Theoretical Foundation Of Strategic Management And Business Growth In Nigeria.

Theoretical Foundation of Strategic Management and Business Growth in Nigeria

Michael Agbayekhai

School of Management, Department of Business Administration, Veritas University, Bwari, Abuja

DOI : https://dx.doi.org/10.47772/IJRISS.2024.814MG0054

Received: 06 December 2024; Accepted: 17 December 2024; Published: 17 January 2025

ABSTRACT

Strategic management has evolved from a military art and a traditional planning tool into a dynamic framework essential for navigating the complexities of contemporary business environments. This paper examines the theoretical underpinnings of strategic management and their application in fostering business growth, particularly within the Nigerian context. The paper explores how organizations can achieve sustained competitive advantage by integrating classical theories, such as Porter’s five forces, SWOT analysis, and the resource-based view (RBV), with contemporary models like Dynamic Capabilities and Blue Ocean Strategy. The article highlights the importance of strategic alignment with environmental shifts, emphasizing the role of strategic management in addressing market dynamics, resource optimization, and uncertainty management. This paper argues that strategic management when tailored to the unique challenges of emerging markets like Nigeria, serves as a critical mechanism for adaptability, resilience, and long-term growth. The paper contributes to the discourse on strategic management’s role in enabling businesses in Nigeria to be resilient and effectively positioned for success in a competitive environment.

Keywords: Strategic management, theoretical foundation, Business growth.

INTRODUCTION 

In today’s rapidly changing business landscape, characterized by technological advancements, globalization, and dynamic consumer preferences, strategic management has become more imperative for business survival. Organizations are now more aware of the impact of the environment and competitive landscape as key considerations in value delivery to stakeholders through both short-term and long-term planning, as well as efficient resource management. Strategic management has evolved beyond basic planning to a comprehensive analysis of internal and external factors, necessitating continuous adaptation to changing environmental conditions. This evolution integrates traditional planning with the flexibility needed to respond to rapid changes, ensuring organizations remain competitive and maintain an edge over competitors (Mintzberg et al., 2020).

The term “strategic management” has a long history pioneered by the military from the art of war to defeat the enemy, it gained popularity in the 1960s when scholars like Igor Ansoff began to formalize the discipline, introducing concepts like SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) and corporate strategy. Ansoff’s 1965 book “Corporate Strategy” was influential in defining the field. Building on the work of Chandler, he invented a comprehensive conceptual framework of “Strategic Management” as a science, and developed strategies for product development, market development, strategies of horizontal and vertical integration, gap analysis, and strategy of diversification (Ansoff,1965).

Another major contributor was Peter Drucker, his major contribution to strategic management emerged in two directions. On one part, he stressed the importance of the objectives set by the business, arguing that, an organization without clear objectives is “like a ship without a rudder. “In 1954, he developed a theory based on management by objectives (MBO) (Drucker, 1954). His other major contribution is in predicting the importance of intellectual capital.

Perhaps the most influential strategist in modern times is Michael Porter.  According to him, the business unit will be successful only to the extent to which it contributes to adding value in a sector. In his work, “The Competitive Advantage”, he posits that strategy is about achieving a competitive advantage by being different, delivering a unique value added to the customer, and having a clear and superior view of how to position itself distinctively in its industry. He found many new concepts, including an analysis of five (5) forces, value chain, etc. His concept of value chain analysis became foundational to strategic management.

Many organizations fail to integrate the theoretical foundations of strategic management into their practices, relying instead on reactive, ad hoc approaches (Mintzberg, 1994; Grant, 1991). This disconnect from key frameworks such as Porter’s Five Forces and the Resource-Based View limits their ability to align resources with market opportunities, leading to inefficiencies and poor strategic outcomes (Porter, 1980; Barney, 1991). The resulting gap between theory and practice hinders long-term success, highlighting the need to explore and apply strategic management principles to enhance organizational effectiveness and competitiveness (Kaplan & Norton, 1996).

