How to Maintain Strategic Fit over Time?

Strategic Fit
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Stefka Nenkova
Student (University), Netherlands

How to Maintain Strategic Fit over Time?

🔥NEW Zajac, Kraatz and Bresser (2000) developed a dynamic model for strategic fit in Strategic Management, encompassing the relation between strategic fit, strategic change and a firm’s performance. They view strategic fit from a dynamic rather than a static perspective. They argue the challenges of considering a strategic fit over time fall into 3 main categories:
  1. THE IMPLICATION OF FACING STRATEGIC CHANGE, i.e. a change in the environmental or organizational circumstances, which a firm faces over time
    • Environmental Circumstances: a shift in consumer preferences, changes in government policies, competitor’s actions, technological changes, etc.
    • Organizational Circumstances: for example a firm may lack certain resources or competences that are needed to implement a particular strategy.
  2. MULTIDIMENTIONALITY. A firm faces multiple environmental and organizational contingencies, which can create a tension resulting from the choice between the strategy-environment fit and the strategy-competences fit.
  3. The pressure resulting from the need to create a NORMATIVE FRAMEWORK that can predict or even prescribe strategic fit over time.
Zajac, Kraatz and Bresser ‘s model of dynamic strategic fit:



The assumptions and logic behind the dynamic strategic fit model are:
  1. One can define a set of organizational and environmental factors that theoretically should define strategic fit.
  2. Variation in those factors implies variation in the necessity for strategic change (across organizations and/or across time)
  3. The comparison of actual and necessary strategic change determines the degree of dynamic strategic fit, which should then influence subsequent organizational performance
Following this logic, Zajac, et al (2000) created a strategic change matrix with 4 possible scenarios for firms that try to maintain strategic fit over time, showing the connection between strategic change, dynamic strategic fit and firm performance:


  1. BENEFICIAL STRATEGIC CHANGE. This represents a situation where, because of environmental or organizational contingencies, a firm changes exactly as much as needed leading to performance benefits. In other words: there is an exact alignment between strategy and current circumstances. Still, challenges are: controversial effect of alignment with other contingencies, differences in magnitude and direction of the strategic change.
  2. INSUFFICIENT STRATEGIC CHANGE. The "worst case scenario". A situation where a firm does not change adequately enough or is reluctant to adapt when facing a strategic change, resulting in bad performance.
  3. BENEFICIAL INERTIA. A situation where a firm does not need to change as a result of an already implemented strategy that is not affected by a shift in the contingencies, where a firm is continuously striving to achieve an alignment with the changing environment by accumulating strategy-specific competences, which leads to performance benefits.
  4. EXCESS CHANGE. A situation where a firm changes even though it is not necessary to do so. This could seriously impede performance. This could be reflecting an “organization's well-intentioned but miscalculated pursuit” of strategic fit or an "opportunistic adaptation".
The testing by Zajc et al of the model led to the following conclusions:
  1. The timing, direction, and magnitude of strategic changes can be logically predicted based on differences in specific environmental forces and organizational resources.
  2. Organizations that deviated from the model's prediction of dynamic strategic fit (i.e., they changed more or changed less than the model prescribed) experienced negative performance consequences.
⇒ What in your opinion could be the practical implications of applying this model?

Source:
Edward J. Zajac, Matthew S. Kraatz and Rudi K. F. Bresser (2000) "Modeling The Dynamics Of Strategic Fit: A Normative Approach To Strategic Change", Strategic Management Journal, 21: 429-453

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