Why Are Some Companies Successful While so Many Other Businesses Fail? Essay


Why are some companies successful, while so many other concerns neglect? Some organisations may merely be lucky. They may hold the right mix of merchandises and/or services at the right clip. But even if luck leads to success, it likely will non last. Most companies that are extremely successful over the long term efficaciously get, develop, and manage resources and capablenesss that provide competitory advantages. For illustration, McDonald ‘s enjoys outstanding trade name acknowledgment and a universe – category operating system. Marriott enjoys these same benefits in the housing industry.

Successful companies have besides learned how to develop and pull off relationships with a broad scope of organisations, groups, and people that have a interest in their houses. The outgrowth of a ferociously competitory planetary economic system means that houses have to spread out their webs of relationships and cooperate with each other to stay competitory. McDonald ‘s investing in Chipotle was a concerted venture. As Steve Ells, Founder, Chairman, and CEO of Chipotle noted, “ We ‘ve enjoyed our relationship with McDonald ‘s since the beginning and appreciate the support they ‘ve shown in funding Chipotle ‘s growing over the last seven old ages. Still, we ‘ve ever operated independently, and that wo n’t alter as McDonald ‘s Continues to cut down its investing in Chipotle and focuses on its nucleus business. “

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Strategic direction is a procedure through which organisations analyze and learn from their internal and external environments, set up strategic way, create schemes that are intended to travel the organisation in that way, and implement those schemes, all in an attempt to fulfill cardinal stakeholders. Stakeholders are groups or persons who can significantly impact or are significantly affected by an organisation ‘s activities. An organisation defines who its cardinal stakeholders are, but they typically include clients, employees, and stockholders or proprietors, among others. Although larger companies tend to utilize the strategic direction procedure, this procedure is besides a critical portion of determination devising in smaller companies.

Firms practising strategic planning procedures tend to surpass their opposite numbers that do non. In fact, executives have reported higher degrees of satisfaction with strategic direction tools and thoughts than with most other direction tools. Furthermore, 81 per centum of companies worldwide reported making strategic planning. In North America, the figure was even higher ( 89 per centum ). Cordial reception houses besides benefit from strategic planning, as suggested by a recent survey of hotels in the United Kingdom, which found that concern public presentation was positively associated with the thoroughness, edification, engagement, and formality of strategic planning procedures. An illustration of how strategic analysis can assist steer concern scheme is shown in Starwood Hotels & A ; Resorts attempts to establish a new merchandise.

This book besides recognizes that there is a difference between the strategic planning procedure and strategic thought, and that both are a portion of effectual strategic direction. The strategic planning procedure tends to be a instead stiff and sterile procedure in many organisations. Strategic thought, nevertheless, leads to creative solutions and new thoughts like Starwood Hotel ‘s launch of the Heavenly Bed. As illustrated in the Heavenly Bed illustration, a house that injects strategic believing into the strategic planning procedure has the best of both universes.




The increasing importance of strategic direction may be a consequence of several tendencies. Increasing competition in most industries has made it hard for some companies to vie. Modern and cheaper transit and communicating have led to increasing planetary trade and consciousness. Technological development has led to accelerated alterations in the planetary economic system. Regardless of the grounds, the past two decennaries have seen a rush in involvement in strategic direction.


The “ Heavenly Bed, “ foremost launched by the Westin trade name of Starwood Hotels & A ; Resorts, has transformed the bed, a basic characteristic of any hotel room, into a epicurean object of desire, heightening the grosss of the concatenation and go forthing many hotel operators to follow suit with imitator linens and usage bedclothes of their ain.

The strategic procedure at Starwood began with consumer analysis and merchandise testing. First, Westin commissioned a survey affecting 600 concern executives who travel often. The consequences showed that 84 per centum said a epicurean bed would do a hotel room more attractive to them. What is more, 63 per centum said a good dark ‘ s slumber is the most of import service a hotel can supply. Half of those surveyed said they sleep worse in hotels than at place. After proving 50 beds from 35 housing ironss, Westin developed its paradigm all – white Heavenly Bed with a usage – designed pillow – top mattress, goose down sympathizers, five pillows, and three chip sheets runing in yarn count from 180 to 250. Once the merchandise was designed and tested, the fi rm introduced the bed with a carefully planned selling scheme. USA Today ran a narrative on the front page of its concern subdivision. The same twenty-four hours, 20 pristine white Heavenly Beds lined Wall Street up to the New York Stock Exchange in New York City. Inside the Stock Exchange, Barry Sternlicht, the so Chairman and CEO of Starwood Hotels & A ; Resorts rang the gap bell and threw out chapeaus proclaiming, “ Work like the Satan.

