Challenges for Strategic Management and Their Meaning - Coursework Example

Challenges for strategic management and their meaning

The emergence of service-dominant logic in the management philosophy, proposing tighter connections with customers, i.e. the co-creation of value presents numerous challenges to strategic management. The argument perceives goods as mechanisms of service provision, which implies that the exchange is more about the intangible and less of the tangible. Consequently, a customer only purchases a service flow, thus necessitating for companies to focus on selling the service flow and not the product per se. In the context of S-D, knowledge, the intangible resource is the primary source of wealth, and hence the source of competitive advantage as well. The implication of this to companies is the need for both collaborative and absorptive capabilities. While the former champions for the need to work with other parties in a truthful and symmetric manner while the latter espouses the need for absorbing information from the environment, and by extension from partners, much to the establishment of an edge in the industry.

The shift in strategic analysis from external to internal environments also presents strategic management discourses with immense challenges. From present perspectives, relying solely on the external environment does not support managers in making sound strategic decisions. For instance, reliance on Potter’s competitive positioning formula only focuses the company’s strategic attention towards the external environment, i.e. the industry. The limitation thereof implies that companies ought to adopt other analytic approaches such as the RBV and the Delta model, both focusing on the internal environment, the former on company functionality itself and the latter on the extended enterprise: the firm, the suppliers and the customers. Noteworthy with this multiple analysis is that it tends to be tedious, yet avails comprehensive, firm- and industry-specific results integral to determining the position and wellbeing of the firm.

The perception of customers and competition also varies significantly with different analytical tools. Potter’s, for instance, finds it better to have customers with lower bargaining power, while the Delta model argues that strategy design processes must centralize on the customer. The S-D logic described earlier propounds that the overall objective of a business is value creation, and with customers as co-creator, measuring the achievement of the set goals must be based on customer satisfaction. Competition, on the other hand has shifted from ‘war’ to cooperation and from between products to between the services offered. Generally, competition and customer perceptions no longer rely on contrasts but rather depend on working together. Cooperation is thus more productive compared to contrasting.

Perceptions on competitive advantage have also undergone immense changes over the past decade, and with it the emergence of new business challenges. Traditionally, competitive advantage was largely a factor of low costs and product differentiation. Presently, the major source of competitive advantage is value proposition, largely determined by customer value and co-creation. Different analytic methods also ascribe their discourses to different approaches, such as through market share or through product market share. For instance, while Potter’s approach attaches the source of competitive advantage to the value chain, others such as RBV ascribe the same to intangible knowledge based resources and capabilities. However, when considering the sources of sustained competitive advantages, more so with regard to intangible resources, the question of whether such elements as design, attitude and ideas as well as such capabilities as skills and knowledge available within the cultural environment amount to sources of sustained competitive advantages arises.

Strategic management has also to address issues pertaining to volatility, especially those related to environmental parameters. Volatility exists at both firm level and aggregate, and are often interrelated. Sudden changes in the individual situation of a company influence strategic decision discourses in a number of ways. For instances, changes in the prices of such materials as copper, nickel, etc. tends to force companies to which they form the bulk of raw materials to treat their prices as strategic parameters. Similarly, shorter product life cycles coupled with rapidly changing technological capabilities impacts on long-term decision making of companies. An example of these transitions in the business world is for instance, the fact that radio frequency coverage took 38 years to reach the fifty million access milestone. On the other hand, Facebook attained a similar feat in only two years.

Increased ambiguity in the business environment also impact on strategic management discourses. Decision making in the contemporary business environment tends to be more complicated due to constraints associated with the variables involved alongside their precise roles. Managers are thus facing increasingly complex situations never encountered before. For instance, the Eurozone crisis presented a situation where it was not clear the possible effects of short-term government interventions on mid- and long-term environments. In such cases, what makes strategic decision making the more difficult is the fact that managers often lack vital information relating to the probability and nature of future events. Coupled with causal ambiguity, the uncertainty associated with connections between actions and results, decision-making becomes a multifaceted process.

