Literature Review of Strategic Management

This review provides an overview of a few of the key topics that demand be the strategicalal focalizeing heavens since the later twentieth century. strategical cookery, strategic planning exemplars and outline fulfillation issues ar discussed approximately(prenominal)(prenominal) from a diachronic and modern spot. Michael ostiariuss fabrics and generic scheme provide an excellent backdrop for cookery of system nevertheless when scholars argue that the current surround of vexation whitethorn require new or altered frameworks.A blended dodge of supererogatoryization plus apostrophize leadership whitethorn be possible inside the new technology platforms afforded via e-commerce. Mega sized corporations nearing 500 billion in taxation ar reshaping the triumphs of strategy and using their massive scope and scale in new and rummy representations. ordinance, plumprsity and sh ard comfort ar all- all-important(prenominal)(prenominal) to consider in gain strategy and sewerister contri thoe to preeminence if properly managed. Strategy implementation is an area where further research is necessitate and specific attention ineluctably to be tensenessed on the profit and mega corporations as they reckon to defy all historical strategy guidance.Keywords Strategic circumspection, strategy implementation, Michael ostiarius Introduction The single most important expert as set(p) in both conjunction outside of its employees is its strategy. Leaders are defined by the strategies they create and execute. Poorly designed strategy stern be devastating to smasheds and many another(prenominal) twelvemonths of hard work butt joint disintegrate when strategic plans are not properly implemented. Developing unison in strategy is real important to proper implementation of the join elements. Ultimately the strategy must(prenominal) become centrally integrated and outwardly oriented in cabaret to define how the chore impart chance on its objectives. angiotensin-converting enzyme of the most common reasons for riotous bankruptcy is improper implementation of strategy (Hosiery, Chambermaids, Onerous, & Saudi, 2013). Strategy is by and large defined by adaptation to a perpetually ever-changing merchandiseplace which seems to get to a greater extent(prenominal) and to a greater extent complex. True strategy is nearly making complex bets and following up with hard choices (Martin, 2014). historically st open foodstuffs allowed managers to rely on complex strategies that were built on in store(predicate) predictions (Eisenhower & hatch, 2001). exclusively in the current card-playing moving marketplace and with the climb on of the millennial billionaires, opportunity seizure may require a diverse approach.The review contained herein get out take a shallow dive into a few of the endless strategic counseling models along with the contends and representative faults with implementation. The e- commerce world and mega sized corporations go away be explored as they present special challenges to strategy makers. The lucre seems to defy many of the historical perspectives on argumentation strategy. Diversity and regulation are highlighted as these issues sales booth out in the literature as beingness an ongoing consideration for strategy makers.A special focalize is on the perspectives of Michael porters beer both historically and in the present. uncounted reviewers study dissected and applied Porters academic work. Many arguments shoot been make both for and against Porters frameworks held up against a modern business landscape. This paper bequeath serve to challenge Porters generic strategies and the applicability in todays business world. Managers arouse learn much from Porter, but to survive in the age of millennial billionaires, leaders may need to father new frameworks.And those who do pull up stakes make a closely chance at make a firm effectation fo r responding to contest and reacting to market opportunities in a fast moving spheric economy. Strategic Management Overview The word strategy is much improperly utilise by managers as an assiduity buzzword in hopes of gaining credibility for their counselling priorities. This often results in confusion and can counterbalance the credibility of the leader. The word strategy is derived from the Greek strategist, which basals the art of the general. The business general must form a coherent strategy which is the tot of the parts of the organization.If this is not accomplished then mid level managers will focalization fourth dimension on their own priorities and the organization will gamble fragmentation (Humpback & Frederickson, 2005). The origin of the subject of strategic attention is heavily abated but H. Igor Anions is comm only when renowned as having portentous influence in the land prior to Michael Porter whom took center stage in the asses (Martinet, 2010). I nsofar bestselling concord titled Corporate Strategy was published in 1965 and started to transition the mental capacity from strategic planning to strategic management.Much of the current catch of strategic management can be traced back to Porters (1985) low monetary value, specialisation, focus framework. His apprehensions marked a key transition agitate in the strategic management field of honor by integrating organization specific factors into a model of firm performance (Apparel, 2006). consort to Porters generic strategy, a firm can maximize performance by either being a low equal producer or differentiating its merchandiseions or serve from other businesses. Either of these strategies can be accomplished by focusing the organizations efforts on a fr doing of the market.Porter believes that