Reference no: EM132309003

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The purpose of this paper is to identify the process of business strategy development, which is what steps are taken in the process of development. This is then differentiated from strategic thinking about key decisions necessary for making strategy decisions, which is the why of the process and the steps. A decision model then follows that explains what decision model is selected, how it aids the process, how it hinders the process, and why.

Process: Business Strategy Development

The process of business strategy development is what the organization does to gain competitive advantage and achieve superior profitability with the objective of long-term successful growth and security of the organization (Gamble, Peteraf, & Thompson, 2019). Organizational strategy must be creative and distinctive to set it apart from competitors, yet it must fit within internal and external capability (Gamble et al., 2019). Good business strategy is developed from knowledge of what works, what does not, and why, and this proprietary knowledge an organization owns that has been gained through data collection from exploration is the most valuable knowledge available to an organization (Rumelt, 2011). With proprietary knowledge and knowledge of organizational capability, there are five dependable strategies in which an organization can be creative and distinctive to achieve sustainable competitive advantage, which are low-cost provider, broad differentiation, focused low-cost, focused differentiation, and best-cost provider (Gamble et al., 2019).

Hypothesis. Business strategy development is about developing a hypothesis about what will work and good strategy ventures into the edge of the known and unknown (Rumelt, 2011). Strategic development is an iterative process of hypothesis, testing, data collection and analysis, and modification, to learn what works (Rumelt, 2011). This is why managers must be willing to modify strategy and adapt to the shifts of competitors, buyers or consumers, market opportunities, economy, technology, new strategic theory, or evidence of unsuccessful strategy (Gamble et al., 2019). Dibrell, Craig, and Neubaum (2014) confirm that organizations that are able to act and react concurrently to effectively change strategic plan objectives as the external environment changes are in a much better competitive position than those organizations unable to do so. Strategic evolution is a blend of proactive actions that are marketplace seasoned or new initiatives aimed at competitive advantage and financial performance that are called deliberate strategy, and adaptive actions that abandon failed strategy and react to unplanned, emergent elements to form the overall realized organizational strategy (Gamble et al., 2019).

Strategic Thinking: Key Decisions

Strategic thinking is the why process of creative and distinctive business strategy development. Shifting attention from what is being done to why it is being done is important to gain a change in perspective to diagnose competitive advantage and overcome the obstacles to gaining competitive advantage (Rumelt, 2011). Organizations that are creative and distinctive, and proactive in business strategy development and execution are typically higher achieving, signify good management, and are stronger performers in the marketplace (Gamble et al., 2019). These distinctions are not possible without good strategies that develop competitive advantage, leading to growth, continuing to create value for the customer, and attainment of profitability (Gamble et al., 2019). Copying a successful competitor is not a recipe for successful strategy because strategy is unique to the distinctive situation of the organization; therefore, a creative and distinctive strategy that sets the organization apart is a good strategic plan that substantially increases the likelihood of success (Gamble et al., 2019; Wright, Hillon, Garrido-Lopez, & Fowler, 2018).

Decision Model

The selected decision model for business strategy development and key decisions is the SWOT analysis. The SWOT analysis is an evaluation of the strengths, weaknesses, opportunities, and threats of the organization to gain a clearer understanding of how strengths can compensate for weaknesses and opportunities can be maximized, while protecting the organization from threats (Krogerus & Tschappeler, 2017). This decision model aids in the process because it pushes management to make lists, which aids in overcoming cognitive limitations and brings urgency and importance into relativity (Rumelt, 2011). The SWOT analysis develops a matrix that deals with the very difficult, yet very important issue of strategy and good judgement, and may help one to think about one's own thinking or judge one's own judgement (Rumelt, 2011). However, SWOT analysis can also hinder strategy development because the process charged as an abstract exercise is "highly dependent on the experience and opinion of the participants" and is subject to "availability heuristic biases" (Wright et al., 2018, "The strengths, weaknesses, opportunities, and threats analysis," para. 1, 6).

Conclusion

A creative and distinctive organizational strategy based on proprietary knowledge is key to gaining competitive advantage necessary to sustain long-term performance and profitability (Gamble et al., 2019). Good strategies venture into the unknown with innovative hypotheses about what will work, whereas, weak strategies stifle innovation with the belief that there is no new knowledge (Rumelt, 2011). These strategies are possible when perspectives are changed to why from what the organization does and more is achieved through proactive strategy development (Gamble et al., 2019; Rumelt, 2011). Finally, SWOT analysis is one model that can be used to direct discussion of how the organization should execute after discovering what should be done and why due to the identified strengths, weaknesses, opportunities, and threats.

References

Dibrell, C., Craig, J. B., & Neubaum, D. O. (2014). Linking the formal strategic planning process, planning flexibility, and innovativeness to firm performance. Journal of Business Research, 67(9), 2000-2007. doi:10.1016/j.jbusres.2013.10.011

Gamble, J., Peteraf, M., & Thompson, A. (2019), Essentials of Strategic Management, (6th edition). New York, NY: McGraw - Hill Higher Education

Krogerus, M., & Tschäppeler, R. (2018), The decision book: 50 models for strategic thinking, (Revised edition.). New York, NY: W. Norton & Company, Inc.

Rumelt, R. (2011), Good strategy/bad strategy: The difference and why it matters., New York, NY: Crown Business

Wright, E. W., Hillon, Y. C., Garrido-Lopez, M., & Fowler, D. (2018). A new scorecard for strategic planning. Journal of Business Strategy, doi:10.1108/JBS-08-2017-0107