Firm's strategy is an essential element it must set carefully so it can express its inspirations and goals and express what is needed from the company to do in order to reach these goals. Strategic decisions are the formulation factors of the strategy, they can define the firm's competitive advantage and highlight how much important are these strategies for the company, no matter its type would be. In this paper, our focus will e oriented towards investigating the four strategic perspectives, define how much they can e suitable to the market environment in the 21 century and finally discuss the aspects of similarity and difference among two of these theories. (Marketing strategies and market research, 2014)
Q1: Characteristics of strategic theories
In analyzing different strategic perspectives, we will find that each of them has its own distinguishing characteristics. The four strategic theories include the classical theory, evolutionary theory, systemic theory and lastly the processual theory. We can distinguish them from each other based on the different features and qualities they posses which are considered as the reference for decision makers in the process of establishing their business strategies. (Strategic management, 2013)
Beginning with the classic theory or perspective, we may notice that this perspective or theory is more appropriate to large and mature businesses. Strategists focus on how to deal with futuristic issues of the company in light of logic; this can be performed through a thorough analysis of all the aspects that require decision making. They tend to rely on both logic and rationality when they formulate the strategy of the company. During the latter half of the last century, with the lack of threatening market challenges, large scale companies found it suitable to take firm and stable decisions that were for the sake of their business success. They benefited from the strong economic environment in USA at this period to follow the classical approach and take successful decisions. They benefited from the demand stability for certain products, like cars, in taking the decision to formulate strong strategies that have for objective to raise profit and reduce costs. (Management control systems, 1984)
Some companies like Chevrolet turned its attention to ameliorate internal strategies as a manner to raise profit levels by gaining competitive advantage among other competitors. The competitive advantage for automotive industries focus on providing a high quality product with a good price compared to other competing products in the market. Companies tend to lower prices by performing dramatic cost reduction; they reduce potential operational expenses so overall costs can be diminished to its minimum. Wataniya Telecom, for instance, is a telecommunication company in Kuwait, it seeks to enhance its competitive advantage by providing strong database for its clients, the company found this way suitable to reach customers satisfactions and exceed their expectations. (Data analysis and decision support, 2005)
The second perspective is the processual perspective which relies mainly on crafted strategies as a way to deal with market fluctuations. It was first issued in the seventies of the last century at the time of fuel crisis and oil scarcity that was the reason behind raising oil price. Unlike the classic perspective, it does not focus on logic or rationality. According to this perspective, decision makers face market challenges by forming policies and setting plans that can be used to react to different market crisis and handle market fluctuations. Dealing new changes requires from decision makers to modify the current strategies and policies applied by the company. This approach is always adopted by new startups because at the beginning of their work they may need to have a thorough understanding of the nature of the marketing environment. (Strategic management, 2013)
After one decade of the issuance of the processual theory, a new perspective called the evolutionary perspective appeared to be applied y most companies at this period of time. Decision makers who adopted this theory focused on achieving survival through performance enhancement. Good examples of the adoption of this perspective can be found among electronic companies, like Samsung, Sony, Erickson, and other companies specialized in manufacturing mobile phone appliances. To reach the goal of survival, these companies tend to distribute its activity in different areas by opening more branches all over the world while differentiating the current products or services. External investments, thereby, can be the suitable decision that top management can take to achieve the goal of survival. This way can enhance the firm position among other competitors in the market. This approach relies on the Darwinian thinking style in taking decisions, because the decision makers tend to hunt any possible investing chances in the market as a way to achieve survival goal. This way, the company can maintain its position in the market while enhancing its trademark and image in the customers mind. Some companies tend to offer different services and products in the market, like Harrods, which provide different types of products and services like beauty and makeup, appliances, food and wine, children products and cloths. (Decision making in manufacturing environment using graph theory and fuzzy multiple attribute decision making methods, 2013)
Another perspective is the systemic perspective which is based on embedded strategies, considering the company goals as an integral complement of the company strategy. Educational and social organizations are the most obvious companies that adopt this theory, like AUC University for instance, because the focus of this approach is the society. The usefulness of this perspective is focused on how much helpful can the strategy e for the society. Small and large companies use this perspective to maintain its marketing position, with the goal of exceeding customers expectations. For instance, Apple Company tends to satisfy a certain segment of population who look for high quality products and strong brand name. The Iphone series of mobile devices helped the company to maintain customer loyalty by the incomparable level of product quality it offers to them. However, price can be another competitive advantage that companies need to pay attention to as not all customers look for high quality product; some may prefer to purchase a medium quality product with lower price. (Strategic management, 2013)
