Strategic fit

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Strategic fit is a concept used in strategic management that describes the degree to which a company's strategies, objectives, and capabilities correspond with and support one another. It is the process of aligning a firm's resources, capabilities and competencies with its business strategies, objectives and the external environment. It is a measure of the degree to which an organization’s activities support its overall strategy. A company's strategic fit can help it make better decisions, allocate resources more efficiently, and create a competitive advantage. Strategic fit is an important concept for firms that are looking to achieve sustainable competitive advantage in their respective markets. The concept of strategic fit is also used in the context of mergers and acquisitions, where it is used to assess the compatibility between two companies’ strategies.

Example of strategic fit

An example of strategic fit is when a company, Amazon, seeks to expand its operations in the retail market. Amazon has identified a competitive advantage in its ability to offer customers a wide range of products at competitive prices, and it has built its business model around this advantage. In order to capitalize on this advantage, Amazon invests in technology to improve its customer service, logistics, and delivery. Additionally, Amazon also invests in marketing, advertising, and research to stay ahead of the competition. This strategy of investing in technology, customer service, logistics, and marketing is an example of strategic fit because it aligns with Amazon’s overall strategy of offering customers a wide range of products at competitive prices. By investing in the areas that support its core advantage, Amazon can continue to build a competitive edge in the retail market.

Examples of strategic fit in different areas of the company

The concept of strategic fit can be applied to different areas of company management.

  • In the area of human resources, a company can use strategic fit to align its recruitment and selection processes with its business strategy. By understanding the company’s goals and objectives, the HR department can ensure that it is recruiting and selecting the right people with the right skills and abilities to support the company’s strategies.
  • In the area of finance, strategic fit can be used to ensure that the company’s financial strategies support its business objectives. For example, a company may invest in new technology or equipment that is necessary to meet its growth objectives.
  • In the area of operations, strategic fit can be used to ensure that the company’s operations are aligned with its overall strategy. This involves understanding the customer’s needs and developing processes and procedures that enable the company to meet those needs.
  • In the area of marketing, strategic fit can be used to ensure that the company’s marketing efforts are in line with its overall business goals. This includes understanding customer needs, developing effective promotional strategies, and measuring the company’s performance.

Importance of strategic fit

  • Achieving competitive advantage: Strategic fit is important because it can help a company achieve a competitive advantage. By aligning its resources and capabilities with its strategies, objectives, and the external environment, a company can gain a sustainable edge in the market.
  • Improving decision-making: Strategic fit can also help improve decision-making in a company. By understanding the company’s goals and objectives, the decision-makers can make better decisions about how to allocate resources and develop strategies.
  • Improving operational efficiency: Strategic fit can also help improve operational efficiency by ensuring that the company’s processes and procedures are aligned with its overall strategy. This can help the company minimize waste and maximize efficiency.
  • Creating a unified culture: Finally, strategic fit can help create a unified culture in a company. By ensuring that all employees understand the company’s goals and objectives, they can work together to achieve them. This can lead to improved morale and greater productivity.

Strategic fit in detail

Strategic fit relates to the situation in which various resources of organization (human, financial, material, technology, knowledge) are aligned with strategic goals and development objectives set by managers in the organization during strategic management process. Strategic fit can be divided into various sub-fits e.g. financial strategic fit, market strategic fit, technology strategic fit. By achieving high degree of strategic fit, managers can exploit opportunities of the organization and reduce negative impact of threats. Strategic analysis and strategic planning helps to identify optimal degree of strategic fit needed to achieve long-term competitive advantage.

There are always two kinds of people. Those who know that there are two types and those who do not know them. If there were only two types of theorists, the universalists would believe that the organization has universal principles and theorists believe that the organization is specific to the environment of the task it faces. Universalists often believe in one of the best ways. Theorists believe that the best way is always specific to the nature of the task and working environment (Thompson 1967).

Differences in organisation and in the pursuit of different strategies are interconnected. The economy and society have specific organisational forms and practices and human resources because economic niches and strategies are different (Sorge, 1991).

Steps to achieve strategic fit

In order to achieve strategic fit, several steps need to be taken. These steps are:

  1. Analyze the external environment: It is important to first understand the external environment in which the company operates. This includes analyzing the industry, the competition, and the customer.
  2. Identify the company’s core competencies: It is important to identify the company’s core competencies and how they can be used to create a competitive advantage.
  3. Develop a strategy: Once the core competencies are identified, a strategy should be developed that aligns with the company’s goals and objectives.
  4. Align resources: Once the strategy is developed, the company must ensure that its resources, both human and financial, are aligned with the strategy.
  5. Monitor performance: Finally, the company must monitor its performance to ensure that it is achieving the desired results.

By taking these steps, a company can ensure that its strategies, objectives, and capabilities are all in alignment and support one another. This will help the company achieve sustainable competitive advantage in its respective markets.

Dynamic perspective on strategic fit

In the Zajac, Kraatz, Bresser study from 2000, we see the development and testing of a dynamic perspective of strategic alignment. A distinctive approach is proposed to check environmental and organisational conditions, which should anticipate possible changes in the company's strategy and show the implications of such changes. The results confirm the model of a dynamic, strategic fit. It turns out that the time, direction and magnitude of changes can be predicted logically based on differences in environmental forces and organisational resources. Organisations, on the other hand, experienced negative consequences in the results.

The identification of factors influencing high productivity is one of the main objectives of the operational strategy research. Since recently, it has also had an impact on the sustainability of competitive results. We can distinguish two basic types of operational strategy research. OS researchers are the first to conduct in-depth case studies of companies operating in specific business environments (Voss, Tsikriktsis and Frohlich, 2002). This gives us insight into individual business situations, but there is a certain limitation in the form of the impossibility of distinguishing between aspects of the phenomenon. Secondly, researchers conduct research on large samples using surveys to obtain more general results (Forza, 2002).

Limitations of strategic fit

  • Limited resources: One of the main limitations of strategic fit is the limited resources that a company may have available. In order to achieve strategic fit, the company must invest in the areas that will help it achieve its overall goals and objectives. This may require the company to invest in technology, human resources, marketing, and other areas. If the company does not have the resources to invest in these areas, it will be difficult for the company to achieve strategic fit.
  • Lack of flexibility: Another limitation of strategic fit is the lack of flexibility that it can offer. Once the company has identified its core competencies and developed a strategy, it may be difficult for the company to adjust its strategy if the external environment changes. This lack of flexibility can be a major limitation and can prevent the company from adapting to changing conditions.
  • Inability to anticipate change: Finally, strategic fit may be limited by the inability of a company to anticipate changes in the external environment. For example, a company may develop a strategy that works well in the current market conditions, but may not be effective if the market conditions change. This inability to anticipate change can be a major limitation in achieving strategic fit.


Strategic fit — recommended articles
Strategic management principles — Importance of strategic management — Importance of swot analysis — Growth potential — Context of the organization — Organizational strategy — Benefits of strategic management — Strategic decision — Organization life cycle

References

Author: Karina Obiegła

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