International strategic management is a driving force behind numerous companies extending their influence and business-making. While it might seem straightforward from the first glance, a strategy is a sophisticated discipline that experiences ongoing improvements in the ever-changing globalized world. For a business to transition to successfully selling goods or services within a particular plan, a CEO has to consider an array of opportunities, threats, and available knowledge to create and implement the best approach. Some management aspects focus on the goals and ways to shape a company’s vision, while other methods deal with how a particular business entity can compete and integrate into unknown and culturally diverse markets. The aims of the person willing to expand or start his/her business are vast, but is it impossible for a CEO to implement a plan of an organizational change without a thorough understanding of the core competencies of strategic management. This paper will provide an extensive overview of the essential topics of international strategic management that will help one understand and create a management plan that fits their particular business.
Firstly, addressing the definition is essential when examining and shaping one’s organizational strategy. There is no universal consensus as to what strategic management entails; however, the peculiarities in the definitions also showcase that the concept of strategy has a wide range of applications. Some define strategic management as a “plan for change within an organization to determine a company’s direction and establish steps to achieve it” (White et al., 2016, p. 37). Thus, it is evident that strategy is a needed resource for every business to have a clear understanding of its goals and means for achieving it. Although there is an abundance of different definitions, most researchers agree that the strategy has to involve some degrees of uncertainty and alteration (White et al., 2016). Consequently, it is also safe to assume that strategy evolves in response to external changes and serves to fulfil the need to develop and fit into the unknown market (White et al., 2016). Creating a strategy involves taking aspects like corporate, business, and functional levels into consideration. Taking these critical factors into account ensures that a plan covers all the essential steps of business-making.
The strategy is formulated through a particular process before being implemented. It is also important to note that there might be a discrepancy between a formulated plan and a realized one. During the creation, businesses are not aware of the future external and internal circumstances, thus creating a so-called “intended strategy” (Faizova, Ivanova, and Pozhuieva, 2019, p. 375). Therefore, after implementation and evaluation, a strategy may change, resulting in an emergent strategy that is created through routine experience and practice.
Given that the strategy is not stable, there are two ways of strategy creation: prescriptive and emergent approach. The first option focuses on a step-by-step process with distinct steps of “analysis, development, and implementation” (Faizova, Ivanova, and Pozhuieva, 2019, p. 371). The strategy created might not account for the business environment’s reality, and problems might appear when implemented. On the other hand, the emergent approach has the same steps, but the development and the implementation are interrelated (Faizova, Ivanova, and Pozhuieva, 2019). This technique allows businesses to apply their strategy in practice, see what is lacking from real-world experience, and go back to the formulation to correct the mistakes. The process can continue until one reaches the desired strategy that integrates into the business-making in the most efficient and effective way.
Vision is one of the aspects that one has to consider when developing a strategy. Vision’s importance is crucial as it determines not only the overall direction but also clearly defines what the future ideal state of the business is. Faizova, Ivanova, and Pozhuieva (2019) have identified vision as the driving force of change as employees, managers, and the CEO have a clear picture of the goal and utilize available resources to achieve it. The absence of an organizational vision is detrimental to business’ success since, without a reasonable purpose in mind, the company lacks a focus for development.
Unlike vision, a business’s purpose or mission is essential in strategy as it determines how the company behaves in a market. Mission provides a business with a goal for existence and adds organizational culture and company-specific values that determine how employees behave and represent their employer (Faizova, Ivanova, and Pozhuieva, 2019). It also reflects social responsibility needs and serves as a tool for differentiating between being influenced by the environment and shaping business decisions independently.
Corporate Social Responsibility
Although corporate social responsibility (CSR) is a relative novelty in the business world, it serves an increasingly important role in strategy creation and business decision-making. CSR is defined as “a system that enables the production and distribution of wealth for its stakeholders through the implementation and integration of ethical systems and sustainable management” (Vitolla, Rubino, and Garzoni, 2017, p. 89). Modern businesses seek profits for the stakeholders and consider their impact on the external world that is not directly financially beneficial. For instance, a 20th-century clothing brand aimed at increasing profits as the core strategic concept. As a result, outsourcing, unethical treatment of foreign employees, child labour, and environmental imprint as a result of manufacturing have been prominent issues that, however, served the agenda of financial incentives for the company (Vitolla, Rubino, and Garzoni, 2017). On the contrary, today, a socially responsible clothing manufacturer would consider employee treatment, fair opportunities, equal pay, and minimal environmental impact as pressing needs of the industry that have to be ensured.
Although all the aforementioned aspects do not contribute to the profit-making, they directly influence external stakeholders. As a study by Vitolla, Rubino, and Garzoni (2017) has shown, socially responsible companies have more loyal employees and customers. As a result, they return their investments in social responsibility by gaining more sales (Vitolla, Rubino, and Garzoni, 2017). Given these findings, every company has to implement social responsibility in strategy development and implementation.
When developing a business strategy, taking several external factors into account is vital for formulating a plan that will give a business a competitive advantage and fit into the market that one aims for. However, the external environment consists of a wide range of aspects to analyze. Therefore, this section will cover some of the most useful external analysis tools that can be integrated into strategic management.
