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Example research essay topic: Strategy For The External Environment - 1,655 words

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Strategy for the External Environment The article by Reginald Beal, Competing effectively: Environmental scanning, competitive strategy, and organizational performance in small manufacturing firms, which is discussed, represents a piece of a great study, in which an integrative model was developed to test contingency theories that link environmental conditions (industry life cycle stages), competitive strategy (a modified version of Porter's generic strategy framework), CEO characteristics (functional experience), scanning (frequency and scope of scanning), and organizational performance. The major theme of the model is that both external and internal alignment influences a firm's performance. The second theme, the focus of this study, is that successful environment-competitive strategy alignment is significantly impacted by the scanning behavior of the CEO (or entrepreneur). (Reginald 104). The contingency theories comprise the collection, analysis, and dissemination of information about events in a company's external environment to decision makers and / or strategists. A major component of the collection phase - environmental scanning, which is the acquisition of "information about events and relationships in a company's outside environment, the knowledge of which would assist top management in its task of charting the company's future course of action." When an organization places a high priority on external information, its decision makers access various sources. (Anderson and Zeithaml 5 - 20). This study starts with Hofers suggestion, that industry life cycle (ILC) was the most fundamental variable in determining an appropriate competitive strategy.

Hofer also advanced several propositions on the effects of ILC on strategy performance relationships. It was later empirically demonstrated the importance of the ILC as a key environmental contingency. Despite the importance of industry life cycle to the choice of competitive strategies, little empirical research has centered on this critical contingency. The few studies that have focused on ILC have not examined the strategy-performance linkages across all stages of the ILC (Anderson and Zeithaml 20 - 24). In a comprehensive study of the scanning systems of 179 small (50 employees) to large (more than 200, 000 employees) manufacturing and service firms, among the relationships that Yasai-Ardekani and Nystrom (1993) examined was that between firms pursuing low cost leadership and the scope and frequency with which they scanned their environments. Results indicated that firms with effective scanning systems pursuing low cost leadership scanned their environments more frequently and more broadly than those firms with ineffective scanning systems pursuing the same competitive strategy.

Furthermore, the findings suggest that firms employing effective scanning systems achieve alignment between strategy and environment. (Miller & Dess 553 - 584). In this study, environmental scanning was viewed as moderating the relationship between competitive strategy and the environment (stage of the industry life cycle). More specifically, frequent and broad scanning should be positively related to an alignment between an industry life cycle stage and a competitive strategy. While a positive, significant relationship does not connote a causal relationship between scanning behavior and environment-strategy alignment, it does indicate a strong association between them. Two hypotheses were offered in support of this thesis. However, only mixed support was found for the hypothesis involving scope of scanning, and no support was found for the hypothesis involving frequency of scanning.

The scope and frequency of environmental scanning will affect the firm's ability to align its competitive strategy with its environment (Yasai-Ardekani and Nystrom 1993). Frequent scanning of environmental sectors provides the firm with current information and allows it to verify the accuracy of the information and to adapt to changing environmental conditions more rapidly than does infrequent scanning. Frequent scanning also positions the firm to stay abreast of environmental events and trends that threaten its existence or offer opportunities to exploit. Small firms are particularly vulnerable to rapidly developing major threats because they often lack the financial resources to withstand them. Thus, our first hypothesis was: frequent scanning of the environment will be positively related to environment / competitive strategy alignment. But this hypothesis was not supported.

Frequent scanning of the environment will not be positively related to environment-competitive strategy alignment, as none of the 35 t-statistics were both positive and significant. Since all the results suggest rejection of the hypothesis, the results are not shown. In this study, the impact of scanning frequency and scanning scope on the five environment / competitive strategy alignments of the supported hypotheses was examined. To test the hypotheses, the sample of 101 small manufacturing firms was divided into two groups -- scanners and non-scanners. These two groups can also be studied along two dimensions -- frequency of scanning and scope of scanning.

Thus, those small manufacturing firms whose CEOs frequently seek information regarding situations or events in an environmental sector (competitors, for example) are classified as scanners, whereas the non-scanners are those firms whose CEOs scan an environmental sector infrequently. For the second dimension, those firms whose CEOs seek and use information regarding numerous events or situations in an environmental sector (customers, for example) are scanners, whereas non-scanners seek little or no information. The mean value of the applicable scanning index was the statistic used to divide the sample into scanners and non-scanners. Firms scoring above the mean were classified as scanners, those below the mean as non-scanners. (Reginald 116). The statistical methods used in testing the hypotheses were analysis of variance (ANOVA) and t-tests. ANOVA was used to partition the sample into scanners and non-scanners on each scanning index across the growth and maturity stages of the industry life cycle. (Growth and maturity were the two stages at which competitive strategies were found to align with environmental requirements, that is, alignments were found between these stages and competitive strategies. ) In the ANOVA models, then, industry life cycle stages and scanning (scanners and non-scanners) were the independent variables, and competitive strategy was the dependent variable.

