Detail the importance of stakeholder mapping in the strategic management process?

Power and politics

A- Detail the importance of stakeholder mapping in the strategic management process?
B- Is it manager’s task to limit the role of stakeholders, and if so how can they do it?

Stakeholders in the business (such as customers, vendors, investors and employees) can be very influential in whether a business achieves strategic success and maintains a top quality market reputation. Stakeholder expectations influence strategic choice (Johnson, et al. 2014). Strategic managers of a firm develop stakeholder matrices that determine the level of power specific stakeholders groups have on business success, whether certain stakeholders have legitimacy to the business, and urgency of servicing certain stakeholder group needs. Such a framework, known as stakeholder mapping, determine which require immediate and in-depth attention and which are less influential (Mitchell, Agle and Wood 1997).

Why stakeholder mapping is important can be illustrated with a hypothetical business scenario. One can consider an airline company that determines it requires construction of a new hub to better service a variety of foreign markets. Stakeholders involved include residents of the community that will be impacted by construction and noise of the new airport hub, advocates concerned about environmental sustainability, investors that hold shares in the securities market, and even employees who might have to become expatriates to support a new foreign hub business model (to name only a few groups). Stakeholder mapping provides a snapshot of the potential level of influence a group might have in interrupting the new construction, such as environmental advocates that attempt to use legal measures to stop land destruction which could potentially hold up hub completion for years. A less-influential stakeholder, the employee, might be serviced well with proper internal training in foreign business practices that is facilitated with minimal resistance, labour and economic expenditures. Stakeholder mapping assists managers in having a relevant picture of the potential threats and opportunities stakeholders have on the entire value chain or special project which provides a framework for how to best influence or service these important or lesser-important stakeholder groups.

Whether it is the role of management to limit stakeholder roles is a subjective issue. Johnson, et al. (2014) suggest that it might be critical to remove certain stakeholder influences when it is determined that a certain stakeholder group would be resistant to corporate changes. If the stakeholders resisting change are internal, such as managers that resist change at senior levels, then strategic leaders can recruit new executives with similar values and attitudes. Johnson, et al. (2014) again asserts that managers can build alliances with smaller stakeholder groups so as to over-power the influence of more powerful stakeholder groups. These coalitions can be built by using relevant stories and symbols to communicate the need for coalition development and persuade stakeholders to join the mission of overcoming the power of those who resist change in the business model (Johnson, et al.).

In some instances, managers do not have the authority or power to remove resistant stakeholder group influences (Johnson, et al.). In some businesses, the status quo related to stakeholder expectations and influence is so pervasiveness that undertaking efforts to remove stakeholder influence becomes impossible. In some instances when certain stakeholder groups have long-established values and beliefs, the ability of managers to undo these normative values is impossible (Johnson et al.).

Managers, in some instances, can remove some dimension of stakeholder resistance by timing strategic changes according to stakeholder expectations. For example, slow change for the aforementioned airport hub construction strategy might mean less immediate stock price returns for shareholders, hence influencing them to adopt a more rapid change model. In the same example, a manager might agree to participate in a collaborative environmental assessment of the new construction site to appease environmental advocates. If statistics of such an assessment indicate there would be no long-term harm to the local ecology, the manager was instrumental in giving the environmental advocate stakeholder group what it wanted and also expedited continuing hub construction. Sometimes, a win-win scenario is most viable for removing stakeholder influence, hence suggesting managers should, in some instances, work to remove those with the most authority to resist change.

As shown, in some instances, it is impossible or highly difficult to remove resistant stakeholder influence in strategic decision-making. However, with strategies such as cooperation, win-win scenario-seeking, or more effective communications using persuasive symbols and stories can be effective in ensuring strategic goals are met and stakeholders do not interrupt strategy implementation. When the status quo is so well-developed and engrained into stakeholder mindsets, managers might have an impossible task of removing stakeholder influences.

Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2014). Exploring strategy: text & cases. Harlow: Pearson Education.

Mitchell, R., Agle, B. and Wood, D. (1997). Toward a theory of stakeholder identification and salience: defining the principle of who and what really counts, Academy of Management Review, 22(4), pp.853-887.

6. Explain and evaluate the role that power and politics may have in an organisation’s strategic development.

In order to realise success in realising strategic goals, legitimate power is necessary to coordinate, implement and direct strategy (Hardy 1996). Even though rational planning models tend to paint the portrait that quality and well-developed strategic plans will ultimately deliver their own results, the reality of the organisational circumstances and external environment assert a type of complexity in implementing new strategic goals.

There are different levels of power that influence strategic implementation, including macro-level power whereby the organisation seeks to protect its own needs and interests by using control tactics or cooperative strategies with other organisations (Mintzberg, Ahlstrand and Lampel 2009). One could view power, in this sense, with a relevant hypothetical example. A Chinese firm wishes to enter the UK market to sell pizza and pasta to consumers and has the cost leadership capabilities to undercut competition in the firm’s pricing structure. Established players in the market hold the majority of market share and seek immediate barriers to stop market entry, such as using intellectual property protections or building differentiated brands to gain consumer loyalty. This new entrant, however, can seek joint ventures or alliances with other established retailers with profit-sharing opportunities or the ability to share resources to create an expensive and wide-ranging marketing campaign that emphasises price and quality superiority. This power is exploited by giving the alliance or joint venture firm more market power that dominates existing competitors’ market relevancy. Power, in this sense, affected the ability of other firms to seek market entry barriers and now the firm, because of its powerful market position resultant of strategic alliance and joint venture, begins dramatically under-cutting domestic competition with a more attractive product price structure.

