Why are models so commonly used in strategic management?
Nowadays, all organisations must have a strategy to manage their business. Strategic management is a “set of decisions and actions which lead to the development of an effective strategy or strategies to help achieve corporate objectives.” Strategic management is also about “understanding the position of anorganisation, strategic choices for the future and turning strategy into action” In order to help senior managers to understand the position of the organisation, theorists have created models. Such models incorporate factors such as what has happened in the past, the success or failure of existing companies and the business environment. Models allow decisions to be taken by an internal or externalanalysis of a company in its current situation. Some models help companies face competitors while others allow them to gain a competitive advantage. Thus, with models senior managers can analyze their internal and external environment and manage the future of the firm better. This leads us to ask two main questions: How might models help senior managers to deal with the challenges facing them,and can the use of models actually improve decision making?
How might models help senior managers to deal with the challenges facing them?
Before starting this part, the role of a manager has to be explained. In a company, the manager is a significant person who has to take all the important decisions for the firm. He decides the future of the company, and organises, manages or plans all theactions of the company.
In addition to all these responsibilities, today, managers have more and more challenges facing them. Three of these challenges are more significant than the others.
The most important work for a manager is to allow the company to make profits. Today, with the development of globalisation, managers have to deal with new markets, quick changes and also with the reductionof costs. Indeed, as the market widens, the competition and managers have to be careful if they want to keep or increase their market share.
Secondly, managers have to plan the future of their company. Consequently they have to take all the decisions and strategic positions in order to lead their company to success. To achieve this goal, managers use models to analyze the internal and externalenvironment of the firm.
Then, managers have to choose the right strategy to put in place according to the results of the internal and external environment analysis If the strategy they choose turns out not to be the good one, then they must accept responsibility and take the consequences. So models can be useful for managers to know which strategy they have to apply.
Finally, senior managershave to stay aware of changes in the business environment in order to react quickly to customer changes and to maintain their competitive advantage.
Faced with all these challenges and responsibilities, it is possible to wonder what role the models play for a manager.
Models have three main roles: to help in the strategic choice, to make a strategic analysis, and finally to help implement astrategy.
First of all, models help managers to take the significant decisions by analysing all the key factors involved. In fact a model provides the managers with a guideline to assist them in their choices.
Secondly, the strategic analysis: a model allows the company environment to be analysed,. Thanks to this analysis managers have a better understanding of their internal and externalenvironment. Indeed, an internal and external analysis also gives a better vision of the global economy, the competition and many other factors, and thus managers can improve their profits or solve problems more efficiently. Therefore models help managers by providing background information.
Thirdly, models provide a framework with a set of objectives and recommendations to follow. In this way models...