CHAPTER 1 organizational events occur that necessities modification in

the intended strategy.

EVOLUTION OF BUSINESS POLICY AND STRATEGY
Thompson and Strickland (1999)
Background
Characterized strategy at the operational level
For any organization to operate and effectively
referring to it as a set of competitive moves and business
focus its efforts on certain tasks and avoid going astray or
approaches that management is employing to run the
deviate away from targets, a sense of direction needs to be
company.
set, and some sort of rules or guidelines have to established
and observed. Strategy is management’s is “game plan”

More often, these rules are guides are in the minds I. Attract and please the customers
of founders, leaders and managers though some are put in II. Stake out a market position
writing. III. Conduct operations
IV. Compete successfully
The set of rules that guides the decisions and
action of the members of the organization is generally CHARACTERISTICS OF STRATEGY
called business policies. These policies may be informal or
1. Strategy is traditionally meant to be a grand plan
in writing coming in the form of operational manual,
made in the light of what it was believed an
personnel handbook, and memoranda composed or issued
adversary might or might not do.
from time to time and as the need arises.
2. Strategy derives its relevance given from the
CONCEPT OF BUSINESS POLICY existence completion in business.
3. It is done on the presumption of the existence of a
The basic theory of the term management which
negative scenario.
evolves around the idea of planning, organizing, staffing,
4. It also connotes general program of action and
coordinating, controlling and evaluating holds true.
deployment of emphasis and resources attain
Within the context of a plan or the process of comprehensive objectives.
planning are a variety of plans taking the form of budget, 5. A process of deciding on objectives of the
policy, strategy, rules, guides, organization, on changes in these objectives, on
the resources used to attain these objectives use
procedures, etc. and disposition of these resources.
BUSINESS POLICY - Generally refers to set of rules the 6. It involves of the basic long-term goals and
guides the conduct of the business in pursuit of profit and objectives of an enterprise, and adoption of
other objectives of the business organization. courses of action and allocation of resources
necessary to carry out those goals.
These policies are developed in coherence with 7. A decision about how to use available resources to
duties and responsibility of various functional units. (e.g. secure a major objective in the face of obstruction
human resource, sale/marketing, production, and the like). 8. Unlike policy, strategy implies actions and guides
decision – making, spelling out directions to be
Business policy is also looked upon as general
taken.
management orientation traditionally viewed as largely
9. Strategy may, in some extreme or necessary cases,
inward – looking as well as more biased with guiding how
exits without a policy.
personnel in the organization would act or what or follow for
as long as one is a part or employee of the organization. STRATEGY vs. POLICY
CONCEPT OF STRATEGY In the course of running the business in a real
setting, business policies and strategies often collide
Wright, Kroll and Parnell (1996) defined strategy as
thereby inviting dilemma and creating confusion. When
essentially referring to top management’s plan to attain the
conflict exists between or amongst policies and strategies,
outcomes consistent with the organization’s mission and
organizational problems or dilemmas begin.
goals.
The following are situation where the strategy and policy
STRATEGY IN THREE VANTAGE POINTS
oftentimes come in collision course making it difficult to
A. Strategy formulation or developing the strategy. operationalize a strategy within the bonds of standing
B. Strategy implementation (putting the strategy into policy.
action)
Business policies exist amidst absence of
C. Strategic control (modifying either the strategy or
business strategy and strategies may exist without
its implementation to ensure that the desired
establishment business policies.
outcomes are attained)
Business policies are generally directional in
These same authors categorized strategy into either
nature and strategy is more operational in context.
intended or realized strategy. Intended strategy refers to the
original strategy that management plans and intends to Business policies are often formal or written and
implement, whereas realized strategy refers to the actual strategies may be informal and not necessarily written and
and eventual strategy that management actually often confidential.
implements. Realized strategy often differs from the
intended strategy because unforeseen environmental or
ORIGIN and NATURE OF STRATEGY Nature of strategic management

