The evolution of strategic fit – ‘Today’s everything organization’
‘Traditional organizations were highly rigid; this was demonstrated by their products and the specificity of markets which they served. Arguably, there was more certainty and predictability then. These were the good old days. Nowadays, increased market volatility has resulted in radically different approaches to choose the strategy to be adopted.’
Author: Victor Kimang’a – LLM Candidate at IE Law School’s Master in Global Taxation
This article highlights the transition of business strategies adopted by businesses, particularly outlining the shift from conventional strategies that focused on particular market segments to today’s organizations that practice diversity and complex interrelations in their products and target customers.
The development of business strategies was remarkable, particularly in the early days of the industrial revolution. This was also prominent after World War II, leading to an economic boom in the United States, Europe and parts of Asia.
Pioneering business strategists had a clear perspective of what was the formula for success when conducting a business. Primarily, the focus was on linking resources and competences to meet goals and objectives (Resource-based Strategy), which is still relevant today. Additionally, there was a keen focus on particular market segments and customers. These were highly rigid, traditional organizations focused on their products and the specificity of markets they served. These were the good old days, where businesses developed in a certain and predictable context. Today things have changed, and increased market volatility has resulted in radically different approaches to choose the strategy to be adopted.
Nowadays, the business environment is increasingly fluid. Businesses are prepared to rapidly change tact and to implement different strategies at the same time. This has been propelled by the rapid emergence of the need to supply more goods to stimulate economic growth. This is a stark contrast from traditional organizations which in most cases focused on particular market segments. Today’s organizations have revolutionized the strategic approach by specializing in serving multiple market segments with a wide array of products.
How did we get here?
A number of relevant factors including technology and increased digitalization, which have reduced the cost of interactions, increased customer awareness, and reduced transaction costs, led us here. Technological changes have required businesses to be more versatile, particularly in relation to ease of access to products. Further, customers have more information than ever at their disposal and can easily distinguish one product from another. Consequently, they are able to shift consumption preferences quickly. In this context, and in an effort to succeed, businesses have responded by expanding their product portfolio and strategies to fulfill the wide needs of the market.
Today’s organizations have revolutionized strategy by specializing in serving multiple market segments with a wide array of products.
What does the future hold?
This diversity can propel a business to unthinkable success or sink it to extinction in a gray spot of lack of definition and clarity of goals. Consequently, it is important to conduct a comprehensive market analysis before embarking on the journey towards product and market diversity. A clear risk is the heavy capital outlay that may be required to bring new products to the market. That said, the benefits of diversity are immense; growing customer base, wider market presence, increased customer loyalty and most importantly enhanced profitability.
Ultimately, it is important to acknowledge that the wind of diversity is now blowing strong. Diversity in products and strategies is a key pillar of sustainable growth and profitability in the current business environment. However, this does not diminish the gains achieved by focusing on specific market segments.
The vision of an organization that ‘serves everything’ within a closed ecosystem of products is increasingly becoming a reality. This is enabled due to the creation of organized launching platforms that have seemingly endless possibilities. Ultimately, businesses have to choose either to adapt or run the risk of reduced growth due to having a restrictive or narrow range of products.
About the Author
Victor Kimang’a is currently an LLM Candidate at IE Law School (Master in Global Taxation) in Madrid. He has prior experience having worked at PricewaterhouseCoopers Kenya Indirect Taxes Department.