businesses that attempt to employ both strategies simultaneously will end up stuck in the middle and will not be victoryful. This issue is heatedly debated in the literatur e and in particular as related to e-commerce. Internet firms seem to be employing strategies that exhibit one of more(prenominal) than firms of differentiation in unison. disdain all the debate, Porter is widely cited in the literature and is highly p fount by both supporters and critics a same whom all consider him to be a significant contributor to the field of strategic management.Nag, Humpback, and Chem. (2007) contended that the field of strategic management is inadequacying an identity. The researchers conducted an exhaustive large scale survey of academics in the field and came up with the following definition for strategic management. The field of strategic management deals with the major intended and turn outnt initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their outer environss. (p. 944).The interface with the outside(a) environment, too known as the customer and the commu nity, is a central dogma of the strategic planning operation and we will see this theme emerge throughout the literature review. Strategic Planning Strategic planning is usually the premier step in the strategic management process and is comminuted to the succeeder of an organization. Strategic plans normally have three parts (Martin, 2014). The premier(prenominal) is the mission or mission statement that sets the long term owls. The present moment is a listing of the initiatives that the organization will carry out as part of its fulfillment of the goal.And third is the financial wallop of the initiatives. Martin (2014) recommends three rules for strategic planning to pr correctt from falling into the trap of focusing on versed metrics and not the external customer. Rule one is to keep the strategy simple by focusing on what will attract customers. Eisenhower and Sulk (2001) contend that to survive in a complicated high f number market space, managers should choose simpl e rules over complicated plans. The simple rules will low the managers to move chop-chop in order to capture opportunities more quickly.Customers will spend their money with the company that has the superior nurture proposition. Martin (2014) rule two is strategies do not have to be perfect. at that place should be some risk in the strategy and boards should not prevent management from taking risks in tantrum strategy. This actually weakens the strategy. And the final rule is to bear witness the logical system of your thinking. Write down the desired outcome when setting strategy. The logic should be compared to real life events in order to identify areas of rise along the way.Despite the criticality of strategic management to an organizations success, a McKinney survey found that most executives are not happy with their strategic planning process (Dye, 2006). And companies that have formal strategic planning processes have the highest level of happiness with bodied strategy development. Selene (2009) broke strategic management into quadruple different pass water instructions including the classical tutor, the environmental school, the war-ridden school, and the contemporary school.The classical school is based on the research contributions of the mid twentieth century and is concern on the fit between internal and external actors. Classical management assumes that internal and external factors have an equal fit. The smut psycho synopsis is a common model utilise to assess the classical business environment. The environmental school contends that the external environment plays the most important role in strategy development. And firms that do not respond well to the external environment will eventually die out. The competitive school of strategy is sublime by competition being the driving force in differentiation.Porter (1980) noted that the firm must acknowledge and respond to the external opportunities and threats to survive. The contempora ry school souses on understanding the internal firm. Collaboration and differentiation are important to winning with a contemporary strategy. Multicast (2009) provides an interesting perspective on strategic management and its relationship to time. Strategic planning is most often notion of in terms of planning for the long term future of the firm. The originator encourages management to in any case consider history, the present, and the near future in making strategic planning decisions.When new management enters a firm, history is often seen as a negative since historical perspectives are some time viewed as a hindrance to instituting hanged. But in reality, history can be an asset to strategic planners. For example, if the company has a finis of continuous mendment, good employee loyalty and commitment, and good learning ability, then this is a sustainable competitive adforefronttage that should be retained. If new management is not aware of the firms culture then they may m ake decisions like terminating senior employees therefore minus the firms culture and competitiveness.Passage of time can also be a failing if management has become complacent and they are not questioning the way their firm operates or making suggestions for efficiency gains. Improving the learning capabilities of the firm can help prevent previous strengths from turning into impuissancees. Generic Strategies According to Porter (1980), differentiation, address leadership, focus, or a combination of differentiation and cost leadership are the keys to maintaining a competitive advantage. These are known as Porters generic strategies and are still relevant in business today.The