Strategies Employed by Organisations in Their Contemporary Business Environment

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TITLE: STRATEGIES EMPLOYED BY ORGANIZATIONS IN THEIR CONTEMPORARY BUSINESS ENVIRONMENT AND THEIR STRATEGIC FIT.




TABLE OF CONTENTS PAGE

TABLE OF CONTENTS2

1. RESEARCH ORIENTATION

1.1 INTRODUCTION3

1.2 BACKGROUND3

1.3 RESEARCH PROBLEM STATEMENT3

2. STATEMENT OF RESEARCH PURPOSE3

2.1 RESEARCH QUESTIONS4

2.2 RESEARCH HYPOTHESES4

3. PRELIMINARY LITERATURE REVIEW5-6

4. LIST OF REFERENCES7

1. Research Orientation

1.1 Introduction

The purpose of this study is to identify strategies employed by organizations in the contemporary business environment and their strategic fit.

In today’s ever-changing business climate, organizations are constantly tasked with identifying potential opportunities and threats, and using strategies in order to best deal with those opportunities and threats. Given the level of uncertainty in the external business environment, without the implementation and evaluation of the strategies and their strategic fit, organizations will face many struggles in today’s risky economy.

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1.2 Background

Organisations are constantly tasked with having to match resources with opportunities and threats in a dynamic environment whilst reviewing and adapting strategies in order to gain a competitive advantage (Louw & Venter, 2013).In the last two decades, the global economic environment has been subject to much uncertainty, rapid change and turbulence. (Ehlers and Lazenby, 2010) Owing largely to the global financial crisis in 2008, many organizations globally were hit with a major economic downturn which negatively affected operations (Edey, M. 2009. Global Economics Crisis Resource Center, 2010 cited in Jansen van Rensburg & Venter, 2012). Effects were felt more harshly in developed economies than that of undeveloped economies, and while South Africa’s economy wasn’t affected as much as a result, the occurrence of such events reiterated the need for management to implement various strategies in order for it to remain competitive and relevant in the industry as it is vital to the organization’s survival or success. Boyne & Walker, (2004), cited in Andrews et al., (2006).

Jansen van Rensburg & Venter (2012:9634) conducted a study which highlighted that most research into the external environment focussed mostly on causes of the crisis and post-crisis implications, whilst also recognizing a need to explore strategic stances and actions employed. Despite the various studies, little explicit attention has been given to the strategic fit, which is seen as somewhat disadvantageous, as it is traditionally viewed as having positive effects on performance Zajac et al. (2000).

My aim is to describe the strategic fit between the common strategies employed and the environment, as well as to show the relationship between strategic fit and organizational performance.

1.3 Research Problem Statement

The research problem is to identify the respective strategic decisions/stances taken by the various organizations in the given industries and evaluate and recognize the strategic fit between the common strategies employed and their environment. Furthermore, this study will assess whether there indeed is a relationship between the phenomena of strategic fit and positive effects on performance as is traditionally viewed.

2. Statement of research purpose

A task will be undertaken to collect and access the integrated/annual reports of five companies in both the mining and food industries, and careful consideration will be used to analyze the content of both the Chairman’s and the Chief Executive Officer’s statements in order to identify and evaluate the strategies employed by organisations in their contemporary business environments and their strategic fits respectively in both industries, with the hope of gaining a greater understanding of the South African business environment and establishing whether the strategic fit plays a positive role in performance.

2.1 Research questions

  • The primary question of this research is:
  1. How is the strategic fit between the common strategies employed and their environment measured?
  • The secondary questions of this research are:
  1. How do strategies play a role in organisational performance?
  1. What is the relationship between the strategic fit of strategies employed and organisational performance?

2.2 Research hypotheses

  1. By reviewing the results of the organisation in relation to stakeholder reaction and risk. Jansen van Rensburg & Venter (2012), Andrews et al., (2006)
  1. The use of strategies play a key determinant role in organisational performance. Andrews et al., (2006)
  1. There is a direct/positive relationship between the strategic fit of strategies employed and organisational performance. Zajac et al., (2000), ÄŒešnovar, T. (2006)
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3. Preliminary Literature Review

An increasing pressure on competition and the effects of change across markets has resulted in big implications on the emergence of strategic management and its role in remaining competitive. Grant, R.M. (1996).

Tienie Ehlers and Kobus Lazenby’s book Strategic Management: Southern African concepts and cases define strategic management as:

The process whereby all the organisational functions and resources are integrated and coordinated to implement formulated strategies which are aligned with the environment, in order to achieve the long-term goals of the organisation and therefore gain a competitive advantage through adding value for the stakeholders. (Ehlers and Lazenby 2010, p. 3.)

