MGT302 Strategic Management

• The approach helps in creating robust and long-term link between the company and its different stakeholders.
• This in turn, helps in creating competitive advantage for the firms, as long-term symbiotic relationships help the business to understand the needs and interests of the different stakeholders and work according to the same.
• The creation of productive and bilateral relationships with the different stakeholders, helps the business to assemble and utilise important information about their stakeholders, the markets and also to increase the goodwill and reputation of the companies, thereby helping in creating stronger brand recognition (Minoja 2012).
• Lesser wastes are generated in terms of production and operational processes
• Co-creation of value takes place for these businesses.
• This process also helps the firms to attract high quality and more motivated labour force and also leads to higher job satisfaction of the employees, which in turn will lead to implementation of innovations in businesses, thereby creating value through the same (Alkhafaji and Nelson 2013).

Implementation Issues of Stakeholder Approach

The approach, in spite of its benefits and positive aspects, have some issues regarding the implementation of the same in the real operational frameworks of the businesses, the primary ones being as follows:

• The stakeholders in businesses, usually have different aims and interests which vary from one another. The interests of the customers are not in general the same as the interests of the investors or the employees. Thus, one of the primary implementation issues of the stakeholder approach of strategic management is that of the aspects of catering to divergent interests of the stakeholders, such that the welfare of all the stakeholders as well as the profitability of the business is maximised (Verbeke and Tung 2013).
• The businesses, aiming to implement this approach, needs to strike a balance between catering to the interests of the stakeholders and increasing the profits of the businesses, both of which can, frequently becoming contradicting and competing objectives.

Limitations of the Stakeholder Approach

The primary limitations of the concerned approach are that emphasizing too much on the interests, needs and demands of the stakeholders, can often lead to allocation of excessive attention as well as resources towards the same, thereby leading to the aspects of over-valuation of the stakeholders. This may, in turn, hamper the productive and other operational activities of the business, thereby hampering the profitability and competitiveness of the same in the contemporary global business scenario (Verbeke and Tung 2013). The power of all the stakeholders are not the same, which in turn may lead to distortions of the allocation of firms profits to the different stakeholders, which is also one of the primary implementation issues in this approach.

Dynamic Capabilities Approach

Another approach devised and commonly implemented for strategic management of operational frameworks of different organizations across the globe, is that of the dynamic capabilities approach, which was first proposed by David Teece, Amy Shuen and Gary Pisano, in 1997. The primary working notion behind this approach of strategic management is that the business organizations, should be able to integrate, reconfigure and also build their competencies (both internal as well as external) with the help of the resources and capacities present within their operational framework, so as to respond to the rapid changes in the environment in which these organizations operate. The implementation of such approach helps the firms to achieve competitive advantages by enhancing the innovations and flexible operations of the firms.

The dynamic capabilities framework, in general consists of the following three components:

Processes- This shows the operational frameworks, routines, practice and ways of doing things in the businesses

Positions- This considers the existing endowments, like technology, complementary assts, clients, external business relations and others, which are present with the companies in the existing period

Paths- This shows the strategic alternatives which the businesses can implement in their operational framework, depending upon the processes and the existing positions of the business as well as the changes which take place in the market where the business ventures

This type of approach can be seen to be taken by the Apple company, in the contemporary period.

Viability of the Dynamic Capabilities Approach

The Dynamic Capabilities Approach, being one of the most popular form of strategic management tools, include the extensive study and analysis of the capabilities and competencies of the firms, in the aspects of the organizational learnings, intellectual property, manufacturing, product as well as process development, technological scenarios, human resources and other aspects. Accounting and analysing these aspects in an organization is not impossible and can be done with the help of proper and systematic approach. This is thus viable and if done properly can help the firms to attain flexibility in their operational frameworks, thereby helping the organizations to respond efficiently to the rapidly changing environments, by changing their operational processes in accordance to the same.

Benefits of the Dynamic Capabilities Approach  

There are considerable advantages of using the dynamic capabilities approach for the purpose of strategic management of the organizations, the primary ones being as follows:

• The concerned approach of strategic management helps the firms to realise the internal as well as external specific competencies which the firms have and also the aspects in which they are unique and are in advantageous or disadvantageous positions compared to their rivals (Wilden et al.2013).
• It helps the firms not only to realise the internal and external competencies, but also to exploit the same in the context of addressing the rapidly changing business environments, especially in the aspects of changes in production processes, demands of the customers, operational frameworks as well as incorporation of technological and infrastructural innovations in their operational framework.
• This approach of strategic management helps in the development of the managerial and organizational capacities of the firms which in turn also helps in developing specific technological and functional skills which are not easy to imitate by other organizations.

Implementation Issues

The concept of dynamic capabilities approach appears to be theoretically and conceptually a robust and efficient approach for strategic management. However, while the implementation of the theoretical approach to the real-life organizational operations, the companies face several implementation issues, which are as follows:

• The concerned approach for strategic management is difficult to operationalize as there remains doubts regarding what factors to include and what not to include.
• The external and internal competencies of businesses are highly subjective and varies according to the perceptions of different people.
• It is also difficult to analyse the path dependency as well as the reconfiguration processes in response to the changes in the business environments as there always lies the aspect of cost effectiveness and risks

Limitations of the Dynamic Capabilities Approach

The primary limitation of the approach is that it is highly theoretical and the implementation of the approach needs the development of a proper systematic and self-monitoring framework. There also lies confusion regarding the very definition of the term “Dynamic Capabilities”. The definition should not only include the aspects of routines and competencies of the firms and should also incorporate the domains of readapting capabilities of the firms, which is an abstract concept and cannot be easily materialised or cardinally measured (Eriksson 2014). There also remains confusions regarding the point of time where, a company decides on adapting to the dynamic capabilities and competencies instead of consistently changing strategic and operational frameworks of the companies to respond to the changing business scenarios.

