Strategic Management Theories Compared

Introduction:

Strategic management is the process of analysing evaluating, assessing and formulating necessary strategies and tactics that are required for achieving the long term goals of organisation. Through conducting proper strategic management process, organisational is able to developed strategies in order to make the long term success and organisational sustainability. Moreover strategic management process is important for organisational to grab the competitive advantages in the current market. This report is going o highlight the represent two schools of strategic management theory, in order to analyse the current market position and relationship between the organisation and the external environment. One the perspective of the strategic management theory is outside-in perspectives and other perspectives is inside-out perspectives. The former perspectives (outside-in perspective) id mainly conducted and adopted by positioning school.. These perspectives would highlight the current market position of the selected organisation in external; environments. One the other hand the later perspectives the inside-out perspectives is the resources based view, which emphasise on analysing the international resources and position of the organisation. This report is going to apply both the perspective on the selected organisation Mercedes Benz, the German automobile company. Then this report will represent the comparison and contrast of these two schools in strategic management theory, in order to analyse the current international and external market position of Mercedes Benz.

Brief discussion Strategic management Theory:

As stated by Ansoff et al. (2018), strategic management is process in which organisation can access, analyse and formulate the useful strategies in order to develop their strength for dealing with the current market trend. Mercedes Benz is one of the leading German automobile companies, which believes in conducting useful strategies that will assist its marketers to maintain strong relations with the external environment but also strengthen their international resources. As stated by strategic management theory focuses on analysing firm’s current position in the external market by evaluating the usefulness of strategies that the marketers have undertaken for achieving organisational gaols. Rather there are two different schools of thought in this theory such as inside out perspectives and outside-in perspective, the two though are applicable in order to analyse the internal resources and strength of Mercedes Ben and relationship between this firms with its external environment. Inside-out perspectives of this theory is based on analysing the internal capacities and resources or organisation, On the other hand, through using the outside-in perspectives it is possible to analyse the competitor advantage of form, by analysing the external environment.

Two different perspective of strategic management:

Outside in perspectives:

This perspective is adopted by the positioning school of thought in the strategic management theory. This perspective focuses on formulation of effectives and relevant strategies in order to gain proper competitive advantage in the external environment (Wheelen et al. 2017). Mercedes Benz, the famous automobile company can apply this perspectives in its strategic management process which will assist the marketer develop appropriate strategies in order to grab the proper market position in the external environment. As mentioned by Hitt and Duane (2017), outside-in perspectives represent the external environmental factors play important in formulating the effective strategies. In this aspect, marketers of Mercedes Benz, needs to make proper market research in the external environment before developing any strategies. External environmental factors such as political, social, technological, legal and environmental aspects have direct impact on determining which type of strategies would be best for the firm in order to deal with the current industrial market. In this aspect Meyer et al. (2017) mentioned that, there are many representative models and theories of positioning school of thoughts have been development in different times. Michel E Porter was the major representative of positioning school, who had developed two different models such as competitive strategy model and five forces model. Both the model are based on analysing the current market position of a firm in the external environment,, through using this two models, Mercedes Benz would be able to analyse its market position in the current market spectrum. Porter’s Five Forces is based on the 5 different forces such as bargaining power of buyers, bargaining power of suppliers, new entrants, threats, substitute threats and the competitive rivalries. Through analysing these five forces, marketers of Mercedes Benz, would be able to analyse the current position in the industrial market, which will assists them to tale effective strategies in order to improve the overall business framework. On the contrary Morschett et al. (2015) argued that, Porter’s Five forces model is not only used to recognise the relationship of the firm with the external; environmental factors but also it also assists the markets to analyse the areas of improvement in order to deal with the external environment. The model adopted by positioning school is competitive strategy model, which represent two basic strategies that are required by firms for strategy formulation (Certo et al. 2016). Mercedes Benz is associated with manufacturing different ranges of cars that can be afforded by both the middle class and high class people. In this aspect marketers on this company needs to focus on the low cost ad differentiation strategy that are important for the form to set useful strategies in order to deal with ever changing market trend. These two strategies are associated with external environmental changes, that assist the marketers to understand current preference and interest of the customer According to Trigeorgis and Reuer (2017), through using differentiation process and low cost strategy , form can grab the competitive advantages which will assist markers to pose he potential challenges onto the their rivals. By using Competitive strategy model, Mercedes Benz would be able to analyse its business function and usefulness of existing strategies in order to grab the potential market position.