Politics can be viewed from the perspective of senior executives that guide an organisation. A hypothetical firm might have determined that growth should be achieved through joint ventures to build a learning organisation and share important talent and economic resources to enter a new foreign market. However, the Board of Directors holds a disparate belief, believing that a joint venture would remove considerable controls over the strategic position of the business and therefore exert their authority to stop joint venture as a market strategy. The governance team might see joint ventures and sharing decision-making with the new venture partner as a threat to their authority in the long-term and begin communications to ensure that shareholders vote against joint venture development. Executives, however, see this new opportunity as a viable growth strategy and consider their own needs, such as bonus compensation for revenue growth, as the self-serving ideology underpinning why joint venture market entry is viable from their own perspective. Hence, politics and legitimate power (governance versus executives) influenced the ultimate hypothetical decision for forego joint venture development and gained coalitions from voting shareholders to assert that the business should seek growth differently. In this hypothetical case, executives had their power superseded by governance and shareholders and strategic intentions had to be redeveloped even though executives are resentful and de-motivated because the business chose a less strategy less conducive to bonus and other remuneration opportunities. Hence, practically, power and politics go hand-in-hand and will dramatically influence the strategic design and direction of a corporation.

Power can also be seen with buyer segments. Some buyers have low switching costs for defecting to competing products especially when there is ample competition in an established market (Porter 1987). In this case, businesses might allocate more resources to the marketing function to differentiate the business and its products or even develop a cost leadership strategy to provide lower prices to give the business competitive edge and attract more profitable target segments. Power should be only viewed as an internal factor, but as a legitimate phenomenon of servicing external customer segments. If customers can negotiate pricing or refuse to buy products as a result of price sensitivity, they exert legitimate authority and the business may have to adopt such strategies as lean production and procurement to ensure that cost controls facilitate a lower product pricing structure when distributed. To service markets with considerable power, a firm must adjust its value chain and its strategic objectives.

As seen, politics and power have significant impact on strategic direction for a firm. Internal political struggles can alter strategic direction and choice, especially when coupled with legitimate power that can be asserted over decision-makers; such as in the governance versus executive example. Genuine authority gained through strategic alliances or joint ventures can reduce power of competition and even coerce executives to alter a long-term plan when politically-motivated organisational actors are resistant in an effort to secure their own needs and self-interests.
Hardy, C. (1996). Understanding power: bringing about strategic change, British Journal Of Management, 7, pp. S3-S16.

Mintzberg, H., Ahlstrand, B. W., and Lampel, J. (2009). Strategy safari : the complete guide through the wilds of strategic management. Harlow: Financial Times Prentice Hall.

Porter, M.E. (1987), From competitive advantage to corporate strategy, Harvard Business Review, 65(3), pp.43-59

Leadership and strategic change
Specify and critically evaluate the key factors which affect how managers should approach the management of strategic change

There are four distinct types of strategic change: adaptation, reconstruction, evolution and revolution (Johnson, et al. 2014). Strategic change involves modifying a firm’s vision and mission to achieve new strategic objectives. Strategic change is therefore a change in firm’s overall strategy which is underpinned by the firm’s scope, resource capabilities, competitive advantage and existing synergies and competencies.

The first key factor in how managers should approach strategic change is consideration of the external environment, in this case economic factors and competition. A firm enacts strategic change to ensure adaptability to better respond to changes in the external market. Adaptation is incremental and can be facilitated with the established culture already present within the organisation. In some instances, change is a prescriptive activity, requiring a rapid change. Lewin’s model of change suggests first unfreezing old behaviours, guiding the organisation to a new level of thinking and mindset, and then refreezing attitudes after achieving a new level (Burnes 2014). The goal in unfreezing is to change an existing mindset to accept a new change practice. Managers must be considerate of the socio-psychological and cultural factors that might impede change and work diligently to prepare organisational members for a new change practice.

Transitioning involves consideration of effective communications systems, promoting active staff involvement in the change, address perceived barriers, make regular use of milestones, and have an openness to negotiation throughout the change process. Freezing new behaviours involves being considerate of reward systems, celebrating victories, and training of personnel when required (Burnes).

Managers considering strategic change must also be considerate of what specific goals the organisation wants to achieve, how to measure change effectiveness (metrics), the specific sequence of activities required to achieve a change goal, and implementation. Winning the support of employees in an environment where change resistance behaviours are often irrational and illogical (Ford, Ford and D’Amelio 2008), is critical to managing successful strategic change.

To illustrate the many complexities of managing strategic change, one can consider an organisation that has a culture where compliance and productivity are main normative beliefs and values. However, the firm’s external market now mandates that the firm develop a team-based ideology under a decentralised model in order to facilitate innovation because of new market entrants with considerable product development capabilities. The business will have to change culture, by unfreezing mindsets related to hierarchy-driven models with power distance to familiarise employees with working collaboratively under a new mission of being a pioneer in a market. This will require considerable upheaval both in terms of adjusting organisational structure and building a new set of values and beliefs that drive a new normative set of values related to cooperation and teamwork.

Therefore, key factors are recognition of employee motivations and needs, considering how to enact a cultural change, opening effective lines of communication, and ensuring managers have considerable leadership skills to gain acceptance of the change, minimise resistance and ensure followership of a new vision and mission. Having an openness to embrace new ideas and values from employees is part of this leadership model necessary to facilitate change effectively (Johnson, et al.).

Coupled with the more humanistic aspects of change leadership, managing strategic change means having an understanding of internal resources and how best to allocate them to achieve a new change goal. For instance, if a firm had been operating under a model where the primary goal is diversification and suddenly requires a cost leadership strategy, the business will have to consider new structural components such as focusing now on cost management, implementing a lean ideology, and determining how to exploit economies of scale or rare resources to achieve competitive advantage. This means introducing new methods of conducting business and responding to customers, which entails understanding how to remove resistance barriers with a blend of legitimate authority that focuses on compliance whilst also satisfying the cognitive and psychological needs of employees concerned about change relevancy.

Managing strategic change is a multi-faceted and complex situation. Being able to align resources with leadership is not simplistic and not all employees will get on-board immediately, especially if the change is prescriptive and not emergent. Having knowledge of all internal competencies, cultural factors and values will assist in unfreezing old behaviours and solidifying new ones related to a new change objective.
Burnes, B. (2014). Managing change, 6th edn. Harlow: Pearson Education.

Ford, J.D., Ford, L.W. and D’Amelio, A. (2008). Resistance to change: The rest of the story, Academy of Management Review, 33(2), pp.362-377.

Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2014). Exploring strategy: text & cases. Harlow: Pearson Education.

