"The reason why firms succeed or fail is perhaps the central question in strategy" stated Porter. While traditional strategy approaches can soundly answer this central question in stable environments, these approaches are not directly applicable to dynamic environments and there is currently no final and complete answer that determines the causes for a company’s failure or success with their strategies in dynamic environments. Nevertheless, there are many examples of companies that outperform their competitors even in dynamic environments, such as Microsoft and Intel, and there are many examples of companies that have not been successful at all, such as Siemens and BenQ with their mobile phone division.
One critical point of each strategy is the strategic management process during which the strategy is developed and implemented and during which strategic tools such as the famous SWOT analysis or Porter’s five forces are used, for example, to structure or collect data. The purpose of this paper is to explore if strategic tools developed in stable environments are still suitable in dynamic environments or if there are certain constraints. Therefore, the paper builds on existing literature to develop a thorough understanding of dynamic environments and successful patterns of strategy in dynamic environments, and based on this understanding, an analysis framework is developed to analyze several strategic tools.
The new finding is that the use of strategic tools is still desirable in dynamic environments, but that there are limitations that must be considered to obtain useful results when using tools. This finding is used to develop a categorization of strategic tools and to propose a new framework for the use of strategic tools in dynamic environments.
At a glance
- Grade: 1.2 (1.0 is the best grade)
- Reviews 28 papers on strategies in dynamic environments
- Develops a three-stage framework for using strategic tools
- 109 sources in the bibliography
- 16 figures and 2 tables
Table of Contents
1 Introduction
1.1 Problem Definition and Objective
1.2 Course of Investigation
2 Background
2.1 A Short Review of the History of Strategy
2.2 Strategy and Firm Performance
2.3 The Strategic Management Process
2.4 Dynamic Environments
2.4.1 Literature Review
2.4.2 Velocity
2.4.3 Complexity
2.4.4 Uncertainty
2.4.5 Unpredictability
2.5 Strategy in Dynamic Environments
2.6 Analysis Framework
3 Strategic Tools in Dynamic Environments
3.1 Literature Review
3.2 Basics of Strategic Tools
3.3 Use of Strategic Tools in Practice
3.4 SWOT
3.4.1 Basics of SWOT
3.4.2 Shortcomings of SWOT
3.4.3 SWOT in Dynamic Environments
3.5 Porter’s 5 Forces
3.5.1 Basics of Porter’s Five Forces
3.5.2 Shortcomings of Porter’s Five Forces
3.5.3 Porter’s Five Forces in Dynamic Environments
3.6 PEST Analysis
3.6.1 Basics of PEST Analysis
3.6.2 PEST Analysis in Dynamic Environments
3.7 Scenario Analysis and Forecasting
3.7.1 Basics of Scenario Analysis and Forecasting
3.7.2 Critical Factors of Scenario Analysis and Forecasting
3.7.3 Scenario Analysis and Forecasting in Dynamic Environments
3.8 Discussion of Findings
4 A New Framework for Strategic Tools in Dynamic Environments
4.1 Foundations of the Framework
4.2 Opportunity Recognition
4.3 Opportunity Analysis
4.4 Opportunity Evaluation
5 Limitations
6 Conclusion
Objectives and Topics
This thesis examines whether strategic tools developed for stable environments remain suitable in dynamic environments and what constraints affect their use. Drawing on existing research, it develops criteria for assessing selected tools and proposes a framework for recognizing, analyzing, and evaluating opportunities.
- The history of strategy and the strategic management process
- Velocity, complexity, uncertainty, and unpredictability
- Strategic patterns in changing environments
- SWOT, Porter’s five forces, PEST, and scenario analysis
- Opportunity recognition, analysis, and evaluation
- An illustrative application involving the iPhone
Excerpt from the Book
2.6 Analysis Framework
Based on the theory outlined above, a framework to analyze strategic tools in dynamic environments has been developed. The analysis of the tools is conducted along three dimensions: (a) fit with basic strategy parameters, (b) fit with the four dimensions of dynamic environments, (c) alignment with strategic patterns in dynamic environments. An overview of the questions derived from this framework can be seen in Table 1.