Scanning was viewed as mediating the relationship between stage in the industry life cycle and competitive strategy. The implication is that scanning must be present for environment (industry life cycle stage) to affect competitive strategy. (Reginald 117). T-tests were used to determine the significance of the difference in the means of scanners and non-scanners using each of the six scanning indices for each applicable life cycle stage / competitive strategy alignment. A hypothesis is supported if the difference was positive (that is, if the mean for scanners was greater than the mean for non-scanners) and statistically significant.

Testing the hypotheses involved examining the effect of five frequency-of-scanning indices and five scope-of-scanning indices on seven external alignments, resulting in 70 ANOVA models and 70 t-tests. The following example illustrates the procedure for testing the hypotheses. (Reginald 118 - 19). The external alignment hypothesis that firms in the growth stage that strongly emphasize innovation differentiation realize increasing levels of performance was supported. Taking this external alignment into consideration, one test of the hypothesis is to use ANOVA to partition the sample into scanners and non-scanners based on the growth stage and scanning frequency index of company information (company's resources / capabilities ).

Then, using the mean scores for scanners and non-scanners obtained from the ANOVA model, a t-test is conducted to determine whether the difference in the means is statistically significant. A statistically significant difference suggests that frequent monitoring of the company's resources and capabilities by the CEO will contribute to the attainment of the alignment between the firm's pursuit of innovation differentiation and the stage of the industry life cycle (growth) in which it competes. Thus, the hypothesis is supported. On the other hand, if there is no difference in means or the difference is not statistically significant, then the hypothesis is not supported. (Reginald 120). The absence of any significant, positive relationships between the various frequency of scanning indices and external alignments was totally unexpected. There are at least three plausible explanations for these results.

First, the set of questions used to measure scanning frequency may lack content validity. While determining content validity is judgmental, we believe that the set of questions designed to capture CEOs' frequency of scanning constitute adequate coverage of the various environmental sectors scanned -- competitors, customers, suppliers, manufacturing and product development technology, economies (local, state, and national) -- and the frequency (daily, weekly, monthly, quarterly, and annually) with which the sectors are scanned. (Hambrick, MacMillan, and Day 510 - 531). Second, CEOs of small manufacturing firms, constrained by their involvement in their firms' daily operations, may not have time for frequent scanning of their external environments. Consequently, environmental scanning may be relatively infrequent. This finding provides the most plausible explanation for the non-significant relationships found between frequency of scanning and external alignment. Third, the frequency at which CEOs of small manufacturing companies scan their environments may not be critical to aligning their firms' competitive strategies with the stage of the industry life cycle in which the firms compete.

This study contributes to the literature by deepening the understanding of the linkages between environmental scanning, environmental conditions, competitive strategy, and firm performance. (Jennings & Lumpkin 791 - 803). Words: 1, 439. Works Cited: Anderson, C. R. , and C. P Zeithaml (1984). "Stage of the Product Life Cycle, Business Strategy, and Business Performance, " Academy of Management Journal 27, 5 - 24.

Hambrick, D. C. , I. C. MacMillan, and D. L. Day (1982). "Strategic Attributes and Performance in the BCG Matrix -- A PIMS-Based Analysis of Industrial Product Businesses, " Academy of Management Journal 25, 510 - 531.

Jennings, D. F. , and J. R. Lumpkin (1992). "Insights between Environmental Scanning Activities and Porter's Generic Strategies: An Empirical Analysis, " Journal of Management 18, 791 - 803. Miller, A. , and G. G.

Dess (1993). "Assessing Porter's (1980) Models in Terms of Its Generalizability, Accuracy, and Simplicity, " Journal of Management Studies 30, 553 - 584. Reginald, M. B. (2000). Competing effectively: Environmental scanning, competitive strategy, and organizational performance in small manufacturing firms.

Journal of Small Business Management; Milwaukee; Jan, 104 - 120. Yasai-Ardekani and Nystrom (1993). Competitive strategy study. Journal of Small Business Management; Milwaukee.


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