To compare with last decade, all industries or organizations have dramatic changed in today’s global market, no matter in social, political, technological and economic areas. Base on that, all industries have to make appropriate respond to these changes. However, the continuous change is no longer appropriate to the newest business model, but that rather, a range of discontinuous changes have become our new experience (Handy,1990) Today’s external environment has rapid, volatile and discontinuous change, which is the newest challenge of strategic management in an industry.
This essay is going to explore the concept of rapid, volatile and discontinuous change with undertaking wide range of academic journal articles, which in order to make sure that has a deeper understanding of its nature, impact or implications for an organization. In addition, according to the real situation of today’s global and industrial market, only those companies who can coordinate their strategic management to follow up the changes in the market can gather long life and profit. Therefore, this essay will discuss an example to see how those companies manage their business to fit in today’s external environment changes and how those change situations are connected to strategic management process making, and they influence the organizations.
Also, the essay will engage theories and models to assess and evaluate the impacts of rapid, volatile, and discontinuous change based on the sample case. Finally, CEOs play significant role in strategic management process, and they should have abilities to solve the puzzles when facing the rapid change. Therefore, this essay will finally use particular cases to address how CEOs respond appropriately to discontinuous change, and what if they respond inappropriate respond.
The concept of rapid, volatile, discontinuous change All industries are getting involved in a business world that has occurred frequent changes nowadays. Those changes can come from anywhere; they can be small or massive. Handy (1990) indicate that the continuous change is no longer exist, we cannot predict the future from the past, and change is unexpected and it can happen at any time. In other words, we are experiencing the discontinuous change epoch. For example, in 2008, plenty of large financial institutions had shut down in terms of the global financial crisis. The crisis resulted that the ‘Great Recession’ of economic happened and many bankrupts appeared. The housing market also suffered and the numbers of unemployment increased. Viljoen and Dann pointed that “a degree of turbulence will exist in all organizational environments (2003).
Because of the turbulence in that time, all industries had to face the influences following such changes. In terms of that, successful companies have to operate an efficient and appropriate management strategy to respond the changes of external environment. On the other hand, we can see the light of those changes. According Viljoen and Dann reported that, the more change the greater turbulence and then more opportunities appeared in the uncertainty external environment. Under the financial crisis, there were some companies survive and even gather large profits from the crisis. For example, Morgan Stanley is a financial services company who survived in financial crisis because of its long term preparation of strategic management. The 2008 crisis eliminated its two largest competitors – Lehman Brothers and Bear Stearns Cos., but had kept it stayed, which means that the survivors who made appropriate management strategies can win the market battle (Malhotra, 2009). All in all, the opportunities in degree of change will be offered for those organizations with appropriate strategic management.
Where this concept fits within the Strategic Management process In an organization, there is no doubt that one of significant part of operating business is strategic management planning. Strategic management planning has supported the organization in a long term running and has offered a direction to manage unexpected change of external environment. One thing can be sure that rapid, volatile and discontinuous change is focusing on strategic management process operation. However, it is difficult to predict accurate future development (Thompson & Martin, 2010). Because every company has their own situation, so that managers have to consider the change occurring in the external political, economic, social and technological environment and do internal and external analysis according to the particular situation.
Some models can be applied by managers to assess their companies’ external environment to improve the current business strategies, and then have more fit in the global market changes. When the companies fail to respond efficient strategic management, they also fail to facing the threats from external environment changes. Moreover, under the rapid, volatile and discontinuous change global environment, strategic management was built and developed in different way comparing with the last decades. For instance, to manage the complexity, dynamism and unpredictability environment is the topic in strategic management (Ambrosini, 2009). Additionally, analysis of SWOT had been combined into the operating strategic management because of the discontinuous change occurring in the world.
Models for assessing the impacts and implications of rapid, volatile and discontinuous change In order to better assess and understand the rapid, volatile and discontinuous change, a variety of business models are using by industries operation. Those models can improve the strategy management process as well as evaluate the implications of rapid, volatile and discontinuous change. First of all, the turbulence model is one of the models that indicate degree of change within a specific environment or industry. The criteria of it are complexity, dynamism and unpredictability (Viljoen & Dann, 2003). Base on this model, managers would consider the turbulence in a particular environment is not only bringing the threats to the company, but also bringing the opportunities. During that period, companies have opportunities to beat their competitors by using appropriate strategic planning. The case of Morgan Stanley is an excellent example while it owns remarkable strategy and management characteristics. Secondly, Michael Porter’s Five Forces Model is another powerful analysis tool to help managers identify the competitiveness of outside environment.
