Publish: 2009
Status: full text
Source: nternational Journal of Management; Apr2009, Vol. 26 Issue 1, p99-106
Preparation: Scientific Database Management Journal Articles www.SYSTEM.parsiblog.com
Abstract: his paper is a survey of recent developments in the field of strategic management. Specifically, this paper argues that recent political, economic, and social changes, among other things, have had relatively little impact on operations in organizations, but have made a big difference to the planning and strategic aspects of management. The analysis and synthesis of the recent developments in strategic management developed in this paper argues that strategic management is entering "a new era" in which (1) stakeholders interests are more important than before and (2) there is a greater concern for social responsibility than ever before. According to the analysis, these features of the new era are deep and pervasive trends that are much more than just responses to recent events such as corporate scandals.     --Download Article

Introduction: For most organizations the transition from the twentieth century to the twenty-first has
had little significance in terms of change of operations. However, the new millennium
has brought on new conditions that necessitated new planning and other management
processes. Dess and Lumpkin (2001) has well documented the emerging issues in
strategy-making processes. The massive managerial advances (known as the reengineering
or re-structuring era) brought about in the 1990s (Bowman and Singh 1993)
was quickly overshadowed by first the collapse of the dot com economy and second by
the September 11, 2001 destruction of the World Trade Center in New York and the
ensuing Iraq war and recently the stock options backdating.
Both of the foregoing events resulted in loss of faith in what was called the “New
Economy” and the loss of faith in institutions and economic agreements that had
dominated international relations for over half a century (The Economist 1996). As a
result, the fall-out for the business world was considerable. The world
economy was plugged into a recession in the early 2000s and U. S. Government’s war
on terrorism resulted in increasing trends towards “unilaterism” which consequently
reversed many of the trends towards closer integration of the world economy. Hoskisson
et al. (2001) have abundantly clarified that restructuring was taking place in most
emerging economies as well during this time.
All of these events, whether domestic or international, imply that planning for the
future is becoming harder and harder. Strategy managers across the spectrum need to
re-assess their traditional planning processes. Need for new means or tools of scanning
the different systems operating in any organization’s external environment are becoming
increasingly important. New forecasting techniques need to be established to address
the emerging instability and volatility of world markets. Expecting the unexpected in all aspects of an organization’s environment should be the rule rather than the exception
as it used to be in the twentieth century economy. According to Lurie’s (2004) research,
even the consumers are facing different decision making approaches in this informationrich
environments.
The purpose of this paper is to review recent developments in strategic planning processes
and understand their implications for both strategy scholars and practitioners. First a
review of some of the new developments and trends which have been shaping up the
early part of this millennium are presented. Then, implications for strategic planning of
those developments are analyzed. These implications are hoped to be helpful to strategy
managers in generating new ideas that more than likely will reshape our thinking and
strategies on how to cope with this era of high uncertainty and rapid change.

Quo Vadis from Here
Alan Greenspan, the former Chairman of the US Federal Reserve Bank, dubbed the
phrase “irrational exuberance” in the late 1990s in describing the new economy of the
dot com era then. At the heart of the new economy was a subtle shift taking place
in corporate America. The shift from industrial economy to digital economy where
intellectual capital was replacing brick and mortar assets had created a new challenge
for strategic planning.
This new and emerging digital economy driven by digital technologies and new
communications media had novel means or requirements of success. The new economy
of the late 1990s has been described as the “third industrial revolution” (Grant 2005).
Different companies rushed to capitalize on this new asset of knowledge or intellectual
capital. Traditional strategies of lowering cost or taking advantage of economies of
scale were no longer the first choice for managers. On-line methods (business-toconsumer
or business-to-business) have challenged traditional marketing and distribution
strategies.
The potential for the digital economy to create new means to advance productivity across
the board and to revolutionize traditional manufacturing and distribution technologies
seems robust. The prospects of the digital economy, using advanced telecommunication
systems and informational technology predicated on good reputation will transform
many management processes such as transforming traditional decision-making processes
into paperless processes and real-time decision making. As Alan Greenspan (2000),
put it in a speech:
“In today’s world, where ideas are increasingly displacing the physical in the production
of economic value, competition for reputation becomes a significant driving force,
propelling our economy forward. Manufactured goods often can be evaluated before
the completion of a transaction. Service providers, on the other hand, usually can offer
only their reputations.”
Thus, the digital economy will make it imperative for companies to lean heavily on their
good reputation to be successful in this hypercompetitive marketplace.

