Strategies - Essay Example

?Running Head: Strategies Strategies [Institute’s Strategies Introduction Once there were two company presidents, which decidedto go on a camping trip. The trip was just an excuse to get into an informal, pleasant, and comfortable environment so that they could talk about a possible merger. While talking about the merger and various other things, both the presidents hiked deep into the woods. Suddenly, they heard some strange but familiar noises. Within a few seconds, they were able to spot a monstrous bear, which was running towards them from some distance. He was up on his hind legs and snarled. Within flashes, the first president took off his knap stick, took out of his pair of jogging shoes, wore them and was on the go. The second president both confused and scared, said to him “Hey! You cannot outrun this bear. He is huge smart and twice as fast as you”. The second president replied,” I know that I cannot outrun the bear but I can surely outrun you. (Gamble & Thompson, pp. 89-91, 2008) (David, pp. 36-39, 2007)” This story mentioned above that the underlying purpose behind “strategy making” and strategic management by firms so that they could gain competitive advantage. Over the past decade or so, many factors ranging from globalization to new entrants, customer awareness to saturating markets, increasing costs to pressures for innovation, lifting of trade barriers to diversity management, stumbling economies to extensive legislation and many others have made the very survival of the companies a big issue for themselves. The market place is now a red ocean, where the only way to succeed is to take away the other’s share of pie. Price wars, value additions, differentiation, innovation are common and all are eating way company’s profits (Mintzberg, pp. 145-146, 2008). This explains why it is important for companies to gain that competitive advantage. Important here to note, that allowing companies to create, harness and nurture competitive advantages is the underlying idea behind strategy formulation or strategic management. However, over the past few years, there has been a new viewpoint in academic and scholarly circles, which has been repeatedly saying, “Strategies aren't worth the paper they're written on.” This paper is an attempt to analyze critically this statement by presenting the two case studies, one of Continental Airlines in favor of strategy and the case of Japanese firms in against of strategy. In light of both of these case studies, the paper will move towards conclusion taking either side of favor or against of strategies. Discussion Case of Continental Airlines In 1994, when Gordon Bethune took over Continental Airlines as the CEO of the company, the company was in the worst possible condition to lead. The company has to take Chapter 11 bankruptcy protection twice during the time period of 1983-1994 (Bethune & Huler, pp. 96-98, 1999). Despite the fact that the company was somewhat able to emerge out of the bankruptcy protection both the times but the problems for the firm were not over. Since 1983, nine different CEOs have tried to fix the company but all in vain. Regardless of the revenues of more than 6 billion US dollars, the company was running in a loss since 1985 (Neff, Citrin & Brown, pp. 142-143, 1999). Continental was the worst possible employer during that era. Wage freezes, back biting, infighting, departmental fights, power struggles, high turnover, use of sick time, use of absences, highest number of mishandled baggage reports, ranking last in terms of on time arrival: these and many others were the highlights by which Continental’s culture was characterized during that era (Hill & Jones, pp. 46-48, 2007). People felt like that, they do not want to come to work and even if they did they were crummy to their co-workers and they were unpleasant to the customers as well. In fact, many employees would remove their company badges during lunchtime or on their way home because they did not want to associate themselves with the company (Gamble & Thompson, pp. 89-91, 2008). However, Gordon Bethune was the man that turned the company around. Under his leadership, not only the company was able to put a full stop to its problems but also towards the end of 1900s, the company started growing again. Without any doubts, Bethune had plan in mind, a clear, well-defined “strategy” to make sure that the company gets back on track. During the mid of 1994, the presented his strategic plan to the board of directors of the company which was approved and he was granted extra powers to make the execution of the plan possible. Bethune named the plan as “Go Forward Plan” which had four distinct parts. These were Market Plan: Fly to Win, The Financial Plan: Fund the Future, The Product Plan: Make Reliability a Reality and The People Plan: Working Together (Neff, Citrin & Brown, pp. 142-143, 1999). The strategy under “The Market Plan: Fly to Win” was that Continental should start exploiting its internal strengths and stop doing things, which the company is not good at doing. In simple words, stop the things, which are losing money and concentrate on the things, which order winners for the company. Examples include selling the plans that are not attracting enough customers, raising fares on selected routes, stopping the offer of “Continental Lite. (Bethune & Huler, pp. 96-98, 1999)” The main idea behind the Financial Plan: Fund the Future was to make sure that the company shows a profit of at least 45 million US dollars, which would have been a great success considering the 200 million US dollars of losses that the company incurred in the year 1994. The plan was to sell some planes, restructure the debts, and delay the purchase of new planes disposing off certain assets and raise fares on certain routes (Hill & Jones, pp. 46-48, 2007). The Product Plan: Make reliability a Reality was all about making sure that the on time performance of the plan could be improved. Bethune announced a US$65.00 bonus for all employees of the company, if the airline would make it to the top five airlines in terms of on time performance every month, according to the data of US department of transportation (Mintzberg, pp. 145-146, 2008). Lastly, The People Plan: Working Together was aimed at improving the organisation culture of Continental from that of backbiting and mistrust to that of confidence, mutuality, and trust. Despite the fact that there were many exceptional things that Bethune had done during the