Investigating factors limiting strategic renewal from dynamic capabilities perspective

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School of Business | Master's thesis
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Digital transformation has disrupted many industries and turned many traditional businesses upside down. The emergence of pure online players in the retail industry has enabled double digit growth of e-commerce and changed consumer shopping experience. Over a decade long struggle of traditional brick-and-mortar retailers to adapt their business models to new realms is the main interest of this thesis. In particular, the focus of the thesis is on the biggest European retailer that has faced several rounds of digital initiatives and attempted a strategic renewal process, only to announce profit warnings as an outcome. The dynamic capabilities theory is still missing holistic alignment, thus investigating which factors can limit the development of such capabilities in a company can provide more empirical support. In addition, understanding the determinants of business failure can lead to positive implications for- future business performance. The first research question was focused on understanding the effect digitalization had on brick-to-mortar retailer. Examining implications of digitalization on the industry, as changing consumer buying behavior and creating new entrants on the market, such as pure players, the digitalization turned out to be disruptive innovation for the business model of the case company. Existing value networks of the company, including customer value proposition and profit formula were no longer viable. Thus, the discontinuous strategic renewal process needed to be initiated by existing brick-and-mortar retailers. The second research question was to determine why the case company was not able to respond to the disruption effectively and undergo business model innovation using strategic renewal process. The limitation factors were studied from the dynamic capabilities’ perspective. Using longitudinal case study approach with Gioia methodology for data structure the following contributions to the research were made. Experienced myopia, avoidance of pain and Organizational inertia can be explained by limitations in managerial cognitive, absorptive and integrative capabilities and ambidexterity prevent the strong development of sensing seizing and reconfiguring processes needed to enable a successful business model innovation. Without one of the micro-level capabilities, dynamic capabilities cannot be developed fully to enable successful strategic renewal. The last contribution is the identification of the iterative capability of strategic renewal process. Given organizational flexibility, positive managerial influence and resources company can start the whole renewal process over and over until reaching sustainable business model innovation
Thesis advisor
Koveshnikov, Alexei
business failure, dynamic capabilities, strategic renewal, disruptive Innovation
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