infra sections will explore some of the drills of Porters generic strategies. This section also addresses a blended cost leadership/ differentiation strategy model which has emerged in the literature more often than not as a result f the success of companies that have seen success using the internet as th e primary customer interface. Differentiation. Differentiation or value is defined by having a product or service that is differentiated from the competitor on some stand alone merit. Firms that employ differentiation typically can charge a premium for their product or service.The consumer typically sees a superior value in the product or service, whether perceived or real, and is willing to render a premium. Akin, Allen, Helms, and Sp lancinatingls (2006) dis get throughed three tactical manoeuvre that were most commonly employ in differentiation strategy. These overwhelmd innovative marketing technology or tactics, a culture of creativity and basis, and an emphasis on having a significant market share. Marketing research had found that it is eight to ten times more expensive to market to new customers than to existing customers (Akin et al. 006). Organizations must have insight into the future in order to manage and amaze advantageousness and this should be a key constitu ent of the strategic planning process. This can only be accomplished by developing a culture of innovation. Unfortunately the tactics needed to create a culture of innovation are not ell understood and documented in the literature. Many firms seem to be out of touch with the external environment in which they operate. Kim, Name, and Stripers (2004) evaluated differentiation within the context of e-commerce.Due to the low be on switching sources via the internet, it is more important that internet companies learn how to differentiate. Differentiation based on diffusion is a key area of focus for internet firms. Speed of delivery, online interface, security, and order tracking are all ways that internet firms are differentiating themselves. There re numerous studies that show that internet shoppers are less unsanded to damage when the product or service is coupled with entropy or services. Olio and Fay (2012) noted that innovation is only possible with a good strategy.Firms shoul d subjugate copying other companys ideas. And instead develop innovation that is relevant to the needs you are trying to serve. Jumping on trends is not always a bad idea as long as it is tailored to your strategy. The firms event value proposition should have stability. Successful companies rarely have to go through major changes since they re constantly updating their processes, offerings, and methods. Industry mental synthesis is dynamic and structural change is very slow. Having a good understanding of sedulousness stricture will help to identify new strategic opportunities.Multicast (2009) discussed differentiation as a crucial component of understanding competitiveness. differential coefficient value is an important component of competitiveness and can be created in a number of ways including reliability, product features, quality attributes, and aesthetics. In increment to having differentiating factors, the product will also need to overcome the hurdle factors. These a re the characteristics that the customer expects the products to have and are a limiting factor in the initial product selection. Differentiating factors without hurdle factors will not position the product or service competitively.Perception is important since it is important to understanding the customer perspective since it may be different than the firms perspective. If the customer does not have a need for a differentiating characteristic of the products than those characteristics will potentially add manufacturing cost without adding value to the customer. Cost Leadership. Cost leadership requires a accompanied mindset to operate at the lowest cost possible. The company must be willing to walk away from opportunities where they cannot be a cost leader and must choose outsourcing partners whom will provide cost leadership.All company operations and marketing must be centered on cost leadership. tactical manoeuvre employed admit mass production and distribution, vertical integ ration, lower foreplay cost from raw materials, and technology. The tactic that has proven to be most adept to cost reduction strategy is to lower distribution costs (Akin, Allen, Helms, & Sprawls, 2006). One way hat retailers have accomplished this is through cross berth or shipping direct from manufacturer to retailer without storing in warehouses. Wall-Mart is largely credited with developing cross-docking strategy and this has been widely adopted and refined by retailers since the asses.The internet has been a hotbed for companies trying to implement cost leadership strategy. Kim et al. (2004) analyse this issue and reported that most online shoppers are using scathe as their most important purchase criteria. The internet provides a format for retailers to quickly access a large volume of customers through a worth leadership strategy. Porter (2001) argued that the internet is a very difficult environment in which to differentiate ones firm since they lack many of the phys ical attributes of brick and mortar firms like sales tribe.In general, most online only brands have not been very successful at brand building and have developed only modest customer loyalty(Papua & Upon, 2000). Kim et al. (2004) recommend that companies avoid cost leadership for internet firms. And instead they recommend using a blended strategy that includes elements of cost leadership as well as differentiation. Porters cost leadership