The Fit-Concept in Strategic Management – an Inappropriate Idea for Companies in the 21st Century?

Topics: Strategy, Strategic management, 21st century Pages: 21 (7291 words) Published: December 8, 2006
Executive Summary
The aim of this paper is confronted with the question of how the fit concept in strategic management is an appropriate idea or not for companies in the 21st century. After a short introduction about strategy which is defined by Michael E. Porter (1980), we will describe some basic concepts. Cited by Porter (1985, 1996) and Thomson/Strickland (1998), we find out that operational effectiveness is a helpful tool, but not enough for gaining competitive advantage. Strategies must be developed and it must match the organization in order to become effective. This is a task which is often fulfilled by the management. Then we will go deeper into the concept of fit. Some additional discussions of different perspectives follow and a briefly overview about the research of the six types of fit can be found. After clarifying the meaning of fit, we come to the McKinsey 7-S framework, because this is an important management tool which is still up-to-date and relevant to our assignment. Inspired by the authors we analyze the Japanese' Keiretsu Concept. We find out that they are effective and successful on the one hand, but on the other hand, symptom appears where the changing environment also influences their business because of globalization. Therefore the concept of fit is important for them too. After this section we compare the business situation between the 20th and the 21st century in the sense of fit. Information and capital movements as well as a spread portfolio for investors are addressed in the last chapter. At the end this paper closed with the result that the fit concept is necessary in the 21st century, because the competition on operational effectiveness alone can only lead to a situation, where the only differentiating factor is prize and this leads to diminishing profits. Michael E. Porter's view of the fit concept seems to be a good option for gaining the competitive advantage until nowadays. 1Introduction

The world economy is moving swiftly from the industrial age to the knowledge/information/systems age. The traditional hierarchical structures built around functional specialization have to undergo radical surgery to accommodate greater emphasis on building competitively valuable cross functional capabilities; the best companies have to be able to act and react quickly and to create, package, and rapidly move information to the point of need- in short, companies have to reinvent their organizational arrangements. This challenge imposed on companies and the required changes, which come with this problem, have to be dealt with to retain or gain sustainable competitive advantage. If we agree with Porter's definition that a strategy is performing different activities from rivals or performing similar activities in different ways, then we can safely assume that strategy is as important for companies in the 21st century as it was for companies in the late 20th century. This would mean that with the change of the industry from standardized to individual products and service the industry structures have to change, which would imply that flexibility is needed. It leads to the question, if the Fit Concept in strategic management as proposed by Porter 1996 is a suitable concept for the 21st century or if the strategic fit will hinder flexibility. We will attempt to answer the question in this paper. The paper will start going into details of the basics of the fit concept, which we will extract from the Literature. In this context we will discuss types of fit and introduce an alternative prospective for the FIT concept. Next the 7s's model is discussed together with the new 7s's model in an attempt to find indications if the fit concept is still applicable for the 21st century. A description of the expected 21st century market requirements versus the 20th century market requirements follows. After the historical excursion we will then take the reader into an excursion of flexibility and show the advantages of...

References: Miller and Friesen (1984) Hambrick (1984) Van de Ven & Drazin (1985) Venkatraman & Prescott (in press) Venkatraman (1986) Venkatraman & Walker (1989)
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