Literature Related To Strategy Theories And Strategy Management Business Essay Example

human activity towards achieving them. The academic field of strategy is highly diverse with ongoing efforts made in the past decade to identify strategic paradigms and explore new approaches.The field of strategy is too diverse to be considered a Lakatosian research program with universally accepted fundamental principles, or to be viewed as a Kuhnian paradigm (Kuhn 1996/1970).

According to Mintzberg (1990; 1998), there are 10 schools of scheme theory. Three of these schools are normative and represent the 'classical approach' to business scheme theory (as discussed below). The remaining seven schools are descriptive and will be mentioned to some extent later on.

Authoritative Theory of Business Strategy

In the early 1960s, three influential books were published that laid the foundation for the theory of business strategy in academic fields. These books include "Strategy and Structure: Chapter in history of the industrial endeavor," "Business Policy: Text and Cases," and "Corporate Scheme."

The design school, represented by Selznick, Chandler, and Learned, along with the planning school, founded by Ansoff, are part of the classical strategy theory. These schools have had a significant impact on the business world in recent decades. Some underlying assumptions can be found in all three schools, such as the belief that the CEO is solely responsible for strategy formation and that centralized and planned processes lead to detailed and explicit strategies. Although these two schools have a common origin, they have played different roles in academic assignments. The design school emphasizes a centralized, yet casual process, while the planning school emphasizes a formal process resulting in detailed organization scheduling.

Both after-school and design school emphasize the importance of different schemes for effective administration. Port School claims that there

are three generic schemes which are distinction, concentration, and leadership. In this school, scheme selection is crucial for achieving success in a specific industry and securing a favorable position within that industry.

Scheme and Competitive Advantage

The scheme is developed to gain an advantage over rivals in an organization. Competitive advantage refers to the advantage obtained by offering consumers greater value, either through lower prices or by providing superior benefits and services that justify higher prices. This advantage can be achieved through various means, including improved product performance, better distribution methods, or innovative advertising. However, most forms of competitive advantage are not sustainable in the long term due to the emergence of new competitors or substitutes for the innovative practices that initially created the advantage.

The concept of competitive advantage is based on the idea that a company can generate value for its customers that exceeds the production cost. Value is determined by customer willingness to pay, and achieving superior value can be done through offering lower prices with similar benefits or providing unique benefits justifying higher prices. This suggests that competitive advantage occurs when a company earns profits above the industry average. A primary goal of organizations is gaining an edge over competitors and attaining long-term superior performance, resulting in increased profits. In 1980, Porter defined competitive strategy as the actions taken by a company to establish a favorable and sustainable position within an industry, aiming for superior performance and significant return on investment (ROI).

Additionally, Porter stated that competition and the business environment can be determined by five forces. According to Porter (1985), competitive advantage is the ability to provide value to consumers that surpasses the total

costs of production. There are two main types of competitive advantage: cost advantage and differentiation advantage, depending on their respective sources. Porter's concept of strategy focuses on the competitive position that allows an organization to stand out in the eyes of customers.

However, some faculty members argue that Porter's claims are inconsistent and lack empirical evidence in the carefully selected case studies. Additionally, they define that if an organization adopts a strategy that creates value when competitors do not implement it at the same time, it means that organization has a competitive advantage.

Strategic Analysis Models

Organizations always face internal and external influences from various factors such as the external economic situation, technological advancements, and the rapid growth of competitors. Another example is the financial situation affecting backward production facilities and capacity, which directly impacts business performance. Therefore, strategy analysis tools play a crucial role in strategy analysis, choice, and implementation.

The focus of the text is to evaluate four strategic analysis models and select specific models for research implementation.

SWOT Analysis

SWOT Analysis, created by Albert Humphrey of Stanford University in the 1960s and 1970s, is a powerful tool based on research conducted with the Fortune 500 companies in the United States (Pahl and Richter,2007). It comprehensively evaluates an organization's strategic planning method and can be used to assess Strengths, Weaknesses, Opportunities, and Threats involved in a project or business venture. The SWOT analysis assists in aligning an organization's capabilities and resources with its competitive environment.

The purpose of SWOT analysis is to identify and analyze an organization's strengths, weaknesses, opportunities, and threats. The goal is to leverage strengths and opportunities while minimizing weaknesses and threats. SWOT analysis is crucial for

scheme preparation and can assist in making informed choices (TnBSolutions 2010). One approach to conducting this analysis is by using a "grid table," which allows for a clear presentation of the organization's strengths, weaknesses, opportunities, and threats. The aim is to maximize strengths, explore opportunities, and overcome threats. By taking advantage of both internal strengths and external opportunities, an organization can mitigate potential threats (TnBSolutions 2010).

Hence, most potential threats could be addressed in a timely manner.

Advantages and Disadvantages

According to the source "Protecting and advancing good nutrition in crisis and recovery: resource guide By Food and Agriculture Organization of the United Nations", SWOT analysis allows us to consider both positive and negative factors and situations. It also serves as a link between the external environment and the organization's strategy. However, there are two drawbacks associated with SWOT.

The utilization of SWOT analysis for defining an organization's goals and strategy heavily relies on personal knowledge and subjective perspective. This can lead to inaccurate evaluations of information. Furthermore, by focusing solely on the strengths of the organization, it may miss the opportunity to address threats or strengthen potential opportunities. It is argued that although SWOT analysis serves as a link between the external environment and the organization's strategy, it has two disadvantages. One disadvantage is that it overlooks important strategic implications that could impact decision-making. Despite these limitations, SWOT analysis can still be useful if practical challenges are taken into consideration.

It still serves as a useful practical tool for summarizing construction and analyzing information gathered from a situation appraisal (Protecting and advancing good nutrition in crisis and recovery). It could lead to a clear strategic decision in the future.

VRIO

Framework

The VRIO model was proposed for the first time as an internal strategic analysis tool in the context of business management. The industry is commonly analyzed using the five-force model, which suggests that the industry's structural characteristics, market power, and barriers to entry are the sources of sustainable competitive advantage. However, the resource-based view (Resource Based View) emerged in strategic fields as a major challenge to the Industrial Organization economic theory.

The resource-based position is a well-known theory that argues that internal factors, specifically a company's resources, are crucial drivers of competitive advantage. In his book "Firm Resources and Sustained Competitive Advantage," the author developed the key concepts of the resource-based position and further expanded upon them in his book "Gaining and Sustaining Competitive Advantage," published in 1996. Barney went on to develop a more systematic analytical model called "VRIO" based on his core idea of firm resources and sustainable competitive advantage. Summarizing the articles in his book "From the Inside for Competitive Advantage," Barney put forth the central idea of the model that "sustainable competitive advantage can only be achieved by evaluating environmental opportunities and threats and then actively operating in high-opportunity, low-threat environments." Sustainable competitive advantage also relies on unique resources and capabilities that companies can utilize to compete in their respective environments.

In order to harness these resources and capabilities, managers must assess their worth, scarcity, and cost in order to enhance the growth of their organizations. The VRIO model, consisting of the Value, Rarity, Imitability, and Organization aspects, serves as a tool for this purpose. The VRIO model can be represented as shown in the following chart. Source: Figure: 2.1. While Barney's VRIO

model has contributed to the development of the resource-based view (RBV) strategy analysis by focusing on internal resources, it also faces criticism for its inherent limitations and inability to adapt to dynamic environments.

They believe that finding resources of VRIO in an organization that is successfully behind instead of in front is excessively simple, thus VRIO may be ineffective in practice.