Q2: Four theories of strategy are relevant to 21st century
Now we need to answer an important question, are the four theories appropriate for adoption by the contemporary companies in the 21st century? Some researchers implies that these theories are not the best choice these days, however, they are not quite right, because all business organizations now adopt these four perspective in the process of formation of their strategies. However, these companies implicitly adopted the four perspectives without declaring the adoption to the public or interested parties. The decisions and policies made by the company are the factors that can reflect which perspective is adopted. They may adopt one or more perspective at the same time according to work settings and market nature. (Strategic management, 2013)
Let's take an example of a company that depends on the classical theory for instance, like Kellogg Corporation, which has for purpose to raise profits and downsize costs. This is a British company that works in the field of nutrition manufacturing, which decided to focus its market analysis and research on finding new ways to achieve profit maximization principle by spreading the product distribution to different customers’ segmentations so many people can learn about the products it sells. Thorough market analysis was the tool used by Kellogg to define how to render positive impact on customers. Decision makers in this company used the results of these researches to learn everything about customers taste and preferences. As a strong UK company, distribution areas included other European countries in addition to UK. The top management in this company used a popular way in rising their profits my enhancing their relationships with suppliers, so they can reach more raw materials, like wheat and milk for instance, easily and with abundant amounts and low price at the same time. They adopted the classic theory to maximize its profit by keeping the loyalty of not only their customers but also their suppliers. Another important factor that can e helpful in raising profits is the geographical area used to build the plant, which must be close enough to material supplies facilities. In our example of Kellogg, the plant must be close to wheat farm so transportation costs can be reduced. Nevertheless, distribution areas also must be near enough to the plant so products can be easily delivered to customers while downsizing the delivery costs. (Kellogg case study, 2014)
Let us have an example from Kuwait, like National Industries Group Holding for instance, the top management in this company focus their capabilities on achieving survival by adopting the evolutionary perspective as a way to maintain the company position in Kuwait market. Decision makers of this company extend their investments in different business fields such as oil industries, cement production, and building materials manufacturing. The company sets its strategy according to the evolutionary perspective to be able to hunt all possible investing chances in its surrounding market environment for the purpose of company survival. (Arabian Business, 2014)
Moreover, we can find a plenty of examples of similar companies adopting the evolutionary theory in mobile appliances manufacturing companies. Sony, for instance, follows product updating strategy by launching new products frequently. This can help the company maintain its trademark and achieve the objective of survival. Sony faces strong competitors who constitute a sort of threat for it in the market; other companies like Apple, Samsung and other similar companies. To deal with these threats, the company needed to innovate its current products and make new mobile phones with extra feature while keeping the price a it lower than other strong competing products. The company top management tends to face greater competition by initiating new products that can maintain their current customers’ loyalty while attracting new potential customers to try the new products. New TV sets and new mobile appliances with new features, the strategy focuses on achieving company survival within an extremely competing market. (Mootee.typepad.com, 2014)
The next perspective is the processual strategic perspective which can be seen everywhere around the globe. This perspective relies on knocking every possible door in order to have a better position in the market. This can lead the company to learn from its faulty experiences so eventually it can formulate the perfect strategy that is based on its past experiences. In 2009, during the economic crisis, the Middle East economy may not seem clear enough to forecast success for investors. This led to the withdrawal of several investors from the market because of potential losses they tend to avoid. However, some other small firms took the decision to continue in their investments, they saw that they can modify their current policies and strategies instead on complete withdrawal from the market. They found that they can reduce costs to its minimum level so they can achieve profit maximization principle which is related to the processual perspective. These small companies formulated plans and internal strategies based on their mistakes experience while dealing with the market. On the other hand, many strong companies working in the field of car manufacturing, like Ford, adopted processual perspective as a way to face the financial crisis of 2009; their focus was to maximize profit by minimize costs. There could be several ways to reduce costs such as decreasing the number of workers to reduce labor cost, in terms of training and salaries. Another way is to reduce the number of branches or fold those branches that render lower profit margins. All these strategies have the objective of enhancing the company position in the market and apply to the processual perspective. (Strategic management, 2013)
