Complexity of Process of Strategy - Coursework Example

Running Head: STRATEGY: ITS COMPLEX PROCESS Strategy: Its Complex Process [The Writer’s Name] [The Name of the Institution] Strategy: Its Complex Process Nowadays, strategy is the focal point of all business ventures. It is essential to any successful business. In a nutshell, a strategy means the actions that manager’s take to attain the goals of the firm (Mintzberg, Quinn and Voyer, 1995, 57-60). Strategy planning is the process of developing and implementing plans to reach goals and objectives. Strategic planning, more than anything else, is what gives direction to an organization and actions necessary to improve its performance. The vision of strategy may be broadened by observing that strategy is the process of deciding how to best position the organization in its competitive environment in order to achieve and sustain competitive advantage, profitably. Strategy is formed at both corporate level i.e. what industries/markets should we operate in and business unit level i.e. in what segments should we compete — and how. The pace of change has significantly increased in recent years and the competitive arena has enlarged, driven by, for example, larger international corporate businessmen with an appetite for new markets, reduced barriers to international trade, and technology. This paper sets out to determine the complexity of process of strategy, fundamentally the differences between 3 forms of strategy, namely the planned strategy, emergent strategy and scenario planning. In accordance with this, the advantages and disadvantages of these strategic thought in relation to the development of primary/core strategy. It also attempts to look at the differences between the proponents and opponents of strategy, in that a discussion is based on why planning is much maligned by its opponents. Business or organisational strategy is what the management of an organisation undertakes in order to exploit the planning environment and maximise the future use of its capital and human assets (Tyson, 1995, 210-15). Strategy is concerned with the fit between the organisation and its environment; it seeks innovation and change in the organisation and it affects the overall direction of the organisation (McKenna and Beech, 2002, 21-24). Strategic planning is the process of setting organisational objectives and deciding on the programmes of action to achieve these objectives. There are two different approaches to strategic planning: prescriptive and descriptive (Mintzberg et al., 1998, 22-23). The prescriptive school of strategy places emphasis on the design, planning and positioning (McKenna and Beech, 2002, 21-24). The design is concerned with matching internal capabilities of the organisation to the external opportunities and environment (Andrews, 1987, 97-101); the planning is to predict and prepare for the future; the positioning decides the position of the organisation in relation to its supplies, competitors and customers (McKenna and Beech, 2002, 21-24). The descriptive school focuses on four perspectives: vision, learning, power and culture (Mintzberg et al., 1998). The two schools of approaches to strategy help to explain the different models that link business strategy to human resource strategy: the matching model, the resource-based model and the processual model. The matching model is a traditional model that focuses on strategic integration to bring about a good fit between human resource policies and the company's strategy that would help management to improve organisational performance (Tyson, 1995, 210-15). The resource-based model is primarily concerned with internal competences of the organisation in order to respond well to external opportunities (Barney, 1991, 99-120); it aims at meeting market demands and criteria with various resources and productive capabilities to generate sustained advantage (Boxall, 1996, 59-75) because such advantage lies in the people and processes capable of delivering business organisation (Gratton et al., 1999, 17-31). The processual model, on the other hand, has many characteristics of the descriptive theories of strategy (Mintzberg et al., 1998) and views strategy as the outcome of both planned and unplanned activities (McKenna and Beech, 2002, 21-24). Inhibiting Factors To identify the factors likely to hinder strategic integration, it is necessary to look first at the basic organisational requirements, the human resource policies and employee relations. The basic organisational requirements are management commitment to HRM, strong human resource force and integrated operations staff administration. The commitment of top management to effective HRM is an important basic organisational requirement crucial to its competitive success. The formulation of business plans should take into account human resource issues. Low top management commitment means that important human resource advice will often be ignored. This gives rise to the need of a strong human resource force at a high level within the organisation. However, the common problem faced by many organisations today is the inadequate influence by the human resource department. If the human resource force becomes too powerful, HRM decisions inadequate for the operational process might dominate. So a balanced integration of responsibilities between operations managers and human resource department is fundamental to the strategic integration. The pursuing of a coherent range of human resource policies contributes to business success (Tyson, 1995, 210-15). The policies adopted by an organisation are strongly influenced by the economic and institutional environment. An organisation should design human resource policies that suit its strategy and technology (Baron and Kreps, 1999, 70-72). Management needs to consciously promote motivating policies, especially concerning salary and working conditions, to reduce dissatisfactions of employees (Kakabadse, 1983). Strategic Process and Implementation Strategic management has commonly been portrayed as revolving around the discrete phases