Discuss how changes in technology contributed towards the globalisation of industries. Would the globalisation of these industries have been possible without these technological changes?

Technology has contributed significantly to globalisation. Leading businesses have chosen to become globalised in response to market conditions and growth in competitiveness facilitated by technological change and evolution. Production facilities now have a global agenda and are strategically determined by global screening processes whilst research and development is now sourced from best and most efficient places throughout the world (Johnson, et al. 2014).

Of the most significant technological contributor to globalisation is emergence of communications technologies. The ability to contact off-site representatives in real-time using mobile devices, Internet conferencing and other telecommunications systems allows managers to coordinate multiple business units throughout the world with efficiency and considerable cost reductions that were once attributed to high travel costs to achieve the same goal. Management of a firm’s headquarters can enter new markets and have expatriate managers coordinate all foreign business activities, regularly using telecommunications systems to report on activity, transmit important market data, and collaborate with governance systems remotely. Information technologies are substantial improvement in the business environment that provide opportunities for business growth and new market entry throughout the world without significant challenges in coordinating strategy development and implementation.

Technology has also reduced barriers to knowledge production, leading to a phenomenon known as borderless knowledge (Gornitzka and Langfeldt 2008). New information technologies and communications technologies allow a firm, even if dispersed into different global business units, to turn their organisations into learning organisations; a form of knowledge management that can facilitate cross-functional training to employees to transform various tacit knowledge into experiential knowledge. Managers now have the ability to use such technologies as the intranet or extranet to provide customers and internal staff members with valuable information that translates into better human capital development. With the ability to translate and distribute knowledge globally, it becomes an incentive to seek a globalised strategy that can bring a business greater revenues and market power.
Furthermore, developing nations and developed nations, alike, now have access to new production technologies and ERP systems due to a amalgamated global supply chain that can facilitate the transfer and distribution of various technologies throughout the world. This incentivises foreign direct investment for a firm, hence seeking a globalisation strategy, as now new technologies in key areas along the value chain make it feasible to launch a new business model in a foreign market territory. New educational technologies, additionally, provide greater human capital expertise along the global labour pool, ensuring that firms have top talent to facilitate business operations and management when entering new markets.

Technology standardisation is also contributing to globalisation. Compatibility of various technological standards make it more simplistic for companies to enter new markets using the same product or service. This strategy forbids having to adapt to local standards, but maintain the same production systems that were built on competencies in the host market (Johnson, Whittington and Scholes 2011). These standards facilitate less costs when offering existing products to a new market.

Improvements, also, in transportation technologies improve speed and affordability for companies with an export or import strategy for its products and raw materials. For instance, improvements in super tanker capacity and efficiency, facilitated by technology evolution, increases the volume of goods that can be transported and GPS technologies facilitate the ability to track transport movements to ensure timely delivery and managerial coordination of goods transfer. With lower cost international transport prices and greater managerial control, using technology, of needed raw products, it becomes an incentive to seek a global strategy for a corporation. Using information technologies, management of an organisation can contact transport representatives and managers in real-time, facilitating coordination of new scheduling and being able to offer realistic promises to customers about delivery in a fashion not feasible prior to the advent of new communications technologies.

As shown, technology significantly contributes to globalisation, both as an incentive for pursuing a global strategy and also facilitating more efficient global business operations. Coupled with standards in R&D and production technologies, firms do not necessarily have to adjust existing low cost production operations when entering a new market, but can launch a similar strategy to their host country markets. This has implications for cost savings, efficiency in production, and ensuring compliance to regulatory frameworks that are also becoming standardised.

Gornitzka, A. and Langfeldt, L. (2008). Borderless knowledge, Higher Education Dynamics, 22.

Johnson, G., Whittington, R and Scholes, K. (2011). Exploring strategy: text and cases. Harlow: Financial Times Prentice Hall.

Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2014). Exploring strategy: text & cases. Harlow: Pearson Education.

Evaluate how important the management of change is in the strategy process? Discuss the approaches available to the manager

Managing change is critical to the strategy process. Businesses that must be flexible and adapt to their evolving market conditions require implementation of new processes and procedures to ensure the business is aligned with market factors. Change is critical to avoid corporate stagnation and requires various approaches to achieve successful change implementation.

Change is highly critical to organisational success. It is illogical to assume that an external market will maintain the same characteristics over the long-term, hence, the old way of doing things will not be sustainable over the long-term. Additionally, new market entrants and those with innovation capabilities can disrupt an established market, forcing a firm to adjust its operations and other value chain activities to achieve sustainable market success. Some firms must reposition their brands to gain market attention, create new and creative products, enter new markets to avoid high taxation and tariff rates in another market, and a variety of other issues influenced by the external environment. Therefore, organisational structure, job role expectations, implementing new technologies, adjusting marketing strategy, or new procurement ideologies (to name only a few) represent the types of recurring change that must occur to remain adaptable to the firm’s respective markets. A firm incapable of change is likely a firm that will meet with ultimate market failure.

The first approach is gaining commitment for a change, a persuasive approach that asserts why change is imperative and critical to meet organisational goals. Change must be perceived as relevant to important internal stakeholders and often rewards are used for complying with change performance expectations. Resistance to change is a legitimate phenomenon and managers can address the different reasons for resistance to ensure change is embraced.

Change resistance can occur because fear of consolidation throughout the business model creates fear of job losses. Expectancy theory justifies this resistance type, asserting that staff members choose a particular behaviour based on the benefits perceived to be an outcome of a behaviour (Montana and Charnov 2008). If employees fear job security, they will likely resist a change practice. This type of resistance can be combated with proper persuasive tactics and communication that clearly identify the potential rewards that will be received for embracing and complying with change (Galpin 1996).

Resistance also occurs because organisational members do not believe a change is relevant or will meet with expected results. In this situation, Gable and Stewart (1999) suggest that managers must show a deep commitment to the change and communicate the vision of the change consistently to gain followership and dedication toward the new practices. This is supported under social learning theory where individuals begin to mould their behaviours to fit the model of another when they maintain charismatic or otherwise desirable traits. A competent leader that role models commitment behaviours will have more likelihood that others will accept the change and begin developing the same outward manifestation of commitment. This, again, asserts that a change manager must be a positive transformational leader who teaches, engages and communicates with employees if they are to be committed to change.

