Strategic renewal and strategic change in the global market

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Strategic Change: Strategic Renewal

In today's global market, firms have no choice but to attempt to keep up with the ever changing market place around them. New technology, suppliers and consumer demands are just some of the constantly changing factors haunting each and every firm in the world today and it can be argued that it is now not a question if firms should change but a question of where, how and in what direction they take (De Wit and Meyer 2004). In order for a firm to manage the constant requirement for strategic change, managers often use strategic renewal to provide constant preparation for change that meets the demands of the environment around them. This paper intends to look at the need for strategic renewal and the ways in which it can be handled within organisations.

Thomas et al. (1992) defines strategic renewal as the continuous evolution of an organization in response to internal and external demands. From this definition we could claim that strategic renewal is an ongoing process and allows a business to adapt to the ever changing internal and external environment around them. Additionally, Agarwal and Helfat (2009) discuss how strategic renewal can be used by an organisation to keep up with the pace or even lead external environmental ways. Conversely, Jones and Macpherson (2006) states that any manager considering strategic renewal must first acknowledge that their organisation is facing a crisis, for example, a decline in sales. This suggests that strategic renewal is not widely seen as a tool for continuous improvement as some may see it as something that a business should do if it is failing. From these view points it is clear that there could be confusion as to when strategic renewal is required within business; however, some see it as a key tool for planning ahead and dealing with the ever changing internal and external environment. On the whole it is clear that there is a need for strategic renewal in business today, whether a business is thriving or failing, strategic renewal could possibly help to secure a business for the future.

Strategic renewal can not only be about preserving existing industries and markets that a business operates in, but seeking out other opportunities, industries and markets that might be valuable to the business in the future. Thompson et al. (2007) agrees with this point, stating that strategic renewal, at its core, is about how new knowledge is created and how this new knowledge leads to new markets and industries that businesses can operate in. Thompson et al. (2007) also goes onto discuss the links between innovation and strategic renewal, claiming that innovation is underplayed in literature. This could suggest that innovation is currently not seen as a key part in the strategic renewal process. Innovation, however, should be seen as a key part in the renewal process, as businesses that attempt to innovate could stumble on to new products and technology, therefore, possibly finding new markets and industries that they could survive in, which is ultimately what strategic renewal is all about. Girod et al. (2005) supports this claim, discussing how linking innovation and strategic renewal can enhance an organisations adaptability. It can be seen that from these points, innovation should not be overlooked in the renewal process as innovation could prove to be a key factor if it leads to new markets and industries, therefore, improving an organisations adaptability in the future.

De Wit and Meyer (2004) discusses how strategic renewal takes time and that it can be done in a number of ways depending on what is right for the business. A factor that is clearly important to the success of strategic renewal is the timescale in which it is done. How quickly an organisation implements key changes decided by the strategic renewal process will ultimately depend on what is right the business and its employees. An organisation that is facing immediate and drastic difficulties may require serious rapid changes in order for it to survive (Kim and Mc Intosh 1996). By contrast, strategic renewal can be used in a much more gentle approach to help a business gain a competitive advantage over a period of time. Agarwal and Helfat (2009) points out that incremental strategic renewal over a longer period of time if undertaken proactively may enable firms to cope with changes in the external environment as they take shape. Both of these contrasting view points show how strategic renewal can be tailored to both businesses that are in immediate danger and to businesses that want to continue to be relevant within their industry and marketplace in the future. Deciding on how quickly to implement those changes as proposed in a strategic renewal plan is certainly dependant on how the business is performing at a certain moment in time.

Another issue that managers have to address in regards to strategic renewal is the scale of the proposed changes. Managers must make the choice between implementing minor or major strategic changes. Businesses which fail to make the correct scale of strategic change may be faced with difficult situations in the future, as Huy (2009) argues, strategic renewal may instigate business decline and possibly even death if the process is not managed competently. However, Boeker (2010) points out that businesses are limited to what choices they are able to make when it comes to strategic renewal depending on their size. He argues that businesses are more able to change easily when they are small and that larger businesses tend to change less easily as they grow larger. This suggests that larger businesses are not easily able to implement large scale changes when planning strategic renewal due to their size. It can also be argued that businesses tend to stay away from large scale change, not only due to their size, but due to the uncertainty of consumer demand and other threats. Agarwal and Helfat (2009) agree with this point, claiming that businesses may not use major transformations at once as the external environment is difficult to anticipate. In brief we can see that there is limited support for businesses choosing to implement radical transformations in regards to strategic change and that any strategic renewal process must be carefully thought out before implemented and then managed appropriately, whatever the scale of change.

Managers must also deal with managing the impacts that any strategic renewal plan has on the organisations employees. Employees play an important role in the success of any business and any strategic change will require complete dedication from the entire organisation. Huy (2009) talks about the importance of managing employee's emotions during a period of strategic renewal as they often experience anger, frustration and fear over their own positions in the business. This could suggest that if managers do not understand employee uncertainties and manage the situation appropriately, then those employees may begin to under-perform as they may become uncertain about the future of the organisation and their own jobs. Gagnon et al. (2008) supports this view as they claim that failure of a new strategy or a strategic innovation is often due to the inability or resistance of individual employees to commit to a strategy and adopt the necessary behaviours for accomplishment of strategic objectives. This suggests that employees play a vital role in the success of any strategic renewal process and ultimately, the performance and future of the business. Therefore, it is clear to see that any strategic renewal plan must consider the needs of employees and be well thought out, understanding and managing employee emotions in order to ensure the successful future of the strategic renewal process and the business.