The Innovator’s Dilemma, the strategic term first articulated in a classic business book, The Innovator’s Dilemma, by the innovation guru, Clayton Christensen of Harvard Business School. It states that a company’s successes and strengths can actually become obstacles when faced with changing markets and technologies. “The innovator’s dilemma [is] that ‘good’ companies often begin their descent into failure by aggressively investing in the products and services that their most profitable customers want.” – Clayton Christensen, The Innovator’s Dilemma. The innovator’s dilemma is the dilemma of recognizing when to respond to technological change in a way that is fundamentally different from that which usually works for large, successful businesses. The dilemma is that of recognizing which of two types of technological innovations are looming on the horizon for a particular industry. The two types of technological innovations are sustaining technologies and disruptive technologies. For each of these, the “threats” posed to Continue reading
Strategic Management Concepts
Business Combination Strategies
A combination strategy is the pursuit of two or more of the previous strategies simultaneously. For example, one business in the company may be pursuing growth while another in the same company is contracting. In the spring of 1989, for instance, Texas Air was rapidly expanding its Continental Airlines unit. But its Eastern Airlines operation was being consolidated. Eastern’s management was selling off routes and planes, cutting back the number of cities served, and making plans for operating a much smaller airline. A combination strategy simultaneously employs more than one of the other strategies. This often reflects different strategic approaches among subsystems. For example, an M-form conglomerate like General Electric might seek growth overall, but it may do so by pursuing growth in some divisions, stability in others, and retrenchment in still others. Combination strategies are common, especially for complex organizations operating in dynamic and highly competitive environments. Many, Continue reading
Effects of Leadership and Organizational Climate on Innovation
Now more than ever, companies are putting more attention to innovation that make their products and services more competitive, thereby enable them to survive and flourish in the changeable and challenging global environment. Innovation is seen as the first attempt to carry out a new creative idea, and translate it into practice. However, it isn’t easy; it’s a difficult and complex task. There are two primary factors influencing the success of innovation: technical resources (people, equipment, knowledge, money, etc.) and the abilities in the organisation to manage these resources to encourage innovations. However, the latter is the precondition which can place high premiums on innovation. Organisation is a kind of breeding ground for generating creative idea and capturing new opportunities. An innovative organisation has several key components: appropriate structure, effective team working, external focus, leadership, key individual, creative climate and etc. All the factors are absolutely essential. All innovative organisation Continue reading
The Rational and Dynamic Approaches to Strategic Management
Strategic management is a not a new concept. It has been defined as a management system which links strategic planning and decision making with the day-to-day business of operational management. Strategic management is not a simple, step by step process, but a complex and iterative process which needs hard work and dedication from many people in an organization to implement it toward the objective. It is the process for the leading members of an organization to forecast its future and develop the necessary procedures and operations to achieve its future. Strategic management is usually found in high levels of management to help organization gather, analyze and organize useful information to keep up with industry and competitive trends. The rational and dynamic approaches to strategic management are two different schools of thought. The rational approach is well-planed and more prescriptive on strategy selection. However, the dynamic approach is opposite. Rational Approach Continue reading
Divestiture Strategy
Selling a division or part of an organization is called divestiture. Divestiture strategy is often used to raise capital for further strategic acquisitions or investments. Divestiture strategy can be part of an overall retrenchment strategy to rid an organization of businesses that are unprofitable, that require too much capital, or that do not fit well with the firm’s other activities. Divestment is a difficult decision for the management of any organization. The barriers that impede an organization from following a divestment strategy have been described as follows: Structural (or Economic) Strategy. Characteristics of a business’s technology and its fixed and working capital impede exit, especially if the business is a core competence to the company. Corporate Strategy. Relationships between the various business units within an organization may deter divestment of a particular business unit. Managerial Strategy. Aspects of company’s decision making process inhibit exit from an unprofitable business. Such aspects Continue reading
Takeover Bid – Meaning and Types
This is a technique for affecting either a takeover or an amalgamation. It may be defined as an offer to acquire shares of a company, whose shares are not closely held, addressed to the general body of shareholders with a view to obtaining at least sufficient shares to give the offer or, voting control of the company. Takeover Bid is thus adopted by company for taking over the control and management affairs of listed company by acquiring its controlling interest. While a takeover bid is used for affecting a takeover, it is frequently against the wishes of the management of Offeree Company. It may take the form of an offer to purchase shares for cash or for share for share exchange or a combination of these two firms. Where a takeover bid is used for effecting merger or amalgamation it is generally by consent of management of both companies. It Continue reading