Another perspective is the systemic perspective or approach that many companies tend to adopt in their business strategies. Companies that tend to follow this approach are those company interested in society welfare, like educational and social organization. These organizations can be either for-profit or not-for-profit organizations. British University, for instance, is one example of these companies that act as a business entity to set its strategy for purposes like generating profits and/or enhancing educational environment for the sake of society welfare. Social needs satisfaction is the main focus or target of decision makers and top management in these organizations. These objectives need to be reflected in the company strategy, which is formulated using the systemic perspective or approach. Other entities in the field of finance, like banks, tend to follow this systemic approach is setting their strategies; in addition to the profit generation objective, they aim to enhance social requirements of the community and try to satisfy them. In Kuwait, the National Bank of Kuwait is a good example of these organizations that use the systemic approach to develop their strategies. The use society needs as a basis to define how to shape their strategies and how to apply it, both in the short run and long run. This approach guarantees a more successful future for the company as it creates a strong relationship between the company’s interests. A better reputation and acceptance from the society will be the intangible reward from society members who will see the bank in a different way than just considering it as a financial entity. (Management control systems, 1984)
Q3: Comparing two strategic theories
Now, let us make a comparison between two perspectives of these four perspectives we discussed above, so we can define the aspects of similarity and differences among them. We will compare the classic approach and the evolutionary approach using examples of companies mentioned above. The classical approach is distinguished by being more formal so determining goals and objectives sounds like a direct process. The classic approach is also characterized by rationality as a thinking style in forming strategies. On the other hand, the evolutionary approach sounds related more to logic; it tends to handle market fluctuations more efficiently. Rationality is not an obvious feature of this approach, contrary to the classic approach, because decision makers have a specific objective to achieve is to let the company survive and hunt every possible chance they can find in the market. Decision maker who adopt the classic approach, however, have a direct objective to maximize profits and reduce costs. They can achieve this target by getting a competitive advantage that can distinguish their products or services, this can be achieved by exploiting a state of the art technology that can enhance product quality and support the supply chain which in turn can raise revenues and sales of a specific product. They also can downsize the operational expenses, like salaries expenses, so profit maximization goal can be achieved. (Management control systems, 1984)
Decision makers in both approaches need to exploit all available opportunities in the market, while try to face and handle all potential threats. New technologies, fewer competitors and decreased trade regulations are examples of market opportunities that decision makers need to hunt as soon as they can. On the other hand, governmental regulations, large scale economies and raised number of new entrances are good examples of threats that decision makers need to put in their consideration when they formulate the company strategy, no matter the approach they follow, no matter the products or services they provide. In both scenarios, the top management must consider to maintain the company position in the market as an objective to be considered when it set and formulate the company strategy. (Data analysis and decision support, 2005)
Concluding the above discussion, we can say that the top management in any organization need to enhance and support the image and position of the company among other competitors in the market, this can be done by setting a strong strategy that reflect the company’s mission and vision and enhance the achievement of its targets using one of the four perspectives we discussed in this paper. (Management control systems, 1984)
References
- Arabian Business, (2014). National Industries Group Holding. [online] Available at: http://www.arabianbusiness.com/companies/national-industries-group-holding-66412.html [Accessed 28 Oct. 2014].
- Businesscasestudies.co.uk, (2014). Marketing strategies and market research - Balancing the marketing mix through creative and innovative strategies - Kellogg's | Kellogg's case studies, videos, social media and information | Business Case Studies. [online] Available at: http://businesscasestudies.co.uk/kelloggs/balancing-the-marketing-mix-through-creative-and-innovative-strategies/marketing-strategies-and-market-research.html#axzz3GyjN0Tel [Accessed 28 Oct. 2014].
- Mootee.typepad.com, (2014). What Is Happening To Sony? Can Sony Be Saved? - innovation playground Idris Mootee. [online] Available at: http://mootee.typepad.com/innovation_playground/2014/01/2013-was-a-good-year-and-a-very-busy-one-for-me-having-been-on-the-road-for-over-120-days-delivered-some-great-projects-and.html [Accessed 28 Oct. 2014].
- Baier, D., Decker, R., Schmidt-Thieme, L. and Gaul, W. (2005). Data analysis and decision support. Berlin: Springer.
- Hill, C. and Jones, G. (2013). Strategic management. Mason, OH: South-Western, Cengage Learning.
- Maciariello, J. (1984). Management control systems. Englewood Cliffs, N.J.: Prentice-Hall.
- Rao, R. (2013). Decision making in manufacturing environment using graph theory and fuzzy multiple attribute decision making methods. London: Springer.