ÄŒešnovar, T. (2006) did a study in which he concluded that organisations that used strategic management were more successful than those organisations that did not employ strategic management. From this it is evident that strategies play a key determinant role in the performances of organisations.

It is discernible that strategies are useful in developing and achieving long-term goals of the organisation. Boyne and Walker, 2004 describe strategic stance as:”The organisation’s position and its interaction with its environment.” They go on further to state that strategic stance “is the broad way in which organisations seek to maintain and improve its performance.”

When an organisation adopts a strategic stance in its environment to gain a competitive advantage, it relates to business level strategy decisions. (Louw & Venter, 2013). It is important to acknowledge the work of Miles and Snow, Miles et al. (1978) with regards their identification of four strategic typologies based on their “entrepreneurial solution” cited in Jansen van Rensburg and Venter, 2012, namely defenders; prospectors; analyzers and reactors. Below is a brief summary with regards to the four typologies:

  1. Defenders – This is the least aggressive stance. Defenders will seek stability and will make a decision not to pursue new markets whilst focussing efforts on current market and stable growth. They are risk-averse.
  1. Prospectors – Prospectors involve an actively aggressive stance towards expansion and new growth opportunities and markets. They are risk seekers.
  1. Analyzers – Analyzers fall somewhere between defenders and prospectors. They are more neutral towards risk. While they seek to engage in new markets and opportunities, they are not as aggressive as prospectors and assume less risk. However, they do not seek as much stability as that of defenders. Instead, analyzers will wait for the market’s reactions to products or only gradually improve upon their own core products.
  1. Reactors – Reactors follow a passive stance towards strategies. They have no real focus or long-term plan, instead reacting only when forced to by external environment.

Doty et al., 1993, cited in Burton et al., 2004, have shown empirically that the relationship between Miles and Snow’s typologies and performance have shown good results. With respect to the abovementioned typologies, it is possible to evaluate and allocate the five organisations in each industry to one of the four typologies and identify the common strategies used, as well as measuring the appropriateness of those policies with the environment in which they operate.

Andrews, 1971 and Hofer & Schendel, 1978, cited in Zajac et al. (2000), have long held that “The appropriateness of a firm’s strategy can be defined in terms of its fit, match, or congruence with the environmental or organisational contingencies facing the firm.” Miles, R.E. et al. (1978) recognize that effective organisations constantly review and refine the strategies by which they achieve their objectives, while ineffective organisations fail to do so. Reading further, even though adjusting to the contemporary economic environment is regarded as a highly complex process, Miles, R.E. et al. (1978) believe a greater understanding of the ever-changing environment and the requirements needed in order to adapt “can facilitate the difficult process of achieving effective organizational-environment equilibrium.”

4. List of references

Andrews, K. R. 1971. The Concept of Corporate Strategy. Dow Jones, Irwin, Homewood, IL.

Andrews, R., Boyne G.A & Walker R.M. 2006. Strategy content and organizational

performance: an empirical analysis. Public Administration Review, 66(1):52-63.

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Burton, R.M., Lauridsen, J. & Obel, B. 2004. The impact of organizational climate and

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ÄŒešnovar, T. 2006). The impact of strategic management on business outcomes - Empirical research. Journal for East European Management Studies, 11(3):227-243

Doty, D. H., Glick, W. H., & Huber, G. P. 1993. Fit, equifinality and organizational effectiveness: A test of two configurationally theories. Academy of Management Journal, 38:1198-1250.

Edey, M. 2009. The global financial crisis and its effects. Economic Papers, 28, no. 3: 186-195)

Ehlers, T. and Lazenby, K, 2010. Strategic Management : Southern African concepts and cases. 3rd Edition. Pretoria: Van Schaik.

Grant, R.M. 1996. Prospering in Dynamically-competitive Environments: Organizational

Capability as Knowledge Integration, Organisation Science, 7(4):375-387.

Hofer, C. and D. E. Schendel.1978. Strategy Formulation: Analytical Concepts. St. Paul, MN: West Publishing

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Jansen van Rensburg, M. & Venter, P. 2012. A longitudinal analysis of the corporate strategic

stance and actions employed by South African banks in response to the global economic

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Louw & Venter P. 2013. Strategic management: developing sustainability in Southern Africa.

3rd Edition. Cape Town: Oxford University Press.

Miles, R. E., Snow, C.C., Meyer, A.D. & Coleman, H.K. 1978. Organisational strategy,

structure and Process. Academy of management review, 3(3):546-562.

Zajac, E.J. Kraatz, M.S. & Bresser, R.K.F. 2000. Modeling the dynamics of strategic fit: a

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