1.0 Introduction “Two roads diverged in a yellow road…” this verse begins the renowned piece by Robert Frost, titled ‘The Road not Taken’ depicting the choices that one has to inevitably go through in life. Organisations are often subjected to choices as well throughout their strategy making process as there is not a single absolute way – the right way - of doing business. Among these choices are the resource-based view (RBV) and industrial organisation (I/O) theory, which is utilised in performing a strategic analysis. These two theories allow an organisation to derive strategies based on different perspectives, either through internal resources or external structures of the market and firms. In this report, the comparison between the RBV and I/O theory will be done; outlining the theories, differences as well as importance between the two and their implications towards multinational corporations. 2.0 Resource-Based View and Industrial Organisation Theory RBV has historical documentations dating back to early 1990’s but was only first coined by Birger Wernerfelt in his article titled ‘A Resource-Based View of the Firm’ in 1984 (Kraaijenbrink, Spender and Groen, 2010). RBV believes that external opportunities …show more content…
In my opinion, both RBV and I/O theory are equally important and accurate in performing a strategic analysis. This is because overlooking one of these theories will allow the organisation to be susceptible to threats from other competitors. As mentioned, RBV is leaned towards the internal environment whereas I/O theory is more towards the external environment. If either of these environment is ignored in the strategic analysis, the company will either end up at a competitive disadvantage or unable to keep up with the industry (Barney,
Andrews, K., 2010. The Concept of Corporate Strategy, 3rd Edition. Financial Times Prentice Hall. [Accessed 13 April 2014]
Winston Churchill once stated “However beautiful the strategy, you should occasionally look at the results”. The current business environment is rapidly evolving due to the pressures of changing technology as well as the increasing demands firms are under to expand regionally and globally. Successful organizations in this often chaotic and changing environment must continually scan their internal and external conditions in order to respond proactively to market conditions and new trends. Firm leadership needs to not only have a vision for the organization’s future but also the ability to critically analyze the internal processes and structure of the firm in comparison to the outcomes or results of the firm’s current orientation. Strategy and vision are meaningless if the way they are being executed does not provide the organization a sustainable competitive advantage. Therefore it is critical that firm leadership examine how their organization is implementing their strategy to determine its effectiveness and results.
All the strategies are not compatible for all the organizations, every strategy suits for a specific kind of organization. The most obvious example is IKEA which uses a cost advantage strategy and won’t be able to use in the meantime the differentiation strategy. We also can say that strategic management is essential to the survival of a company because it allows it to have some competitive advantage, more or less important according to the strategy the company used. According to an article extracted of the Strategic Management Journal (Richard A. Bettis, Alfonso Gambardella, Constance Helfat and Will Mitchell – October 2014), “Many of the theories that have been used and developed in strategic management research, as in other established disciplines, implicitly or explicitly, reflect understandings of business activity and other social behavior that has taken place in traditional developed market”. This quote reflects perfectly what strategic management
Strategic Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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Miles and Snow have produced a typology of business level strategies. Their typology involves four strategic types: defenders, prospectors, analyzers and reactors. Using Miles and Snow’s strategy typology that consist of; defender, analyzer, reactor, and prospector, I will categorize Dollar Tree in its strategy typology. In the first strategy defenders try to carve a niche in the market where stability can be found. As in the prospector strategy, companies are constantly producing innovations. I understand through Miles and Snow typology of business level strategies that defenders, analyzers, and prospectors are forms of organizations. Therefore, if an alignment is reached between a chosen strategy, and organizational structure mentioned above Dollar Tree has the potential to be a
According to Slack et al. The corporate strategy or business strategy is the guide lines for the whole corporation’s businesses in relation to its markets, customers, and the competitors (2007). In the same context, the same authors discussed the link between the corporate strategy and
J., & Ghauri, P. N. (2015). International business strategy: theory and practice. London: Routledge, Taylor & Francis Group.
Hitt, M., Ireland, R., Hoskisson, R. (2013) Strategic Management: Competitiveness & Globalisation, 10th edition, Cengage Learning
Porter (1980) created a model which considers five important forces (Porters five forces) which aims to establish a profitable and sustainable position against the forces that determine industry competition, therefore position themselves within it and differentiating themselves where necessary in order to strategically gain a competitive advantage - this model gives vision of: Threat of new entrants, Threat of substitute products or services, Bargaining power of customers , Bargaining power of suppliers and Intensity of competitive rivalry (Porter 1980). Using models and academic theory like this allows strategy to be formed through a rational and an analytical process. Chandlers (1962) cited in (Lomash 2003) suggests the analytical process is about the determination of long-term clear goals, adopting actions to achieve these goals and then building the resources within the organization around this strategy in order to ensure it succeeds. Johnson (2005), likewise, simply suggested a three step approach to strategy - analysis, choice and implementation which goes hand-in-hand with intended strategy.
According to Michael Porter, "Almost no consensus exists about what corporate strategy is, much less about how a company should formulate it"[1]. This is due to a combination of factors that relate to strategy terms, concepts and principles and their practical application.
Alfred Chandler(1963) defines strategy as ‘ the determination of the long-run goals and objectives of an enterprise and the adoption of courses of action of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals’. And Michael porter(1996) sees it as ‘Competitive strategy is about being different. It means deliberately choosing different set of activities to deliver a unique mix of value’.
Hitt, Michael, Hoskinsson, Robert, Ireland, D. ( 2011) Strategic Management: Competitiveness & Globalization: Concepts ( 10 ed.) Cengage Learning.
1) Barney, J., (1991). Firm Resources and Sustained Competitive Advantage, Journal of Management, vol. 17 (1991), no. 1, pp. 99–120.
Business Strategy approach: - this is based on the idea of Pragmatism (Welford and Prescott, 1994) with the company making trade-offs between a number of unstable decision to internationalize and the way it adopts to do so Reid (1983) argues that foreign expansion is contingency based and