Objectives of the study

The objectives of this study are as follows:

1. To analyse the theoretical foundations of strategic management, focusing on their applicability to the Nigerian business environment.
2. To examine the role of strategic management in fostering business growth within the Nigerian context.
3. To evaluate the effectiveness of strategic management in achieving competitive advantage for businesses operating in Nigeria.

The study contributes to both academia and practice by applying strategic management theories to the Nigerian business context. It connects global frameworks with local challenges, offering a structured approach to address economic volatility, regulatory issues, and infrastructure gaps.

 LITERATURE REVIEW

Strategic management involves the formulation and implementation of major initiatives and decisions taken by an organization’s top management on behalf of owners, involving both resources and performance in external environments (Wheelen & Hunger, 2018). It is an ongoing process that defines the direction of a company, fostering alignment between the organization’s goals and its operational capabilities. More than just planning, strategic management ensures ongoing alignment of strategies with external environmental shifts, allowing organizations to adapt while remaining focused on their vision, mission, and objectives (Johnson et al.,2008).  Furthermore, it equips organizations with the tools to navigate complexities and uncertainties, allowing them to adapt to changes and seize new opportunities essential for ensuring sustained growth.

Typically, strategic management involves plans that span five years or more.  It serves as a roadmap for organizations aiming to attain long-term goals and navigate intricacies in the business landscape. It is a tool for organizational success and sustainability, particularly in complex and dynamic environments like Nigeria.

The strategic management process encompasses the analysis, formulation, execution, and assessment of strategies aimed at achieving long-term goals. This includes evaluating performance drivers, setting priorities, allocating resources, and guiding the organization toward its desired goals (Porter, 1996; David, 2011). It Promotes long-term focus and a wider perspective, encouraging companies to prioritize their long-term goals and sustainability rather than becoming stalled in daily operational tasks.

This process is not merely about setting goals; it encompasses a thorough analysis of both the internal and external environments in which the organization operates. By understanding these dynamics, organizations can make informed decisions that align with their vision and mission. In Nigeria, where businesses face economic volatility, regulatory challenges, and intense competition, strategic management is even more essential. Organizations must therefore adopt a strategic approach to effectively manage these challenges to achieve long-term success (Adeleke et al., 2020).

Key Components of Strategic Management

Fig 1: Key Components of Strategic Management

Environment and Company Analysis. This initial phase of the strategic management process involves evaluating internal capabilities and weaknesses alongside external opportunities and threats using tools like SWOT analysis. A thorough understanding of market conditions and internal competencies is essential for informed decision-making.

Strategy Formulation. Following environmental analysis, organizations set SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals and craft strategies aligned with their mission, vision, and available resources. At this stage, Key Performance Indicators (KPIs) are established for organizational units and employees, providing a framework for assessing both individual and corporate performance in line with strategic objectives.

Strategy Implementation. In this phase, strategies are executed through resource allocation, team management, organizational realignment, and culture change. Effective communication ensures alignment with the strategic vision, while strong leadership sets the tone at the top to sustain momentum. This phase is often the most challenging, requiring careful planning and leadership to ensure objectives are met.

Monitoring and Evaluation. Post-implementation, organizations must continuously monitor strategy effectiveness using performance metrics. Regular evaluations ensure progress toward goals, and deviations are addressed to maintain alignment with the strategic plan.

Feedback. Stakeholder feedback is integral to assessing strategy execution. It provides insights for addressing gaps and ensuring the strategy remains on course to achieve its intended objectives.

Strategic Management and Business Growth in Nigeria

Effective strategic management enables businesses to align their resources, capabilities, and external market conditions to achieve long-term objectives. In the Nigerian context, businesses that adopt strategic management practices have been shown to experience enhanced performance, increased market share, and improved operational efficiency (Bello, 2021). For example, firms in sectors such as fintech, telecommunications, and agriculture have successfully leveraged strategic management to innovate, expand their customer base, and adapt to regulatory changes, thereby fostering growth (Olawale & Garuba, 2021).

The application of strategic management in Nigeria faces significant challenges, including an unpredictable regulatory environment, infrastructural deficits, corruption, and bureaucratic inefficiencies (Olaniyan & Okafor, 2020; Ajayi, 2021). Limited access to capital for SMEs, inadequate capacity building, and a lack of skilled workforce further constrain business growth. Addressing these issues requires promoting ethical practices, enhancing policy alignment through industry-government collaboration, and expanding digital transformation.