of formulation, implementation, and control, carried out in almost cascading steps (Mintzberg, Ahlstrand and Lampel, 1998, 22-23). These are three steps of the planned approach to strategy involves a formal process to strategy formation: problem awareness, the development of solutions and the selection of a solution (Forbes and Fletcher, 2000, 125-45). In the same context, Marlo (2000: 135-48) denoted a planned strategy comprising of a declaration of specific and expressed intentions, supported with formal controls. Jauch and Osborn (1991: 491-98) commented with his realization that towards a successful outcome of the strategy, a firm structure is necessary for an organization. Hence all decisions made from the top management can be carried out throughout the organization, with the “people” convinced and act in ways that are expected to create desirable results ad hoc to the plan. Therefore, strategy-making authority rests with top management, committing a centralized power in an organization. In view of the forward looking nature of a planned strategy, Mazzolini (1988: 85-96) observed that goals or objective fulfilments are the critical outcome of the strategy. In a foresight, Snow and Hambrick (1992: 527-38) notes that the planned strategy is decision making to attain corporate goals in the future which are treated in a formal, explicit and systematic process. Harrison and Philips (1991: 319-58) found out that a planned strategy is often billed as a future oriented activity, merely projecting the recent past into the future. Through this process, it carries out operational planning, project planning and strategic planning constantly, making sure that top management holds the influence and control for the undertaking in the future. The basic concept behind planned strategy is just exactly what the name implies meaning that it is planned therefore at best a guess/forecast which then is the basis for any type of decision making. Typically, organizations will “plan”/forecast variables that they foresee that will have an future impact on their business, so they anticipate certain events to occur in the future, and as a result of this anticipation they design and implement a strategy to effectively allocate the proper resources in place to either minimize or maximize respectively the negative or positive effects of the event. In essence, it allows an organization to “see the bigger picture” of the challenges and opportunities ahead of them. Any form of planned strategy will contain some element of contingency planning, though not much, but these contingencies is not the focal point of planned strategy. Opponents of this type of strategy believe that this strategy is at best a guess, which could be totally wrong. An example of such a strategy failing was the lack of business planners to adequately factor “terrorism issues” in their business planning, The business planners in the airline industry were hit the hardest during 9/11, as their planned strategy had no contingency to allow for such losses in their business. As with all strategic level decision making there are pros and cons (advantages and disadvantages) to every decision, so is the case with planned strategy, which are outlined below: A major advantage is that a good strategic planning process involves the establishment of a clear goal and the necessary processes to achieve it (Armstrong, 1982). The main advantages to use formalized strategic planning in that it facilitates the inclusion of strategy in the corporate agenda and a direct result of the strategic planning process increases staff awareness and enhanced participation in the strategic plan. In addition, (Mang, 2000) argued that those strategic ideas might emerge from everybody, anywhere, anytime, through trial and error or through planning in that it allows the strategic planner to address and incorporate suggestions on strategy that might not have occurred to him/her. Planned strategy is controllable for future occurrence and it makes current planners involved. It makes decision making rational. It pushes for coordination and every person involved such as suppliers and customers are represented and taken care of resulting in a more effective supply chain and customer relations. It also reduces company's risk when entering a new strategy (Shiner. D, 1998, 23-31). Furthermore, Mintzberg (1994: 119-30) pointed out that creating and integrating the efforts of the organization properly can be made sure by developing efficient internal coordination of activities with decision making in a single process. It also allows for greater control, which is vital in formalizing strategy making, for it makes certain that actions are taken care of progressively and quality, accuracy and completeness are taken into account, optimal coordination of these gives the organization the control for the future, both internal and external (Dean and Sharfman, 1995: 450-63). Integrating control into preparation, evaluation and implementation of decision making will result in realization on ways towards the desired future of an organization (Miller, 1987, 7-32). In other words, effectiveness and efficiency as a whole can be attained when strategy is divided into measurable and realistic objectives to each part of the organization by expressing courses of actions clearly (Eisenhardt, 2001, 106-16). Mintzberg (1994: 119-30) paper suggested three disadvantage of planned strategy. He argued that primary among these was the planners’ inability to foresee the market position in the future. Basically any form of planning is at best a guess, no matter how accurately one tries to forecast it, it is still a guess, and sometimes guesses can go wrong. Secondly, Mintzberg held strong opposition that the theory, which formalized strategy, can produce strategies, which implied significant resource deployment (in terms of expenditure) and time consumption. Lastly Mintzberg, argued that administration and operations part of formulating a strategy are both very different. Additionally, a planned strategy limits an organization’s flexibility as