Strategic Management
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I NTERNATIONELLA H ANDELSHÖGSKOLAN HÖGSKOLAN I JÖNKÖPING Strategic Management -A Combination of the Internal & External Perspecti v e Master Thesis in Business Administration Author: Caroline Axén Wrigfors Karin Eliasson Supervisor: Cinzia Dalzotto Jönköping June 2008 Acknowledgements The authors of this thesis would like to thank our tutor Cinzia Dal- zotto for her support and advice. Further we would like to thank Lucia Naldi and Anders Melander for their feedback, comments and general input. We would also like to show our gratitude to the company, all the interviewees from re- lating industry organizations, customers, competitors and the mu- nicipalities within the Jönköping County. Caroline Axén Wrigfors Karin Eliasson Jönköping International Business School, June 2008 Master Thesis within Business Administration Authors: Caroline Axén Wrigfors Karin Eliasson Tutor: Cinzia Dalzotto Date: 2008-06-11 Subject Terms: Strategic Management, Strategic Leadership, Strategic Think- ing, Corporate Strategy & Competitive Advantage Abstract Strategic management has long been viewed as the concept and process that link an organi- zation and its environment together (Leibold, Probst & Gibbert, 2002). It consists of the analysis, decisions and actions an organization undertakes in order to create and sustain competitive advantages (Dess, Lumpkin & Taylor, 2005). Within the history of strategic management research there has been an unbalance between the internal and the external perspective. During the 1980s Michael Porter, one of the most prominent strategic management researchers, and his Five Forces model focused strictly on the external competitive environment (Mintzberg, Ahlstrand & Lampel, 1998). Further, in the 1990s the focus shifted from external to internal along with Jay Barney’s development of the resource based theory in 1991 (Barney, 1991). The issue of excluding one or the other perspective has now started to be acknowledged and researchers today are striving for developing models integrating both perspectives. However, theoretical models existing today that combine the two perspectives are complex and hard to apply in practice for managers within the business world. In order to address the complexity of the strategic management concept we have chosen to develop a model with the purpose to connect and relate the external and internal perspec- tives by conducting an in-depth analysis of a chosen company. The model also strives to be easily communicated, applicable and understandable for managers and employees on dif- ferent levels within the organization. This leads us to the purpose of this thesis: “to develop a simplified model that combines the external and internal perspective of strategic man- agement and apply this to a chosen company”. The research was conducted through a case study based on the authors’ participation in a PBM (Project Based Module) - project. The model was tested on the company in question by analyzing the company’s internal and external environment with the means of analysis tools such as PEST-analysis, strategic group analysis, threshold analysis and the SWOT- analysis. To conclude it is important to balance an organization’s internal efforts with the external market conditions and avoid excluding one or the other from the strategic management process. Combining the two perspectives results in identifying the current capabilities and competences and the direction of how to use these in order to meet market demands and gain competitive advantage. 2 Table of Contents 1 Introduction ..............................................................................6 1.1 Background ........................................................................................6 1.2 Problem discussion ............................................................................7 1.3 Purpose..............................................................................................8 1.4 Definitions ..........................................................................................8 1.5 Research Questions...........................................................................8 2 Frame of Reference ..................................................................9 2.1 The Development of Strategic Management......................................9 2.1.1 Competitive advantage .............................................................10 2.2 External Perspective ........................................................................11 2.3 Internal Perspective..........................................................................11 2.4 Strategic Thinking and Strategic Leadership....................................12 2.5 Own Framework...............................................................................14 2.6 Strategic Management Analysis Tools .............................................15 2.6.1 Strategic Capabilities & Competitive Advantage .......................15 2.6.2 PEST- Analysis .........................................................................16 2.6.3 Strategic Group Analysis...........................................................17 2.6.4 SWOT- Analysis........................................................................18 2.7 Summary of the Theoretical Framework ..........................................19 2.8 Reflection on the Theoretical Framework.........................................20 3 Method .................................................................................... 21 3.1 Research Approach..........................................................................21 3.2 Research Strategy............................................................................21 3.3 Data Collection.................................................................................22 3.3.1 Case study................................................................................22 3.3.2 Primary and Secondary Data....................................................23 3.4 The Interviews..................................................................................24 3.4.1 The Interviewees.......................................................................24 3.4.2 The Structure of the Interviews .................................................25 3.4.3 The Transcription process.........................................................26 3.5 Data Analysis ...................................................................................26 3.6 Reliability and Validity ......................................................................27 4 Empirical Findings ................................................................. 28 4.1 Company Description.......................................................................28 4.2 Internal Interviews ............................................................................28 4.3 External Interviews...........................................................................31 4.3.1 Relating Industry Organizations................................................31 4.3.2 Customers.................................................................................32 4.3.3 Competitors...............................................................................33 4.4 The external environment.................................................................34 4.4.1 Political Factors.........................................................................34 4.4.2 Economical Factors ..................................................................35 4.4.2.1 National level............................................................................................35 4.4.2.2 Regional level...........................................................................................36 4.4.3 Social- and Demographic Factors.............................................38 4.4.4 Technological Factors...............................................................39 3 5 Analysis................................................................................... 40 5.1 Internal Analysis...............................................................................40 5.1.1 Communication.........................................................................41 5.1.2 Identity ......................................................................................42 5.1.3 Recruitment...............................................................................43 5.1.4 Development possibilities .........................................................44 5.2 External Analysis..............................................................................45 5.2.1 PEST- Analysis .........................................................................45 5.2.1.1 High Growth Municipalities.......................................................................45 5.2.1.2 Business Opportunities ............................................................................46 5.3 Strategic Analysis.............................................................................46 5.3.1 Strategic Group Analysis...........................................................46 5.3.1.1 Current Geographical Spread ..................................................................47 5.3.1.2 Future Geographical Spread....................................................................47 5.3.2 Threshold Analysis....................................................................48 5.3.3 SWOT- Analysis........................................................................50 6