Decision making is a fundamental skill for any successful executive. But decisions at strategic level are hard to make. They require large amounts of resources and commitments which may be irreversible. They involve long-term consequences that are hard to predict. And, they require considering multiple, often conflicting, strategic objectives which are difficult to balance, particularly in the presence of risk and uncertainty. Research and thinking about modern business strategy emerged as a field of study and practice in the 1960s. Prior to that time, the words "strategy" and "competition" rarely appeared in the most prominent management literature. When influential academics in the USA started to think fundamentally about strategic decision making in the 1980s and ‘90s, they made the assumption that everything works in a competitive working, free market and developed thereof generic strategy tools, that are supposed to work everywhere.
However, Elmes (the guest speaker) argues that they are not well founded, since strategies need to be developed in the respective context of an industry or market. This position will be explained in more detail during this essay. Especially the determinant of market efficiency, meaning how competitive a market is, strongly influences the development of strategic decisions. There are many industries where government involvement or asymmetric competition need to be considered to make strategic decisions, whereby generic strategy tools tend to be ineffective. Therefore, the key questions for this essay will be firstly what are the traditional concepts of strategy and how have they involved, secondly what actually makes a strategy successful and lastly how does it apply in practice.
Table of Contents
1. Introduction
2. The development of strategy approaches
3. What makes a strategy successful
4. The practical strategy advisor perspective
4.1 BCG / Adaptive Strategy
4.2 Booz&Company
4.2.1 “The Coherance Premium”
4.2.2 “The Capabilities Premium”
5. Tesla as an example for strategic decision making
6. Conclusion
7. Bibliography
Objectives and Key Themes
This essay explores the evolution of strategic decision-making in business, examining how management theories have transitioned from rigid, plan-based approaches to dynamic, context-dependent models. The core research question addresses how modern organizations define, develop, and implement successful strategies in volatile market environments, using Tesla as a practical case study for strategic agility.
- Historical evolution of strategic management paradigms
- Core theoretical frameworks: Position-based view vs. Resource-based view
- Adaptive strategy and dynamic capabilities in modern consultancy
- The importance of organizational coherence and internal competencies
- Case study analysis: Tesla's integration of energy and automotive strategies
Excerpt from the book
3. What makes a strategy successful
Generally, there are many determinants that influence how successful a strategy will be. Besides the two basic conceptions as the context of a strategy and the process of strategy making, there are the two core concepts of the position based view and the resource based view, which are very useful and relevant, according to Elmes. (See Exhibit 1)
Firstly, there is the position based view addressing the position of a company in a market and its competitors, which can be interpreted as a focus on external determinants. The fundamental assumption is that there are two generic strategies either to compete on costs of the products or to compete on differentiation. Therefore, if a firm wants to achieve a competitive advantage it is needed either to produce cheaper or to deliver superior value and differentiation compared to its competitors, whereby consumers are willing to purchase at a higher price.
The most famous advocate of this concept is Michael Porter who is known for his Five Forces analysis and his “Generic Strategies”. His arguments include the approach to base a strategy on competitive analysis and appropriate value creation.
Secondly, there is the resource based view, which argues that a firm can reach a competitive advantage by using their resources and capabilities to achieve a sustainable competitive advantage, which can be interpreted as internal determinants. According to this view, it is crucial to make the right combination of resources to create competence and therefore succeed in a competence driven competition. As an example for a firm with distinct capabilities Elmes mentioned Apple having the ability to create very user centred designs which eventually creates a competitive advantage. So which resources and capabilities give a firm such a core competence? According to Jay Barney, crucial are the ones that add value, are rare, can’t be copied and can’t be substituted.
Summary of Chapters
1. Introduction: Discusses the fundamentals of strategic decision-making and how the shift from a controlled to a volatile market environment necessitates new theoretical approaches.
2. The development of strategy approaches: Traces the historical transition of strategy from a fixed, long-term plan to a dynamic, ongoing process influenced by organizational context.
3. What makes a strategy successful: Explains the dichotomy between position-based and resource-based views as primary determinants of competitive advantage.
4. The practical strategy advisor perspective: Analyzes modern consulting frameworks, specifically BCG’s Adaptive Strategy and Booz&Company’s concepts of Coherence and Capability Premiums.
5. Tesla as an example for strategic decision making: Demonstrates how Tesla leverages dynamic capabilities and business model innovation to navigate and disrupt the automotive and energy industries.
6. Conclusion: Synthesizes the move toward dynamic capabilities as the current benchmark for maintaining long-term competitiveness in changing markets.
Keywords
Strategic Management, Competitive Advantage, Resource-Based View, Position-Based View, Dynamic Capabilities, Adaptive Strategy, Coherence Premium, Tesla, Business Model, Strategic Decision-Making, Innovation, Market Environment, Organizational Competence, Strategic Planning, Sustainability.
Frequently Asked Questions
What is the core focus of this work?
The work focuses on the evolution of strategic management and how businesses navigate complex decisions to maintain a competitive advantage in modern, volatile markets.
What are the central themes discussed?
Central themes include the transition from traditional planning to adaptive strategy, the role of internal resources versus external positioning, and the application of these theories in real-world business environments.
What is the primary objective of the research?
The objective is to examine how strategic theories have evolved over time and to analyze how contemporary companies, like Tesla, apply these insights to achieve success.
Which scientific methods are employed?
The work utilizes a qualitative approach, combining a comprehensive review of strategic literature with an analytical case study of a specific industry leader.
What topics are covered in the main section?
The main sections cover the history of strategic thought, standard consultancy frameworks like BCG’s Adaptive Strategy, and a practical application of these principles through the lens of Tesla's business model.
How would you characterize this work with keywords?
Key terms include Strategic Management, Competitive Advantage, Dynamic Capabilities, Business Model Innovation, and Adaptive Strategy.
How does Tesla exemplify the concept of "dynamic capabilities"?
Tesla demonstrates dynamic capabilities by continuously integrating new technologies, such as solar energy and self-driving software, into its existing automotive business, allowing it to adapt to changing market demands.
Why does the author contrast the "Coherence Premium" and the "Capabilities Premium"?
The author highlights these as complementary consulting perspectives that emphasize the importance of aligning internal organizational strengths with external market positioning to ensure sustainable growth.
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- Lukas Wagner (Autor:in), 2017, Strategic Decision-Making. A Practical Example Based on "Tesla", München, GRIN Verlag, https://www.grin.com/document/451749
