Essay: Strategic Management Theory

Essay: Strategic Management Theory

Strategic management theory (Industrial Organization model) suggests that
organizational decision makers are rational—exhibit profit-maximizing behaviours; that is, organizational decision makers will do what is in the best interest of the firm. Profit orientation is a distinguishing feature betweenentrepreneurs and small business owners.

An entrepreneur is defined as an individual whoestablishes and manages a business principally for profit and growth; the entrepreneur ischaracterized by innovative behaviour and employs strategic management practices in his/herbusiness. In contrast, a small business owner is an individual whoestablishes and manages a business principally to further personal goals; the business is anextension of his/her personality and is intricately tied to family needs and desires

The decision maker’s profit orientation will affect the firm’s profitability or performance
as decision-maker goals affect the decisions that s/he makes and thevalues of powerful organizational actors affect strategic outcomes (Hambrick and Mason, 1984).

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