The Development of the Field of Strategy and the Extent to Which This Definition Remains Appropriate Today - Literature review Example

CRITICAL EVALUATION OF DEFINITION OF STRATEGY Business in the modern world is constantly evolving. As a result of consistent change in the environment, firms are faced with challenges to overcome the hurdles which threaten their growth and sometimes even survival. In order to deal with the challenges posed by the changing dynamic environment, organisations are required to adopt and adapt to different strategies at different level of business to remain profitable (Tsai and Yen, 2008). As a result of such consistently evolving need of strategies, the considerable research has focused on the development of the strategies (Maalu & Wekesa, 2013). Importantly, the focus of the research is on the exploring and differentiating the right strategy that can direct the businesses to strengthen capabilities so that organisational operations and performance are aligned. Importance of the strategy lies in the fact of the ability of the strategy in winning the success for the organisations in terms of effective performance. However, on the other hand, the relationship of the strategy and the organisational performance is also under constant evaluation. Slater and Olsen, (2000) in a study established that the performance of the organisation receives impact from the strategy adopted by the organisation. The contrasting view is presented by Kemp and Verhoeven, (2002) strategy and the organisational performance do not share any relationship. According to Maalu & Wekesa (2013), there is consensus on the fact that the strategy in an art as well as science that guides business in planning and organise the resources for the business that produces effective and efficient results. With this consensus, different strategists have focused on different dimensions of strategy. For example, Porter (1980) referred to three generic strategies of low cost, differentiation and focus. Similarly, Miles and Snow (1978) refers that strategies followed by the organisation divides the organisation into prospects, analysers, defenders and reactors types. Another most famous strategy typology is one that is proposed from the Chandler (1962). Chandler (1962) has defined the strategy as a planned process as the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for those goals. This was the first major contribution from Chandler (1962) in the strategic development. Furthermore, Teece (2010) cites that Chandler referred that strategy also requires to respond to the environmental factors such as changing demographics, social, economic and technological factors. Another core aspect of the definition of strategy by Chandler (1962) is the direction of strategy pursuit and proposition that strategy is follows structure. According to Kiechel (2010), strategy proposition from Chandler (1962) can be referred suitable in the corporate environment of the time when the proposition was made. Organisations then were largely ready to remain on the mercy of the environmental factor. Furthermore, the organisations then had no idea that successful organisations to remain successful in the long term have to carve the opportunities for them in the evolving environmental context. Also, organisations then had no framework to design their future. The work of Chandler (1962) directed that the organisation’s top management, in addition to considering the external environment, shall determine the future objectives. With greater emphasis and responsibility laid on the structural hierarchy, Chandler (1962) referred organisation’s top management shall determine the decision to be followed in future. Hence, the businesses then received guidance that top management of the organisations along with depending on the external factors shall also make decisions to drive the organisation to a particular direction. Taking account of this definition of strategy development, the results in the modern world does not prove fruitful and effective. Zook & Allen (2001) analysed 1,854 large corporations on a global level despite of the fact that almost 90% of companies in the sample had conducted comprehensive strategic planning process. However, the analysis in the book reports from every nine organisations, only one was able to achieve the success (where success was measured with annual growth of more than 5.5% percent). Setting of the organisational long term goals can have following performance picture at the end of the strategy year: (Kaplan and Norton, 2005) The above calendar depicts that though the organisations have a strategy determined at the top level, it is not transcended to each level accordingly. The process is being individually followed at multiple levels, and there lacks alignment of all the entire organisation. For instance, human resource, finance and managerial performances are not linked to the strategy which in turn results each departments defining its own direction. On the other hand, Kaplan and Norton (2005) referred that organisations in the contemporary world have achieved success with the adoption of balance score card. To mention balance scorecard is a strategic tool to communicate and support the execution of the strategy with coordination across the board to all employees. For example, with the implementation of the balanced scorecard for the implementation of the strategy, Tesco realised the need to alter the performance measures for the company from economic value added to the stores success (Morgan, 2004). Hence, the two contrasting evidences implied that Chandler (1962) work’s main focus of decision making at the top as well setting of long term goals is not enough to generate the success in the modern business world. According to Teece (2010), Chandler (1962) definition is developed on the ground where top management of the organisation is to make a decision pertaining to the organisation. In the modern world, only setting goals by the top management and also at different hierarchical levels does not work. Instead, organisations are required to consistently evaluate the performance of the organisation across the broad (for example as balance score card evaluates the performance from four dimensions including financial performance, Customer satisfaction, improvement in Internal Business Processes and Learning and Growth of the organisation in overall performance by proactively assessing changing environmental factors) (Norreklit, 2000). This lacking of the definition of the Chandler (1962) in the view of the Barnard (1968) is determined as the creativity of the organisation lies in the coordination across the board. The successful organisations such Starbucks communicate the strategy at the level of bar-tenders and service providers and declare each employee as partners in the organisation. Additionally the matter of organisational hierarchies’ role in the strategy by Chandler (1962) is debated in the assessment of the definition by Teece (2010). Teece (2010) opined that the role of hierarchy dominance in strategy decision making