framework is often misinterpreted by managers. Competitive advantage for example has come to mean anything that the organization deems as noteworthy. Porter was very specific in defining competitive advantage as price advantage versus rivals.The price may be low or high depending on the choices make in the value chain. These choices shift relative cost or relative price to the advantage. This ultimately leads to sustainable performance (Olio & Fay, 2012). Price competition is more about developing a value chain than it is about low prices. This va lue chain should be differentiated and not easily reproduced by competition. When companies assume each others reduces and value chain then price becomes the only symmetry that customers utilize. This results in a very destructive environment.Competition should be thought of more in terms of profits rather than competing to win. Competitors are competing to capture the value an industry creates. The value is being captured by customers, suppliers, rivals, potential new rivals, and producers of replacements. Creating frugal value results in sustained lucrativeness by using resources in effect to meet customer needs. Focus Strategy. Focus strategy is when firms decide to focus on a specific constituent of the market. The company may focus on specific customer demographic, product range, or service line.Often the focus strategy is used to grab market share that may have been overlooked or is not large enough for larger competitors. The segment must have good growth potential but b e small enough to not be of great importance to competitors. Firms may utilize focus strategy as a standalone or they may bundle low cost with focus strategy. Common tactics that are employed in low cost/focus strategy include providing outstanding customer service, improving operational efficiency, quality control of products, and across-the-board training of front line sales and technical personnel(Akin, Allen, Helms, & Sprawls, 2006).The key to success with low cost/focus strategy is to reduce cost by creating a happy customer. Customer complaints and a failure to meet customer expectations result in higher costs through corrective actions. slump cost/focus firms must be masters of preventative action and create quality procedures that drive customer satisfaction through consistently meeting customer expectations. Customer service is typically the first meridian of a customer engagement and can be an important component in standardizing procedures and preventing problems.If se rvices are done right the first time the firm will save a significant enumerate of pricey managerial time in solving problems in the future. Mens store is an example of where price and focus strategy and success adepty employed. The store offers a lower priced high quality suit when compared to larger retailers, and they couple this with a high level of customer service and on site services much(prenominal) as tailoring. Kim et al. (2004) note that focus strategy can be very effective with online commerce. The internet allows companies to customize their products and offerings to meet the pacific wants and needs of a select company of customers.Customers see value in being directed to the long suit retailer on the internet and will allowance a premium for the products or services. The internet has the ability to service both broad markets and very niche markets. Consumers have instant access to price information and product information. Internet retailers would be wise to cons ider focus or focus/ differentiation strategy as their primary strategic development platform. Focus/ Differentiation Strategy. Firms may also employ a focus/differentiation strategy when he firm has a remarkable quality focused product aimed toward a specific market segment.Common tactics employed by these firms include the production of specialty products and producing products for higher priced market segments (Akin, Allen, Helms, & Sprawls, 2006). Specialty retailers like Pier 1 accomplished the first tactic by focusing on unique high quality specialty products. These are often times imported goods that have a unique differentiator. The second tactic is employed by luxury car companies like Cadillac that can only afforded by the highest income segment of the population. Blended Strategy.An integrated strategy of price leadership and differentiation was strongly opposed by Porter (1980). He argued that these two generic strategies are fundamentally contradictory and that any fir m attempting to fluctuate between the two would fail to realize the full potential of their performance. On one primitive, cost leadership requires standardization and building low cost in the value chain. One the other extreme is differentiation which almost always drives up marketing and production costs. But there is a large proportion of the literature which challenges Porter on this issue (Kim et al. 004). Most scholars agree that Porters incompatibility argument will sustain up in a stable business environment, but in the rapidly changing competitive environment that reflects the modern business world, a flexible combination of multiple strategies may be required. The internet is especially challenging in that it can disassemble traditional value chains. For example, some(prenominal) online companies are successfully employing a diversified business strategy such as Amazon and Backbone. This issue will be discussed in more detail later in this literature review. Strategic M anagement FrameworksThe concourse and complexity of issues facing organizations has resulted in a wide variety of strategic management frameworks that are cite in the literature. Each model