Inside out perspectives:

This perspective of strategic management theory, believes that through developing internal strength and competence, it is possible to gain strong market position in external environment. As stated by Ethiraj et al. (2016), this perspectives is adopted by the capability and resources school, which focuses on the fact that, sustainable competitiveness of firms actually comes from the internal organisational resources management process. Based on this perspective, Mercedes Benz needs to focus on analysing its internal resources which are important for developing the competitiveness in the company. As stated by Hitt et al. (2016), two main theories are associated with inside-out perspectives of strategies management theories such as core competence model and resources based view. Through using the resources based view, Mercedes Benz can analyse the types and usefulness of internal resources and that the organisation currently have. As stated by Zhao et al. (2017), resources based viewpoint suggest that, each firm would have both the tangible and intangible resources that are required for developing proper strategies in order to deal with the current market situation. Moreover, competitive advantage actually comes from the proper strategic formulation process that is based on proper arrangement of organisational resources. Mercedes Benz needs to focus on analysing and arranging proper internal resources in order to make effective strategies that would be relevant with the business need of this firm and current market trend. As stated by Hanson et al. (2016), unique resources that are irreplaceable and heterogeneous, are important hat for developing the internal strength and potential of the form. Moreover, through well-organised management of the internal resources it is possible for Mercedes Benz to analyse the actual preference and demand of customer in the national and internal market. Therefore, this school of thought is highly effective for Mercedes Benz in order to develop their corporate strategies and business strength that will, assist its marketers to develop the competitive advantage of this firm to grab highly potential market position in external market.

On the other hand the anther model of inside-out perspectives in strategic management is Core Competence Model. This model focuses knowledge and skill that the organisation has (). Mercedes Benz, can use this model in order to develop their competitive advantage in the external, market by developing the skill, proficiency and knowledge of the staffs. Through this model, Mercedes Benz would be able to develop the efficiency of workforces which will assist the marketers in order to understand the actual market tone. There is one framework, VRIO, which is associated with the Core Competence Model (Hanson et al. 2016). V stands for volubility, which means, through enhancing core competence of firm, organisation can enhance the customer value, customer loyalty and competitive advantage. R stands for rareness, which means small number of organisation can obtain the core competitiveness through developeing the inner strength, internal resources and skill (Bergh et al. 2016). Moreover, I represents that, firm cannot imitate the strategies or tactics of other organisation in order to obtain the core competence, lastly I represent the fact that, core competence can be archived through he collaborate synergistic approach of the entire organisation rather than individual activities. Based on the VRIO framework of Core Competence Model, marketers of Mercedes Benz can develop high level of core competence, through developing effective strategies, analysing internal resources and developing skill of he staffs. On the other hand, as Mercedes Benz operates its business across the world, core competence model is highly relevant and useful for this company, as it will assist the marketers to pose high level of competition to the international rivals in order to grab string market opportunities.

Critical analysis of comparison of above two perspectives:

According to Durand et al. (2017), although the abovementioned two perspectives in strategies management process assist firm in developing the competitive advantage in international market, the principles and core concept of these two perspectives are completely different from each other. When it comes to discuss the positioning school perspectives, it can be stated that, outside-in perspectives emphasizes mainly on the external environmental analysis rather than focusing th internal resources if firm. All the enterprises in this model is considered as homogenous, in which more emphasis has been given to external environment rather than internal environment,. According to Albers et al. (2017), in outside-In viewpoint, internal environment of all the enterprises is considered as the black box, in which all the inputs are designed and conducted for gaining the better output. This school of thought is based on hew the organisation can take proper decision and strategies based on external environment changes, in order mange their fund, materials, equipment and human resources. Moreover, this viewpoint poses more emphasis on the fact that, how organisation can develop its profit by analysing the external environmental factors. In this aspect, Mercedes Benz can use outside-in perspectives of strategic management, which would assist its marketers to develop strategies in order to analyse the current market trend and current preference of customer in the international market.

On the contrary,. In the inside-out viewpoint, the overall organisational structure and resources are considered as heterogeneous that have potential impact in the business structure and strategic decision of organisation. As stated by McKiernan (2017), unlike outside-in perspective, this inside-out perspective is focuses on maintaining the strong internal resources in order to developed proper core competence. In this aspect, Mercedes Benz needs to focus on analysis of its internal resources such as human resources, fund, employs, technologies, strategies customers, suppliers and dealers, in order to understand the current strength and weakness of this company. Moreover Karadag (2015) stated that, as compared to positioning school of thoughts inside-out view has represented the completely different, which mainly based on developing core competitiveness through improving the value of the organisation’s internal resources. In this aspect, Mercedes Benz can be benefited through using this model in order to develop the value of its organisational resources for grabbing the better competitive advantage in th internal automobile market. On the other hand, the two abovementioned strategic management perspectives differ in their understanding about the sources of the competitive advantages. Both the model have represented he different discussion on the actual sources of competitive advantages from which core competence of organisation comes. Based on the positioning school of thoughts, core competence is developed through the two major strategies such as low cost strategy and differentiation strategy, through using the low cost strategy, Mercedes Benz can attract the high range of customer by allowing them to get the high quality products in reality lower price in the market. On the contrary Gallus and Frey (2016) argued that, sometimes the low cost strategy makes the organisational, unable to achieve the profit target in the annual segment of business. In this aspect, Mercedes Benz needs to conduct proper market research in order to set strategies through for setting such a price that would assist the market to grab customers and gain competitive advantage. One the other hand differentiation strategy is useful for enterprise like Mercedes Benz, as it assist the company to use innovative techniques and smart tactic in order to gain proper market position in the external market. On the other hand, capacity and resources school of strategic management believes that, core competitiveness can come from analyse internal resources. As stated by Daspit et al. (2017), based on inside-out view of strategic management, if organisation can develop the value and efficiency the internal resources they would be able to deal with the changing market trend and the increasing rivalries in the internal market. Mercedes Benz focuses on developing value of its internal resources such staffs, manufacturers, dealers, customers, suppliers, technologies, appliances, instruments and the overall organisational strategies. Moreover, capacity and resources believes than, through strengthening the internal resources, firm will be able to understand its areas id development that is important fur marketers to set effective strategies that are relevant with current competitive market.

