Strategic Management: Definition And Approaches
Every Corporation aims for better competitiveness and long term growth within the market. Strategic management approach helps a firm sustain in the market competition and attain their specific growth. There are elective methods to strategic management of which every method focuses on different action plan and criterion. In this report, three different alternative approaches to strategic management (Dynamic method, Sustainability method and stakeholder method) are derived showing their introduction, brief history, benefits and limitations. Among the three approaches, Dynamic approach deals with the securing of competitive advantage in a indicated trade environment. In the environment of rapid technical change, this approach analyzes the source and technique of wealth creation. Stakeholder approach, however, deals with formulation and implementation processes which satisfy the stakeholder (people who can influence or be influenced by the organization’s activities, goals and policies) in the long term. Sustainability approach can be defined as a method that makes long-term shareholder esteem by bracing openings and overseeing dangers inferring from financial, natural, and social advancements. Also how Apple Corporation, a renowned tech giant company, gained success and made long term growth in their respective field using each of the mentioned approach are illustrated in this report.
Strategic management is the continuous identification, analysis, assessment, selection and implementation of a firm’s long term goals and objectives. There are some alternative approaches to strategic management which are effectively used in the organizations management decision. Each approach provides some techniques, models and processes to improve management environment of an organization. But they have some pitfalls too. There are various types of alternative approaches available such as sustainable, stakeholder, dynamic capabilities, sequential, incremental and interactive, revolutionary, resource based view, agency theory, industry leadership etc. Among them, three major approaches (sustainable approach, dynamic capabilities, stakeholder approach) have been elucidated in this report.
Major Approaches To Strategic Management
1. Stakeholder Approach:
In arrange to guarantee the long term victory of the firm, managers ought to define and actualize forms which fulfill the stakeholder is called the stakeholder approach(Freeman and Parmar, 2004). Stakeholders are those individuals who can influence or be affected by the organization’s activities, goals and approaches. Stakeholders incorporate workers, suppliers of credit providers, clients, nearby communities, natural bunches and government and their interface out to be taken account of by the executives of the company. This approach states that if the organization treats its employees badly, it will eventually fail.
1.1: Brief history of stakeholder approach: In the mid 1980’s, stakeholder approach was emerged. Publication of R. Edward Freeman’s “Strategic Management- a Stakeholder Approach” in 1984 was one of vital point in establishing this approach (Freeman and R.E,2010).In spite of the fact that this publication given the environment of the control of stakeholder approach, the approach was not modern. The term ‘stakeholder approach’ was utilized by the Stanford research institute (presently SRI international) within the 1960’s.1.2: Benefits of stakeholder approach: there are a few benefits of this approach which are depicted within the underneath:
- This approach spurs administration of the organization to create procedures by looking out from the firm and distinguishing, contributing in all the connections that will guarantee long term victory.
- This approach isn’t the as it were show that recognizes the targets of an enterprise. stakeholder approach moreover takes conservative and moral questions into thought.
- Stakeholder approach makes an environment where social riches is advanced for everybody.
- Another advantage of this approach is that higher efficiency through representative fulfillment.
- Moved forward maintenance / referrals from upbeat clients and ability procurement from a positive picture within the community.
- By achieving the core objectives of this approach organizations can Increase investment from happy financiers and can also increment mental wellbeing of the workforce through work fulfillment
- Height of the socio-economic status of the nearby community.
- This approach encourages to contribute towards a healthy competitive ecosystem where other companies can too flourish and bring benefits to their claim stakeholders in turn.
1.3:Limitations of stakeholder approach: There are some confinements of thisapproach which are described in the below:
- It is not possible to satisfy all the stakeholder interest at the same time.
- This approach must be applied by the management of an organization on a continuous basis.
- Stakeholders want to achieve their own interest and give the priority on their own benefits. So trying to satisfy all the stakeholder interest will complicate governance.
- Scholars criticize this approach in terms of an inequality of resources, negotiating power and time required.
- The identification and calculation of prices and opportunity costs for the different stakeholders are difficult and reduce the operability of the stakeholder approach.
- Sometimes organizations may overvalue their stakeholders which creates extra cost.
- Power among stakeholders is not equal. So powerful stakeholders can get more benefits from the organization than others.
1.4: Stakeholder approach used by Apple: Apple’s victory is somewhat subordinate on its capability fulfill partners. Partners altogether influence the trade operation of Apple Organization in terms of client recognition and deals incomes. Apple features a firm and all-encompassing approach in tending to the interface of partner bunches critical to the trade.
