Theories on Strategy Making Processes - Coursework Example

Theories on strategy making processes Introduction Strategy is important to a firm because it is the strength of strategy that decides how a company performs its expected role. Therefore it need not be overstated that the process of strategy making is one of the most important activities that take place in a company. This is because all future activities of the company will depend on the strength of the decision-making process. The strategy making process is a complicated one because it had to take into account various activities of the firm and manage them all. An effective strategy that provides direction to the company has to make a fit out all the situations in the company and derive a plan of action that can apply well to the complexity of the situation at hand. Analysis Business entrepreneurs often make decisions that help them to create a niche business segment in the highly competitive market. This in turn helps them to create value for a product that can create waves in the business world. There are many theories that have diverse views on the strategy making process. For example, The Michael Porter perspective puts emphasis on the fact that companies have to create strategies that makes the firm distinct from its competitors. According to Porter, a company may be said to be following good strategic principles if it follows a set of actions differently from its competitors. This change in attitude, if sustainable, will create value for the firm. It may be seen that many leading companies in the world have adopted various strategies to remain different from their competitors. This is because a change in strategy will make the company distinct in the minds of the consumers. A change may also help companies to create better value for themselves by pursuing a course of action that is different from the existing one. Hence, a different idea of performing a task can reap substantial values for a company. This also means that companies must not merely imitate in order to succeed in the market. Sometimes companies blindly imitate the strategy of a company that would have made it successful. However, it must be kept in mind that a strategy is unique for a company because the situations that it has to deal are unique. Hence no two strategies may be the same for two different companies. Some companies may consider value as more important than economic considerations. A strong public image is important for a company’s strategy because the success of the company will depend a lot on the acceptance of these strategies by the public. A company that has better credibility will find it easier to float its shares in the market, while an unpopular firm cannot generate trust from the public. It is a common observation that the success of the company policies is always associated with public credibility. The Classical Approach of strategy making by Chandler, Ansoff says that the strategy making process is determined by a person who has the position to impose his or her views on the company. In this theory, a manager or a person of utmost influence in the company makes a decision that is imposed on the rank and staff of the company. This leaves little scope for other staff members to contribute to the decision making process because the boss will finally decide what is to be done in the company. According to this theory, the strategy making process is highly personal because all the decisions are dependent on one person. Depending upon the person who leads the firm, the strategy making process becomes a collective decision-making process, or a one man show. It must be said that according to this theory, the strategy-making process can be a failure or success depending on the success of one person because too much stress is placed on one person. Unlike a collective effort where many people contribute to the success of a strategy, the classical view of strategy-making places all the responsibility on the shoulders of one person and the outcome is heavily dependent on the analysing capacities of one person [Francis 1991] According to the Processsual Approaches by Cyert and March and Mintzberg, strategy- making is an evolutionary process. Here the stress is more on the circumstances that drive the strategy-making process than the individual who is called upon to make the decision. This is a unique theory because it lays so much of importance on how businesses develop and evolve in a market. According to the growth of the business, strategies will have to be changed to suit the mood and tenor of the business. Hence, a company that finds itself in a precarious position will have to create strategies that will help it to cope with the challenges posed by the business environment. Here, the manager or the decision maker is not the ultimate force that creates a decision for the company. It is the circumstances that coerce the company to take decisions. Of course, decision taken today will manifest as circumstances in the future. According to this theory, strategy making a collaborative process where the experiences, instincts and projections of many individuals pass through a brainstorming session that finally helps in the creation of a strategy that is apt for the company. In this decision-making process, the weight of the strategy rests on the shoulders of many people and many people are responsible for the creation and implementation of a strategy. Here, a strategy that is appropriate for the company is selected after many rounds of negotiations and a collective weighing of the pros and cons that the company will have to pass through by implementing the chosen decision. Detractors of the theory believe that the strategy is determined by the environment and the politics of candidates who will have a say in the decision-making process. Hence a company may have to forcibly adhere to a strategy that may be supported by more number of people, but may not be appropriate for the company at that particular point of time. The leader-member exchange model essentially states that there are some people (called the “in group”) who are close to the manager, while there are some others who maintain a distance from the manager (called the “out group”). The members of the “in group” are the close confidents of the manager, while only professional duties are expected from the “out group” [Greg, 2004] The Carnegie School’s theory of decision making also highlights the fact that politics play a significant role in the creation of strategy for a company. We can see that politics play an important role in each aspect of modern companies. Those within the company who have enough lobbying power will be able to force the company to take decisions that may often go against the grain of the company principles. In fact, politically-biased decisions can be viewed in almost any major company worth its name. The biggest drawback in such a strategy-making process is that when strategy is based on consensus, the strategy is made to satisfy influential members than the problem at hand. The manager may often have to strain to select an appropriate strategy that is helpful to the company. He may also have to balance between strategies and make concessions in order to keep some people in good humour [Mayer, 1998] The Systemic Perspectives by Granovetter and Whitley say that there are many factors other than economic considerations that affect the strategy-making process. For example, the social constructivist view by Huff suggests that the strategy-making is not cognitive, but cultural. This is because culture is a series of social systems, which affect the decision making capacities of individuals. In a company the organisational culture will have a strong influence on the strategy-making process in the company [Burrows 2000] All these theories indicate that strategies are created by a cognitive process that decides where the company is, what it plans to achieve and how it plans to achieve what it plans to achieve. The amount of introspection that goes into all these processes finally decide the strategy that will be adopted by the company. Hence it becomes evident that a lot of factors that influence the human mind and its decision-making capacities will influence the way a strategy is created for a company. References 1. Thomas Greg, 2004, Leader-Member Exchange Theory (LMX), retrieved from http://www.leadingtoday.org/Onmag/nov03/LMX112003.html on April 30, 2004 2. Francis, David R. "Prevent Trouble by Improving Ethics". Christian Science Monitor, p. 9, June 1991 3. Mayer h. John, 1998, Avoiding a fools mission, Software Magazine, Issue: Feb, 1998 4. Peter Burrows 2000, Business Week, July 24, 2000; New York; Read More