Stratman and Roth (1999) also state that change resistance occurs because employees are confused about a change and unsure of its expectations on their job roles. Therefore, they should be provided with hands-on training, when possible, to involve them in the change and ensure that they understand all dynamics of the change and feel confident to facilitate change role activities. Such training could be testing software that will be implemented in the change. Being able to boost esteem, from a socio-psychological perspective, represents tactics to ensure a change, whether prescriptive or emergent, meets with its intended compliance goals.

As illustrated, change is an important predictor of organisational success and ensures that a firm remains adaptable and flexible to changing market conditions. Resistance to change could make a new change strategy fail miserably and these barriers need to be removed. They can be undone through effective leadership, training, communications, and persuasive tactics that are paramount to ensuring compliance and embrace of new change activities critical to meet evolving market demands and conditions.

Gable, G. and Stewart, G. (1999). SAP R/3 implementation issues for small to medium enterprises, 30th DSI Proceedings, 23 November, pp.779-781.

Galpin, T.J. (1996). The human side of change: a practical guide to organizational redesign. Jossey-Bass.

Montana, P.J. and Charnov, B.H. (2008). Management, 4th ed. Barron’s Educational Series, Inc.

Stratman, J. and Roth, A. (1999). Enterprise resource planning competence: a model, propositions and pre-test, design-stage scale development, 30th DSI Proceedings, November 20, pp.1199-1201.

Merger

Evaluate the concepts of Merger, Acquisition and Alliance, as effective strategic management processes.

Mergers, acquisitions and alliances are effective methods of strategic management to reach a desired goal and objective. Mergers involve blending two firms to become a single entity. Acquisition is the procurement of other businesses to grow and expand an existing firm that made the acquisition. Alliances involve short or long-term partnerships with other organisations to exploit potential synergies and share resources.

Mergers can be effective as a strategic intention to achieve financial or strategic-level goals (Johnson, et al. 2014). If a business determines that another business entity maintains a positive strategic fit, merging the two companies can have significant advantages. This can be illustrated with the merger between Air France and KLM, two airline companies serving wholly-different markets, but both with high volume of resources including managerial competency, financial resources and tangible resources (fleet). Air France and KLM were having difficulty achieving growth in their markets and, through merging of the companies, the business now had ample resources to service many new markets that would not have been available to either firm (individually). Merging these companies allowed a new, merged business entity to leverage its management-based and economic-based resources in a way that made the firm larger than competition and have much more market power throughout the entire value chain.

Acquisitions have the substantial advantage of removing competition in a key market. If a firm makes a realistic offer for acquisition to a competitor that holds market share in a desirable market, acquiring this firm gives the buying firm an opportunity to seize market share. It also gives tangible asset growth through the acquisition, such as now having control over this old competitor’s production facilities, warehousing and logistics systems, and even human talent that is transferred to the purchaser with knowledge and experience operating in the new market. Especially in a situation where an acquiring firm has not cultural knowledge of a new foreign market, acquisition and transfer of staff from the acquired firm gives the business new competencies in how to service the socio-cultural aspects of customers and vendors that consume or provide products in this new market environment. From a learning perspective, acquisitions can greatly improve human capital competencies that translate into an effective learning organisation.

Strategic alliance, additionally, allow a firm several advantages. First, it allows the firm to spread its investment over a period of time, where acquisitions require an immediate upfront investment (Johnson et al. 2011). This has significant implications economically in the event that the alliance concept does not meet with intended strategic objectives, making it easier to exit the alliance agreement without considerable loss of capital. It also spreads risk among the different alliance partners. However, strategic alliances must be handled carefully and when terminated, it should be under good terms between both partners. This is because in some alliance situations, the two partners might be forced to work together again, which emphasises a need for improved courtship and sensitivity if an agreement is terminated (Johnson, et al. 2014).

Mergers and acquisitions also have the added advantage of giving a firm more control. Unlike alliances where control is often shared between partners, through acquisition a firm continues to make strategic decisions whilst being able to utilise the resources and assets it has gained through purchase or merger. M&A also provides better capabilities for the purchasing firm to leverage its competitive advantages by having access to new markets, new resources and knowledge sources.

One can consider a firm unable to achieve organic growth in a very saturated domestic market. Through analysis, it has determined that a foreign market represents a lucrative opportunity because there is high demand and predictable consumption behaviours that favour market entry. The firm identifies another with a quality strategic fit and makes a purchase offer. Now, the firm has market presence with facilities absorption occurring in the acquisition without the high costs of new facility construction and, in some instances, can even rely on the established brand power that the acquired firm maintained in this new market.

As illustrated, mergers, acquisitions and alliances assist in achieving strategic goals. They control costs of expansion, spread risk, and provide opportunities for managers to leverage new human capital. All of these factors are critical for achieving strategic objectives.
Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2014). Exploring strategy: text & cases. Harlow: Pearson Education.

Johnson, G., Whittington, R and Scholes, K. (2011). Exploring strategy: text and cases. Harlow: Financial Times Prentice Hall.
Innovation

Justify the importance of innovation and an entrepreneurial approach in the formulation and implementation of a firm s strategy.

Innovation is critical for a business if it is to maintain a longer product or corporate life cycle. Innovation represents the development and ultimate launch of new products or services that fill existing market gaps necessary to satisfy customer segments and fulfil their needs in a way that is creative and inventive compared to existing competition. Any unique concept that can potentially displace a market gives substantial advantages to pioneering and entrepreneurial firms (Frankelius 2009).

Innovation is critical for success of an enterprise. Innovations, when unique and relevant to market expectations, can serve to enhance an economy and the lifestyles of multiple demographics of consumers (Hussein, et al. 2011). Consumers, in environments where there is ample competition and low switching costs, demand innovation as a consumption behaviour influence that makes them select one competitor over another. Hence, innovation is a major entrepreneurial activity that will predict more market success. Christensen and Raynor (2003) suggest that radical innovations can completely re-transform an existing market and cause rapid market share losses to competitors when the innovation is revolutionary and maintains highly unique benefits not capable of being replicated by competition.