it confines in one course of action depicting the occurrence of a means-end shift (Fredrickson and Mitchell, 1986, 399-423). Originally, the means to an end, the plan becomes the end and adjustments in the plan are instinctively resisted. Harrison and Philips (1991: 319-58) commented that the basis of a planned strategy is often built on future plans. However, when organizational resources are allocated based on future plans instead of past performances; the risk of strategy turning into a crisis naturally exists. Moreover, planned strategy overemphasizes the degree to which it is possible to foresee which competences or strategic positions. Little emphasis has been put upon the importance and challenge of creating and executing the chosen strategy. It is not capable with the intense rapid change in the industries. It also might make the organization lose important sharing bond that will improve the overall organizational performance (Shiner, D, 1998, 23-31). Another disadvantage is that planned strategy often makes top management neglect that individual and teamwork effort can coordinate better to qualitative goals and measures that relate directly to their job (Amit and Schoemaker, 1993: 33-46). As they are assessed on the ability to allocate capital effectively, makes a great deal for top management. The emergent strategy, however, is in sharp contrast to planned strategy. Emergent strategy views strategies as “emerging from” the organization from time to time, rather than “planned for” the firm at particular decision points. It will make clear the pursuit of consistent actions by the organization that was not included in its formal intentions and indicate the flexibility and ability to respond to circumstances by the management (Pettigrew, 1992, 5-16). Interestingly though emergent strategies have existed historically, but have been in the limelight and thus were not incorporated into the formal planning concept (Shiner, D, 1998, 23-31) Dill (1979: 47-51) has called” machismo management” were “deliberate” and “emergent” strategies two distinct phenomena in practice. Then there might be merit in implementing the label strategy only to the formal (Mintzberg, Henry and McHugh, Alexandra, 1985: 160-97). The main advantage of emergent strategy is apparent because it allows a response to a real situation, which the planned strategy does not do. Emergent strategy is particularly important during times of challenge, perhaps owing to some external threat, or to internal change (Mintzberg, 1994, 119-30). Secondly it encourages open communication and information sharing which enhance relationship between companies and alliances. It also gives the flexibility to adapt to the changing technology and market trend (Shiner, D, 1998, 23-31). Emergent planning is used to drive flexibility in the implementation of plans, making change to strategies to respond to the dynamic environment, and plan is used as parameters and guidance rather than as process boundaries and control. Additionally, the emergent strategy reduces power of control and creates an urge to management and business units of the organization for flexibility of their work in effort to create a stimulus for innovative directions; contrast to the inflexibility of a planned strategy. However, there are a number of disadvantages to the emergent strategy. Primary among these is that managers may not be able to plan effectively, they may focus too much on change only, and may it be market change or product change. No matter how adaptable the strategy is, the future is still unpredictable (Shiner, D, 1998, 23-31). Secondly, it opens an exposure to risk of focusing too much on short term and neglects strategic thought in the absence of organizational objectives (McDermott and O’Connor, 2002, 424-38). Lastly, Liedtkla and Rosenblum (1996: 141-57) observed that lower level management was unable to deal responsibly with high level of uncertainty, so order and stability cannot be maintained. Scenario planning is a method for learning about the future by understanding the nature and impact of the most uncertain and important driving forces affecting our future. Scenario planning is more focused on describing the future rather then forecasting the future. Scenario planning is a method of planning; it contains both planned and emergent elements. Planned strategy is about forecasting, predicting, plan and controls the future. However, scenario strategy is about describing the future, which has at least two alternative futures. It helps the manager be realistic and understand the outside world more. In other words, scenario planning is more flexible (at least have two alternatives) compare with the planned strategy (fix strategy, trying to expect the unexpected). Rather than rely on a single “most likely” forecast. In addition, scenario planning is very effective at identifying growth strategies for the company as well as potential threats to the market positions. Moreover, scenarios can also identify the specific external industry changes that are causing the company to lose market share or margins. On the contrary, the disadvantages of scenario planning are (1) stuck - it takes a long time to describe the things that may happen in the future (2) there are too many alternatives, which are difficult for the manager to access (3) it is impossible to expect the unexpected (4) finally, it is difficult to manage when there are too many possibilities. The company cannot afford to do the research for all of the alternatives. Despite the advantages of three strategies outlined above, there is much debate and controversy surrounding the issue. Central to this is that planning is maligned in terms of its formal structure and control. The proponents of planning argue that it is much more about a system for thinking rather than of control. The opponents think otherwise. At grass-root level planned strategy is more about control, whereas emergent and scenario planning is more about thinking. Planning is essential for an organization, and scenario planning is perhaps the best way to design