Strategic Management in Turbulent Environment
Surviving Turbulent Business Environment Through Strategic Management
The organization environment is not static. The frequently changing business environment affects the smooth operation of an organization. The environmental change and its complexity is a major factor that affects the way companies carry out their activities. Management strategy in adapting to the turbulent business environment has been an area of concern for a long time now. Research carried out by different scholars identifies how the firm can use the management strategy to adapt to the ever-changing environment. The study on this area can be traced back to the time when Harvard Business School introduced the concept of business policy in the year 1985. The business manager should formulate strategies that will help the firm to cope with the turbulent environment. The organization environment can be described in two ways. These ways include; the environments degree of homogeneity and its degree of change. The environment’s degree of homogeneity may be simple or complex while the environment’s degree of change defines the extent of the organization’s environment may remain stable or dynamic. The changes in the business environment can be described by the phrase ‘environmental turbulence’. Due to the ever-changing organization environment, the management should develop ways to deal with its impacts. This paper will study the ways through which Tesla uses strategic management understand, prepare, and adapt to environmental turbulence.
Strategic Management during Turbulent Environments
Robbins (1990) defines the environment turbulence as a measure of diversity or heterogeneity in the business environment and other sub-factors such the business’ suppliers and customers, politics and technology. The increasing complexity of the business environment reduces the ability of the managers to use the available information to plan and predict the future of the business.
According to Benson and Lloyd (1992), turbulent environments are unexpected. These changes occur without prior signs. It therefore, means that the managers need to be prepared so that they can be able to survive the turbulent environment. McKenna (1991) and Samli (1993) notes that turbulence is the natural state of the whole world. They hold that every aspect of the world, including business environment are meant to change. The two scholars hold that environment turbulence in the business world is mainly caused by changes as well as the interaction between various business factors due to the advances in technology. Haleblian and Finkelstein (1993) state that environmental turbulence has greatly reduced the competition and caused an increased need for decision makers to access information. Turbulence in the business environment necessitates innovation. Lynch (1991) holds that due to the environment turbulence, it has become extremely difficult for the managers to predict customer needs, as well as the product and service requirements. The change in the business environment makes the decision windows appear shorter and increases the risk of obsolescence. These two factors make it impossible for long-term control and it, therefore, means that managers have to learn and adopt new ways of doing things to operate effectively during the turbulent environments (Swayne, Duncan, & Ginter, 2012). Tesla Motors uses the history of their customers and carefully analysis the customer’s purchasing pattern to predict the customer needs. This is a strategy that help Tesla remain competitive as their products meet the needs of their customers.
Strategic management entails the process through which the managers formulates and implements major goals as well as the initiatives as a result of resource consideration and that is necessitated by the assessment of business environment, both internal environment, and external environment. An organization’s managers can use strategic management to provide the direction. Strategic management specifies the objectives of the organization, the policies that can be used for development as well as the organization’s plans that are designed to facilitate the achievement of the objectives. Michael Porter, a Harvard University Professor, identifies several principles of strategy. These principles include creating a unique and valuable position, making a trade-off between what to do and not to do, and finally, creating a fit. The fit is created by aligning the activities of the company to each other to support the strategy that the management has chosen. The management of an organization should develop ways in which the organization will be able to survive in the turbulent environment (Hitt, Ireland, & Hoskisson, 2012). This means that the managers should develop and formulate the strategies that will be effective for the organization during the time of turbulent environment.
The management can use the complexity approach strategy to foster and create conditions that will enable it to explore the possibilities as well as help in the facilitation and creation of new forms of the organization that will be sustainable and effective during the changing environment. Botha, Kourie, & Snyman (2014) states that strategic management helps the managers be able to identify certain elements or factors that are useful in the times of emergency. These factors improve the organization’s ability to respond to changes. Strategic management also helps the managers to provide work arrangements according to the situation at hand and not as it is dictated in advance.
According to Hill, Jones, & Schilling (2014). Strategic management helps the business managers create social construction factors that enable the business to respond and adopt changes. These social factors include; effective communication, collaboration, trust, morale, and trust. These factors help the businesses to remain competitive even in the times of turbulent environment. The social elements handle the interaction and creative thinking simulation. Due to interaction and simulation, human feel empowered, and there is leveraging in the organization.
Strategic management has adaptive factors. According to Eden, & Ackermann (2013), the management can determine the dynamic of the environment by looking at the relationship of the inter-component. Adaptive factors improve the ability of the business entity to adapt to changes. Adaptive factors that help the business to adapt to changes include; interrelationship, connectivity, and interdependence (Hill, Jones, & Schilling, 2014).
Through strategic management, a specific organization can create an enabling infrastructure. The enabling infrastructure helps the organization to adopt the changes in the environment (Mitchell, 2013). The enabling infrastructure facilitates an emergent response to the changing environment. There are several aspects of the enabling infrastructure that enable the organization to respond to changes in the environment. These as aspects include; hierarchy and structure, management style and good leadership, cultural conditions of the organization, bureaucratic regulations.
A Case Study: Tesla Motors
Tesla Motors Inc is an international automotive company that is headquartered in Palo Alto, California. The motor industry in the world is not stable. The industry is characterized by changing environment. The Tesla Motors’ management has to develop strategies that enable the company to adapt to the changes. They have to adapt their products and services to meet the consumer needs. Tesla Motors designs really good cars that meet the requirements of the clients. For instance, one of the company’s model, ModelS, won the Motor Trend’s award in 2013. This is a prove that the company’s management realises that quality of the products enhances the company’s competitive advantage (Nithisathian et al., 2012). Tesla Motors improves its market position through the use of strategic management. The company recruits the best personnel in its labour force and uses advanced technology in production. The company re-evaluates the products and improves the services to meet the customers’ needs. The company also invests in advanced innovations in its marketing strategies. The marketing strategies are improved in-store as well as online where the company uses several multi-channel activities to reach a large number of customers. Tesla Motors realizes that customer loyalty leads to improved business results and, therefore, more profit. This means that the company has to find ways to satisfy the customer and meet all the requirement of every individual customer (Liu, 2013). This is done through decreasing the cost of marketing and generating barriers that would make it impossible for other firms to enter the industry. The company develops and implements effective customer relationship marketing to develop and sustain a competitive advantage. Tesla Motors faces the following microenvironment; stiff competition as the automotive industry is been flooded with cars form Volkswagen and General Motor and Ford companies, threat from new entrants and available substitutes such as trains and buses.
Since the organization’s environment is complex and ever changing, many businesses became uncertain about the future of their operations when faced with the turbulent environment. It therefore means that the organization managers should develop strategies to cope with these turbulences. Tesla CEO and other managers identify the causative link that exist between the environmental variables and the nature of the environment, and this makes it possible for them to create strategies that enable Tesla to survive in the times when faced with turbulent environment (Hahm et al., 2013). The cars are manufactured in a way that meets the customer’s needs and advanced innovations is used to manufacture the cars
and this helps to create customer loyalty.
The study has revealed that the business environment is not stable. The environment keeps changing. Due to this dynamic nature of the business environment, it becomes very hard for the managers to predict the future operations of the organizations. It even becomes harder for the business to cope with the changes. As has been seen in the case of Tesla, the company is faced with a threat by the increased entrants into the electric automotive especially from the year 2013. This will make the environment change and therefore the managers must formulate strategies to enable Tesla remain competitive. One of the strategies that Tesla has used very effectively is product differentiation where the cars are manufactured to suit the needs of the customers. The products and services are improved to meet the requirements of the customers. This creates customer loyalty and enables the Tesla to remain profitable even in the times of turbulent environment.
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