Nigerian businesses must adopt flexible, adaptive strategies, emphasizing innovation, stakeholder engagement, and scenario planning to navigate risks and seize opportunities. Effective implementation of strategic management can drive growth and foster competitive advantage both locally and globally

Theoretical Foundations of Strategic Management

The discipline of strategic management is anchored in foundational theories that offer structured frameworks for understanding competitive dynamics and guiding organizations toward achieving a sustainable competitive edge. These theories, including Porter’s Five Forces, SWOT analysis, and the Resource-Based View (RBV), help businesses assess their environments and optimize internal resources for strategic advantage (Proskurnina, 2023).

In Nigeria’s volatile business landscape, shaped by economic instability, regulatory uncertainty, and socio-political factors, strategic management principles are essential for nurturing growth and addressing immediate challenges. By applying these frameworks, organizations can identify target markets, allocate resources efficiently, drive innovation, and align leadership goals to capitalize on emerging trends. For instance, SWOT analysis is widely used in strategic planning to evaluate internal strengths and weaknesses against external opportunities and threats, aiding in gap analysis and strategic decision-making (Pickton & Wright, 1998).

The Resource-Based View (RBV), Industry-Based View (IBV), and Institution-Based View (InsBV) collectively form the Tripod Model of Strategic Management, introduced by Peng (2006). This model integrates internal resources, market conditions, and institutional factors, providing a comprehensive approach to strategy formulation in unpredictable environments. The tripod analogy underscores that a robust strategy requires all three components for a stable foundation (Science Watch, 2010).

The RBV, in particular, emphasizes leveraging valuable, rare, inimitable, and non-substitutable resources to gain a competitive edge (Barney, 1991). This theory is particularly relevant in Nigeria, where external conditions are often unpredictable. Businesses can achieve sustained success by harnessing unique internal resources such as skilled labour, proprietary technology, and strong brand identity (Proskurnina, 2023; Schühly, 2022). The tripod perspective effectively addresses the limitations of single-perspective approaches, offering a nuanced understanding of strategic behaviour and competitive interaction (Peng et al., 2008; Yamakawa et al., 2008).

Fig 2: The Tripod Model by Michael Pang.

Another significant theory that has shaped strategic management practices is Porter’s Five Forces model. Conceived by Michael Porter, it examines the competitive dynamics that influence various industries. This model offers a thorough framework for industry analysis by investigating the competitive forces that shapes an industry’s structure, including the threat posed by new entrants, the bargaining power of suppliers and buyers, the threat of substitute products, and the degree of competitive rivalry (Porter, 1980). These forces affect how an organization maneuvers through the highly competitive and frequently unstable markets

Fig 3: Porter’s Five Forces

Contemporary strategic management theories have expanded on these classical foundations, introducing concepts that address the need for organizations to be more flexible  and adaptive in rapidly changing environments.

The Dynamic Capabilities framework, for instance, focuses on an organization’s ability to integrate, build, and reconfigure internal and external competencies to address changing environments (Teece et al.,1997). This theory is particularly relevant in Nigeria, where businesses must frequently adapt to shifts in the economic, political, and social landscape.

The Blue Ocean Strategy is another contemporary approach that encourages organizations to create uncontested market space, making the competition irrelevant by offering unique value propositions (Kim & Mauborgne, 2005). For Nigerian businesses, adopting a Blue Ocean Strategy can be a means of bypassing the intense competition in established markets by identifying and capitalizing on new, unexploited opportunities.

Finally, the Stakeholder Theory highlights the importance of balancing the interests of various stakeholders in the strategic decision-making process (Freeman, 1984). In the Nigerian context, where businesses often operate in environments with diverse and sometimes conflicting stakeholder interests, this theory underscores the need for inclusive and ethical management practices.