Sustainable Approach for Strategic Management

A new and more inclusive form of strategic management in the business organizations, is that of the sustainable approach, which mainly has its roots in the conceptual framework of “Corporate Sustainability”, which again has its roots in the late 1990s. The main notion behind the sustainable approach for strategic management is that the businesses should form their operational framework and strategies in such a way that all the dimensions of the business, that is, the ethical, cultural, social, environmental as well as economical dimensions of the same are efficiently integrated and taken into consideration (Seuring and Gold 2013). The aims of such approaches of strategic management are that of creation of a sustainable, long-term profitable as well as reputable business operational framework, which can be beneficial to not only the companies but also to the overall population as well as the future generations of the businesses.

The sustainability approach for strategic management is a wide domain consisting of various components, which can be primarily categorised under the following broad aspects of the operational frameworks of the concerned companies, incorporating this approach: The Coca Cola Company has been famous for implementation of this type of strategic management framework in their overall operations.

Transparency in business operations- This component is one of the most significant parts of the concerned strategic management approach, focussing on the idea of creation of an engaging as well as open and liberal business environment in the company, thereby improving the performance of the company due to lack of unfair activities, catering to vested interest groups, which in the long run help the companies to stay profitable and sustainable (Kindström, Kowalkowski and Sandberg 2013). Transparency in operations, help to increase the trust of the community, thereby creating higher possibilities of co-creation of values.

Stakeholder engagements- For the purpose of brining sustainability in the operations of the businesses, the companies need to assess the environmental, economic and social impacts of the same, internally as well as externally, which in turn requires the engagement of different stakeholders, for taking into consideration the needs and concerns of the same (Teece 2012).

Viability of the Sustainable Approach

In the contemporary period of increased dynamics and complexities in the operational frameworks of any business, it becomes considerably difficult for the business to bring complete transparency in their operational framework. However, the increased technological and infrastructural development in the contemporary period, has been facilitating communication, globally, which in turn may facilitate higher engagement of the stakeholders, thereby making it viable for the companies to implement sustainable approach for strategic management, in the aspects that it is feasible for the companies to analyse the impacts of their operations on different ethical, cultural, social and economic aspects (Teece 2012).

Benefits of Sustainable Approach

The primary benefits of the sustainable approach can be seen to be as follows:

• The approach is a more integrated one, which takes into consideration not only the present but also the future welfare.
• The approach not only considers the economic and profitability aspects but also the social, ethical, cultural aspects of businesses, which in turn makes the business operations more meaningful to the society as a whole.
• Incorporating a sustainable and pro-society business approach increases the popularity and goodwill of the companies among the customers, investors and employees, thereby contributing to the long-run sustainability and competitiveness of the companies (Stead and Stead 2014).

Implementation Issues

There, however, remain confusions, in implementing this approach of strategic management as there always remain several trade offs which the businesses face in this aspect, particularly in the aspects of designing the strategies in such a way that the welfare of both the present and the future generations are maximised (Eden and Ackermann 2013).

Limitations of Sustainable Approach

The primary shortcomings of this approach are as follows:

• There remains a continuous trade off between the welfare maximization of the future and the current generations.
• The ethical and social aspects and interests often go in opposite directions to that of the profitability and personal interests of the owners of the companies, thereby leading to creation of trade offs between the different stakeholders and the companies (Asif et al.2013).
• The sustainability approach for strategic management does not address the aspects of competitiveness and efficiency of the operations of the companies, which are of utmost importance in the era of an increasingly competitive global business environment.

References

Alkhafaji, A. and Nelson, R.A., 2013. Strategic management: formulation, implementation, and control in a dynamic environment. Routledge.

Asif, M., Searcy, C., Zutshi, A. and Fisscher, O.A., 2013. An integrated management systems approach to corporate social responsibility. Journal of cleaner production, 56, pp.7-17.

Asif, M., Searcy, C., Zutshi, A. and Fisscher, O.A., 2013. An integrated management systems approach to corporate social responsibility. Journal of cleaner production, 56, pp.7-17.

Cooper, S., 2017. Corporate social performance: A stakeholder approach. Routledge.

Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management. Sage.

Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management. Sage.

Eriksson, T., 2014. Processes, antecedents and outcomes of dynamic capabilities. Scandinavian Journal of Management, 30(1), pp.65-82.

Eskerod, P. and Huemann, M., 2013. Sustainable development and project stakeholder management: What standards say. International Journal of Managing Projects in Business, 6(1), pp.36-50.

Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2012. Strategic management cases: competitiveness and globalization. Cengage Learning.

Kindström, D., Kowalkowski, C. and Sandberg, E., 2013. Enabling service innovation: A dynamic capabilities approach. Journal of business research, 66(8), pp.1063-1073.

Minoja, M., 2012. Stakeholder management theory, firm strategy, and ambidexterity. Journal of Business Ethics, 109(1), pp.67-82.

Seuring, S. and Gold, S., 2013. Sustainability management beyond corporate boundaries: from stakeholders to performance. Journal of Cleaner Production, 56, pp.1-6.

Stead, J.G. and Stead, W.E., 2014. Sustainable strategic management. Routledge.

Teece, D.J., 2012. Dynamic capabilities: Routines versus entrepreneurial action. Journal of management studies, 49(8), pp.1395-1401.

Verbeke, A. and Tung, V., 2013. The future of stakeholder management theory: A temporal perspective. Journal of Business Ethics, 112(3), pp.529-543.

Wilden, R., Gudergan, S.P., Nielsen, B.B. and Lings, I., 2013. Dynamic capabilities and performance: strategy, structure and environment. Long Range Planning, 46(1-2), pp.72-96.