The historical development of the concept of ► Stahl and Grigsby (1992) defined strategic management
strategic management was elaborated by Jeffrey Bracker of as referring to the entire process of strategic decision –
Georgia state University who cited the term of strategy was making that relates to its environment, guides internal
mentioned in the Old Testament and largely treated as activities, and determines the long-term performance of
semantic issue. Bracker cited the numerous authors have the organization.
focused their attention on the concept of strategy but have
► Wheelen and Hunger (2004) described the strategic
failed to comprehensively investigate the historical
management as a set of managerial decisions and actions
evolution.
that determine the long-run performance of a corporation.
Bracker cited It includes environmental scanning (both external and
internal), strategy formulation (strategic and long run
► Strategy originated from the Greek word “stratego”
planning) strategy implementation, evaluation and control.
referring to a “general” which in turn traces its roots from the
words “army” and “lead”. As it is, the term strategy has its ► Williamson, Jenkins, et al. (2004) as a framework that
roots and gained its popularity in the field of military evolves around the idea of shaping and destiny of an
science. The word stratego means “to plan the destruction organization.
of one’s enemies through effective use of resources”.
It is about:
EVOLUTION OF STRATEGIC MANAGEMENT
a) Putting an organization into a competitive position.
The concept of strategy as related to business b) Sustaining and improving that position by
become greater after World War II, as business moved from developing an acquisition of appropriate resources
relatively stable environment into more rapidly changing and by monitoring and responding to
and competitive environment. environmental changes
c) Monitoring and responding to the demands of key
The changes in context of strategy were attributed
stakeholders.
to two significant factors.
Organizational strategies must be able to answer the ff.
I. The mark acceleration of the rate of change within
questions
the firms
II. The accelerated application of science and • Where is the organization going?
technology to the process of management. • What options are open to the organization?
• What is the best way forward for the organization?
It was reported that the first modern writers to relate
• How can this be done?
the concept of strategy to the business were Von Neuman
and Morgenstern (1947) with their theory of games. ► Wright, Kroll and Parnell (1996) strategic management in
a broader term that encompasses managing not only the
By historical account of some authors in management
stages or vantage points they have identified but also the
science. Strategic management is essentially perceived as
earlier stages determining the mission and goals of an
business policy going out of the shell realizing that
organization within the context of external and internal
operationalization of business organizational is not only a
environment.
concern of how the organizational should operate, and
hence the need of internal policies, but also how the SM involves a series of steps in which management should
business organization itself should conduct its business in accomplish the ff. task
light of prevailing external and environmental realities.
• Analyze the opportunities and threats of
In recent years, and given the above premise, business constraints that exist in the external environment.
policy has metamorphosed from being inward-looking into • Analyze the organization’s strengths and
outward–looking evolving into what is now known as weaknesses in its internal environment.
strategic management. As a tool for managing the business • Establish the organization’s mission and develop
organizations, business policy has expanded its role to goals.
include external factors as influencing factors in developing
• Formulate strategies (at the corporate level,
business policies eventually transforming into strategic
business unit level, and functional level) that will
management.
match the organization’s strength and weakness
THE NATURE OF STRATEGIC MANAGEMENT with the environment’s opportunities and threats.
• Implement strategies
More importantly, integrating the concept of • Engage in strategic control activities to ensure that
strategy into the mainstream of the management system is the organization’s goals are attained.
what matters most in terms of giving direction that
promises delivering profit expectations. ► Wright, Kroll and Parnell emphasized that strategic
management is a continuous process. Indeed, it is
Much more than simply applying planning considered a continuous and dynamic process in the sense
principles. Strategic management takes into consideration that being externally oriented and driven by macro and
various external as well as competitiveness and micro environmental conditions, managers have to be
sustainability over the long-term period in industry or sector always conscious that business being an ongoing wealth
it belongs. creation endeavor, appropriate efforts have to be made to
ensure profitable operations and survive in times of trouble.
BENEFITS OF STRATEGIC MANAGEMENT Strategy and tactics are differentiated in many ways as
follows:
There is no doubt that substantial benefits can be
expected from the practice of strategic management. As it ► As to level of conduct, strategy is developed at the
promises and articulates a series of activities or tasks highest levels of management whereas tactics are
meant to ensure achievement or desired outcomes both on employed at related to lower levels of management.
the producers and consumers’ side, embracing the ideals
► As to regularity, formulation of strategy is both
of strategic management and doing it well does not only
continuous and irregular whereas tactics are determined
stand to benefits business owners but the industry and the
on a periodic cycle with fixed time schedule (e.g. budget)
society.
► As to subjective values, strategic decision- making is
The three most highly rated benefits of strategic
more heavily weighted with subjective values of managers
management:
than is tactical decision-making
► Clearer sense of strategic vision for the firm
► As to range of alternative, the total possible range of
► Shaper focus on what is strategically important alternatives form which management must choose is far
greater in strategic than in tactical decision-making.
► Improved understanding of a rapidly changing
environment ► As to uncertainty, uncertainty is usually much greater in
both the formulation and implementation of strategy than
STRATEGIC TYPES
in deciding upon and knowing the results of tactical
Is the category of firms based on common strategic decisions.
orientation and combination of structure, culture, and
► In terms of nature of problems, strategic problems are
process consistent with strategy.
generally unstructured and tent to be one of a kind. Tactical
General Strategic Orientation into four types as follows: problems are more structured and often repetitive in
nature.
Defenders Prospectors
► As to information needs, formulating strategy requires
Analyzers Reactors large amount of information. Tactical information needs a
DEFENDERS contrast rely more heavily on internally generated data (e.g.
accounting system,)
►This type includes companies with a limited product line
that focus on improving the efficiency of their existing ► In terms of horizon, strategies are intended to and do last
operations. This cost orientation makes them unlikely to for long periods of time whereas tactics cover a short
innovate in a new area. duration and are more uniform for all parts of operating
program (e.g. annual budget).
PROSPECTORS
► By reference is primal in the sense that it is the source of
►This type of companies includes firms with fairly broad origin for development of tactics. Tactics are formulated
product lines that focus on product innovation and market within and in pursuit of strategies.
opportunities. The sales orientation makes them somewhat
inefficient. They tend to emphasize creativity over ► As to details, strategies are usually broad and may have
efficiency. fewer details than tactics.

