Strategic fit. Strategic Fit in Mergers & Acquisitions 2022-10-17
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Strategic fit refers to the alignment of a company's strategies, capabilities, and resources with its external environment. In other words, it is the extent to which a company's strategies and actions are well-suited to the opportunities and challenges presented by the market in which it operates.
Achieving strategic fit is important for several reasons. First, it helps a company to maximize its competitive advantage by leveraging its strengths and minimizing its weaknesses. For example, if a company has a strong brand and a reputation for high-quality products, it may focus on expanding its product line and investing in marketing efforts to increase its market share. On the other hand, if the company lacks strong competitive advantages, it may need to adopt a different strategy, such as focusing on cost leadership or differentiation.
Second, strategic fit is essential for long-term survival and growth. Companies that are not well-aligned with their external environment are more likely to face challenges such as declining market share, reduced profitability, and even bankruptcy. By contrast, companies that are well-aligned are better positioned to take advantage of opportunities and navigate challenges.
To achieve strategic fit, companies need to regularly review and assess their internal and external environments. This process, known as strategic planning, involves identifying the company's strengths and weaknesses, as well as opportunities and threats in the market. Based on this analysis, the company can develop and implement strategies that are well-suited to its capabilities and the market conditions.
However, achieving strategic fit is not a one-time event. The business environment is constantly changing, and companies need to be flexible and adaptable in order to maintain their alignment with it. This may involve modifying existing strategies or developing new ones as circumstances change.
In summary, strategic fit is the alignment of a company's strategies, capabilities, and resources with its external environment. It is important for maximizing competitive advantage, long-term survival and growth, and requires regular review and assessment of the internal and external environments through the process of strategic planning. Maintaining strategic fit also requires flexibility and adaptability in the face of changing market conditions.
Dell PCs were designed to use common components and to allow rapid assembly. Firms operate in an environment where external opportunities always prevail as a striking option and considerably be lucrative for firms to adopt such strategies coping with the requirements to reap the fruits from the prospects around. The matching takes place through strategy and it is therefore vital that the company has the actual resources and capabilities to execute and support the strategy. Both the product demand uncertainty and various customer needs that the supply chain tries to fill affect implied demand uncertainty. It is important to understand that the desired level of responsiveness required across the supply chain may be attained by assigning different levels of responsiveness and efficiency to each stage of the supply chain as illustrated by the following examples. The idea is that all these seven elements are interlinked and you need to consider how any changes impact on and can be impacted by the other elements of the McKinsey 7 s framework.
The matching takes place through strategy and it is therefore vital that the company have the actual resources and capabilities to execute and support the strategy. Process measurement and customer feedback is used in the performance management process; the outcome of which will guide the refinement of strategy and process improvement. IKEA provides responsiveness in the supply chain, with the stores absorbing most of the uncertainty and being responsive, and the suppliers absorbing little uncertainty and being efficient. Expansion Via Acquisition As a buyer, you could be looking to grow your business through acquisition. Other factors considered in the Strategic Project Management Model are assessing leadership skills, identifying availability of technology and resources, the use of power, and strategically managing a changing environment to support effectiveness and efficiency. Strategy as a plan establishes a view of the organisations in the leaders view and pre-determines the course of action it can also serve as a ploy in the same scenario, Strategy as position refers to external environment to create economic rents, As perspective, strategy looks inwards to the corporate personality or culture of a firm. Customers at Walmart may be less sensitive to new product innovation.
What are some of the major obstacles to success? What are supply chain strategies? Increasing responsiveness results in higher costs that lower efficiency. In the case of a pharmaceutical company, these changes occur when demand for the drug stabilizes, production technologies are well developed, and supply is predictable. Can you afford to buy the business? For instance, to respond to a wider range of quantities demanded, capacity must be increased, which increases costs. Another example is Levi Strauss, which sells both customized and standard-sized jeans. It is important not only to look at financial records and to understand the product, but also to closely examine the corporate culture and human factor of the business—they can make or break a partnership. The Strategic Project Management Model SPM explicates the important elements that are keys for developing strategic leadership project management in a team.
Align the organizational structure, objectives, and administrative arrangements. Strategy is Implementation, Planning the change in the organization and achieving the Strategic Fit. Strategic Fit The first thing to consider: is it strategic? Girard, 2002 An agreed definition of knowledge management has eluded scholars and practitioners alike since the term first entered our lexicon. Tailoring of the supply chain is an important concept that we develop further in subsequent chapters. Different people are right for different organisations.
As a result, the implied uncertainty faced by the supply chain is extremely high. HERE ARE SOME FACTORS TO CONSIDER WHEN LOOKING AT STRATEGIC FIT: Management team. The best combination of roles depends on the efficiency and flexibility available at each stage. Moreover, each company has its internal resources and capabilities to exploit and deal with its exteriors and usually endeavors to adopt the strategies most suitably are in accordance with the prerequisites of potential externalities. You want to spend a certain amount of money and feel pressured perhaps by your CFO and board to pull off the deal of the century. The level of responsiveness is tailored to each product, channel, or customer segment.
In Acquisition, Consider Strategic Fit and Cultural Fit, in Addition to Financial Fit
Focused solely on price, off you go to find some company that you believe will be a great fit. Increased implied demand uncertainty thus leads to both higher oversupply and a higher stockout rate. You know your competitors and begin to target some for discussions; in addition, you research other companies and could aim for those as well. New products being introduced have higher supply uncertainty because designs and production processes are still evolving. Similarly, consider a scenario in which a retailer has decided to provide a high level of variety while carrying low levels of inventory but has selected suppliers and carriers based on their low price and not their responsiveness. It refers to consistency between the customer priorities that the competitive strategy hopes to satisfy and the supply chain capabilities that the supply chain strategy aims to build.
How is Strategic Fit Achieved? This may not be the case for the construction order. Most organization failures are attributed to bad execution. Although such a scenario holds for firms like IKEA, many firms are required to achieve strategic fit while serving many customer segments with a variety of products across multiple channels. This is necessary to evaluate how the organization is capable to achieve its external demands. Whittington, 2005 Strategic Management Model: Strategic management model is also known as strategic planning model.
What are the challenges to supply chain fit? An order for material to construct a new production line is likely to be large. There are many reasons companies might merge. STEP 2: UNDERSTANDING THE SUPPLY CHAIN CAPABILITIES After understanding the uncertainty that the company faces, the next question is: How does the firm best meet demand in that uncertain environment? Given the large variety of products and rapid desired delivery, demand from McMaster-Carr customers can be characterized as having high implied demand uncertainty. A company may fail because of a lack of strategic fit or because its processes and resources do not provide the capabilities to execute the desired strategy. By proceeding in this order to find the three fits, you are guaranteed not to miss great opportunities. The retailers, however, do not carry much inventory and pass most of the implied uncertainty on to England, Inc. Unfortunately, you will waste a lot of time with this method.
What are obstacles to achieving the strategic fit?
If you are fueled by a motivating vision, you will keep going when everyone else has already given up. Two important key factors that help organization achieve strategic fit are the planning and implementing strategy. The retailers can thus be efficient because most of the implied uncertainty for the supply chain is absorbed by England, Inc. Supply Chain II, in contrast, has a very responsive manufacturer that absorbs most of the uncertainty, thus allowing the other stages to focus on efficiency. The cost-responsiveness efficient frontier is the curve in Figure 2-3 showing the lowest possible cost for a given level of responsiveness.