The analysis of fit with basic strategy parameters consists of three parts. In the first part, the focus of the tools is examined. Even if tools are analysis-oriented, they might induce users to derive actions instead of goals or guidelines. Actions would drive a strategy to an action plan instead of a goal-oriented, long-term instrument. Tools can have different time focuses. They can induce goals as short-term or long-term goals, while the data, they gather, can be past-oriented data, present-oriented, or future-oriented data. Lastly, the tool is examined to determine if it clearly addresses one of the four dimensions of dynamic environments or if it mingles some dimensions.
In the second part, the tool with regard to the four dimensions of dynamic environments is analyzed more thoroughly. As velocity deals with the speed of upcoming opportunities, the tool should prove that it can capture several, new opportunities in the domains of demand, competition, technology, and regulations. Complexity arises because features of opportunities become blurred. Therefore, a tool should help distinguish features of opportunities arising from market diversity, competitive complexity, resource complexity, and process/facility complexity. While proper identification of features reduces complexity, establishing relationships between the features reduces complexity even further. Uncertainty arises because of unknown outcomes of opportunities and because the opportunities are indistinguishable. Therefore, the tools should reduce uncertainty by identifying and adding missing information, evaluate different outcomes, and distinguish opportunities. Unpredictability can be reduced by taking patterns of previous opportunities into account while analysing consumer and competitor behaviour, changing market trends and innovation. Since fulfilling all four dimensions with one tool would be complex, no tool is expected to work perfectly within all four dimensions. Nevertheless, at least parts should be covered.
Chapter Summaries
1 Introduction: The thesis defines its research objective and outlines the investigation, from the theoretical background to the proposed framework.
2 Background: This chapter reviews strategy research and the strategic management process, defines four dimensions of dynamic environments, and develops criteria for analyzing strategic tools.
3 Strategic Tools in Dynamic Environments: SWOT, Porter’s five forces, PEST, and scenario analysis and forecasting are examined against the analytical framework, alongside selected extensions.
4 A New Framework for Strategic Tools in Dynamic Environments: The proposed framework organizes strategic analysis into opportunity recognition, opportunity analysis, and opportunity evaluation.
5 Limitations: The author discusses the theoretical nature of the work, its environmental assumptions, and the limited selection of tools.
6 Conclusion: The final chapter brings together the argument and identifies directions for future theoretical and practice-oriented research.
Keywords
strategic management, dynamic environments, strategic tools, environmental analysis, velocity, complexity, uncertainty, unpredictability, SWOT analysis, Porter’s five forces, PEST analysis, scenario analysis, forecasting, opportunity recognition, strategic framework
Frequently Asked Questions
What is this thesis about?
It examines how strategic tools can be used to support strategic analysis in dynamic environments.
What are its main themes?
The thesis addresses environmental change, strategic decision-making, established analysis tools, and the recognition and evaluation of opportunities.
What is the central research question?
It asks whether tools developed for stable environments remain suitable in dynamic environments and what constraints affect their use.
What research method does the author use?
The work is theoretical and literature-based. It reviews research on dynamic environments and strategy, develops an analytical framework, and uses it to examine selected strategic tools.
What does the main analysis cover?
It evaluates SWOT, Porter’s five forces, PEST analysis, and scenario analysis and forecasting, including selected extensions and their potential uses and limitations.
Which keywords characterize the work?
Key terms include strategic management, dynamic environments, uncertainty, complexity, SWOT, PEST, scenario analysis, and opportunity recognition.
How does the thesis describe dynamic environments?
It uses four related dimensions: velocity, complexity, uncertainty, and unpredictability.
What are the stages of the proposed framework?
The framework divides strategic analysis into opportunity recognition, opportunity analysis, and opportunity evaluation.
Does the work include an example of the framework?
Yes. An illustrative example applies the framework to the opportunity associated with Apple’s iPhone, using fictitious information rather than internal company data.
- Quote paper
- Cornelius Herzog (Author), 2010, Strategic Tools in Dynamic Environments, Munich, GRIN Verlag, https://www.grin.com/document/156625