ANALYZERS ► In terms of the type of personnel involved, strategies are

for the most part formulated by top management, and the
►This type includes business organizations that operate in staff, fewer in the number as contrasted with the
at least two different product-market areas, one stable and formulation of the tactics where large number of managers
one variable. In the stable areas, efficiency is emphasized. and employees usually participate in process.
In the variable areas innovation is emphasized.
► As to ease of evaluation, it is usually considerably easier
REACTORS to measure the effectiveness and efficiency of tactics than
strategies.
►This type includes companies that lack a consistent
strategy-structure-culture relationship. Their (often ► From the contest point of view, strategies are formulated
ineffective) responses to environmental pressures tend to from corporate viewpoint, whereas tactics are developed
be piecemeal strategic changes. principally from a functional point of view.

► As to importance, strategies are of the highest

importance to an organization, while tactics are
STRATEGIC vs. TACTICS
considerably less significant.
STRATEGY – as common terminologies often mentioned in
Bases of Policies and Strategies
the world of strategic management
► Having a business policy in place is not a product simply
TACTICS – its role in concretizing the intents and purposes
copied from other business organizations but a set of
of business policy and strategic management is equally
documents that needs to be developed in a well-planned
important. Tactics are more operational and done in context
manner on the basis of certain presumptions or sets of
with or as support activity or operation to achieve a strategy.
biases.
The following are the bases from which policies and jungle. This approach is conscious on keeping cost or
strategies are drawn upon: expenses low with open options.

a. Legal mandate PROCESSUAL

b. Vision and mission statement
► It emphasizes the sticky imperfect nature of all human
c. Specific objectives
life, pragmatically accommodating strategy to the fallible
d. Program and policies
processes of both organizations and markets.
Legal mandate
SYSTEMATIC
A. ► This refers to formulating policies on the basis of
►This approach is relativistic, regarding the ends and
the provisions of the charter or legal basis for
means of strategy and inescapably linked to the cultures
certain or existence of the business organization
and powers of the local social system in which it takes
including the applicable provisions of laws and
place.
policies or pronouncement of the government and
its statutory or regulation bodies. STRATEGIC DECESION

