STRATEGIC DRIFT THEORY & THE EXTERNAL ENVIRONMENT OF THE ORGANIZATION

What Does the Term ‘Strategic Drift’ Mean?

Johnson came up with the word "Strategic Drift" in 1998 to describe when a company's internal strategy and focus start to shift away from the outside world and don't adapt to changes in the outside market.

A lot of businesses just try to keep up with pressures from outside, but Apple is one of the few that is a market leader, which means they not only keep up with changes in the market but also start them.

Strategic Drift Theory

Strategic drift occurs when the strategy pursued by a business no longer fits with the external environment and trends around it. Therefore the service or product the business is currently selling is not suitable for the current trends or market conditions.

Therefore the business will need to look into transformation and changing the way it is operating, providing a service, or selling a product.

Strategic Drift Theory - Diagram

The Four Phases of Strategic Drift

Phase 1 – Incremental Change

In the first part, it is made clear that the outside world hasn't changed much. By making small changes to their business, the company can stay competitive in the market.

Phase 2 – Strategic Drift

Now that the outside world has changed a lot, the small changes the business has been making aren't enough to keep up with the competition.

Phase 3 – Flux

This phase shows that managers are having trouble making decisions because there is a big difference between what the business offers and what the outside world wants. This might make management start to change their plans, but it's still not clear enough to make the big changes that are needed right now. It's possible that the top managers don't agree on how the company should move forward.

Phase 4 – Transformational Change or Death

This is the point where management has to realize that the business needs to change right away and go in a new planned direction. They are doomed to fail if the management doesn't change quickly. 

Discuss the  External Environment of the organization 

PESTLE looks at 6 important types of outside factors to explain the external environment.

Political: Tariffs, trade restrictions and change, environmental rules, tax policy, and the stability of the government

Economic: Interest rates, exchange rates, inflation, wage rates, minimum wage, working hours, unemployment, credit availability, cost of living, and economic growth or decrease.

Sociology: Cultural norms and expectations, health awareness, population growth rates, age distribution, views toward work, safety, and health.

Technological: Changes in technology, like AI, and how quickly people accept them

 
Legal: Changes in the law that affect jobs, quotas, resource access, imports and exports, and taxes

 
Environmental: Global warming, sustainable resources, ethical sourcing, supply chain intelligence
Taking a look at all of these things can help you make smart decisions by revealing which parts of your business are affected by different changes in the outside world and what you need to do to lower the risks these changes may bring.

Reference

Kacinova, S. (2021, June 8). Strategic Drift: Understanding What It Means and Its Impact on Your Organisation. https://www.linkedin.com/pulse/strategic-drift-understanding-what-means-its-impact-your-kacinova#:~:text=In%201998%2C%20Johnson%20coined%20the,up%20with%20external%20market%20changes.

Strategic Drift Theory – The Tutor Academy. (n.d.). https://www.thetutoracademy.com/revision-notes/strategic-drift-theory/

http://www.jcreview.com/fulltext/197-1580283115.pdf?1580292009. (2020, January 1). Journal of Critical Reviews, 7(01). https://doi.org/10.31838/jcr.07.01.52

T. (2016, May 31). Strategic Drift Explained | Busness Strategy. YouTube. https://www.youtube.com/watch?v=arvSGys2lfQ

[online] [Accessed 02 April 2024]