Apple’s Partner Groups: Apple considers the interface and concerns of a number of key partners in its arrangements and programs for corporate social responsibility.
In Apple’s case, the taking after partners are the foremost significant:
- Apple’s Employees
- Employees of Providers and Distributors
Customers/Consumers. The most intrigued of clients is to have compelling and effective items that are sensibly estimated. In spite of the fact that Apple items have higher cost point, Apple’s premium estimating procedure is satisfactory since it matches the tall quality and aesthetics of these items.
Apple’s Workers: Workers are the second-priority partners in Apple’s approach to corporate social obligation. The most interface of these partners are appropriate remuneration and career improvement. The firm addresses the interface of its workers through emolument bundles competitive in Silicon Valley.
Investors: In Apple’s case, financial specialists are curious about maximizing the returns on their speculations. The company viably handles this partner gather through excellent financial execution. For example, Apple is presently one of the foremost beneficial companies within the world. The firm keeps up tall benefit edges. Employees of Suppliers and Merchants: This partner gather is inquisitive about moral work hones. To address these interface, Apple includes a Provider Code of Conduct. The company screens and forces prerequisites on the business hones of firms in its supply chain.
2: Dynamic capabilities:
Procurement of competitive advantage in an indicated commerce environment is considered dynamic capabilitiesapproach to strategic management (Teece and Pisano,1997). In the environment of rapid technical change, this approach analyzes the source and technique of riches creation and capture by private endeavor firms.
2.1: Brief history: David Teece, Gary Pisano and Amy Shuen developed and defined the concept in their paper of dynamic capabilities and strategic management as ‘the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments’ which was published in 1997. The core assumptions of this concept is that an organization’s fundamental competencies ought to be utilized to make short-term competitive positions that can be created into longer-term competitive advantage. World is continuously changing. To coping up with the change, managers should develop strategies to achieve the desired advantage. Dynamic capabilities approach concerns the development of new strategy for the company’s manager to adjust to the discontinuous change and also ensure competitive survival while maintaining minimum capability standard.2.2: Benefits of this approach: There are some benefits of this approach which are described in the below:
- One of the main benefits of this approach is that it helps the companies to extend their businesses and it also encourages to enter into a new business. This includes mergers and acquisition, alliances, joint ventures.
- Global market is changing rapidly. So this approach encourages the companies to create new and innovative product and services to satisfy the demand of the customer at the time of alter. This will be utilized for the existing showcase or indeed creating new marketsso that organization can satisfy its customer with inventive ways.
- Dynamic capabilities approach leads the company amid the time of change to make more benefits.
- This approach will permit the organization to alter its asset base, either by altering the current one or procuring unused ones, so they can react to the outside changes.
- Dynamic capabilities are easy to cope with so managers can stay widely focused.
2.3: Limitations of this approach: There are some benefits of this approach which are described in the below:
- Companies cannot utilize this approach at any time since current state of the company does being completely maintainable is still a way off however, the building squares are gradually being put into put.
Since 2016, Apple has been utilizing its reusing robot Liam, which extricates recyclable materials from iPhones. The machine dismantles the company’s smartphones and takes gold and copper from the camera, cobalt and lithium from the battery, and silver and platinum from the rationale board. Sustainability doesn’t just stop with recycling old iPhones, with the company’s massive new headquarters, Apple Park, using 100 per cent renewable energy from solar, hydro and wind sources. Apple also claims over 99 percent of its packaging comes from materials sourced from protected sustainable forests.
Apple has been very successful using sustainability approach which include:
- Apple Organization is effectively overseeing and arranging for climate alter and they have secured an 18% higher return on venture (ROI) than companies that aren’t and 67% higher than companies who deny to reveal their emissions.
- Apple Organization is contributing in carbon diminishments and they have accomplished a 50% lower instability of profit over the past decade and 21% more grounded profits than their low-ranking peers.
- Thirty-four companies within the S&P 500 file scored the exceptionally most elevated review for climate execution and Apple Organization is one of them.
The alternative approaches play the very crucial role in making the strategic management decision of a company. They emphasize in the fruitful planning and decision making through their superior models and processes. The approaches should be implied in the firm on a continuous basis to ensure the reliability of the firm’s objectives and purposes. Management must take into account of the current state of the firms while implementing these approaches. Selection of approaches may vary from organization to organization because of the diversified characteristics of different organizations. Also a company should take into account their geographical and economical condition of the country they are operating their business in.
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