The purpose of this document is to provide an overview of what are strategic management models. To conduct this analysis, the today's context in which companies evolve has been taken into account in order to define in what extend managerial tools play an important role in the business framework. The Ansoff's Matrix, also called product-market expansion grid, has been used as an example to cover the strengths and weaknesses of a specific model.
Today, businesses have to grow in changing and complex environment. Globalisation is one of the best opportunities for companies as they are able to extend their market internationally. However, it is not without risks; trade liberalization also means that businesses have to challenge fierce international competition and hunt out emerging markets as well as understand their specific features. Of course, the same report can be done in dynamic national market.
The main responsibility of managers remains to make right decisions whether it is short or long-term, personal or technical decisions; in this way they should have the ability to accurately allocate available resources. In particular situation, they also should know "how to price products; when to drop a product line and how to organize the product and process" (Barnes, Frank C., 1992). Shenhar and Renier (1996) also add that managers are committed to executing decisions.
[...] On the one hand, diversification strategy remains risky because company operates with different range of products in new markets. Risks are worthwhile but it mainly depends upon the competitive position of the company's products/markets. They also depend upon the ability of a company to identify the opportunities in fresh markets in comparison with possibilities in its current markets. (Campbell, D. et al., 1999). On the other hand, diversification allows businesses to spread the risk by extending their product/market portfolio because if an entity is running into trouble, another one may not suffer. [...]
[...] Again, the Ansoff's matrix helps managers to frame various and possible product market opportunities and may equally help them to evaluate potential risks of different growth options. For example, if a company wants to operate in a new market, this model can encourage the thought about the level of risk this strategy involves. Nonetheless, the model itself does not asset the level of risk but leads manager to think about the potential risks. This method can be also a first approach to target the most profitable growth options facing the company. [...]
[...] As Recklies (2001) emphases that models can yet “help to better understand particular aspects of an organization or its environment.”Nonetheless, a model is only effective, valid and valuable if the analyst gets the situation in which the selected model is used. Equally important, the user must be aware of the “gaps and connections” of the reality of the market to obtain thoughtful conclusions (Recklies, 2001). Shenhar and Renier (1996, p.29) also hold that effective management analysis requires specific qualities of managers such as “fine judgment, related experience, good sense and intuition”. Thus, users must always reappraisal management models they use in order to fit those with the constant changes and developments of their company's environment (De Bono and Heller, 2006). [...]
[...] Actually, a bad decision or an error in judgment can run the business into trouble up to strongly affect its reputation, loose competitiveness or even lead to company closure. Experienced managers know the importance of strategic management in decision-making process. In order to assist them in their daily tasks or in their decision-making process, they do no longer hesitate to use various managerial models which have previously been experienced by experts (De Bono and Heller, 2006). Barnes (1992), De Bono and Heller (2006) agree with models, in different ways, help managers to “organize, plan and decide” and also prioritize actions to make the more accurate and rational decisions. [...]
[...] Relying a decision or a strategy upon a simple model is a big mistake. Indeed, the environment in which businesses grow is changing. As Recklies (2001) states, new technologies or processes can totally change the way of using or interpreting a model. E-commerce is a shining example as it has completely overturned old management models of entire industries and has limited their validity. Amazon.com has revolutionized e-commerce industry by selling books online since 1995. Indeed, a lot of management tools do not include the technological development; so imagine that the founders of Amazon.com would have been relied upon a model picked up in a strategic management book, they might never create their world's larger online book business. [...]
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