Dynamic Capabilities and Enterprises in Today's Unstable Environment

Dynamic Capabilities and Enterprises in Today's Unstable Environment
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Dynamic Capabilities and Enterprises in Today's Unstable Environment
1.0. Introduction
In the face of the complexity and unpredictability of today's business environment, it is increasingly challenging to maintain a strategic fit. For this purpose, businesses have to build and maintain dynamic capabilities, which involve directing and configuring resources to ensure adaptation to the ever-changing status of the external environment (Teece, 2018). The purpose of this paper is to highlight the strategic importance of dynamic capabilities with particular focus on three major knowledge points, including entrepreneurial mindset, Uppsala model of internationalization, and cooperative strategy.
2.0. Entrepreneurial Mindset and Adaptation
Today's unsettling business environment challenges a traditional one-size-fits-all static approach and requires entrepreneurs to adopt a dynamic approach to business. An ever-changing business environment, catalyzed by tech development and globalization, exposes the enterprises to the risk of facing unique challenges in quick succession (Cuellar, 2019). Therefore, it is the time for entrepreneurs to use creativity that is an integral part of the process through which they create value as also shown in the diagram below:
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Entrepreneurial Mindset: Adapted From (McGrath & MacMillan, 2000)
As shown in the process depicted above, creativity precedes the strategic management of resources. For example, when faced with a decline in demand, entrepreneurs should ideally downsize to a level that they can eliminate the consumption of redundant resources (Ireland, Hitt, &Sirmon, 2003). For example, the enterprises can perform layoffs and retrenchment of production facilities to adapt to the reduced levels of demand. In this way, they can make sure that their margins are not compromised through their profitability is likely to remain on the low side due to the advantage of economies of scale and scope getting lost (Ireland, Hitt, &Sirmon, 2003). Adaptation can add to their chances of survival when putting under pressure.
3.0. Uppsala model of growth
Uppsala model of growth also aligns with the dynamism and sophistication of the contemporary business environment, especially in an international context. The model is based on the assumption that cultural understanding and geographic distance between the home country and host country, for an enterprise looking into the prospects of global expansion, are crucial knowledge points (Sindakis & Theodorou, 2017). The model challenges simple ideas focusing on uniform expansion across the globe. The model presents the case for gradual expansion which involves first setting up a presence in geographically and culturally closer countries with defensive market entry strategy (such as traditional exports) and then gradually move to culturally distant markets with intensive strategies (such as building a subsidiary or FDI) (Filho, Brito, & Frankenberger, 2019). Adherence to the Uppsala model enables a firm to base its expansion plan on its learning about a foreign market so it can adapt to its culture and other vital sp...