Sleep like an angel. “ Meanwhile, at New York ‘ s Grand Central Station, 20 more beds graced one of the rotundas at that place, and commuters debarking the trains were invited to seek them out. Similar events were staged the same twenty-four hours at 38 locations across the United States, tailored to each metropolis. Savannah ‘s event featured a bed drifting on a flatboat down the river with a landing skydiver. Seattle ‘s event took topographic point atop the Space Needle.


Traditional Position

As the field of strategic direction began to emerge in the latter portion of the twentieth century, bookmans borrowed to a great extent from the field of economic sciences. For some clip, economic experts had been actively analyzing subjects associated with the fight of industries.


Industry concentration, variegation, merchandise distinction, and market power. However, much of the economic sciences research at that clip focused on industries as a whole, and some of it even assumed that single house differences did non affair. Other Fieldss besides influenced early strategic direction idea, including selling, finance, psychological science, and direction. Academic advancement was slow in the beginning, and the big consulting houses began to develop their ain theoretical accounts and theories to run into their clients ‘ demands. Scholars readily adopted many of these theoretical accounts into their ain articles and books.

Finally, a consensus began to construct sing what is included in the strategic direction procedure. The traditional procedure for developing scheme consists of analysing the internal and external environments of the company to get at organisational strengths, failings, chances, and menaces ( SWOT ) . The consequences from this “ state of affairs analysis, ” as this procedure is sometimes called, are the footing for developing missions, ends, and schemes. In general, a company should choose schemes that ( 1 ) take advantage of organisational strengths and environmental chances or ( 2 ) neutralize or overcome organisational failings and environmental menaces. 10 After schemes are formulated, plans for implementing them are established and carried out. Figure 1.1 presents the natural

flow of these activities.

The first of these thoughts was that the environment is the primary determiner of the best scheme. This is called environmental determinism. Harmonizing to the deterministic position, good direction is associated with finding which scheme will outdo fit environmental, proficient, and human forces at a peculiar point in clip, and so working to transport it out.

The most successful organisation best adapts to bing forces. Some grounds suggests that the ability to aline the accomplishments and other resources of the organisation with the demands and demands of the environment can be a beginning of competitory advantage. 12 However, after a critical reappraisal of environmental determinism, a good – known research worker one time argued:

There is a more cardinal decision to be drawn from the predating analysis: the scheme of a house can non be predicted, nor is it predestined ; the strategic determinations made by directors can non be assumed to be the merchandise of deterministic forces in their environments. On the contrary, the really nature of the construct of scheme assumes a human agent who is able to take actions that attempt to separate one ‘ house from the rivals.

Basically, a big house may make up one’s mind non to vie in a given environment. Or, as an option, the house may try to act upon the environment to do it less hostile and more contributing to organisational success. This procedure is called passage, which means that a house can act upon its environment.


The rule of passage assumes that organisations do non hold to subject to bing forces in the environment ; they can, in portion, create their environments through strategic confederations with stakeholders, investings in taking engineerings, advertisement, political lobbying, and a assortment of other activities. 14 Of class, smaller organisations are slightly limited in their ability to act upon some constituents of their environments on their ain. For illustration, a little eating house house may hold a hard clip act uponing national authorities bureaus and decision makers.

However, smaller organisations frequently band together into trade groups, such as the National Restaurant Association, to act upon authorities policy on pressing issues like lower limit pay, in-migration policy, and wellness – attention costs. Besides, they may organize confederations with other entities. The Global Hotel Alliance is one illustration, in which Omni Hotels, Kempinski Hotels & A ; Resorts, Pan Pacific Hotels and Resorts, Rydges Hotels & A ; Resorts, Marco Polo Group, Dusit Hotels & A ; Resorts and Landis Hotels & A ; Resorts have joined forces to vie against the mega ironss.

In add-on, even a little house may be able to exercise a powerful influence on its local operating environment. The key to passage is understanding that a house does non needfully hold to accommodate wholly to the forces that exist in its operating environment. It can at least partially influence certain facets of the environment in which it competes.


The traditional school of idea refering scheme preparation besides supported the position that directors respond to the forces discussed therefore far by doing determinations that are consistent with a preconceived scheme. In other words, scheme is calculated. Deliberate scheme implies that directors plan to prosecute an intended strategic class. In some instances, nevertheless, scheme merely emerges from a watercourse of determinations. Directors learn as they go. An emergent scheme is one that was non planned or intended. Harmonizing to this position, directors learn what will work through a procedure of test and mistake. 16 Supporters of this position argue that organisations that limit themselves to moving on the footing of what is already known or understood will non be sufficiently advanced to make a sustainable competitory advantage.

