 57-75. Ketchen, D.J., Ireland, R.D., and Snow, C.C., 2007. Strategic Entrepreneurship, Collaborative Innovation, and Wealth Creation. Strategic Entrepreneurship Journal. 1, 371-385. Morris, M., Kuratko, D., and Covin, J., 2010. Corporate Entrepreneurship & Innovation. USA: Cengage Learning. Rauch, A., Wiklund, J., Lumpkin, G.T. and Frese, M., 2009. Entrepreneurial Orientation and Business Performance: An Assessment of Past Research and Suggestions for the Future, Entrepreneurship Theory and Practice. 1(2). 761-787. Sleptsov, A., and Anand, J., 2008. Exercising Entrepreneurial Opportunities the Role of Information-Gathering and Information-Processing Capabilities of the Firm. Strategic Entrepreneurship Journal, 2, pp.357-372. Wickham, P. A. 2006., Strategic Entrepreneurship. UK: Financial Times Prentice Hall. Read More