Agarwal and Gort (2001) assert that when a business has an opportunity to be a market pioneer, offering creative products as a first-to-market mover, they are more likely to have long-term favourability over later entrants from the customer perspective. Therefore, entrepreneurial behaviour is critical in order to ensure speed to market and the ability to develop radically innovative products to outperform competition and maintain a longitudinal competitive advantage in the market. Johnson, et al. (2014) assert that process and product-related innovations go hand-in-hand which requires entrepreneurial behaviour and opportunistic ideology.

Hayton (2005) defines true entrepreneurial behaviour as fostering innovation and creativity as a set of cultural values. The strategist, as part of planning, identifies opportunities for innovation in a market and then fosters these values throughout the entire culture. Innovation is important as it can provide opportunities to differentiate the business from competition, better satisfy an evolving market with changing tastes and expectations, and improve longevity of the corporate life cycle when the innovation cannot be easily replicated or developed for competitive launch. Therefore, managers should utilise leadership and focus on human resource management strategies to build a culture of innovation where new ideas and concepts are regularly discussed and brainstormed. It can effectively position a business for the long-term and give the firm intangible benefits such as brand reputation and a unique corporate personality for creativity and ingenuity.

Entrepreneurship as a developer of innovation might entail building a team ideology where cooperative tacit knowledge holders in a key specialty area are able to transform this knowledge into explicit learning so that all members can be involved in the innovation process. With such positive revenue-related and reputational advantages of being a market pioneer, leadership as an entrepreneurial trait fosters an implementation strategy of collaboration where all members are dedicated to identifying opportunities to develop and launch disruptive market innovations. As one example, a true entrepreneur might seek opportunities for joint venture partnerships that can leverage talents and other economic resources whilst also spreading risk for a new innovation development campaign and market launch of a pioneering product. This is justified by Inkpen (2000) who asserts that the knowledge and shared talents gleaned through joint ventures provides new resource leveraging opportunities and establishment of a learning organisation that can lead to competitive advantages.

Innovation as an entrepreneurial activity and benefit to a firm can be witnessed with Sony Corporation, a business that lost considerable revenues for failing to keep up with the pace of competitive innovation. A traditional, Japanese hierarchical model with high power distance between managers and employees facilitated these recurring profit losses. After using entrepreneurial behaviour to use Westernised HR practices, the firm ultimately built a culture of innovation that led to the development of the Sony Playstation which now provides billions upon billions of dollars in revenues to this once-struggling firm.

As illustrated, innovation is critical for business success and achieving a positive market reputation. It ensures revenue growth and better satisfaction of customers. Using entrepreneurial strategies such as joint venture-seeking, HR strategy for culture development, and team-based methodologies in a more decentralised hierarchy, a firm can achieve better competitive success through pioneering product launches.
Agarwal, R. and Gort, M. (2001). First mover advantage and the speed of competitive entry, Journal of Law and Economics, 44(April), pp.161-177.
Christensen, C.M. and Raynor, M.E. (2003). The innovator’s solution: creating and sustaining successful growth. Boston: Harvard Business School Press.

Frankelius, P. (2009). Questioning two myths in innovation literature, Journal of High Technology Management Research, 20(1), pp.40-51.

Hayton, J.C. (2005). Promoting corporate entrepreneurship through human resource management practices: a review of empirical research, Human Resource Management Review, 15(3), pp.21-41.

Hussein, M.F., Azal, A., Asif, M., Ahmad, N. and Bilal, R.M. (2011). Impact of innovation, technology and economic growth on entrepreneurship, American International Journal of Contemporary Research, 1(1).

Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2014). Exploring strategy: text & cases. Harlow: Pearson Education.

Ethics

Explain and critically evaluate the extent to which there is an ethical dimension to strategic management.

There is definitely an ethical dimension to the strategic management process. Ethics are defined as values and beliefs which emphasise the concept of right versus wrong behaviour and maintaining a moral position in the minds of stakeholders. A firm must have some dimension of ethical positioning and values if they are to gain market attention and sustain a quality reputation in an established market.

Ethics manifest themselves in strategic management, especially in terms of corporate social responsibility. Oh and Yoon (2014) conducted an empirical study and found that when a firm has publicised, strong ethical and moral values, they are more likely to have a favourable attitude toward this firm (over that of less-ethical competition) and more willingness to buy products from this firm. Grande (2007) calls this ethical consumption and more consumers are chastising the firm with less CSR emphasis in favour of patronisation toward the ethical firm. Hence, having a strong and publicly-advertised sense of ethics is highly profitable for firms with a growing trend in ethical consumption behaviours with multiple demographics that value these moral standings of a firm. For instance, the multi-national company, Nike, faced public negative publicity and even boycotts when the company was alleged to have engaged in unethical business behaviours (Carrigan and Attalla 2001).

Servaes and Tamayo (2013) assert that when companies spend extra attention giving consumer demographics knowledge and education about its corporate social responsibility activities, it serves as a symbol of quality to customers. The automaker General Motors does this regularly, using press releases and other public relations mediums to illustrate its focus on environmentalism which emphasises how GM is an innovator, far ahead of competition, in such initiatives as carbon footprint reduction strategies and waste reduction. General Motors was the second largest automaker, in terms of revenues, in 2014, hence illustrating that ethical publicity and having strong ethical values and CSR focus tend to attract more market interest and attention toward the brand or the firm.

Therefore, firms are focusing more on corporate social responsibility, in such activities as philanthropy, giving back to communities, and charity work/volunteerism as a means of building a more positive market reputation. This can be witnessed with Starbucks that utilises promotion of its CSR efforts related to sustainable agriculture and helping farmers achieve greater lifestyle quality related to its coffee procurement strategies. It is also witness with the UK grocer Sainsbury’s that has ethical steering committees reporting to the governance team that promotes, publicly, its efforts in areas of fair employee treatment and environmental sustainability. CSR as an ethical consideration of strategic management serves to differentiate a firm from competition and in an environment where ethical consumption is a growing trend, ethics maintain positive profit and reputation benefits if leveraged properly and promoted effectively.