strategy execution phase, however, the major recipe of his success was the strategic direction in form of the “Go Forward Plan” that he gave to the company. As mentioned earlier that before Bethune, nine different experienced, well learned CEOs from outside and from the inside tried to fix the company. However, Bethune was the only one who was able to make things happen. Other CEOs that tried to change the company were doing everything right but the one thing that was clearly missing in their approaches was a clear strategic plan. Despite all the sincerity in their actions and hard work in their efforts, none of them was able to show the results because they lack strategic direction. As Joel Ross said, “Without a strategy, an organization is like a ship without a rudder, going around in circles. Its like a tramp, it has no place to go. (Gamble & Thompson, pp. 89-91, 2008)” Case of Japanese Companies It was during the revolution of 1970s and 1980s that many Japanese companies came onto the scene with their techniques’ of group work, continuous improvement, total quality management, and others. Quite clearly, many of these firms were able to influence their respective markets and gain significant market shares in their respective industries. However, the problem with Japanese has been the fact that they rarely have strategies (Montgomery & Porter, pp. 365-366, 1991). These firms live by the rule, principal or ideal of imitation. The idea is keep a close eye on the offering of the competitors and create a product line similar to that of the competitor, even copying the marketing and distribution channels. Important here to note is that if these companies do not have a clear strategy then why they have been able to such success over the past few decades. The answer lies in the productivity frontier or the state of best practice. These companies have worked extremely hard towards making sure that they provide superior quality to their customers and at the same time, they are decreasing their operational costs as well. However, it appears that these companies are falling into their own trap (Pascale & Athos, pp. 55-58, 1986). Pushing the productivity frontier to extreme possible limits may be good for the customers but is extremely detrimental to the company and to the industry as well. Furthermore, the competitors are quick enough in copying these practices of operational efficiency thus washing way the advantage for the leader of invention and raising the bar for every one. Today, Japanese companies are realizing that what they have been doing over the past few decades has made the industry structure unfavorable for them. Rather than copying other players of the world, they should have tried to occupy unique and new positions in the market by better and innovative strategies (Mintzberg, Ahlstrand & Lampel, pp. 257-258 2009). However, one of the reasons why Japanese companies try to stay away from the strategy making process is because of the fact that it is somewhat not in line with the Japanese cultures of consensus making, collectivism, and agreeableness (Day, Reibstein & Gunther., pp. 87-89, 2004). Strategy formulation is not a straightforward process and requires the formulators to take some tough decisions, decisions they would not have thought of under normal circumstances. Achieving consensus of all people for on the given strategy is almost impossible and whenever strategies are being made, there is no concept of taking everyone on board (Mintzberg, pp. 149, 1994) . Conclusion It is evident from the above-mentioned cases that strategy making is not at all waste of time or paper. There are firms that deliberately choose not to formulate strategies, make visions, and decide on their mission mostly, these firms stay away from strategies because they know that they are not capable of doing the same. As mentioned earlier that strategy making is a tough and painful process where difficult and otherwise unimaginable decisions are taken (Pietersen, pp. 6-7, 2002). Gone are the days, when firms has to see and react, today the market place has became so cruel that proactiveness has become the key to survival. The future and direction is a company is too important to leave on environment, luck, and fate (Mintzberg, Ahlstrand & Lampel, pp. 257-258 2009). Smart companies and successful leaders know that they can write their own future and they can tame their own future by deciding on their strategies and choosing on their direction. Furthermore, with the help of proactive, planned and visionary strategies, firms take positions in the market place which do not only create benefits for the firm it self but improves the overall structure of the industry (Goldman & Nieuwenhuizen, pp. 18, 2008). When companies face each other without clear strategies, they end up increasing the rivalry to such levels that overall profitability of industry goes down. Therefore, with any doubts, strategy and strategic management is one of the most important aspects of business and avoiding the same may be too risky (Page, pp. 41-42, 2002). The paper used for strategy making is worth much more than their worth of thousands of those papers given that the firm knows how to go successfully through the stages of strategy implementation and strategy evaluation (Day, Reibstein & Gunther., pp. 87-89, 2004). References Bethune, Gordon, & Huler, Scott. 1999. From Worst to First: Behind the Scenes of Continental's Remarkable Comeback. John Wiley & Sons. David, Fred R. 2007. Strategic management: cases. Pearson Prentice Hall. Day, George S., Reibstein, David J., & Gunther, Robert E. 2004. Wharton on Dynamic Competitive Strategy. John Wiley and Sons. Gamble, John E., & Thompson, Arthur A. 2008. Essentials of strategic management: the quest for competitive advantage. McGraw-Hill Irwin. Goldman, Geoff, & Nieuwenhuizen, Cecile. 2008. Strategy: Sustaining Competitive Advantage in a Globalised Context. Juta and Company Ltd. Hill, Charles W. L., & Jones, Gareth R. 2007. Strategic Management: An Integrated Approach. Cengage Learning. Mintzberg, Henry, Ahlstrand, Bruce, & Lampel, Joseph. 2009. Strategy safari: the complete guide through the wilds of strategic management. Pearson Prentice Hall. Mintzberg, Henry. 1994. The rise and fall of strategic planning: reconceiving roles for planning, plans, planners. Simon and Schuster. Mintzberg, Henry. 2008. Strategy Bites Back: It is a Lot More, and Less, Than You Ever Imagined. 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