This model was made in Michael Porter in early 1980s; it indicates that bargaining power of suppliers and buyers, threat of new entrants and substitutes, these five forces will impact industries profit potential in the final. They have power to analyze the competitive environment effectively and have been used for the analysis of competitive strategy. This model produces far-reaching impact on global business strategy formulation. To propose a viable strategy should include these five forces to identify and evaluate the characteristics of different industries and companies. Besides, the Strategic Alignment Model can also be applied to exam the business strategy systems. This model refers to the value of intangible assets in a company, and it helps companies to achieve the coordination of operational strategy and information technology. For example, an excellent IT system is an indispensable part of operating strategy (Lerina, 2012). In addition, Business Rules Group model also can be applied to making efficiency business strategies (David, 2010). Under the business perspective, Business Rules model refers to in a particular activity; there is an obligation to take care conduct, action, practice and procedure. It offers managers to better understand their business strategies’ suitability.
The response of the CEOs to this kind of change
The response of the CEO to today discontinuous change would affect whether the company can sustain its competitiveness in the changing world market or lose its seat. Research shows that in ‘Great Recession’ time, those companies which can introduce and conduct the most efficient strategy can survive to the last. For example, Morgan Stanley survived in 2008 financial crisis because of its operating and strategy characteristic. It converted from an investment bank to a financial bank during the height of financial crisis. As a depository institution, it can acquire fund through deposits by the general public. To compare its competitors, even though it is not quite unscathed, Morgan Stanley has survived. Therefore, it is clear that CEOs should use different business models which can suit for their own company to analysis about the changing environment, specially the potential threats, new entrants and substitutes. Furthermore, dynamic learning is a useful approach to maintain the competitive advantage, which is based on four activities: scanning, monitoring, forecasting, and assessing (Trkman, 2010). Morgan Stanley’s CEO used dynamic learning to contribute the capabilities of this company and then to face the business challenges.
Also, the CEO has done sufficient research about the potential capabilities when he wanted to invest in new field projects, therefore, Morgan Stanley can extend its line of credit to depository institutions such as credit unions, savings and loan associations. For more cases like Samsung Electrics group, has set up an efficient strategy to face its major competitor – Apple. Since in early 1980s, Apple’s smartphone has started to dominate the cell phone market with its creative features and unique system. Due to the change in global market and development of Apple, Samsung industry created a new line smartphone – Galaxy S with some new features in order to compete Apple iPhone’s line.
That is an effective change and creating in management strategy made by Samsung industry, which can keep customers eyes on its new products and its development in the world area. Samsung industry have done an excellent job to respond the discontinuous changing market, which has brought it large scale of profits and also become one of the dominate smartphone industry in the global market. However, some CEOs make an appropriate respond while others do not respond to the volatile change of external environment appropriately. For example, Blackberry smartphone industry has made inappropriate strategies when facing discontinuous change in global market. Blackberry smartphone has maintained its stiff features and cannot get used to today’s technological change and customer’s demands. Therefore, the industry ends up experiencing a dramatic decrease in sales and customer loyalty.
In conclusion, under the economic development and the rapid, volatile and discontinuous changes in global market, all industries are facing huge challenges to maintain their business. CEOs have responsibilities to upgrade their companies’ management strategies in order to adapt the changing of global business environment. However, there are large scale of uncertainties in today’s market and plenty of risky consequences, CEOs have to introduce and implement the most efficient strategy to keep the company staying in the competitive market. Also, as the dominate roles in organizations, they have to adopt appropriate business models to support the strategic management process. Furthermore, they should have abilities to see the company’s trends, strength, weakness and opportunities as well as analyze their competitors’ strength and weakness, in order to better cope with the external environment dramatic change. Finally, they should gather the lessons from those companies who fail to adopt efficient strategies and could not survive in the changing global market.