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Until the 1970s, researchers explored the importance of internal resources as strengths or weaknesses of firms, which resulted in four paradigms such as SWOT analysis (strengths, weaknesses, opportunities, threats). In this decade, a shift occurred in strategic management studies, and this resource-oriented approach got replaced by industrial organisation economics in which companies were assumed as defenceless entities against threats, and opportunities happened in business environments.
This passive approach could not be a sustainable perspective that can be applied to change and to overcome challenges. Due to this limitation, from the mid- 1980s, many authors published research that supported the idea of how companies’ internal resources could influence competitive advantage to some extent. These studies developed the theoretical fundamentals of a resource-based view by which the critical role of companies’ internal resources such as organisational strategy was considered to achieve a higher degree of competitive advantage.
To define business strategy, Hofer and Schendel (1978, p. 25) state that strategy is a “fundamental pattern of present and planned resource deployments and environmental interactions that indicates how the organisation will achieve its objectives”. Organisational strategy is a pattern of decisions and plans, which are directed at interacting with the corporate environment and efficiently allocating capabilities to meet organisational goals.
Rumelt (1979) also shows that a firm’s strategy primarily aims to develop goals and plans to restructure unclear and vague situations into a set of organisationally resolvable problems. Organisational strategies are therefore formed to efficiently deploy capabilities and interact with environments.
In knowledge based view, organisations as social communities exist to enhance competitive advantage by utilising and creating new ideas and knowledge. Some authors concentrate on knowledge application, and argue that firms are entities that must apply knowledge to enhance competitive advantage. Gupta (2006, p. 39) also posits that the major function of companies is “how to best utilise the knowledge that its employees possess but which is not given to any one individual in totality”.
Knowledge creation and application manifest themselves as constructs of the knowledge based view. In applying knowledge, organisations are those entities that actually apply their knowledge to develop objectives, plans and procedures to efficiently interact with other organisations. In addition, organisational strategy can help the structuring of knowledge creation through upgrading capabilities and interacting with the external business environments. These arguments highlight organisational strategy as an important enabler for KM effectiveness, which develops organisational capacities to enhance knowledge management effectiveness though more effectively creating and using knowledge around the organisation.
Gupta, VK 2006, Firm strategy and knowledge management strategic supply chain relationship: a knowledge based view, University of Missouri-Columbia.
Hofer, CW & Schendel, D 1978, Strategy Formulation: Analytical Concepts. West Publishing Company, Saint Paul