Both the school of thoughts also differ from each other based on their understanding of the corporate development process. As stated by Goldfarb and King (2016), positioning approach believes that, firm can develop their corporate business through making high level of investment into business. In this aspect, Mercedes Benz needs to focus on building string relation with international investors and stakeholder in order to make huge investment into its business. On the contrary Chen et al. (2015) argued that, in order to gain the monopolistic dominance on international market, if the organisation focuses only on investment it will reduce their internal strength and resources. Therefore, Mercedes Benz needs to focus on alternative strategies that will assist markets to develop their business framework through investing into the internal resources. Unlike the positioning school, the capacity and resources believes that, corporate development is possible through maintaining proper resources in well-organised manner (Peppard and Ward, 2016). Based on these perspectives, Mercedes Benz needs to focus on developing and improving the value of the internal resources in order to grab the market profit and long term customer relationship. On the other hand, the two perspectives differ in using Strategic Business Unit (SBU) into the overall organisational framework. In the positioning school of thoughts, SBU is applied for the entire organisation, which assists marketers in order to set the effective strategies for dealing with current market demand and trend. On the contrary the capacity and resources school focuses on the fact that, SBU plays supporting roles in the organisation for developing competitive advantage in the internal market. In this aspect, Mercedes Benz can apply the positioning school of thought that will assist marketers to use SBU as one of the important business aspect in order to develop the core competitiveness of this company.

Limitations and contribution of the two perspectives:

Outside-in perspective and inside-out perspectives both have certain contribution and limitations into practices which are as follows: One of the most important contributions of poisoning school in strategic management perspectives is Porter’s five forces (Goldfarb and King, 2016). Through using this model, Mercedes Benz is able to analyse the five different external factors that have important impact on the core competence of organisation. Moreover through using this model, Mercedes Benz is able to analyse the overall organizational structure. Before innovation of Porter five forces, organisation has to focus on the PESTEL analyse in order to analyse the external factors enhance the complication in understanding the overall business structure. Moreover, in the case of small organisation PESTEL analysis is not relevant as the marketers are unable to operate the business in the international market. Positioning school of strategic management theory develop Porter five forces which assist both the small scale and large Scale organisation to analyse the external forces in smart manner. A limitation of positioning school is that, the competitive strategy theory is unable to highlight the importance of the internal resources capacities of firm grabbing the core competitiveness. Moreover, through using Porters Five forces it is not possible to determine impact of some external factors such as political, social and economic factors on the business framework. In addition to this, positioning school is unable to highlight the heterogeneity of internal resources in different organisation that have strong impact on the overall business process of the organisation.

The important contribution of resources and capability school is it highlights the important of arranging international resources of organisation in order to grab the high level of core competitiveness (Bromiley et al. 2016). By applying this school of thoughts, marketers of Mercedes Benz would be able to prioritise the internal resources in order to ensure suitability if this business in the international market through posing high level of competition to the potential rivals. This model assists marketers of am organisation to understand the importance of analysing the strength and weakness of internal resources for conducting smart management of these resources. The limitations of Resource and capability school are it ignores the importance of external resources on business operation. In this aspect Gallus and Frey (2016) mentioned that an external resource has potential impact on improving the competitive advantages for an organisation. Especially in case of eth internal organisation, like Mercedes Benz, external environment such as political, social, technical, economic and legal aspects in the overseas countries pose potential impact in the business strategies, marketing operation and overall competitive advantage of the business in the new environment.

Conclusion:

From the above-mentioned discussion it can be concluded that, there are two type of strategic management approaches the positioning school and Resources and Capability schools. The two schools of thoughts have several similarities and difference. On discussing similarities, the two theories are based on improving business framework of organisation, moreover the two schools based on highlighting the importance of maintaining sustainability and competitiveness in the organisation in order to grab the success. On discussing the difference it can be stated that, positioning schools focuses on managing external resources in order to improve the business framework and the resource and capability approaches prioritise the internal recourses within organisation in order to maintain sustainability and grab competitiveness.

Recommendation:

Mercedes Benz should focus on both the positioning school and resource and capability school of thoughts in order to make perfect balance between internal and external; environment.

Mercedes Benz should also focus on analysing external environmental factors such as political, social and economic factors in order to pose potential threats on its rivals in internal market

Marketers of Mercedes Benz should focus on analysing strength and weakness of internal and external resources in order to conduct proper strategic management framework

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