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Whittington’s Classical and Evolutionary Approaches Towards Business Analysis

Theoretic Basis

Even though the strategic approaches towards business development presuppose the definite and clear realization of further development processes. This notion is confirmed in numerous research resources, however, the actual situation is far from forecasting in detail the events that may come. A professional business leader needs to know the tendencies and be able to predict the possible outcomes of any decision taken. Nevertheless, the mechanism of this forecast, as well as decision making is framed by the key business theories. The key theories that should be analyzed are Whittington’s classical and evolutionary approaches towards business analysis, as well as resource-based view of decision-making.

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Whittington’s Theory

First, it needs to be emphasized that the classic, as well as evolutionary approach requires having a particular strategy as well as business scenario for assessment. In general, the evolutionary approach presupposes analyzing business tendencies and processes for defining further events as well as consequences of the decision. In detail it is explained by Friedman (2002, p. 399):

Evolutionary approaches do not rely on top management’s skills to plan and act rationally. Instead of depending on managers, they believe that markets will determine profit maximization and not the managers. Whatever methods the managers will adopt, the best performance will be the ones that survive. Rational methods are not the basis for this approach because it is ‘evolution that is nature’s cost-benefit analyses.

Nevertheless, there is a necessity to consider the environmental scenario of business and industry development. In accordance with Whittington’s presumption associated with the aspects of business development and decision-making, the general aspects of building business scenarios are featured with the extensive uncertainty level associated with the rapid changes of the business environment. The environmental influence of the evolutionary approach would inevitably affect organizational strategies that may be dangerous for business development in general and scenario building for entering an industry, or forecasting industry development. On the other hand, scenarios that are based on the reliable environmental analysis may be quite important for forecasting further events in the sphere of industry development. The possible variants of environmental analysis are PESTEL and SWOT. Hence, analyzing the industrial environment, providing a clear forecast will help define the industry structure (Ranft and Marsh, 2008). Hence, various scenarios will have various consequences for various competitors. As it is stated by Donaldson and O’Toole (2004, p. 287):

Competitors will respond to structural change in ways that reflect their goals, assumptions, strategies, and capabilities. Scenarios aim to reduce the chances that actions taken to deal with one element of uncertainty in an industry will unintentionally worsen a firm’s position vis-a-vis other uncertainties. An industry scenario is not a forecast but one possible future structure.

In the light of this statement, it should be emphasized that the actual importance of classical, as well as evolutionary approaches towards the scenario planning and decision-making is explained by the fact that Whittington’s followers prefer all-round approaches towards planning, as environmental analysis and industry structural planning should be performed first.

Resource-Based View

This approach is a bit more definite in comparison with Whittington’s theory, however, it is not intended for a implementation into a particular environment. This approach is based on the resource allocation strategy of the company, while resource allocation itself is defined by the requirements of the industry. As for the matters of environmental analysis, it should be stated that PESTLE matrix is mainly useless (Fahy, 2000). Nevertheless, SWOT analysis should be performed to analyze the aspects of resource management. This requires the traditional analysis of company’s strategy, as well as history of resource consumption tendencies. In accordance with the research by Barney (1991, p. 111), the following statement should be emphasized:

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A resource must enable a firm to employ a value-creating strategy, by either outperforming its competitors or reducing its own weaknesses. Relevant in this perspective is that the transaction costs associated with the investment in the resource cannot be higher than the discounted future rents that flow out of the value-creating strategy.

The essence of resource-based view is explained by the critical approach towards assessing the existing potentials of the company, hence, any manager has an opportunity to provide the actual analysis of the company’s opportunities and limitations, as resources available will inevitably point out the values of the required decision. This means that resource-based view approach is based on the opportunity to structure the resources available, and create a definite plan, describing the outcomes and results of any decision taken.

In fact, these actions will ensure that strategy managers know the future with certainty, as the proper forecast measures require the detailed environmental and resource analysis available for a company, for a business or an industry. Strategic approaches, in general, may be outlined from several perspectives. The most important value of the evolutionary strategic approach, linked with the RBV approach is the opportunity to provide all-around industry analysis for performing the reliable and effective decision-making process. The evolutionary approach in general emphasizes the constantly changing nature of any business environment, hence, it presupposes the corresponding actions from a business entrant.

Reference List

Barney, J.B 1991, “Firm resources and sustained competitive advantage”, Journal of Management, Vol. 17, pp. 99-120.

Donaldson, B., & O’Toole, T. 2004. Strategic Market Relationships: From Strategy to Implementation. New York: John Wiley & Sons.

Fahy, J. 2000, “The resource-based view of the firm: Some stumbling-blocks on the road to understanding sustainable competitive advantage” Journal of European Industrial Training”, Vol. 24, No. 2, pp. 94

Friedman, L. G. 2002. Go-To-Market Strategy: Advanced Techniques and Tools for Selling More Products, to More Customers, More Profitably. Boston: Butterworth-Heinemann.

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Ranft, A. L., & Marsh, S. J. 2008. Accessing Knowledge through Acquisitions and Alliances: An Empirical Examination of New Market Entry. Journal of Managerial Issues, 20(1), 51.

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