Vision and Mission Statement ► The strategic management, it is not just simply making
decision, but it is important to exercise strategic decision or
►This refers to the leadership bias as well as sense of
something like hard and unusual decision that need to be
direction and mission for which the organization was
done for certain strategic considerations.
conceived or established.
► Unlike the usual or many other decisions business
Specific objectives
managers do on a daily or routine basis, strategic decisions
►These are the corporate objectives purposely developed usually consider a lot of external factors and deal with the
for the organization and for its members or employees at long-run future of the entire organization.
large to pursue.
What it takes for a decision to be considered strategic is
Programs and policies described by Wheelen and Hunger

► These are specific programs and policies set forth by the A. Rare- Strategic decisions are unusual and typically
organization’s policymakers (i.e. Board of directors and Top have no precedent to follow.
management) in pursuit of short- and long-term goals given B. Consequential – strategic decisions should
certain considerations at hand. commit substantial resources and demand a great
deal or commitment from people at all levels
Approaches to identifying Policies and Strategies
C. Directive – strategic decisions set precedents for
A. Policy/ Strategy Profile – This approach involves a lesser decisions and future actions throughout the
systematic examination of present company organization.
policy/strategy – implicit and explicit.
MODALITIES IN STRATEGIC DECISION
B. Gap analysis – The stimulus is an examination of
whether an end that has been established is likely Decision-making function is a daily or routine aspect of a
to achieved. managerial function. Doing strategic decision, however, is
C. Competitive strategy analysis – This involves a not a simple and considered ordinary or routine task
thorough analysis of the competitive forces compared to strategic decision.
operating in a firm’s environment and searching for
Four most typical approaches or modes of strategic
an alternative option.
decision-making and they are as follow:
►Richard Whittington (2001) theorized that strategy comes
A. Entrepreneurial mode – In this mode, strategy is
in four generic approaches that differ fundamentally along
made by one powerful individual and the focus is
two dimensions: the outcomes of the strategy and the
on opportunities; problems are secondary.
process by which it is made.
B. Adaptive mode – sometimes referred to as
Figure 1. Generic Perspective of Strategy “muddling through” this mode is characterized by
relative search for new opportunities.
Four approaches are briefly described as follows:
C. Planning mode – This decision-making mode
A. Classical approach B. Evolutionary involves the systematic gathering of appropriate
information for situations analysis, the generation
C. Processual D. Systematic of feasible alternative strategies and the rational
Classical Approach selection of the most appropriate strategy.
D. Logical mode – It can be viewed as a synthesis of
► The oldest of the four approaches and still the most planning, adaptive and to lesser extent, the
influential, it relies on the rational planning methods entrepreneurial modes.
dominant in the textbooks. As such, this approach follows
a pattern of analyzing, planning and commanding or
directing.

EVOLUTIONARY

►It draws on the fatalistic metaphor of biological evolution

but substitutes the discipline of the market for the law of the
CHAPTER 2 MOTIVATORS AND DRIVERS business hours during weekdays to a round the clock
and round the year as well as real time transactions
The Need for Strategic Management
beyond traditional geographical boundaries.
In the era where there are only a few business
organizations offering the same or similar products in a given
The Triggering Events
market and demands of prospective clients are not that
sophisticated, strategic management or strategizing per se may While developing strategy is a must for believers of
not be that critical or important. In fact, the idea of strategic strategic management theories and principles, having a strategy
management was never heard of or that popular back in the 1960s itself is not a matter of accident or taken out of the blue. It can
or even in the 1970s. happen because of certain factors, drivers, motivators and
circumstances or triggering events so to speak. Triggering events
It is acknowledged that the profit motive and the nature
refer to situations or scenarios that may have caused or resulted
of competition have been dominant factors that motivated and
to the actions or initiatives of the top management of the firm to
driven business organizations to edge out or outcompete each
consider certain strategic options to make the firm competitive or
other. Much more than this, however, there are many other
to achieve certain strategic objectives.
reasons as well as applicable theories and principles of strategic
management. Triggering events may come in two forms namely:

