Strategic Management Approaches for Competitive Advantage

This report analyzes three major strategic management approaches used by companies to gain competitive advantage: stakeholder approach, dynamic capabilities approach, and resource-based view approach. It discusses the history, benefits, limitations, and provides examples of companies that have applied these approaches. Strategic management has become crucial for businesses to survive and thrive in the current business environment.

MANAGEMENT

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Executive summary
Strategic management has become an essential part in the modern day business and it has
become crucial for the companies to apply best of strategic management approaches so as to
gain competitive advantage. This report will analyse three major strategic management
approaches that is applied by different companies so as to gain competitive edge over the
rivals. It is crucial for the company to apply all these approaches checking their capabilities
and the resources they have. Stakeholders approach suggests to take account of the fact that
any strategy has an impact on the stakeholders hence companies must make strategies that
benefit the stakeholders. Dynamic capabilities suggest that the capability of the firm to
purposefully adapt with the resource base of the firms is necessary so as to survive in the
current business environment. This report also discusses about resource based view approach
where company aims to develop, nurture and modify their resources so as to gain competitive
capabilities that gives them strategic edge over the rivals. This report contains the history,
benefits and limitations of all three approaches. Along with this it suggests the name of the
organisations that is actually using these three approaches for their benefit. Tata Company is
using stakeholder approach, Companies like amazon is using dynamic capability approach
while BMW and Honda is using Resource Based View approach.

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Contents
Executive summary...............................................................................................................................1
Introduction...........................................................................................................................................2
Three approaches to strategic management...........................................................................................2
Stakeholders approach.......................................................................................................................2
History...........................................................................................................................................2
Suggested benefits.........................................................................................................................3
Limitations.....................................................................................................................................4
Company that used this approach..................................................................................................4
Dynamic capabilities approach..........................................................................................................4
History...........................................................................................................................................5
Benefits..........................................................................................................................................5
Limitations.....................................................................................................................................5
Companies that applied this approach............................................................................................6
Resource Based View approach.........................................................................................................6
History...........................................................................................................................................6
Benefits..........................................................................................................................................7
Limitations.....................................................................................................................................7
Companies that applied this approach............................................................................................8
Conclusion.............................................................................................................................................8
REFERENCES......................................................................................................................................9

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Introduction
Strategic management has become very much essential in the modern day business. Every
organisation takes a different approach for doing strategic management. The way of
implementation plays a very crucial role in their success. It depends on the leadership and the
type of resources they have ensures the success of the organisation through that approach
(Hitt, Ireland and Hoskisson, 2012). The selection of approach must be done on the basis of
requirement of the firm and the challenges they are facing in their business. This report
analyses different aspects of the three major approaches that is taken by different
organisations so as to do strategic management.
Three approaches to strategic management
Among the different approaches that is used by different organisations the approach that is
highly used by the organisations are Stakeholders approach, Dynamic capabilities approach
and Resource based view approach (Hill, Jones and Schilling, 2014).
Stakeholders approach
Stakeholders approach works around stakeholder theory and concentrates on the idea of how
the stakeholder management is going to affect the management practices.
History
This approach to strategic management as emerged around in 1980’s. The idea of this
approach was moved in the publication by R. Edward Freeman’s in Strategic Management-A
Stakeholder Approach, a book published in the year 1984. Motivation behind stakeholder
management was to try and create a outline that was responsive to the managerial distresses
especially in the environment where environmental change or turbulence remains on the
higher side (Eden and Ackermann, 2013). The idea of this approach came as the traditional
approach was not as much capable of giving strategic direction or creating new opportunities
in the time when the change are so fast. This approach devises the methods to manage
relationship between stakeholders and the company so that it could benefit them strategically.
Stanford Research Institute in 1960’s suggested that managers need to understand the
concerns of the stakeholders are increasing with enhancement of turbulence in the
environment of business (Harrison, Bosse and Phillips, 2010). This calls for making of
strategies or objectives that would be supported by stakeholders as this is necessary for

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achieving long term success of the organisation. The major idea of approach remained same
only a fragment of change can be noticed in the original idea.
Suggested benefits
There are several benefits attached with the use of this strategy. First and foremost thing that
it does is that increases the trust among stakeholders and the management which is very much
crucial for the growth of the organisation. It benefits the organisation as it makes the strategic
planning process more effective and the implementation of strategies also becomes easier
(Freeman, 2010). It helps in improving the satisfaction level among the stakeholders which is
very much essential for improving the productivity of the organisation. Using stakeholder
approach is that it has a descriptive accuracy, its instrumental power is good and at the same
time its normative validity of doing goods is also high. It also benefits the firm to make a
strategy that is more democratic and has the acceptability from the entire stakeholders group.
This approach helps in managing the corporate social responsibility which is matter of
concern for the companies in the modern day business environment. This has become
necessary for the company to make sure that they have a plan to follow the ethics while
taking decisions. In the current times this is one of the biggest challenges as the nature of
business in the industries is changing. With the increasing global competitive environment, it
is easily possible that stakeholder might get affected by the type of decision made by the
company so as to gain competitive advantage in the longer run (Mitchell, Wooliscroft and
Higham, 2010). A complete analysis of stakeholder’s concerns helps the company to cope up
with the challenges related sustainability. This helps in creating a better image of the firm
which is necessary for building long term associations with the shareholders. Since
environment of the industries are getting highly unstable hence keeping the stakeholders
approach as priority becomes highly important. With the help of this approach companies can
easily improve the performance of the stakeholders like employees which is very much
essential in the modern day business. The casualty remains complex among corporate social
performance and the financial performance of the firm and hence this approach might be
implemented as planned.
Limitations
Along with the benefits that are attached with this approach it is seen there are certain kind of
limitations that are also attached with this approach. It takes away the autonomy of the
management to create and take decisions that they feel are beneficial for the growth of the