Approaches to development of strategic toolkit

Strategy development requires comprehensive understanding of both the internal and external environment of the business. Three important approaches are pertinent to the development of a strategic toolkit, namely content analysis of the environment, identification of strategic options and evaluation and selection of the most suitable options. In environmental and context analysis, of greater importance are resources, liabilities, strengths and weaknesses from the organization’s perspective. Also important are the core competencies i.e. unique strengths of the business. Regarding environmental analysis, the business must assess the existence of strategic opportunities, the likely future scenarios in the industry and their potential impacts on business undertakings. Noteworthy also is that the existing business undertakings must align with changes in the operating environment of the business, having in mind that anything that may compel a change in external conditions, often which is beyond the reach of the business would be catastrophic.

Stakeholder and customer analysis is another component worth paying attention to. While the preferred strategy may define the course of success in traditional terms, contemporary business practices define success from the point of customer satisfaction. However, in as much as customer satisfaction is important, the approach must also assess market segmentation, target subpopulations and the ease of their reach as well as the optimal market mix. Analysis of competitors and the competition environment is also of immense value. In such analysis, the focus must extend beyond comparing the company’s products with those of the existing competitors, but also include sublime competencies of competitors. The company must show proof of its ability of value addition, prospects of meeting the set objectives as well as direct contribution to organizational success.

Identification of strategic options is another important approach to establishing comprehensive strategies. Once the organization develops a fit to internal and external environments, the next task relates to defining clear advantages capable of meeting the set objectives. Here, such discourses as brainstorming options, examining threats and opportunities as well as availing solutions to existential and emergent problems are crucial. The organization can brainstorm, reverse brainstorm or starburst available options to decide on a project that offers better leverage towards competitive advantages. By examining threats and weaknesses, the company will be able to brainstorm additional ways of maximizing opportunities, minimizing threats or even turning threats into opportunities. Problem solving on the other hand must seek to establish the root causes of problems, then working around turning them into comprehensive leverages.

Finally, a detailed evaluation and selection of strategic options is integral. With a range of good projects worth pursuing, the focus should shift to strategic qualities of the projects, more so in light of pertinent contextual factors identified earlier on. In this case, such aspects as risk analysis, failure modes and effect analysis as well as impact analysis are crucial. Additionally, the company might find it necessary to conduct decision matrix analysis in order to assess both the financial and non-financial aspects of the different options, much to arriving at one that is both cost effective and fulfils such subjective qualities as team fit. Finally, the organization lays ground for the way forward, essentially by checking consistency of ideas with organization’s mission, vision and values. Often, many people forget to critical elements of projects during the strategic planning stage, hence the need to employ strategic ladder of inference in confirming the soundness of reasoning employed in the strategy development.

Developing strategic management plan

In relation to developing strategic management plans, the discourse has to consider three important steps: determination of the firm’s position, development of a strategy and plan building. In determining the position of the firm, one must consider the strategic issues worth addressing, industry and market data with the objective of identifying market opportunities and threats, customer insights i.e. present satisfaction and possible future demands, strengths and weaknesses associated with employee output as well as conducting a comprehensive SWOT analysis. The outcome of this assessment, rather the mission statement, is to enable the firm establish a link between performance of some social functions and the execution of specific objectives and targets integral to the organization. While profit may emerge as the all-important goal, especially with respect to business survival, the analysis must ensure that the business is in a position to fulfil a specific social function.

Next involves strategy development, through which the organization determines the mission, vision, values, prospective competitive advantages, long-term objectives and forecasts. These aspects are crucial in defining the philosophy of the business, enabling the employees and associates to determine whether the organization is inclined towards intensive risk taking or gradual development of the business from a solid base. It also defines the probable role of the organization to the community such as participation in environmental conservation through e.g. recycling or enhancement of volunteer activities. It also justifies the firm’s objectives alongside the discourses for achieving such objectives, among others. While it is true that such often presents numerous challenges, the organization through the planner must ensure that the adopted process aligns with the comfort and acceptability of the intended implementers.

The final step entails building the plan, which is largely a factor of reviewing organizational, departmental and team member goals, alongside assessing their longevity through such means as SWOT analyses and KPI measurements. Additionally, the plan build-up must ensure that a comprehensive budget that aligns with a one-year target is established. A strategic management plan must address conflicting mandates and goals, designed to ensure business sustainability, employee retention, etc. As managers develop these plans, they ought to be aware of the conflicting mandates, and more so have to be clear on what the business body can or cannot do in light of its mandate. The information from the above-mentioned analyses will be crucial to the establishment of the necessary mandates.