Term Paper, 2008
14 Pages, Grade: 2,1
1 Strategic Management Theory
2 Becoming Marketing Oriented
3 Creating Superior Customer Value
4 Developing a Unique Positioning Concept
5 Sources of Innovation and Organisational Learning
“For us, our most important stakeholder is not our stockholders, it is our customers. We're in business to serve the needs and desires of our core customer base.”
John Mackey, Whole Foods Market, CEO
This assignment is a critical review of the strategic management theory of nowadays business, based on the business article “Musings on Management” by Henry Mintzberg. He meets a hard criticism on today’s management values and claims a huge lack of understanding of on-going processes within an organisation due to hierarchical structures, no transparency and a wrong application of strategic thinking. As a result of this error, he argues numbers and costs being put over core assets such as qualified employees and that strategic approaches are not being applied correctly. But what is strategic management?
Businesses can not do business without the right strategy. It is an indispensable tool, which builds the foundation for every single operational activity of the company. Every step is based on decisions that have been evaluated and made in the past. Defining strategic management, it can be outlined as the process that focuses on achieving and maintaining a strong competitive advantage in the future and on meeting the customer’s needs and demands. Furthermore, it implies the application of corporate strategy to all aspects of the organisation. With greater empowerment, strategy not only affects CEO’s but also employees in any organisational department. In this context, the author believes that the mass firings Mintzberg is animadverting in his article are not the right strategy to generate long-term success for a company. Since today’s customers have an almost unlimited assortment of products and services, one better and fancier than the other one, the perceived distinction towards a brand can guarantee a stable market position. In order to achieve this, the customer must be provided a superior service and, more importantly, a company must make a connection to the customer and develop long-term relationships. However, this will be difficult to achieve, if positions are being rationalised and employees lose motivation. In addition, Doyle (2002, p.23) explains that,
“To be a leader in today’s globally competitive market requires two attributes – an ambitious intent and outstanding competences. Strategic intent refers to a conscious commitment of top management to focus the resources and energies of the organisation on achieving a leadership position in the market. Like an athlete competing at the top level, there is no chance of success unless an organisation is totally dedicated to winning, and willing to make almost any sacrifice to get the price.”
Twenty years ago, when markets were not developing as fast as they are today, a corporate strategy could determine the company’s activities for up to 10 years. Today, almost every industry is altering in short periods of time, and therefore, strategic thinking has to include flexibility and the capability of adaptation. In order to control competitive changes in the marketplace, Porter’s Five Forces might be an appropriate application.
Table 1: Porter’s Five Forces
illustration not visible in this excerpt
Source: http://harvardbusinessonline.hbsp.harvard.edu [Internet, 2008]
This model gives the tools to understand the industry’s dynamics and how buyers and suppliers, substitutes and potential entrants are evolving. It is a holistic way of looking at any industry, and it is understandingly structural underlining the drivers of profitability and competition. But how can a company handle this? Rather than go for market share, it can expand the pie and use the whole profit pool of the industry. For a market leader, this might be the best way to improve the circumstances rather than to trigger a destructing battle with the competitors. Therefore, it is crucial to know how the industry is changing . The main problem here is that s trategists mostly are not connected with the rest of the organisation. Consequently, strategy is completely useless, unless the results of its process and the position that you choose to occupy are broadly understood in the organisation. The weakness that the author sees in this model is that competition is being looked at too narrowly by those who should see widely.
In contrast, the modern Blue Ocean Strategy offers a wider range of possibilities, since it doesn’t consider competition at all. It is mostly applied by innovative visionaries and can enable a new company to achieve a breakthrough performance. However, this might not always be an opportunity but also a threat, since there is a risk to underestimate the market dynamics.
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