6 pages/≈1650 words
Literature & Language
Strategic management and organisational success (Book Report Sample)
A literature review on the key underlying theories on strategic management.source..
Strategic management and organisational success: A literature review of key underlying theories
Date of Submission:Strategic management and organisational success: A review of key underlying theories
The pressure resulting from the forces of competition and globalization has been prompting firms to invest heavily in the attainment of competitive advantage and an improved performance against their competitors. The drive to attain a competitive position is based on strategic management. Strategic management defines a management approach through which firms seek to compete and be sustainable both locally and globally as well being able to persevere in the long term. Recardo (2011) defines strategic management as an approach in which the objectives of the firm are specified, policies and plans developed for accomplishment of these objectives, and resources allocated for implementation of these plans. In short, it is a carefully selected means of establishing a fit between the external environment (competition) and internal capabilities and resources (Ainuddin, Beamish, Hulland, & Rouse, 2007). It is therefore indisputable that achieving a sustainable competitive position is a challenge and demands an appropriate strategy to address. Strategic management has been credited for the growth of various firms including multinationals such as Toyota, Sony, Intel, Apple, Samsung and Microsoft among others. The strategy or road map towards the attainment of competitive advantage is better expounded by a variety of theoretical underpinnings. Strategic management theories seem to derive majorly from the contingency model, systems approach and information technology perspectives. Hence, the objective of this paper is to identify and discuss the key theories underlying the concept of strategic management.
The Dynamic Capability Theory
This theory is founded on the resource dependency theory. Dynamic capability theory emphasizes the manner in which resources are developed, integrated within the firm and how resources are realized (David, Michael, Jean-Luc, Joanna, 2010). Therefore, this theory addresses organizational abilities in terms of incorporation, building and reconfiguration of the internal and external competencies as a way of responding to the increasing complexity and uncertainty characterizing the ever-changing business environment. For managers therefore, it is important to note that firms ought to be able to constantly reconfigure their asset structures and invest in both internal and external transformation. The dynamic capability theory is thus a central component of strategic management. This is because the theory focuses on the ability of an organisation to survive the hostility characterizing modern business environment. In view of this theory, managers emphasize on environmental scans, market evaluation and fast reconfigurations and transformations in the wake of competition and build on the role of innovations.
The aspect of dynamics entails the ability to renew competences to remain relevant in an evolving business environment. Capabilities on the other hand stress on the major role played by strategic management in efforts to appropriately position, adapt, integrate and reconfigure both external and internal skills of the firm, resources as well as functional competences that position a firm to match the demands of the evolving environment (Teece, 2011). The theory therefore seeks to build on the potential of a firm to renew its resources in the context of increasing competition. It encompasses changing ordinary capabilities. Like the Management by Objective (MBO) approach, Dynamic Capabilities Theory emphasizes on the fit of an organisation to the challenges presenting in the business environment, basing on evolving portfolio of capabilities and activities. Unlike other theories though, dynamic capabilities theory is not just an inward-looking perspective of the firm and its strategy. MBO considers the internal resources, the Resource-Based Theory focuses on the external environment, but the Dynamic Capabilities Theory considers both internal resources and external environment and resources of a firm (David, Michael, Jean-Luc, Joanna, 2010).
The concept of dynamic capabilities entails both structures and processes that promote new combinations and the alignment of the behaviors of teams within the organization; these are vital in enhancing innovativeness and therefore productivity. Dynamic capabilities are vital for the evolving organisation and in the context of change. According to the dynamic capability theorists, organizational competencies constitute a certain type of organizational resources underpinned by processes or routines within the organization and these are built and not bought (Teece, 2011).
Dynamic Capability Theory builds on the ability of a firm to compete based on functional and strategic efficiency and not solely on price. Therefore, firm managers achieve dynamic capabilities functionally through improvements in labor relations, product(s), purchasing and marketing. Strategically, firms enhance their dynamic capabilities by rapidly investing in growing markets while also divesting from declining markets effectively and faster than competitors. According to Arend (2003), the hostility of the market place and the drive for profits builds an organisation’s functional and strategic abilities. It is these organizational capabilities then that offer an internal dynamic significant for the continued growth of the firm. Organizational capabilities stimulate managers to invest in distant markets as well as international markets. Organisational capabilities also facilitate diversification as seen in the innovation of products aimed at thriving in competitive markets other than the markets originally serve by the enterprise. A dynamic capability represents firms’ potential to maintain a position of dominance following changes in markets and technology (Teece, 2011). This is because both opening of new markets and technological advancement is associated with economies of scale as well as reduction in transaction costs. Dynamic capabilities e...
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