appear to well suit the organisations in the era of industrialisation. However, in the modern world, the organisations are moving towards the flatter organisational structure with greater emphasis of the specialisation expertise at all levels. For example, owing to the increased expansion to new markets by Starbucks, the company has recently evolved its organisational structure to a flatter version with regional presidents for three regions as follows; All Asia Pacific markets and China; United States, Canada, Mexico and Latin America under region entitled Americas, and Europe, U.K., Middle East, Russia and Africa under the region EMEA. Each region’s president is then responsible for the conduct and result of the organisation in the pursuit of growth strategy (Starbucks, 2011). On the other hand, in the view of Mintzberg and Waters (1982) the strategy defined by Chandler (1962) is based on the planned process and decision and does account to all the practical dimensions working on the ground. Mintzberg and Waters (1982) referred that organisation in the modern world employs strategy that is altered version of the planned strategy. For example, David McConnell was a writer and offered a perfume as a marketing plan to foster sales for its non-selling books. The perfumes gained popularity and formed and levelled ground for the establishment of the California Perfume Company, which then changed the name to Avon. Avon is now among the leading cosmetic companies of the world (Ketchen & Short, 2012). Hence, the planned strategy of the selling a book changed due emergent pressures into a cosmetic company and the realised strategy is a leading cosmetic company. Hence, success of the organisation in the modern world cannot be reaped with the strategies as strictly as planned; instead it is a combination of planned and emergent strategies. Importantly, strictly following Chandler’s (1962) proposition of the planned strategy would have resulted in the complete failure of the David McConnell while the survival was ensured by taking into account the potential strengths of organisation and opportunities offered by the external environment. Strategic assessment tools like Balance Score Card directs business to alter the course the strategy in order to achieve the planned results. Notably, in the modern business world, the organisation’s success and even the survival is based on winning the competitive edge over competitors. Grant (2002) referred that an organisation’s competitive edge is the ability of the company to outperform rivals in achieving the primary objective of the business which is profitability. Molina (2003) elaborates on the link between the competitive edge and strategy. In accordance to Molina (2003), a strategy of the firm is to determine the process using which the organisation will sustain its capability of outperforming business rivals. Furthermore, the strategy determines that the company can sustain and expand its competitive edge by enhancing the value chain processes’ efficiencies and effectiveness and/ or the product and service facilitation. Hope and Hope (1997) puts competitive edge as an organisation’s success in winning the operational excellence, leadership in product or service or the strong customer bonding. For example, Starbucks in the coffee industry has achieved a competitive edge with the premium experience associated to the coffee as Starbucks experience (customer intimacy), Wal-Mart in the grocery industry has achieved an edge with cost leadership (achieved through operational excellence) while Apple in the technology industry has differentiate its products from other smart phone makers. Hence, defining strategies in order to sustain a competitive edge over competitors has enabled these companies to become leaders in the market where large number of competitors are present. This competitive edge perspective that gains success to the organisation was not referred in the definition of strategy proposed by Chandler (1962). In concise manner, Teece (2010) puts that the strategy is a systematic conduct that involves diagnosing the environment, following the guiding policy and most importantly making coherent decisions. All these efforts in turn result in the achievement of the competitive advantage for the organisation. In an assessment of the Chandler’s (1962) definition of strategy, it has been concluded that Chandler’s work was more towards defining goals while it is only one component of the strategy (Teece, 2010). As a matter of fact, Chandler’s (1962) definition of strategy lacks complete applicability in the modern business world and has received notable improvement recommendations; however, it is also a matter of fact that propositions made by the Chandler (1962) has opened the way for the further development in the strategy formulation (McGarth, 2013). This can be understood from the working conditions on the most recent business environment. Organisations in the most recent business environment are facing the challenge of continuing success with a competitive advantage as the competitive advantage in hyper competition markets are being copied. Businesses in their strategies are now aimed towards gaining sustainable competitive advantage (McGarth, 2013). McGarth (2013) has referred different options such as Option reasoning where investment is to be made in the future while controlling the risk of heavy losses or investing in expanding and specialising in the opportunity recognition to act proactively as compared to competitor etc. Competitive edge of the organisation becomes sustainable and is not easily exploitable by the existing and potential competitors (McGarth, 2013). Hence, criticism to Chandler (1962) is a way to open ways for development for future. List of References Barnard, C. I. (1968). The functions of the executive (Vol. 11). Harvard University Press Chandler AD (1962). Strategy and structure, Cambridge, Ma: MIT Press Grant, R. M. (2002). Contemporary Strategy Analysis: concepts, techniques, and applications. Oxford: Blackwell Publishers Hope, J., & Hope, T. (1997). Competing in the third wave: the ten key management issues of the information age. Harvard Business Press. Kaplan, R. and Norton, D. (2005). The office of strategy management. Available from http://hbr.org/2005/10/the-office-of-strategy-management/ar/1 [Accessed 3 April 2014] Kemp, R. G., & Verhoeven, W. H. J. (2002). Growth patterns of medium-sized fast-growing firms. EIM Business & Policy Research. Ketchen, D., & Short, J. (2012). Mastering Strategic Management. Irvington, NY: Flat World Kiechel, W. (2010). Seven Chapters of Strategic Wisdom. Available from http://www.strategy-business.com/article/10109?pg=all [Accessed 3 April 2014] Maalu, J. K., & Wekesa, L. C. (2013). Firm strategy impact on performance of small and medium enterprises. Prime Journal of Social Science, vol. 2, no. 1, pp. 176-180 McGarth, R. (2013). The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as your business. Boston: Harvard Business School Mintzberg, H., & Waters, J. A. 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