In the first hebdomad of establishing the Westin Heavenly Bed, 32 invitees called to inquire where they could purchase the bed. A light bulb went on. Westin executives put order cards with a toll – free figure in every room. Then they started puting catalogs by bedsides and desks and put up a web site. By June of 2004, Westin had sold 20,000 pillows – $ 75 for the male monarch – sized version – and 3,500 bed/bedding jazz band, at $ 2,965 each, plenty to distribute the thought throughout Starwood, with the Sheraton, St. Regis, and W lines all turning into retail merchants. The unforeseen success of the Heavenly Bed has spawned a new concern – companies that help hotels run their retail weaponries. Boxport, a spin – off of San Francisco – based hotel pimp Higgins Purchasing Group, operates web sites and catalogs for several ironss that now sell

Bedclothes of this illustration of emergent scheme, it is non a good thought to reject deliberate scheme either. One of the strongest advocators of acquisition and emergent scheme late confessed, “ We shall acquire nowhere without emergent larning alongside deliberate planning. “ Both procedures are necessary if an organisation is to win. When Starwood foremost launched the construct of the Heavenly Bed in 1999, the scheme was a calculated attempt, but the chance to supply retail gross revenues was an unintended result, and this unanticipated chance led to an emergent and extremely successful retail scheme, as the above illustration shows.


In drumhead, bookmans have determined that both version and passage are of import to organisations. They should accommodate to environmental forces when the costs of ordaining ( act uponing ) the environment exceed the benefits. However, they should be proactive in making their ain chances. In add-on, organisations should prosecute in deliberate strategic planning procedures, but they should besides be willing to do errors and learn from them as they chart a strategic class. In other words, scheme should be both deliberate and emergent, and houses should both accommodate to and ordain their environments, with the state of affairs finding which option to take. Westin learned these lessons by paying attending to their clients.

The Organization as a Bundle of Resources:

The Resource – Based View

In recent old ages, another position on scheme development has gained broad credence. The resource – based position of the house has its roots in the work of the earliest strategic direction theoreticians. 20 It grew out of the inquiry, “ Why make some houses persistently outperform other houses?

One of the first competences identified was general direction capableness. This led to the proposition that houses with high – quality general directors will surpass their challengers. Much research has examined this issue. Clearly, effectual leading is of import to organisational public presentation, but it is diffi cult to stipulate what makes an effectual leader. Besides, although leaders are an of import beginning of competency for an organisation, they are non the lone of import resource that makes a difference.

Economic idea besides influenced development of the resource – based position. About two centuries ago, an economic expert named David Ricardo investigated the advantages of possessing superior resources, particularly land. 22 One of Ricardo ‘s cardinal propositions was that the husbandman with the most – fertile land had a sustained public presentation advantage over other husbandmans. More late, another economic expert, Edith Penrose, expanded on Ricardo ‘ s position by observing that assorted accomplishments and abilities possessed by houses could take to superior public presentation. She viewed houses as an administrative model that coordinated the activities of legion groups and persons, and besides as a package of productive resources. 23 She studied the effects of assorted accomplishments and abilities possessed by organisations, reasoning that a broad scope of accomplishments and resources could act upon competitory public presentation.

A common yarn of concluding in the typical competence literature and the statements of Ricardo and Penrose is that organisational success can be explained in footings of the resources and capablenesss possessed by an organisation. Many modern bookmans have contributed to this position of the house. Harmonizing to this position, an organisation is a package of resources, which fall into the general classs of:

1. Fiscal resources, including all of the pecuniary resources from which a house can pull.

2. Physical resources, such as land, edifices, equipment, locations, and entree to raw stuffs.

3. Human resources, which pertains to the accomplishments, background, and preparation of directors and employees, every bit good as the manner they are organized.

4. Organizational cognition and acquisition

5. General organisational resources, including the house ‘ s repute, trade name names,

Patents, contracts, and relationships with external stakeholders.

Visualizing the house as a package of resources has wide deductions. For illustration, the most of import function of a director becomes that of geting, developing, managing, and flinging resources. Besides, much of the research on the resource – based position has demonstrated that houses can derive competitory advantage through possessing “ superior resources ” . Superior resources are those that have value in the market, are possessed by merely a little figure of houses, and are non easy to replace. If a peculiar resource is besides dearly-won or impossible to copy, so the competitory advantage may be sustainable. A sustainable competitory advantage may take to higher – than – mean organisational public presentation over a long period.


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