1. Internal triggering events. Classified as such in those

The Dynamic Nature of the Market and the Business situations and scenarios intervening or disturbing the business
organization on account of factors internal or inherent to the firm
The business and the market are not static but dynamic
itself and one that the company can exercise certain level of
in nature. Given the old adage that one thing constant in this world
control.
is change itself, business managers need to live and accept that to
be competitive, one has to live with a constantly changing 2. External triggering events. Those factors external to the firm or
environment and get the best out of it. Business organizations matters where the business organization itself may not like or want
have their own unique or creative ways of responding to this to happen but there is nothing much it can do as compared to
change resulting to a level of competition that motivates and internal triggering events.
drives the business organizations to adopt strategic management
Internal Triggering Events
theories and principles in the hope that their respective
organizations would make them competitive or survive the 1. New CEO/President. New leadership in any business
challenges of business competition. organization generally results to some changes. Such a change
itself may have been a reason for having a new leadership or team
The nature of the market and the business itself, is in part due
of managers. Or, a new leader or set of officers may have been
to the following circumstances and realities:
installed to carry on a new direction desired by the business
A. The ever-changing market conditions. Essentially driven owners and investors or as the situation calls for it.
by supply and demand situations, entrepreneurs and
2. Performance gap. A performance gap exists when
business strategists are obligated to respond to the
performance does not meet expectations. Sales and profit are
changing market scenario resulting to a situation that
either no longer increasing or may even be falling. Since targets
drives and motivates other players in the market to do
and expectations are perceived and presumed to be doable and
the same resulting to a situation that drives and
achievable, the gap between expectations and performance of the
motivates other players in the market to the same
entire business organization could be traceable to the
resulting to a much stiffer competition within and
management’s efforts that need to be further improved but not
outside of its industry.
necessarily effecting a change in leadership.
B. The changing taste of the market. Other than purely
demand and supply market conditions or factors, the 3. Change in ownership. A change in ownership either by way of
taste and preferences of the buyers/consumers change acquisition, sellout, merger or changes in majority of ownership of
over time thereby compelling businesses to make stockholdings among publicly listed firms can trigger or may result
appropriate changes that invite other players in the to a new set of strategy whether changes were made in the top
market to the same, thus, creating and enhancing management team or not. New owners of the business have this
competition and hence, the need to strategize. natural tendency to promote a new culture or strategy with status
C. Sociopolitical changes. It cannot be denied that political quo not an option unless extremely necessary.
changes affect the conduct of the business in other
countries. Quite often, political changes in a given 4. Management team shake up. Although strategy making is
country have domino effect beyond its shores. largely influenced by the President or CEO may not trigger a new
Nowadays, sociopolitical changes in any corner of the President or CEO may not trigger a new set of strategies. An
world are not only a matter for exporters and importers incumbent President or CEO may opt to form a new management
to be bothered with but also for non exporters/importers team comprising of middle and senior-level managers because
who need to respond to variety of impacts down the line. the President/CEO may not be able to do it alone or the situation
D. The impact of global developments vis-à-vis the local simply requires it.
markets. The world of business is getting smaller and
5. Corporate reorganization/restructuring. Corporate
borderless on account of globalized scheme of doing
reorganization or restructuring resulting from internal decision or
business exacerbated by the increasing role of
driven by external factors necessarily requires new schemes or
technology particularly the internet. This scenario has
strategies to achieve new vision-mission statement or desired
placed small or domestic concerns under pressure as
goals triggered by the reorganization/restructuring itself.
large or multinational business concerns have
undermined the competitiveness of the local or 6. New products or services. A change in products or services
domestic business concerns resulting a new kind of offered by the firm may also trigger or result to another kind or at
competition that has to be lived with. least an enhanced strategy given the new kind of products or
services offered by the company particularly so if they comprise a
E. The changes in the conduct of business. The increasing number or variation having substantial impact upon the stature of
role of the technology resulting to the popularization of the firm.
e-commerce/e-business has changed the conduct of
the business from the usual morning and afternoon Triggering events considered external
1. The overall economic environment The Product Life Cycle