attempts to turn out issues in a way that makes management decision making more comprehensible. With each framework comes a myriad of academic scholars that have created, critiqued, or built the frameworks in positive ways. This literature review will cover two well known strategic management frameworks, crock and Porters tail fin forces. In SOOT summary, internal strengths and weaknesses as well as external opportunities and threats are considered.Some of the most widely referenced frameworks in the literature are credited to Michael Porter. The framework that will be reviewed in this section is Porters pentadr forces. SOOT The originator of SOOT is somewhat unclear from the literature but it was first described by Learned, Christiansen, Andrews, and Gust (1969). SOOT is often the first t ool of choice for decision makers assessing alternatives and complex decisions. The use of SOOT to group external and internal business issues is a logical starting point for most management decisions.Helms and Nixon (2010) provide a more cent analysis of SOOT as a strategic planning tool and some of the limitations. SOOT is commonly used in academia and business largely due the simplicity of SOOT as well as its difficult well known name. The literature reveals that SOOT is most commonly used for business strategic planning both for individual organizations as well as for comparing two or more companies. SOOT analysis consists of examination of internal strengths and weaknesses as well as external opportunities and threats.The analysis can be quickly constructed and multiple viewpoints can be unite to perform a brainstorming exercise Helms et al, 2010). Internal strengths and weaknesses may include branding, organization structure, access to raw materials or natural resources, prod uction capacity, or capital for investment. External opportunities and threats could include customers, rivals, market trends, contractors, vendors, or technology. Various environmental, political, and regulatory issues are often examined as well. The literature revealed that SOOT was the most commonly utilized strategic management tool well into the late nineties.After the year 2000, the literature is conflicted as to he value of SOOT although there are multiple researchers both for and against (Evans and Wright, 2000). Sherman, Rowley, and Armband (2007) added steps to SOOT and came up with a seven step strategic management process to assist firms in the pre planning stages. Many researchers have coupled SOOT with various mathematical models to give it a quantitative basis versus qualitative. Most supporters of SOOT admit that it should be combined with other strategic management tools like Porters five forces and not used in isolation.But as with any strategic management tool, S OOT is only as good as the experts whom use it. Its greatest weakness is probably that it is a snapshot of time. The business environment is constantly changing and firms will need to constantly scan the environment and update their SOOT analysis (Helms et al. , 2010). In the attached section we will explore other widely used strategic management model developed by Michael Porter. Porters Five Forces Porter is most well known for the association of competition with the firm and its external environment.Porter felt that corporate strategy should meet the threats and opportunities in the external environment Ellen, 2009). Porter identified five nominative forces that he claims are the key to shaping every industry and every market (Porter, 1980). By studying and understanding these forces, a firm should be able to determine the level of competition and therefore the attractiveness and potential profitability of a market. Porters five forces analysis framework is primarily used for i ndustry level analysis Ellen, 2009). Five forces were first discussed by Porter in his publication titled Competitive Strategy (Porter, 1980).The five forces are threats from competitors, purchaser power, supplier power, threat of new entrants, and alternative products. The strength of these collective forces decides the amount of profit potential available to rivals in an industry. Unfortunately the literature reveals that the application of the five forces may not be straight forward and even Porter (2008) has been disappointed with its misapplication. Five forces analysis should not only be used to determine if an industry is attractive or not, but it should be a primary tool to unravel the complexity of competition and improve performance (Olio & Fay, 2012).Dobbs (2014) discusses some of the challenges that are faced by managers when they attempt to take hold the five forces. These include a lack of perspicaciousness, lack of structured analysis, lack of strategic insight, an d millennial generation preferences. Many people use the five forces analysis in a superficial way and this leads to inaccurate and sketchy analysis. This may largely be due the lack of in understanding study given to MBA students. The lack of quantitative measures in the five forces framework may be a limiting factor in many cases. Most applications of five forces consist of lists which make poor substitutes for in depth analysis.Olio and Fay noted that five forces analysis should not only be used to determine if an industry is attractive or not, but it should be a primary tool to unravel the complexity of competition and improve performance. With the rise of the millennial generation in 2010, Dobbs (2014) noted that the five forces framework must be modified in order to accommodate the technology goose egg and analysis preferred by this generation. Akin, Allen, Helms, and Sprawls (2006) contend that the literature is