Johnson, et al. (2014, p.129) calls ethics a sensible expenditure. Many firms agree and have established rigid corporate codes of conduct that all employees and managers are expected to adhere with in order to build an ethical culture. Literature on the subject even asserts that companies with such ethical cultures make it more enticing for investors to provide investment funds to companies as it minimises a variety of risks within the business and to external stakeholder groups (Very, et al. 1997). Hence, from a capital procurement perspective, having strong ethical focus in strategic leadership could bring the firm greater stock value or attract more venture capitalists that can provide very valuable funding for a firm, especially the smaller to medium-sized enterprises.

As shown, there is a substantial place for ethics in the strategic management process for a business. It builds greater market interest in the firm over that of competition, provides a sense of greater trust from less ethical firms, avoids boycotting and negative publicity, establishes a profitable culture of ethical values, and gives a firm new promotional opportunity to differentiate its brand in a way that has meaning to customer segments. Ethics should be incorporated into strategic management and leveraged as a means of outperforming competition and gaining new opportunities to better engage with important and influential corporate stakeholders. Ethics should be a consideration in strategic management in the same capacity (or greater) than other consideration as there is ample evidence it can be profitable for a firm.
Carrigan, M. and Attalla, A. (2001). The myth of the ethical consumer – Do ethics matter in purchase behaviour?, Journal of Consumer Marketing, 18(7), pp.560-577.

Grande, C. (2007). Ethical consumption makes mark on branding, The Financial Times. [online] Available at: http://www.ft.com/cms/s/2/d54c45ec-c086-11db-995a000b5df1062.html#axzz2kT95cwFY (accessed 20 April 2015).

Oh, J. and Yoon, S. (2014). Theory-based approach to factors affecting ethical consumption, International Journal of Consumer Studies, 38(3), pp.278-288.

Servaes, H. and Tamayo, A. (2013). The impact of corporate social responsibility on firm value: the role of customer awareness, Management Science, 59(5), pp.1045-1061.

Very, P., Lubatkin, M., Calori, R. and Veiga, J. (1997). Relative standing and the performance of recently acquired European firms, Strategic Management Journal, 18(8).

Decision making

Identify and explore the factors which influence decision making and discuss the impact on strategic outcomes.

There are many diverse factors that influence decision-making. Such factors include resource capabilities, core competencies available to the firm, market conditions, competitive rivalry, economic factors in an operating or desirable market, organisational culture and even all combined aspects of the firm’s value chain. These factors greatly influence how strategy is formulated that the direction a firm takes to achieve growth or a better market reputation.

A firm must, first, determine where it wants to be currently and where it expects to be in the future (Johnson, et al. 2014). This means identifying how to position the firm in the long-term against competitors in an operating market, which requires planning and assessment of the external environment. For instance, a firm might examine the social and economic conditions of a new market that it wishes to enter in order to capture more target market attention and boost revenue growth. These factors will predict how consumers will adopt a product and whether they maintain the disposable incomes required to provide sustainable revenues to a firm entering this new market.

Additionally, competitive rivalry is highly relevant to how a business structures its strategic objectives and implements a new strategic plan. For example, a company might conduct competitive analyses and determine that no competitors have differentiated in terms of quality, thereby enacting strategy to inject total quality management systems into the firm to ensure that all products have rigorous inspections and are superior to the quality of competing products; common in such industries as the automotive industry where quality is often a marketing tool against competition.

How to successfully market a product is also an influence on strategic decision-making. Literature in marketing asserts that when a product brand is able to give consumers the perception that it can enhance their social status or lifestyle, they are more likely to develop very strong and potent emotional attachments to the brand (Zhang and Chan 2009). If a firm maintains competencies in marketing and knowledge of the culture and social factors of a market, it can seek strategies to leverage these competencies to improve the competitive, brand-related strengths of the business. Hence, how to advertise, communicate benefits of the product or brand, and how to match brand personality with consumer lifestyle and personality are strong influencers of how to adjust operational strategy and allocate resources effectively. The expenditures on marketing and promotion are considerable influences in decision-making especially in very saturated competitive markets.

A firm also must understand its current financial position and ability to procure capital if the firm wants to expand as a strategic objective. For instance, it might consider an initial public offering in the securities market to gain shareholder interest and also improve capital growth rapidly. Capital procurement, loans or even venture capitalist investments in the firm’s future would underpin criteria considered before a firm began a rapid expansion strategy, such as opening new retail facilities. If the firm conducts financial analyses and determines it is not capable of rapid expansion and likely cannot achieve rapid capital infusions, it might seek another strategy that is within the financial capabilities of the business in its current state.

There are many other influences, including how to formulate an exit strategy in a market in the event of competitive or marketing-based failures. It can be costly for a firm that has chosen a strategy of entering a new market to exit in the event of inability to satisfy the market or provide relevant products (Hawkey 2002). If the costs of exiting a market are high and the market is uncertain in terms of relevant competencies to service it and risky market conditions, managers might seek an opportunity for domestic market growth or organic growth in other fashion.

There are many potential influences on strategic decision-making. However, managers must consider economic, social, market-based, and long-term sustainability of these findings to plan and implement a relevant strategy. This requires multiple management competencies to build strategic objectives and plans that will have long-term profitability and relevancy.
Hawkey, J. (2002). Exit strategy planning: grooming your business for sale or succession. Aldershot: Gower Publishing Limited.

Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2014). Exploring strategy: text & cases. Harlow: Pearson Education.

Zhang, H. and Chan, D. (2009). Self-esteem as a source of evaluative conditioning, European Journal of Social Psychology, 39, pp.1065-1074.

2. Identify and critically appraise the key factors that affect how managers should approach the management of strategic choice.

The notion of strategic choice is that dominant groups or organisational leaders maintain the ability to influence the organization through political processes. Various members of the organization or groups assist in making decisions in most organisational models, either serving their own objectives or the objectives of whole. Examples of strategic choice could be determining that it would be a relevant strategy to acquire a competitor to improve market share or choosing to sell products at trade shows (as part of the marketing function) to expand the firm’s target markets and improve revenues. Strategic choice, therefore, is how strategic leaders or dominant groups identify and evaluate different business strategy alternatives and make decisions for how to position the firm in the future (Child 1997).

