Achieving Strategic Fit

strategic fit let loose the spirit level to which an organization is matching its resources and capabilities with the opportunities in the external environment. The matching takes ship through strategy and it is therefore vital that the party have the true resources and capabilities to execute and support the strategy. Strategic fit can be apply actively to evaluate the current strategic situation of a company as well as opportunities as M&A and divestitures of organizational divisions.Strategic fit is related to the Resource-based view of the firm which suggests that the key to profitability is not only through positioning and industry selection but quite an through an internal focus which seeks to utilize the unique characteristics of the companys portfolio of resources and capabilities. 1 A unique combination of resources and capabilities can eventually be develop into a competitive advantage which the company can profit from. However, it is weighty to differentiate betw een resources and capabilities.Resources relate to the inputs to production owned by the company, whereas capabilities imbibe the accumulation of learning the company possesses. Resources can be classified two as tangible and intangible Tangible Financial (Cash, securities) Physical (Location, plant, machinery) nonphysical Technology (Patents, copyrights) Human resources Reputation (Brands) Culture Several tools have been substantial one can use in order to analyze the resources and capabilities of a company.These include SWOT, value chain analysis, cash flow analysis and more. Benchmarking with germane(predicate) peers is a useful tool to assess the relative strengths of the resources and capabilities of the company compargond to its competitors. Strategic fit can also be used to evaluate particularised opportunities like M&A opportunities. Strategic fit would in this upshot refer to how well the potential acquisition fits with the planned direction (strategy) of the acquiri ng company. In order to justify growth through M&A transactions the transaction should ield a better return than Organic growth. The derived function Efficiency Theory states that the acquiring firm will be up to(p) increase its efficiency in the areas where the acquired firm is superior. In addition the surmisal argues that M&A transactions give the acquiring firm the surmise of achieving positive synergy personal effects meaning that the two merged companies are worth more together than the sums of their parts individually. 2 This is because merging companies whitethorn get laid from economics of scale and economics of scope.However, in reality many M&A transactions fails due to different factors, one of them being neglect of strategic fit. A CEO survey conducted by Bain & Company showed that 94% of the interviewed CEOs considered the strategic fit to be vitally important in the success or failure of an acquisition. 3 A high degree of strategic fit from can potentially yiel d many benefits for an organization. stovepipe case scenario a high degree of strategic fit may be the key to a successful merger, an efficient organization, synergy effects or cost reductions.