Emerging New Values and Social Systems
An important process of any strategy is to match organizational resources and ives
with opportunities found in its macro environment. A major force in the external
environment is the value/social system of the immediate and greater community(ies)
where that organization conducts its business transactions. Compatibility between
interests of business organizations and interests of their community or society should
be the goal of any socially responsible business.
Traditional corporate strategies which have been emphasizing the maximization of
shareholders’ value need to, at least, partially reflect on maximization or fulfillment
of society’s interests. The recent collapse of some high profile U.S. firms, such as
WorldCom, Enron, Global Logistics, and Health South are primary examples of the
failure of these companies in reacting positively and quickly to changing societal values
and beliefs. These companies were major advocates of maximizing shareholders values
under any circumstances. Evolving societal values in this digital economy are rapidly
changing.
This trend has created a challenge and a need to strategic planners to be able to predict
such changing needs and values in a timely fashion. Enron and WorldCom planning
and value systems have ignored the upsurge in demands by different societal forces for
an increased and proactive role of socially responsible corporate citizens.

Emerging Competitive Forces
One of the consequences of the digital economy and its information technology
is the ever increasing competition which is dubbed “Hypercompetition” by
Lucas (2005). The electronic commerce and the Internet of the digital economy
have created a greater competition than existed during the past economy.
A hypercompetitive economy has to depend heavily on the generation of new resources
for the firm, such as new products, services, procedures, and processes. Companies in
the digital age find their investments and assets depreciate very rapidly. It has been
estimated that a brand new PC depreciates at the rate of ten percent a month.
The Internet abolished some of the traditional barriers to entry in a number of industries.
It also resulted in creating instant global markets for little known businesses. It has
created a new, for less costly, distribution channel which drove cost of distribution to
minimal levels compared to traditional distribution channels. All of that resulted in
lowering profit margins per unit.
The creation of electronic commerce has profoundly changed rules of the game for
competitors. Weak entry and exit barriers, instant global and national markets, and
increasing price transparency have intensified competition. This internet era has
transformed the traditional competitive variables in many industries. This emerging
competitive environment made strategies such as winner-take-all markets not that
uncommon strategy in some industries.

Emerging Manufacturing Strategies
Manufacturing in its traditional mode where company’s assets is most invested in
heavy equipment and other tangible assets is on the decline as a consequence to the
digital economy and outsourcing. More than half of capital investment in the U.S. is
in information technology. As a consequence this resulted in having innovation occurs
at a rapid pace. As a matter of fact, U.S. manufacturing jobs have been in a descending
trend since the early 1990s.
The digital economy has eliminated manufacturing all together in some industries. A
new form of companies called the “virtual corporation or organization” is on the rise.
These trends suggest that since technological and competitive conditions are changing
rapidly, business organizations need to be more flexible in responding to the exigencies
of the marketplace.
To enhance flexibility, companies have resorted to rely on outside independent firms.
Almost 95 percent of virtual company operations or processes are outsourced. In some
industries such as software or semiconductor, only two functions are under management
control, that is, the research and development function and the firm headquarters is the other.

In the pre-internet economy, the premises of strategic planning were somewhat

benign: low inflation, reasonable consumer demand, stable regulations, low interest

rates, and stable equity markets. This stability in the business environment enabled

strategic planners then to proceed with their aggressive strategies such as re-structuring,

downsizing, outsourcing, refocusing, and engaging in drastic cost cuts. Those strategies

resulted in substantially improving the bottom lines results of many large firms.

As we entered the twenty-first century most of the aforementioned strategies were

exploited to the limit. The substantial gains in profits of the late 1990s began to disappear.

As a result, firm’s valuations or stock prices suffered. Some executives responded to

demands and high expectations by their shareholders in unethical approaches, such

as, what was known then as “creative accounting.” In the short run, they employed

creative accounting measures which kept valuation high. At some point, those firms

ran out of any new or creative scheme to artificially boost revenues and profits. Well,

by now we all know that that the path chosen (i.e., creative accounting) was the wrong

strategy to follow.

Serious and responsible firms opted to take a step back and think strategically of what

can they do to reverse their fortunes. A new strategy of focusing on what they know best

or focusing on areas of their business where they have obvious and clear competitive

advantages is gaining popularity.

For instance, some utilities firms have decided to choose refocusing on energy generation

and distribution and to exist from energy trading and other non-core businesses.

Similarly, some banks decided to focus on traditional banking services and to exit from

brokerage and investment businesses.

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