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organisation (Cooper, 2017). Since the concerns of the stakeholders about any strategies are
evaluated hence starting or ending point of this analysis cannot be known. Basic limitation of
this approach is in the monopolistic market where the objectives of the organisation and that
of the network come into the alignment. It seems to overpower the stakeholders that might
not be even so much important for the company to gain competitive advantage. This
approach does not give the idea about the way in which stakeholder’s problems can be
resolved. It might slower down the speed with which the organisation can grow.
Company that used this approach
This approach is used by many of the organisation for example Tata Company. They have
been one of the forerunners in involving stakeholders in the decision making process. Most of
their decisions are taken keeping mind the effect it will have on the stakeholders (Chien and
Tsai, 2012). In spite of the fact that they were facing loss after purchasing Corus, they have
not reduced the benefits that their employees were getting previously. Coca-Cola is another
example of the companies that implemented stakeholders approach at priority as their
stakeholder engagement in the strategic affairs remained higher.
Dynamic capabilities approach
This is another major approach that is used in the modern day business so as to do
stakeholder management. This approach gives a competitive advantage over the rivals in the
time of rapid changes. This approach is highly beneficial in terms of the facts like
performance/price rivalry, innovation-based rivalry, and inventive destruction of present
competencies as well as increasing returns (Reuter, et al. 2010). This approach is also
understood as the firm’s capability to purposefully adjust with the resource base of the firms.
The prime assumption of this framework is that firm’s basic competencies must be utilised
for creating short-term competitive positions that can be transformed into long term
competitive gains.
History
This approach draws its belonging from a paper published in the year 1997 named Dynamic
Capabilities and Strategic Management. This approach was developed by Gary Pisano, Amy
Shuen and David Teece. This was developed as a strategy that provides ability to the
organisation to shape, integrate and reconfigure external and internal competence so as to
counter the fast transforming business environment (Clifton and Amran, 2011)

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Winter and Nelson in the book An Evolutionary Theory of Economic change published in the
year 1982 is linked the growth of the concepts of dynamic capabilities to the resource-based
view of the organisation. Scheuder and Douma describe it as a link between evolutionary
approaches to firms and economics-based strategy.
Benefits
Resources play a very essential role in the success of the business. It has a benefit that it helps
in enhancing the organisational capacity by improving the strength of the firm. It allows the
firm to analyse the current strengths they have and the resources they need to accumulate so
as to manage the present business environment and be prepared for the situation that will
arise in future. It helps the firms in gaining advantage over the others (Weiss, 2014). This can
be understood by the fact that suppose a company has installed most advanced technological
systems for different operations, they can easily bring smoothness in their business processes.
Product and process development is an essential part of the dynamic capabilities. Research
and Development plays a very essential role in this regards. In order to improve the capability
intellectual property needs to be managed. Organisational learning and human resource
development has a crucial role in the capability development.
Limitations
Dynamic capabilities is seen as a multidimensional construct as it has four distinct
dimensions hence all dimension should be taken into consideration which is not easy to be
done. For example tendency to alter the resource base is significant only when there is also
tendency to create conducive decisions for using the former capability (Kindström,
Kowalkowski and Sandberg, 2013). Reconfiguration tendency attains a high effect only when
pooled with a tendency to create decisions that are market-oriented. This approach does not
suggest that what an organisation should do when it is making desired growth. It can be
possible that company might be performing well but might require capability development
for long term future growth.
Companies that applied this approach
There are many companies which has adopted this approach as most of the companies are
conducting research so as to sense the opportunities and threats and create, refigure or extend
their resources so as to gain advantage over their rivals (Barreto, 2010). Amazon has adopted
this approach to strategic management from past several years. This is the reason they have
entered into several markets with the help of the capabilities they have and the requirements