the core strategy of the company. A strategic plan is as good as the paper it is written on if it does not remain open to changes in the future if there is need for the change. Remember that despite however many scenarios are planned for there will come situations no-one can predict (such as Sept 11). However, the organization should keep in mind that any strategy adopted needs to remain flexible and customizable if situation calls for it. Effective human resource policies lead to better adaptability of social environment and so the relationships with employees are less likely to be undermined. If good employee relations are not maintained, conflicts can occur at collective level, leading to strikes, or individual level, leading to absenteeism or even sabotage, that are potentially damaging for the organisation (McKenna and Beech, 2002, 21-24). Important elements of employee relations include: the level of employee participation, the trade union representation, the issues of conflict in organisations, the diversity of ethical issues and the health and safety at work. What is difficult in achieving efficient employment relations is the sacrifice of immediate self-interest for the common good by both the employers and employees because the compensation may be insufficient for the inconvenience (Baron and Kreps, 1999, 70-72). Conclusion Human resources are an important factor to organisational success (Baron and Kreps, 1999, 70-72), as evidenced in a study by Becker and Huselid (1998, 53-101) who found that considerable differences in organisational performance were attributable to the implementation of high performance HRM practices. Many elements inherent in the strategic integration of human resource policies with business strategies are potentially capable of inhibiting the progress. These range from the basic organisational requirements of management commitment and strong human resource force to the complex human resource policies and delicate employee relations. The internal structure and external forces of an organisation are also sources of impediments; these can be broad topics of debate or detailed issues of discontent. In any discussion concerning HRM, the human factor is perhaps the most important one since it is connected to all other elements. Each of the factors presents a different challenge to the implementation of strategic HRM. Attention should be paid to all these factors to ensure smooth operations of the organisation in carrying out strategic plans. Though conflicts of interests may occur at different stages, it is believed that these will be resolved in an effective manner and the organisation will enjoy the reward of success. It is critical for the organization to make a decision, to use strategic plans as guidelines for following competitive actions or apply emergent strategies in unplanned situations, assuming within the context of organizational objectives, as opportunities and threats are embraced. To come across those conditions that support the expression of planned or emergent strategic behaviours, and provide guidelines that advise when each of these behavioural patterns that fit best. The structure of the industry will significantly affect the profit potential of the business operating in that industry. The strategy and actions of a business operating in the industry may improve or destroy the industry structure. Each business and the relevant decision takers must recognize and evaluate the impact, short term and long term, of actions taken on the overall industry structure and attractiveness. For many more complex organizations operating in sophisticated markets an `industry-wide' approach locks the business into the `mindset' of differentiation or cost leadership. This may lead to inappropriate approaches being taken to certain segments of the market. Competitive positioning is best examined at Strategic Business Unit (SBU) level where the relevant competitive strategy can be identified in direct relation to specific customers and competitors. This enables a tailored approach to be adopted for each SBU. In turn this may lead to cost efficiency by ensuring that only the specific competitive requirements of the segment are addressed rather than, for example, market/industry wide differentiation approaches which may add significant cost. The differentiation strategy is often the most `attractive' in that it provides the opportunity for a more creative approach to the market. For this reason the organization tends to be marketing led. It is vital in these business units that the cost/benefit analysis of any new form of differentiation is thoroughly evaluated. In addition, sensitivity analysis must be used to look at the viability of the associated cost base at different levels of sales performance and in different market conditions. The cost leadership strategy often requires a `lean' culture and is usually perceived as `unattractive' with the consistent focus on cost management and efficiency. A tendency to be production or operations led therefore emerges. This produces a concentration on standardization of products, components and processes with the minimization of variations/derivatives. A fine balance needs to be achieved between maintaining a narrow range of products/services and meeting the varying needs of different customer groups. A major evolutionary leap requires a tangible, visible strategy supported by clear corporate goals and a common sense of purpose. Success depends on harnessing each aspect of the organization — the culture, the people and the systems — and focusing attention in the same direction. In practical complex process of strategy implementation, it is the lack of proper leadership, applied to both the task and the people requirements, that leads to ineffective implementation of the actions arising from the strategic review and business planning processes. The strategy is fine; it is the implementation that fails. References Amit, R. & Schoemaker, P. J. H., 1993, “Strategic assets and organizational rent”. 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