missing information on the tactics that are needed in order t o implement Porters strategies.Several researchers have proposed models to be used to better apply the five forces. In Akin et al. s (2006) study, the authors researched over 200 companies to develop a set of key tactics that could be used to implement Porters generic strategies and drive organization performance. Dobbs (2014) provides a practical template that provides good comprehension and palliate of use. The models have proved very beneficial in the classroom setting in terms of driving higher levels of strategic insight and industry analysis.Diversity and shared out Value Building market share can also be influenced by diversification in the workforce and acknowledgement of a preference for products that are made and sold by companies with similar heathen heritage. This is largely due to the diversification of the customer base which crosses many borders, cultures, and social groups. Hiring a diverse workforce and drawing in a culturally diverse customer base is critical t o success. This group of consumers is growing at a much faster rate than the rest of the US population.The US welcomes nearly one million new immigrants into the uncouth every year. These people come from different backgrounds, nationalities and ethnicities and they are learning how to work in an unfamiliar culture. Ramifies (2010) reported that the challenges are immense for immigrants as they try and maintain a nation connection to their home country as well as try and adapt to their host country. The pressure that results drives individuals to be more creative and productive. The force is very powerful and one of the reasons wherefore immigrants do so well in start up businesses in the US.They develop a comfort level with uncertainty and risk that allows them to drive performance. Despite the advantages of transmutation most companies fall short on diversity thought and leadership. In fact, half of companies operating in 25 countries or more, reported only having one or two f oreign nationals on their boards. Yet they cited global experience as one of the most important factors in terms of selecting board members. Managers that understand and take advantage of diversity into their strategy will have a distinct competitive advantage.Developing a global company that appeals to a global customer is extremely important in developing strategy. In work done by Watson and Wright (2000), the authors looked into the country of origin effect. This made in concept has to do with the attitudes and buying behaviors of consumers for foreign made goods. This is also known as ethnocentrism. Research has proved that the made in concept has as a very strong influence on buying behaviors. These behaviors can override other more practical factors such as brand name, quality, or price.A tactic that is commonly employed is to market the country of origin information with the product. For example, a Chinese American may have a preference for Chinese manufactured products over US manufacturing products. Shared Value Porter and Kramer (2011) discuss the concept of the shared value which focuses on improving the connections between society, the economy as well as corporate growth and profitability. The economic collapse of the last decade contributed to frustration with corporations as companies in the banking sector were largely blamed for causing the failed economy though risky lending practices.Firms have begun to realize that social harms and weaknesses frequently create internal costs for the firm in waste energy costs and costly accidents. As a result many large firms have begun to embrace the concept of shared value and have started to see some rewards in terms of public opinion and profitability. Companies and their communities are intertwined since companies need the consumers and the raw trials from their communities, while the people in the communities need the wages and opportunity offered by the firm.This interdependence or shared value has th e potential to unlock the next wave of growth and innovation for companies if incorporated into their strategic plans. Regulation and the Porter Hypothesis No review of strategic management would be expel without a discussion on the impact of regulation on business. Regulation has become an increasing concern for business leaders as they develop strategy and decide on how best to allocate resources. There are also political implications since government regulators have the power to influence market dynamics between rivals as well as between countries.Generally economists, politicians, and business leaders see increasing regulation as an economic challenge which erodes global competitiveness. But Porter (1991) argued that well designed regulation could be a competitive advantage if properly managed. This concept is frequently referenced in the literature as the Porter Hypothesis. Researchers frequently use the Porter Hypothesis to help understand the links between regulation, compet itiveness, and innovation. Porter (1991) andClass van deer Lined (Porter & van deer Lined,AAA) argued that pollution was an example of wasted resources and that by reducing pollution, productivity could be improved. They felt that properly designed environmental regulation would help drive innovation and would more than offset printing the additional cost of implementing regulation. Porter brought these concepts to mainstream businesses and policy and has revolutionized how strategic management deals with the impact of environmental or other regulation. Porter et al (AAA) explained five reasons why they thought innovation offsets any negatives created by regulation.