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they have in the market. Their decision making is based on the research they have done on
the market and accordingly they develop their capabilities to fulfil the customer’s
requirements. For Instance they had big suppliers attached with them but while entering into
Asian markets they understood to get attached with the smaller suppliers also and deepened
their supply chain so as to more suppliers in their base and work with all of them with ease.
Resource Based View approach
It is an approach that is used for describing the strategic resources having the potential to
transport relative benefit to the organisations. Such resources are exploited by the
organisations so as to gain sustainable advantage over the rivals. RBV suggests that
organisations are heterogeneous as they have heterogeneous resources and hence
organisations do have different types of strategies as they have different mix of resource. The
resource based view is interdisciplinary and its development is within disciplines of ethics,
marketing, supply chain management, economics, general business and law. RBV offers
strategists a means of analysing possible factors which can be used to provide a competitive
advantage. This view also suggests that not all resources are of similar importance and
neither they are probable to convert into a basis of competitive gains. Sustainability of the
competitive benefits depends on the degree to which resources can be substituted or imitated
(Dixon, Meyer and Day, 2010). Managerial efforts have to be put in finding, understanding
and classifying core competencies. Firms should invest in organisational learning for
developing, nurturing and maintaining key competencies and resources. Following this
approach company chooses one strategy that gives them competitive advantage over the
rivals by exploiting the internal capabilities and resources in a best possible way relative to
the available external opportunities.
History
In the emergence of resource-based view, Barney’s article “Firm resources and sustained
competitive advantage” from the year 1991 played a very major role. Few researchers believe
that there was sign for a disconnected resource-based theory from the year 1930s. Resource
based view of the firm grown into the dominant model in the strategic planning initiatives.
Scholars suggests that the resource-based view depicts a new model where a firm can get
sustainable supernatural returns only when they have some higher quality resources and it
must be safeguarded by some kind of isolating mechanism preventing their diffusion all
across the industry (Katkalo, Pitelis, and Teece, 2010).

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Benefits
RBV is best applied for the assessment of organisation’s existing resources portfolio or when
exploiting the resources of the organisation to transfer into new product markets. There are
two major motives for utilising the R&C as a material to its tactic. This gives a route to the
strategy of the organisation and these are the major source of return for the organisation. The
RBV sees the value resulting from information capabilities, skills related to management and
administrative procedures as rare features that is capable of generating monetary rents
(Kraaijenbrink, Spender and Groen, 2010). By increasing the accessibility of resources a firm
implements a value creating strategy at the places where rivals haven’t thought of it. It gives
the idea about the company’s potential primary resources as well as letting understand that
whether the resources fulfil criteria such as imperfectly imitable, Rare, Valuable, Non-
substitutable and Rare. Apart from this, it also helps in developing, nurturing and protecting
resources that crosses the above given analyses. There are different classifications of
competitive positioning that includes price, quality, Innovation, service, benefit and tailored
positioning.
Limitations
Resource based view has various kinds of limitations as it provides insights on both
organisational and strategic issues. RBV’s core logic comprises of circular reasoning in the
specification of relationship among resources and rents. Its results are based on the
assumptions of firm economists preferences and heterogeneity. Rents are regularly utilised as
critical resources of organisation which is acknowledged by comparing unsuccessful firm
with successful organisations. RBV focuses on human resource’s role in the making of
competitive advantage that also creates challenges for accountants in the form of intangible
asset valuation and total business. Meanwhile accountants are equally troubled with controls
that avoid resource misappropriation that is eventually the property of stakeholders (Hart and
Dowell, 2011). Some suggests RBV to be tautological. Diverse resource arrangements can
produce similar value for the organisation and hence could not provide competitive
advantage. This approach also does not give the role of products market and it remains
underdeveloped. This theory has restricted prescriptive implications. It also fails to consider
factors surrounding resources like evaluating whether the key capabilities are developed or
acquired. It is based on the hypothesis that an organisation can only gain profits in the highly
competitive market till the time it can take use of advantageous resources (Wimmer and

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Matoly, 2017). This might not hold true all the time. It also overlooks external factors that are
concerning the industry as a whole.
Companies that applied this approach
In the modern time, many companies are using this approach of strategic management.
Honda and BMW are the two organisations that are using Resource based view approach for
gaining competitive capabilities in terms of the fact that are able to configure their value
chain respectively. Both these organisations have made value creating strategies over the
years in different operational areas so as to improve their position in the market (Nath,
Nachiappan and Ramanathan, 2010). In terms of quality Honda has made such strategies that
they are ahead of their current and potential competitors.
Conclusion
A conclusion can be derived from the above report that strategic management is very much
essential in the modern day business. Different organisations utilises different approaches for
their strategic management. Three major approaches are stakeholders approach, Dynamic
capabilities approach and resource based view approach. Stakeholder approach suggests
considering the concerns of stakeholders while making of strategies. Dynamic capability
approach suggests that a firm must develop their capabilities while making strategies. At last
there is resource based view approach where firm must learn to develop, nurture and maintain
resources that give them competitive edge over the rivals. There are various kinds of benefits
and limitations attached with all these three approaches.

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performance. Journal of Organizational Change Management, 25(3), pp.434-444.
Clifton, D. and Amran, A., 2011. The stakeholder approach: A sustainability
perspective. Journal of Business Ethics, 98(1), pp.121-136.
Cooper, S., 2017. Corporate social performance: A stakeholder approach. Routledge.
Dixon, S.E., Meyer, K.E. and Day, M., 2010. Stages of organizational transformation in
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Kindström, D., Kowalkowski, C. and Sandberg, E., 2013. Enabling service innovation: A
dynamic capabilities approach. Journal of business research, 66(8), pp.1063-1073.

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Kraaijenbrink, J., Spender, J.C. and Groen, A.J., 2010. The resource-based view: a review
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