2. Government (its leadership, politics, and regulatory functions) Every product or service in any industry or sector has its
own life. The same product or service life cycle translate to what is
3. The sociopolitical environment
also known as the market or industry life cycle. These are:
4. The legal environment
1. Introduction 2. Growth
5. The technological environment
3. Maturity 4. Decline
6. The global/regional environment
The product life cycle sometimes referred to as the S-curve is a
7. Market factors (demand and supply situation)

8. The religious environment

9. Occurrence of calamities and other natural phenomena

Theory of the Firm

The concept of the Theory of the Firm suggests that under ideal
conditions, there are four categories of market conditions that can
either favorable or unfavorable to the business. The market
condition is either a monopoly, oligopoly, monopolistic
competition or perfect competition. Under a monopolistic living proof that just like humans, there is beginning and end for
competition, strategizing is not much of a problem because being everything and the same is true for every product or service in this
there is only one or a few producers/suppliers of a product in the world. Realizing that there is an end for everything on earth,
market. business managers and strategists have to prepare for it. There is
a time to be born, grow, mature and eventually become extinct in
In other words, there are certain types of market structures are the market place.
also referred as the types of market structures described as
follows:

1. Monopoly. It is a market structure characterized the existence

of a single seller of a product which dominates the market. A true Experience Curve
monopoly offers no clear substitute for the product, a buyer must The theory of experience curve suggests that as the
purchase the good from the monopolist or forego the product business organizations stay much longer in the business or the
altogether. industry, the business organization accumulates a body of
2. Oligopoly. This type of market has more than one producer or knowledge and experience that enables the firm to do its business
seller of a product, which may be either homogenous or better. In specific term, as plants produce more products, they
differentiated. A market dominated by few firms that hold similar gain experience in the best production methods and in the
share in the market is considered oligopoly. process reduce their costs per unit. Down the line, this experience
translate to an opportunity to price the product or service in lower
3. Monopolistic competition. It exists when many sellers offer terms which under traditional perception should mean
similar products that are not perfect substitutes for one another. competitiveness, price being a very important aspect of business
Barriers to entry are fewer than in an oligopoly. Each firm attempts competitiveness.
to differentiate its product to the consumers through various
methods, including advertising, promotion, location, service and The theory of the experience curve is also referred to as
quality. the learning curve. The curve is based on the constant decline in
the deflated marginal cost of production with increasing
4. Perfect competition. It is a market structure characterized by cumulative volume of production.
many producers or sellers and a homogenous product. The
market has almost similar product or service and no single firm Economies of Scale
dominates the market. A popular theory in economics, the theory of economies
Technology Developments and Innovations or diseconomies pf scale appears similar to the experience curve.
Economies of scale postulates that there is decline in the per unit
As cited by Bitter and Pierson (2002), technology is an cost of production (or activity) as the volume of production (or
agent of change spurring the traditional definition time and space. services rendered) is increased.
With emerging technologies rapidly becoming a common place,
the need to keep pace is a constant challenge and opportunity for Other than producing a volume internally to take
managers and strategies. advantage of the benefits of the theory of the economies of scale,
another application of the concept is when the business
Rapid developments and innovations in technologies organization outsources its raw materials or inputs. Operationally,
have given so much impact upon the level of business competition what it means is that ordering more that what is needed for the
anywhere in the world. moment may result to cheaper (or discounted) price knowing that
suppliers do apply the theory of economies of scale in pricing the
The development and introduction of personal
product they produce and sell to the market.
computers on a massive scale along with the meteoric rise of the
internet technology has changed the course of doing business Best Operating Level
worldwide. From an 8 hour day conduct of business in the brick
and mortar era, the global introduction of e-commerce/business The concept of best operating level in the field of
resulted to the called click and mortar era whose mode of doing production management and engineering science, there is a point
business transcend beyond traditional business hours with of machine use that redounds to the best mix resulting best
business transactions happening round the world and round the operating level. In other words, there is an optimum level of
clock or on a borderless scenario and on a real time basis. operating machines or using resources that can result to the
lowest possible cost of production of a product or service.
Building Competitive Strategies The practice of e-commerce embraces the broader
context involving inter-business organization concerning the use
The theory behind the product life cycle or the S-curve
of information and communication technology.
suggests that unless nothing is being done about the product or
services and given the ever changing market conditions, The biggest threat and impact of e-commerce/e-
competitiveness of the product will be eventually eroded and business in the competition aspect of the business is its capability
hence it must be continually built up. to conduct business operations any time of day or on a round the
clock and round the year basis and the mode of doing anywhere
Pitts and Lei (2000) and several other authors have
where there is access to computer, may it be on ground or in the
discussed some of these theories in their works in the area of
business class of intercontinental airlines.
strategic management. These are:
The features and amenities of e-commerce/e-business schemes
1. Evolution and revolution theories. In its most basic form as
have indeed brought forth a new paradigm in business that makes
espoused by Charles Darwin, this theory suggested that
business competition much more difficult to address given the
environmental change forces each species into incremental, but
fact that business players in the cyberspace are not physically
continuous, mutation or transformation. Through such change, a
visible unlike the traditional business organizations in the brick
living entity can adapt to its environment and survive. Species that
and mortar era. In fact, many of the organizations and individuals
cannot conform to its environmental requirements is doomed,
engaged in e-commerce/e-business may not at all exist in the real
and eventually becoming extinct. In business context, what is
world in terms of size and asset base, but just the same, the cyber-
simply means is that for a business undertaking to be an ongoing
based entrepreneur can deliver the same or better kind of
and profitable endeavor, it has to adapt itself to market changes
business deals with minimal investments thus promising more
otherwise, it will go bankrupt and fold up.
profits for the entrepreneur.

