Strategic Management Behavioral Economics

Question: Discuss about theStrategic Managementfor Behavioral Economics. Answer: Introduction Garbuio, M., Lovallo, D., Ketenciouglu., E (2013) Behavioural Economics and Strategic Decision Making, in Thomas, C Shughart, W (eds) The Oxford Handbook of Managerial Economics, Oxford The article has clearly discussed how strategy making for a particular project is conducted in the modern era upon a set of principles. The principles are mainly based on the most discussed techniques that have been said to be in trend among the executives and the other officials in the upper designations. They remain mainly based on the decisions which are adopted by the company usually on the behalf of the owners. This is indeed believed by me to be a very good step as the higher officials are mostly incorporated within the main workforce and work culture o a higher degree than the owners. Previously the strategy making in the twentieth century were mainly based on the relationship shared by the strategy making models and the economic theory. This mainly was based on the traditional assumptions of the economic theory that mainly contributed the forming of the early evolution strategic theories, analytical tools and also different frameworks. However, the main issue was that it mainly lacked proper predictions and the assumptions which are very important to assess the results of the strategic theory that needed to be evaluated for the predictions had no way to confirm the data.. This criterion has been clearly discussed in the articles which have effectively brought out the main concerns with that of the early methods of strategy making based on economic theories. Just making prediction based on the rationality is not accepted by the recent day executives. Therefore behavioral assumptions have come to the rescue. New approaches of the behavioral objectives like the behavioral economics, behavioral finance and behavioral corporate finance, its study thoroughly and followed by their application in the strategy making have been believed to find out the best results [1]. The strategy makers have mainly based their analysis on the three important characteristics which are indeed very important in the strategy making which are based on the market entry and exit in mergers and acquisitions The first involves the decisions to be not only rare and complex and even absorb a large portions of the resources of the company. Moreover the decisions which are taken take a lot of time because this decisions need to evaluate the cist and benefits associated with the strategy and also to seek for managerial consensus. The third mainly concerns the feedback mainly in the terms of profits and losses which are realized and therefore gets delayed and thereby becomes difficult to identify it as the cause and effective mechanisms. Non standard preferences help the executives to evaluate long term investments. They are also believed to be underinvest in long term investments and also explore new opportunities. They have also developed a habit of asking more when selling rather higher to those which they would have paid if they were the buyers. Distortion of internalization strategies, preferring adjacent over domestic markets and others are some of the initiatives should be taken. Nonstandard beliefs also play an important role in three different aspects handled by the executives like the first being internal situation of the company, the external situation of the company and thirdly their tendency to overweigh internal causes success and external causes of failures resulting in decisions which are distorted. Moreover they also follow the heuristics and biases while decision making that helps them to analyze the weakness and strengths of the organizational along with the external factors and thereby take decisions in strategy making. Thereby by providing different types of such tactics in behavioral economics and behavioral finance, strategies can be put forward for an organization. Shields, J.,Shelleman, J (2015) Integrating Sustainability into SME strategy, Journal of Small Business, Vol.25, No.2, pp.59-75. The paper mainly focuses on incorporating a number of sustainability considerations in case of the different small and medium enterprises called the SMEs. O feel that indeed it is a very noble prospective for the companies which have about 20 members in them and thereby can see high levels of success. The paper has shown that how a flexible structure of framework can be incorporated in the various sectors of the SMEs so that they can integrate sustainable development in their company structure. Many companies have been observed to lack the awareness of the benefits of addressing sustainability and therefore it has been seen that a proper SWOT analysis helps such companies. The paper had rightly focused on an important issue that the recent day SMEs face and therefore this article have been found to help a large number of companies to guide them with right direction. This article had also helped to act as a tool that will help the companies to analyze various issues in terms of strength and weaknesses and thereby help in analyzing and proper handling the threats faced by the companies in implementation of the new techniques to develop sustainability. I have seen in many case studies that a proper SWOT analysis from time to time helps in modifying the techniques and thereby implement results. I have seen that the SWOTS have been excessively useful because the SWOT system mainly helps in analyzing issues in those companies where the SMEs have limited resources. Over the years not only small companies, but also different big companies have taken the resort of SWOT that had helped them to excel in their fields. The checklist provided by them helps to provide a matrix which helps the SMEs to identify the issue that act as barriers for strategic sustainability implementation and thereby help the companies to seek then to help in optimizing the congruence between the internal capabilities and external cells in the matrix[2]. This helps in examining the current status of the company and the various potential that it requires to meet the competitive demand. Researchers over the years have also made SWOT an important tool for any business student to learn business of different companies and hence its authenticity as a tool can never come under suspicion. When the SME would find that they possess much strength after a SWOT analysis, they readily become proactive in improving sustainability performance. This help to provide better understanding of the stakeholder and thereby would help to understand the preferences of the customers. Here the strengths that they possess will be converted by them to further development of the capability of the company. This will then be logically analyzed which will be followed by enthusiasm to achieve the benefits of improved sustainability and its performance. This may include cost reduction, brand enhancement, risk reduction and others. Hence one can find here how the first criteria of SWOT that is strength can rightly help SMEs to identify their potential which they can venture and develop more in future When the SME finds that the company has lots of weaknesses instead of strength, the company should take immediate actions and face the strategic imperative. They should immediately the action to mitigate the different weaknesses through a variety of steps which would in turn help the companies to develop internal capabilities that mainly address the sustainability. Here, the second criteria of SWOT called the Weakness are rightly described which helps SME to be careful enough and introduce interventions to handle such weaknesses to achieve their mission fast. Not only this, several other factors also needs to be assessed by the company and identify issues in company capabilities, stakeholder preferences and also a number of environmental trends which can be described in forms of threats and opportunities that the SME harbor. However it is very important to avoid the parallel organization concept for sustainability with lesser priority that tends to analyze when times are tough. In this way one can apply the evaluation of the SWOT analysis in developing the sustainability development. I have seen that the Sustainability SWOT helps to give attentions to the draw attention towards the stakeholder and also helps to point any concerns that may be treated as sustainability implication and can affect the entire business. In this way over time it will become incorporated in the main business strategy as its sustainability strategy and thereby would help to overcome issues. I believe that the SME which gives importance to sustainability management with correct researches through SWOT will perform better achieving a higher productivity than those which fail to do so. References: Cornelissen, Joep P., and Mirjam D. Werner. "Putting framing in perspective: A review of framing and frame analysis across the management and organizational literature."Academy of Management Annals8, no. 1 (2014): 181-235. Garbuio, Massimo, Dan Lovallo, and Elif Ketenciouglu. "Behavioral economics and strategic decision making." (2013). Hollensen, Svend.Marketing management: A relationship approach. Pearson Education, 2015. Shields, Jeff, and Joyce M. Shelleman. "Integrating Sustainability into SME Strategy."Journal of Small Business Strategy25, no. 2 (2015): 59.