The role of conceptual models in strategic management

Résumé du document

Since many decades the corporate world has experienced significant changes. In order to remain competitive, companies must adapt themselves to the new changes. Strategic management is one of key success for competitiveness. To achieve the company's goals, strategic management models have been created. In the 1960s, strategic management models had started to become popular within US companies. Lot of economists and analysts have contributed to the popularity of certain models. Indeed, models are good tools to encourage managers to evaluate the situation of their businesses. They are also a good way for communicating with business partners because they encourage dialogue. Anybody from different a department of a company is able to plot information into models as they are simple to use. So, everyone can bring new ideas and solutions that can help the final decision-maker in his decision-making process. However, managers cannot make decisions only from an analysis based on one or several models. As models are not perfect, they need to be combined with other models because they focus their analysis on a few specific features. For instance, the PESTEL analysis enables to structure and study the different features of the business environment. This model can be matched with a SWOT analysis and also with other models like the Ansoff Matrix or Portfolio analysis which do not take into account the external analysis of a company.

Extraits

[...] Contrary to arguments advanced in the strengths analysis of the matrix, the model does not necessarily offer investment strategies. For example, Alkhfaji (2003) argue that the BCG matrix does not show if the manager should invest in the “Questions Markets” or not. The model does not assess if those specific products are “potential loosers or winners.” Brassington and Pettitt (2006) agree this argument by saying that the BCG model does not answer the question: does the company should invest in the or in the “Question Marks”. [...]

[...] (2003) suggest that this strategic management tool evaluates the strategic competitive position of the company. Indeed, the BCG determines which are the most and the less profitable products of the company compare with its main competitor. The BCG matrix is a good tool for competition analysis. As this model is simple to use, the company can easily analyse its main competitors' products portfolio by plotting in it acquired information. This enables to better understand the strengths and weaknesses of the competition. [...]

[...] So, the analysis can be skewed by incorrect or approximate data and the manager cannot choose adapted strategies. To avoid confusion, the manager must define accurately the product market before using the BCG matrix. This model oversimplifies the four business units by relying upon only two dimensions. Consequently, the manager can be attempted to put prematurely a product in a box and he can underestimate the potential a specific product. For example, a manager can drop a product too quickly or overestimate a product by investing too much into it. [...]

[...] Indeed, they can help to shape strategic, tactic or operational decisions. Moreover, they can figure out different aspects of the strategy. For example, the SWOT analysis considers the Strengths, Weaknesses, Opportunities and Threats of a business. Managers can make decisions by using their strengths to take benefits from the opportunities by being aware of their weaknesses and threats and try to fill them in. Some models can base their analysis on the people management by helping managers to determine the different profiles in their business team or to find new ways of encouraging, rewarding their team or even new ways of managing like the Drucker's management by objectives. [...]

[...] Again, the BCG analysis is a simple model which is not fully complete as it is focused on only product portfolio and do not take into account other aspect of the company such as its environment. Consequently, the managers cannot make decisions or determine a whole strategy based on one model. So, it should be used with other strategic management tools. Equally important, it is the context the BCG matrix has emerged from. It has been created at the beginning of the 1970's that was a stable economic growth time. [...]