Strategic Planning And Strategy Formulation

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It should be recognized that all or most strategies have their own value and limitations. One of the foremost scholars and proponents of strategic planning is, again, scholar Michael Porter. As discussed above, his ‘five forces’ analysis is widely adopted in organizations and in academics. In academics his work usually appears in chapters on external analysis. While his work on the concept of the ‘value chain’ certainly focuses internally, I will be considering the overall contribution of Porter’s work as an example of the ‘outside-in’ approach to strategy. In critically evaluating the outside-in approach to strategy formulation I will first contrast it with an almost opposite approach to strategy, the inside-out approach. These are two…show more content…
Focusing entirely internally carries far too much risk in today’s world. As Day puts it, outside-in strategy involves “viewing everything the organization does through the customer’s eyes. Think of customer value as the lens on the strategy.” Organizations like Toyota and Dell have adopted an inside-out approach which has resulted in negative results. Whereas organizations like American Express, GE, and Cisco have adopted outside-in approaches to positive results. Day states that in times of recession it may be attractive to turn to an inside-out approach by making production more efficient, cutting innovation costs, but this leaves the organization vulnerable to missed opportunities in the external environment and loss of competitive advantage. On the other hand, it may be very advantageous to utilize an outside-in approach during a recession when other companies are focusing inside out. It may lead to a major innovation gap and long-term sustained competitive advantage. Where an inside-out approach may produce increased shareholder value in the short-term through improvements in say production efficiency. However, by focusing on customer value and the long-term advantage it brings, this will naturally create increase shareholder value; it’s just not the primary focus. The proposition of the outside-in approach is that success is achieved by exploiting opportunities in the external
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