It is mutually agreed that the converses of intuition and analysis generate tension during the strategic thinking process. Researchers and contributors to strategic management making the case for logic argue that for strategy to be effective, the strategic thinking process must involve extensive formal analyses and objective collection and processing of data both from within and without the corporation. Rational reasoning enables managers gain an accurate perspective on the different options available before identifying the strategic option that best serves the organization’s cause: achieving its goals and objectives. Logical analysis encompasses assessing internal and external risks, strengths and weaknesses, market need and so on; so that strategy can be thought out to fit each of the above factors. In contrast to logical thinking, creative thinking involves taking a “leap of imagination” without any logically defined reason for taking such a leap. Creative thinking is a divergence from the rules governing Continue reading
Strategic Management Terms
What is First Mover Advantage? Definition & Examples
In the business world that is characterized by cutthroat competition, businesses do whatever is in their capacity to gain a competitive advantage. One of the common desires for any business is to dominate an industry or a region by being the first to enter into the specific business area. As a business concept, first mover advantage is a highly preferred concept where businesses seek to dominate given business areas by being the pioneers. Although many examples show first mover advantage is not always the best, there are equally many success stories of being the pioneers in a given business area. Firstly, from a management viewpoint, any business that acquires customers in an area where other companies have not been established ends up being the market leader as the pioneer in the given business area. Such an organization has the technological leadership of the products it creates. The process of developing Continue reading
3 Important Models of Organisational Growth
An organization is a group of people who work together with coordinated efforts to achieve certain objectives or goals. Organisations are established by individuals or groups of individuals. During their formation, there is usually very little to talk about by the owner(s) and too much for them to do. Just like human beings, organisations need to grow so as to enable the owner or owners realize their objectives. If the aspect of growth is removed, then it becomes almost impossible for an organisation to exist beyond its formation stage. The signs of growth are expansion and increase in financial base. It also includes increase in the number of employees and diversification of a business as well as the separation of the owner from the business. Organisations also grow through mergers and acquisitions, all in the spirit of attaining their mission and vision. Business management commentators have described various models of organisational Continue reading
Firm That is Stuck in the Middle
The three Porters generic competitive strategies are alternative, viable approaches to dealing with the competitive forces. The converse of the previous discussion is that the firm failing to develop its strategy in at least one of the three directions – a firm that is stuck in the middle – is in an extremely poor strategic situation. According to Porter, a company’s failure to make a choice between cost leadership and differentiation essentially implies that the company is stuck in the middle. Porter argued that cost leadership and differentiation are such fundamentally contradictory strategies, requiring such different sets of resources, that any ï¬rm attempting to combine them would wind up “stuck in the middle” and fail to enjoy superior performance, Cost leadership requires standardized products with few unique or distinctive features or services so that costs are kept to a minimum. On the other hand, differentiation usually depends on offering customers Continue reading
The SCP Framework – Structure Conduct Performance Framework
The origin of the SCP (Structure-Conduct-Performance) paradigm can be traced to the work of the Harvard economist Edward Mason in the 1930s. It was popularized during 1930-60 with its empirical work involving the identification of correlations between industry structure and performance. This is a paradigm that is foundational to industrial organization economics, consistent with the positional view of strategy, as opposed to the resource-based view of strategy. There are two competing hypotheses in the SCP paradigm: the traditional “structure performance hypothesis” and “efficient structure hypothesis”. The structure performance hypothesis states that the degree of market concentration is inversely related to the degree of competition. This is because market concentration encourages firms to collude. The efficiency structure hypothesis states that performance of the firm is positively related to its efficiency. This is because market concentration emerges from competition where firms with low cost structure increase profits by reducing prices and expanding Continue reading
The Strategic Game Board
The Strategic Game Board is a concept coined by McKinsey & Company, this strategic framework can be used to identify the strategic management options in a competitive landscape by showing the strategists that the business organization can choose where (market segments), how (business system) and when (timing) to compete. A firm’s decisions pertaining to the scope and mode of competition and the time for the overall action should be based on a continuous analysis of the firm’s strengths, vulnerabilities, and resources in relation to those of its competitors. The strategic game board describes the options open to a firm regarding the scope and mode components of strategy. The vertical axis represents a continuum of where-to-compete options ranging from a sharp focus on a narrow market niche to competing across an entire market. The horizontal axis represents a continuum of how-to-compete options ranging from playing entirely by the accepted rules of Continue reading