How to manage strategic choice is a subjective issue, meaning open for debate (Johnson, Whittington and Scholes 2011). It is dependent on the specific long-term goals of the organisation and how it wants to position the business against competition. Hence, the first key factor is determining how to differentiate from competing players in the market (Johnson, et al.). Essentially, how the firm will successfully compete in its established market determines strategic choice. Company leadership might evaluate whether a cost leadership strategy is most appropriate to service price-sensitive markets or perhaps seeking cooperative strategies with competition (Johnson, et al.). Strategic choice is the array of potential strategic options available to the organisation and how the firm begins evaluating how various strategies can best position the business for long-term success and improved product/service life cycles.

Managers must also determine the specific methodologies that will be undertaken to implement various strategies once they have been determined. For example, a manager might determine that acquisitions are the best strategy for new market entry in a foreign market, allowing the business to link its unrecognised brand with an established brand in the market to gain consumer trust. The business might also evaluate whether joint ventures would be ideal for a new market entry strategy, thereby spreading risk between more than just one organisational unit and allowing the business to share talent and economic resources to service a new market.

Strategic choices are aligned with business strategy, the specific strategic direction selected, and methods of strategy (Johnson, et al.). Managers would seem to have to be aware of the many different choices at their disposal and identify the potential challenges and issues that might occur by adopting various strategies (Johnson, et al.). Strategic leaders should utilise different analytical tools, perhaps such as the PESTLE framework or the Five Forces Model to fully examine market conditions, potential threats and macro-level considerations. These criteria underpin strategic choice options and provide evidence and even quantitative statistics that improve decision-making and guides a final strategic decision. All of these criteria are based on how the firm wants to position itself, compete or achieve growth.

From a different perspective, strategic choice might also be based on politically-motivated objectives, such as ensuring more power for managers and executives. As an example, one can consider a business that had operated in a very hierarchy-driven model where separation of decision-making power drove relationships between subordinates and managers. However, new market conditions dictate a need for change that would mandate more decentralisation strategies to facilitate a team-based environment. Managers, accustomed to maintaining high levels of authority and control over subordinates might be resistance. Literature on the subject indicates that many managers will resist decentralisation if they feel it poses a threat to their organisational power (Skarlicki and Folger 1997). Hence, how the firm evaluates strategic choice related to change might be influenced by this strong desire to maintain a hierarchy-driven model. Therefore, firm leadership might select a strategy that minimises shared decision-making, even though this might not be the best alternative, to ensure their authority levels are sustained similarly to historical levels.

As mentioned, strategic choice is a subjective matter and seems to be founded on socio-psychological considerations of management, market conditions, potential evaluation tools of a strategic option, and the long-term strategy that a firm has determined would be most viable for success in their markets. Depending on the objectives of a firm, it will underpin how strategic choices are identified, evaluated and ultimately selected.
Child, J. (1997). Strategic choice in the analysis of action, structure, organisations and environment: retrospect and prospect, Organization Studies, 18(1), pp.43-75.

Johnson, G., Whittington, R and Scholes, K. (2011). Exploring strategy: text and cases. Harlow: Financial Times Prentice Hall.

Skarlicki, D.P. and Folger, R. (1997). Retaliation in the Workplace: The Roles of
Distributive, Procedural and Interactional Justice, Journal of Applied Psychology, 82,
pp. 434-443.
Strategic capabilities

2a. Identify three benefits of utilising the VRIN?
2b. Evaluate the how sustainable capability and competencies can enable competitive advantage

The VRIN framework is an acronym for value, rarity, inimitability and non-substitutable (Barney, Wright and Ketchen 2001). Value is associated with a corporate resource that can build value for the firm or client, by outperforming competition. Rarity is a resource held only by a single firm or difficult to procure by others. Inimitability is the ability of a single corporation to control a resource and inability of a competitor to replicate or imitate this resource. Non-substitutable represents the inability of another product to serve as a market substitute for a product.

The VRIN framework has three distinct benefits when utilised in strategy. First, if resources have value, rarity, inimitability and are non-substitutable, it provides a firm with competitive advantages (Barney 2010); from a resource-based perspective. The VRIN framework provides strategic leaders with tangible knowledge of their existing resources and allows them to compare to other industry/market players to gain an understanding of what resource competencies could be exploit properly to gain prominence and uniqueness in their established markets. This model gives a snapshot of internal resource availability and capability and, when used as model of contrast with other competition, shows strategic leaders how these resources can be utilised to differentiate a business.

To illustrate, the company Apple was the first to launch a smartphone, as a market pioneer, which was initially a disruptive innovation in the cell phone market. It provided consumers with a new type of value in terms of memory capacity and functionality unprecedented in the consumer electronics industry and, at the time of launch in 2007, was non-substitutable except by outdated cellular technology as no other consumer-centric device maintained nearly the capability and capacity of the iPhone device. Hence, the VRIN framework would provide opportunities, theoretically, for Apple to patent and protect this device (intellectual property) to ensure that no other competition could replicate this product. The VRIN framework, therefore, allows for examination of Apple’s value, non-substitutability and inimitability opportunities for this particular product-based resource and develop strategies to ensure it has a longer life cycle and is not emulated by competition. Without the VRIN, Apple would likely have had competition quickly copy its features, benefits and raw materials. With the VRIN analysis data and findings, patent protections provided the most valuable strategy for ensuring sustained competitive advantage.