2. Industrial organization theory. Considered branch of

microeconomics, this theory emphasizes the influence of industry
environment upon the firm. There are certain factors and culture
common or unique to the industry that parties forming part of this
industry or sector have to live with. A firm must adapt to its
particular industry’s forces to survive and prosper.

3. Chamberlin’s economic theories. Theorist of economist

Edward Chamberlin are anchored on the context of evolutionary
environmental change and he specifically espoused that a single
firm could clearly distinguish itself from its competitors.
Obviously, this view is associated with focus and niche as well as
differentiation strategies advocated by many proponents.

4. Contingency theory. The basic premise of this theory is that

higher financial returns are associated with those firms that most
closely develop a beneficial fit with their environment,
contingency theorists view organizational performance as the
joint outcome of environmental forces and the firms, strategic
actions. Firms can become proactive by choosing to operate in the
environment in which the opportunities and threats match the
firm’s strengths and weaknesses.

5. Resource-based theory. Somehow related or similar to

contingency theory, resource-based theory accords more weight
to the firm’s choice to be proactive capitalizing on the firm’s
unique resources to comprise the key variables that allow it to
develop and sustain a competitive strategic advantage.

6. Institution theory. This theory holds that organizations can

adapt to changing conditions by imitating other successful
organizations.

7. Organization learning theory. It holds that organizations adjust

defensively to a changing environment and use knowledge
offensively to improve the fit between the organization and its
environment.

8. Transaction cost economics. It proposes that vertical

integration is more efficient that contracting goods and services in
the marketplace when the transaction cost of buying goods in the
open market becomes too great.

Challenges and Opportunities of e-commerce/e-business

As mentioned earlier in connection with the role played

by technology development and innovation, among the biggest
threat to competition is the advent of computers or the variety of
technologies falling under the generic term information and
communication technology, in particular, the invasion of the
Internet in the world of business or the popularization of the so-
called e-commerce and e-business.