“Inside-Out” and “Outside-In” Paradigms: Benefits and Limitations

Subject: Strategic Management
Pages: 1
Words: 365
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2 min
Study level: Master

There are two main ruling paradigms in business that are inside-out and outside-in. This essay discusses the benefits and limitations of the strategies regarding the implementation.

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The inside-out approach strongly believes that the inner strengths and capabilities of the business structure will make it successful. In contrast, the outside-in approach instead claims that success can be achieved by value creation for customers, customer orientation, and customer satisfaction (Adžić, 2020; Johnson et al., 2020). One benefit of the inside-out approach is the effective use of a company’s resources and main competencies. By this, the company can easily adapt to changing circumstances and know its capabilities (Michaud & Audebrand, 2019). Outside-in strategy is expected to have long-term shareholder value. This is because there is a strong emphasis on customer needs and preferences.

The first limitation of the inside-out approach is neglecting customer needs and preferences. By focusing only on internal aspects, there are high chances of not following the market trends that are based on customer needs (Johnson et al., 2020; Kang, 2016). For example, less spending on customer analysis leads to inaccurate data, hindering sales. The second limitation is the lack of customer instinct, which may result in poor competition. Customers are the main driving force of the company, and not knowing their behavior and choices will lead to inevitable decline (Frau et al., 2020). The third limitation is not being recognized by potential customers. For instance, if there is no customer-oriented approach, they will not know about the company and its goods.

The limitations of the outside-in strategy are related to its customer-oriented approach. Firstly, an organization with such an approach may have an unstable internal organization, as it is not a priority for it (Gong et al., 2018). For example, the company’s internal operational issues, such as recruitment, can be less productive. Secondly, there can be less or even no culture inside the business structure, which may lead to the loss of human resources (Johnson, 2020). Finally, it is a belief that if customers are not satisfied with the solutions offered, shareholder value will be eliminated (Quach et al., 2020). This approach suggests that once solutions are not good enough, the business will decline.

Reference List

Adžić, S. (2020). The compatibility of outside-in and inside-out strategic approaches. Eurasian Business Perspectives pp. 189-199.

Gong, M., Simpson, A., Koh, L., & Tan, K. H. (2018). Inside out: The interrelationships of sustainable performance metrics and its effect on business decision making: theory and practice. Resources, Conservation and Recycling, 128, pp. 155-166.

Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2020) Fundamentals of Strategy, 5th Edn., Harlow: Pearson

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Frau, M., Moi, L., and Cabiddu, F. (2020). Outside-in, inside-out, and blended marketing strategy approach: A longitudinal case study.

Michaud, M., and Audebrand, L. K. (2019). Inside out, outside in:“supporting members” in multi-stakeholder cooperatives. Management Decision.

Kang, D. S. (2016). Turning inside out: perceived internal branding in customer-firm relationship building. Journal of Services Marketing.

Quach, S., Thaichon, P., Lee, J. Y., Weaven, S., & Palmatier, R. W. (2020). Toward a theory of outside-in marketing: Past, present, and future. Industrial Marketing Management, 89, 107-128.