METHODOLOGY

The study adopted a qualitative research approach, relying on a systematic review of literature, case studies, and academic articles. The review focused on key themes of strategic management theories such as the Resource-Based View (RBV), Porter’s Five Forces, and Ansoff’s growth strategies. Through a detailed examination of prior works, the study identifies key themes, including competitive advantage, resource allocation, industry positioning, and growth strategies, which are central to understanding business growth in Nigeria.

The literature review highlights how these theories have been applied in various contexts, particularly within emerging markets like Nigeria. Key findings from the literature are synthesized to establish a framework that connects strategic management practices with business growth outcomes.

DISCUSSIONS AND CONCLUSION

Application of Strategic Management Theories to the Nigerian Context

Fig 4:  A Model of Strategic Management Theories

Strategic management in Nigeria requires a comprehensive understanding of the local business environment, characterized by economic volatility, regulatory hurdles, and socio-political challenges.

Frameworks like SWOT analysis help businesses identify internal strengths such as workforce resilience and local knowledge, while addressing weaknesses like limited capital, and infrastructural and technological gaps. Opportunities in sectors like Fintech and agribusiness must be weighed against threats such as economic instability (Osuagwu, 2006; Akpan, 2020; Nwankwo, 2021; Ezenwafor, 2022).

Porter’s Five Forces model highlights industry-specific competition dynamics. For example, high entry barriers and regulatory constraints in telecommunications moderate threats from new entrants, while competition in retail and banking drives differentiation and cost leadership strategies (Oladipo & Bakare, 2014; Ogunyemi & Adeola, 2020; Olawale & Garuba, 2021).

The Resource-Based View (RBV) emphasizes leveraging internal resources like skilled human capital and proprietary technologies to achieve a competitive advantage, particularly in resource-intensive sectors such as oil and gas and the burgeoning tech industry (Akinwale, 2018; Ogunyemi, 2020; Adegboye, 2021). Dynamic Capabilities further underscore the need for agility, enabling businesses to adapt quickly to economic and regulatory changes, as seen in Nigerian banks adopting digital transformation strategies (Olaniyan & Okafor, 2020; Bello, 2021).

Blue Ocean Strategy encourages businesses to explore untapped markets, as demonstrated by Fintech companies like Paystack and Flutterwave creating new demand with digital payment solutions tailored to local challenges (Akinbiyi, 2019; Adewumi & Akinola, 2020; Ogundele & Fakoya, 2021). Stakeholder Theory underscores the importance of addressing diverse stakeholder interests, particularly in socially sensitive sectors like oil exploration in the Niger Delta (Ajayi, 2021; Onyema, 2022; Okafor & Emeka, 2021).

Models such as Scenario Planning and Systems Thinking equip businesses with tools to anticipate challenges and design resilient strategies. Scenario Planning enables businesses to prepare for diverse economic, political, and social conditions by envisioning multiple future scenarios and developing robust strategies (Schoemaker, 2020). Similarly, Systems Thinking promotes a holistic view of business operations within broader interconnected systems, emphasizing the impact of strategies on economic, social, and environmental contexts (Senge, 2020). Adopting these models fosters adaptability and sustainability in strategic management.

CONCLUSION AND RECOMMENDATIONS

Strategic management goes beyond routine business operations, serving as a critical framework that guides organizations through the complexities of modern markets. It enables businesses to navigate challenges and exploit opportunities, fostering adaptability, resilience, and success in uncertain environments.

By incorporating strategic management theories and cognitive frameworks tailored to the Nigerian context, businesses can more skillfully address the distinct challenges and seize opportunities in the local market. By integrating established models like SWOT analysis and Porter’s Five Forces with modern approaches like Dynamic Capabilities and Blue Ocean Strategy, complemented by adaptive thinking strategies, Nigerian enterprises will be prepared for sustainable growth and secure a competitive edge in an increasingly intricate business landscape.

Limitations and suggestions for further studies.

The focus on thematic analysis may overlook dynamic variations across different industries within Nigeria. Also, the absence of primary data collection, such as surveys or interviews with Nigerian businesses, restricts the ability to validate findings with firsthand evidence. Future research could address these limitations by incorporating quantitative methods or longitudinal studies to track the long-term effectiveness of strategic management practices in specific industries in Nigeria

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