PESTEL analysis stands for political, economic, social, technological, environmental, and legal factors and is one of the most comprehensive frameworks for assessing the external environment of the market. As it concerns the first aspect, it focuses on the political landscape that applies to the particular business entity. It includes but is not limited to applicable governmental regulations like employment, competition, foreign trade laws, government relations, and the overall stability of a particular political system (Pan, Chen, and Zhan, 2019). Taking the political landscape into account is crucial since it determines the legal framework of business operations. In its turn, the economic part accounts for “GDP, inflation and employment rates, consumer spending, investment, and so forth” (Pan, Chen, and Zhan, 2019, p. 2). Considering the economic stability of the external environment plays a vital role in strategic management as it determines its profitability.
The next two aspects of social and technological environments cover the external development of issues that a business has to analyse to fit the consumer expectations and remain competitive. The social analysis focuses on the market’s values, culture, trends, and general characteristics that will help a company determine what kind of product its target market wants and needs (Pan, Chen, and Zhan, 2019). The technological part concentrates on market development, patenting, and innovation to stay relevant and advance a product or a service. The legal framework of the business correlates with the political issue described above but focuses more on the specificities of the legal requirements for business-making rather than the industry’s relation to the government. Additionally, the environmental aspect involves analyzing the availability of resources, climate, and forecasted change that might affect the company’s manufacturing (Pan, Chen, and Zhan, 2019). All six factors of the external environment have to be analyzed to correctly assess and evaluate the aspects that are going to impact the organization.
Porter’s Five Forces Framework
Porter’s Five Forces Framework is a viable tool for evaluating the external business environment to create a management strategy that fits the existing conditions. Bruijl (2018, p. 5) highlights that “the framework distinguishes five forces in the microenvironment that drive competition and jeopardize an organization’s ability to make a profit.” The first force of the framework is called “rivalry among existing competitors” and covers the current market’s power dynamics and the possibility of profit loss due to high competitiveness (Bruijl, 2018, p. 2). The second force of “Threat of Entrants” describes how easily new competitors can enter the market under review and disrupt it with putting pressure on prices and the need for innovation (Bruijl, 2018, p. 3). This step is essential as it can uncover the opportunities for entering the market or its possible dangers.
Bargaining power of suppliers and buyers determines whether these stakeholders can significantly influence business and harm profitability by either extracting maximum profits or switching to competitors’ products. There is also a “threat of substitute products and services” that poses a danger for the business in the form of cheaper or better alternatives (Bruijl, 2018, p. 3). Taking all five forces into consideration will help the company’s strategic management to avoid external risks and dangers, as well as mediate predicted harm.
Similar to the external analysis, an internal one also plays a vital role in strategy formulation and maintenance. One of the main internal assessment tools is the strengths, weaknesses, opportunities, and threats analysis. Although it partially covers the external aspects, its primary focus is enhancing the competitiveness of the business internally. According to White et al. (2016), the company’s analysis of the internal strengths and weaknesses has an end goal of appraising the competitive advantages and minimizing disadvantages. A second part of the threats’ and opportunities’ analysis includes the external review of an organization’s possible development opportunities and risks. When applying SWOT, one has to critically determine and then address the existing issues from both the inside and outside of an organization, which requires a level of objectivity and critical thinking. SWOT analysis helps to mediate the role of threats and weaknesses while enhancing competitiveness by recognizing and addressing the opportunities and strengths.
Resource-based view on the innate potential of a business is a more comprehensive framework pertaining to the use of business-owned resources and their purpose. According to Solesvik (2018, p. 9), “a firm is more than an administrative unit; it is also a collection of productive resources the disposal of which between different uses is determined by the administrative decision.” From this foundational understanding, it is evident that the resource-based view “is based on the perception that an organizational strategy should encounter the opportunities and threats in the organizations setting” (Solesvik, 2018, p. 10). The four-stage framework of this theory can be applied to any business entity. Firstly, one must identify and consider a company’s resources and skills to then, on the second stage, explore their interrelation (Solesvik, 2018). Thirdly, the two concepts should be evaluated in terms of their strategic importance and strength compared to other businesses. At the final stage, a strategist must consider the company’s weaknesses and strengths and identify actions to enhance its competitiveness.
In conclusion, strategic management is a comprehensive process that requires an understanding of a wide variety of approaches. However, the most critical aspects of the discipline are understanding of the definition and strategy development components, as well as external and internal analyses. The successful application of the concepts described above will help a CEO to develop, implement, and correct a business strategy that will allow for a profit-generating and competitive future for the company.
Brujil, G. (2018) ‘The relevance of Porter’s five forces in today’s innovative and changing business environment’, SSRN, 19(1), pp.1-22.
Faizova, S., Ivanova, M., and Pozhuieva, T. (2019) ‘Prospects for improving the methodology of strategic enterprise management’, Baltic Journal of Economic Studies, 4(5), pp.371-378.
Pan, W., Chen, L. and Zhan, W. (2019) ‘PESTEL analysis of construction productivity enhancement strategies: a case study of three economies’, Journal of Management in Engineering, 35(1), pp.1-19.
Solesvik M. (2018) ‘The rise and fall of the resource-based view: paradigm shift in strategic management’, Journal of the Ural State University of Economics, 19(4), pp. 5−18.
Vitolla, F., Rubino, M. and Garzoni, A. (2017) ‘The integration of CSR into strategic management: a dynamic approach based on social management philosophy’, Corporate Governance: The international journal of business in society, 17(1), pp. 89-116.
White, G. et al. (2016) ‘Trends in international strategic management research from 2000 to 2013: text mining and bibliometric analyses’, Management International Review, 56(1), pp.35-65.