Relevance and Implications of Chaos Theory for Strategy (Levy)
Stefka Nenkova, Student (University), Netherlands, Premium Member
Industries are complex, dynamic and nonlinear systems, in which interdependence occurs between firms, as well as between firms and other actors in the same environment such as consumers, the government, and financial institutions (Levy, 1994). Taking into account this view, Levy suggests several really important implications of chaos theory for strategic planning / strategy:
- LONG-TERM PLANNING IS VERY DIFFICULT – the main problem is “trying to use finite measurements in an infinite world”. According to chaos theory, there is little use in trying to plan for the future based on the past since history does not repeat itself. On the contrary, it suggests that instead of putting valuable resources into forecasting, strategic planners should , which would allow for more flexibility when facing change. In this train of thought, joint ventures and acquisitions could be seen as an effort to in order to cope with uncertainty and change.
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