Strategic Fit

Topics: Management, Strategic management, Brand Pages: 7 (1561 words) Published: January 18, 2011

This paper analyzes the term ‘strategic fit’ exactly means, types of strategic fit, necessities to focus on strategic fit, and most importantly how well an organization can align its resources & capabilities with the opportunities that exist in the external environment so as to achieve peak performance in the business. Strategy of Nestlé as an example to discuss how far it is true that effective strategic fit ensures organization’s resources & capabilities and what the environment exactly needs from it. Key Words

Strategic, Fit, Strategy, Resource, Capabilities, Opportunities, Environment, Business

It should be recognized that any strategy or management style is appropriate only in a particular set of circumstances. Strategic fit enables an organization to operate in its particular competitive situation at peak effectiveness. It expresses the degree to which an organization is matching its resources and capabilities with the opportunities in the external environment. 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. Meaning of Strategic Fit

The contingency theorist’s argument that performance outcomes are maximized when a firm achieves an alignment or “fit” between a firm’s external environment, its internal factors and its strategy has been well established in the literature (Burns & Stalker 1967; Lawrence & Lorsch 1967; Keats & Hitt, 1988). Nadler and Tushman (1979) theorized that the greater the total degree of congruence or fit between the various components, the more effective will be the organization, leading to higher levels of goal attainment, utilization of resources, and adaptation. Need for Strategic Fit

Strategic fit is a quest to align the organization’s operation with the needs of the market. It also involves identification of the opportunities and the action to capitalize on the opportunities. Strategic fit can be used actively to evaluate the current strategic situation of a company as well as opportunities such as M&A and divestitures of organizational divisions. Strategic fit is related to the Resource-based view of the firm which suggests that the key to profitability is not only through positioning and industry selection but rather through an internal focus which seeks to utilize the unique characteristics of the company’s portfolio of resources and capabilities. Resources s Capabilities

A unique combination of resources and capabilities can eventually be developed into a competitive advantage which the company can profit from. However, it is important to differentiate between resources and capabilities. Resources relate to the inputs to production owned by the company, whereas capabilities describe the accumulation of learning the company possesses. Types of Resources

Resources can be classified as tangible resources and intangible resources. Tangible Resources
The term tangible means capable of being touched, real or actual, rather than imaginary or visionary, definite; not vague or elusive, having actual physical existence, as real estate or chattels, and therefore capable of being assigned a value in monetary terms. • Financial (Cash, securities)

• Physical (Location, plant, machinery) are some of the tangible resources Intangible Resources
Resources that are not physical in nature are said to be Intangible resources. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible resources in business point of view. An intangible resource can be classified as either indefinite or definite depending on the specifics of that resource. A company brand name is considered to be an indefinite resource, as it stays with the company as long as the company continues operations. However, if...
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