Sustainable capability and competencies are an amalgamation of how an organisation conducts its business and utilise its talents and resources effectively to ensure a positive market position over a long period of time. A firm can, first, integrate all of its capabilities to build a business model to maintain longevity of a product along its life cycle (Baldwin 2014). For example, one can consider a consumer electronics firm that managed, through R&D focus and allocation of capital to product development, to launch a new type of High Definition television with plasma-based features. The firm used its management talent to motivate teams designed for development project groups, used these same competencies to identify marketing sponsors to promote this product effectively, used superior HR strategies to recruit top talent, and established metrics by which to test the product (such as focus groups and tangible QA testing), to finally launch a first-to-market HD innovation. Integration of all competencies of the firm now have built a business model that can support future innovation development with less labour and resource challenges now that all members of these project teams have experiential learning on how to facilitate a faster innovation model. Hence, the firm built sustainable competitive advantages which now favour the firm as a pioneer with first-to-market advantages. Kalyanaram and Gurumurthy (2009) state that first movers in a market have considerable advantages over later entrants as consumers use the pioneer as a model to judge others; usually unfavourably.

The firm, by integrating all of its competencies (difficult to competitively-replicate skills and resources), now has a sustainable business model in areas of innovation that radically outperform the talents and resources of competing firms. As other competition begins to struggle to try to emulate or benchmark these competencies, the firm is continuing to develop further strengths in its amalgamated capabilities and innovate, thereby creating market barriers to competition attempting to emulate the firm’s team effectiveness, research and development prowess, and ability to procure rare resources by diversifying its supply chain.

As shown, the VRIN framework provides knowledge for what resources a firm maintains that can be exploited in comparison to competing industry players. Once identified, a firm uses its difficult-to-replicate competencies in an integrated fashion, creating knowledge and experience that competition is unable to achieve. It is through this that innovation production is more efficient, valuable and rapid which gives a firm a positive market reputation and differentiation that has implications for revenue growth and achieving higher market share.
Baldwin, D.A. (2014). Building sustainable organisational capability, Dave Baldwin Consulting. [online] Available at: http://www.davebaldwinconsulting.com/Building_Sustainable_Capability.html (accessed 17 April 2015).

Barney, J.B. (2010). Gaining and sustaining competitive advantage, 4th edn. Abingdon: Pearson.

Barney, J.B., Wright, M. and Ketchen, D. (2001). The resource-based view of the firm: ten years after 1991, Journal of Management, 27(6), pp.625-641.

Kalyanaram, G. and Gurumurthy, R. (2008). Market entry strategies: pioneers versus late arrivals, Wright University. [online] Available at: http://www.wright.edu/~tdung/entry.pdf (accessed 19 April 2015).

Current literature suggests that it is the manager’s task to undertake the process of resource analysis. If this is the case, critique the issues and the importance of those issues they must consider to develop an appreciation of the resources available?

The total strategic capability of a business is dependent on the adequacy and relevancy of its available competencies and available resources that enable a business to be sustainable and achieve competitiveness and profitability. A firm has threshold resources, such as administrative competency, tangible financial resources, technical expertise or infrastructure. A firm also sustains unique resources, which are a firm’s brand identity or establish brand loyalty and even innovation. All of these resources must be analysed to create a relevant and profitable strategic plan.

Resource analysis involves using a matrix to identify the threshold and unique resources available to the firm. Many businesses do not realise the intangible resources held by the business and tend to focus on simply tangible resources such as finance and infrastructure. Chwolka and Raith (2011) assert that many businesses fail because managers do not fully understand their full resource capacity and the challenges posed by their existing business models. It is critical that managers use appropriate metrics to evaluate their unique and threshold resources as well as core competencies if a relevant strategic objective is to be implemented into the business model.

For example, one can consider a firm that desires to growth using a diversification strategy, entering new markets with new product lines to improve revenues. This manager must assess its human capital competencies, its brand identity, potential brand equity, and all tangible internal resources to determine if they are sufficient, in their current form, to achieve the goal of growth and successful servicing of new markets with development of a diverse business unit. This hypothetical strategist may only review infrastructure and finance and determine that it is sufficient for launching a new business unit. However, this manager did not utilise metrics that assisted in measuring culture, flexibility to change, and other intangible resources. In such a situation, there might be problems with offering quality of customer service to the new, diverse markets and resistance to any changes imposed by a diversification strategy.

Resource analysis should be the responsibility of management as argued. If they do not utilise resource analysis effectively that measures all internal resources, the business will be unprepared to deal with contingent scenarios and challenges that conflict implementation of new strategic plans. Organisational activity is not confined to a proverbial vacuum and must, therefore, maintain readiness to respond to a constantly-evolving marketplace. As a result, new resources must be procured and new strategies for leveraging existing resources developed which underpins the necessity to understand all threshold and unique resources available to the strategist (Proactive Resolutions 2010).

There are many subjective ways that managers can come to appreciate their tangible and intangible resources. They can review quantitative data, such as customer satisfaction surveys, to determine how customer segments perceive the competency and quality of service. They can also conduct focus groups with relevant consumers to gain valuable qualitative knowledge of consumer expectations. This would provide insight into whether the intangible aspects of a business, such as service ideologies or human talent, serves as a detriment or success factor for achieving market success. Managers can conduct consultations with internal staff about their motivational levels and satisfaction levels which are critical to organisational culture cohesiveness and ability to perform roles competently. Coupled with quantitative financial analyses and asset calculations, a manager can better understand all dynamics that will impact business success and begin determining how best to leverage these resources to maximise total competitive advantage. The resource-based view of strategic management is to use various analysis tools and metrics to find resources with the most value, rarity, inimitability and non-substitutability (Johnson, et al. 2014). Understanding these dynamics provides a strategist with considerable opportunities to use these resources to exploit market opportunities with more profit than competition.

Resource analysis is critical for managers and is a responsibility to ensure an organisation achieves competitive success. It entails using metrics to evaluate tangible versus intangible resources to understand resource deficiency and strength. As a leveraging tool and planning tool to guide allocation of these resources effectively, it leverages more market relevancy in the long-term.
Chwolka, A., and Raith, M. G. (2011). The value of a business plan before start-up – A
decision-theoretical perspective, Journal of Business Venturing, (2011), pp. 1-15.
Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2014). Exploring strategy: text & cases. Harlow: Pearson Education.

Proactive Resolutions. (2010). Business tool: resource analysis. [online] Available at: http://www.cultivate-em.com/uploads/business-tool—resource-analysis.pdf (accessed 19 April 2015).

Last Completed Projects