Keeping the Organization on the Right Path of Growth - Essay Example

? Business Strategy Business Strategy Business works or functions on strategies. Without strategies, no business can survive for longer periods. The business environment is changing day by day and it is necessary for the business people to change or update their strategies based on the changing business environment. For example, globalization has produced revolutionary changes in the domestic and cross border business activities. The importance of business processing and customer processing has been understood by the organizations more than ever under the current globalized business environment. Outsourcing and offshoring are some of the new business concepts contributed by globalization. These business strategies help the entrepreneurs to exploit overseas markets. Those who stick with the old business strategies may not take advantage of these revolutionary business concepts and may struggle to survive in the market. “Competition existed long before strategy. It began with life itself” (Henderson,1989, 139). Competition is becoming intense in every field of life and business is also not an exception. In order to stay in the market most of the organizations devises new strategies and approaches within and outside their organization. According to Markides (1999:6) “Behind every successful company there is a superior strategy; however there is little agreement on what strategy is or how to develop a good one”. This paper critically analyses the importance of strategy in business. Importance of strategy in business “There are two major types of strategy: (1) corporate strategy, in which companies decide which line or lines of business to engage in; and (2) business or competitive strategy, which sets the framework for achieving success in a particular business”(Strategy formulation, n. d). Business strategy seems to be getting more attention than the corporate strategy because of the importance of it in determining future of the organization. “Strategy sets direction, defines the organization, focuses effort and provides consistency” (Mintzberg et al, 1998, Ch.1). Proper strategy helps an organization to stay in the right direction even if the business climate or environment fluctuates. It is not necessary that the business environment remains stationary all the time. For example, the recent financial crisis came quite unexpectedly and many big organizations struggled for survival. However, the negative effects of recession have not affected some organizations very much. For example, Apple Inc escaped from recession without much trouble whereas Lehman Brothers faced immense problems. This is because of the better business strategies of Apple Inc compared to that of Lehman Brothers. Negative entropy, Feedback and Steady state etc are some of the business strategies adopted by organizations. Negative entropy is a scenario in which organizations conserve something for the harder times. Apple Inc succeeded in conserving something for the harder times whereas Lehman Brother failed to do so. Feedback is another important business strategy through which an organization fine tunes its strategies. Negative feedback enables the organization to correct deviations or problems. For example, most of the new products developed by organizations will be tested in the market for a substantial period of time before the introduction of the final product. This is a business strategy adopted by organizations ensure the success of the new product in the market. Steady state refers to the balance to be maintained between inputs from the external environment and the outputs going back to it. In other words, “Companies should define their strategy not based on the product they are selling, but according to the underlying functionality of the product they are selling” (Markides, 1999, p.6). It is necessary to know the market requirement of a product before deciding about the amount of production. So the inputs from the market collected through various market research methods will help an organization decide about the amount of product needed by the market. Strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations. Strategic Decisions are About; The long-term direction of the organization; The scope of an organization’s activities; Gaining advantage over competitors; Addressing changes in the business environment; Building on resources and competences (capability); Values and expectations of stakeholders which affect operational decisions (Exploring corporate strategy, 2008, p.1-8&9) For example, when Microsoft introduced their Windows operating system in the 90’s, it was a big hit. In fact Windows operating system helped Microsoft to monopolize the operating system market in the world. Arch rival Apple failed miserably in countering the threats of Windows in the 90’s. Microsoft gained definite advantage over Apple in the 90’s only because of their Windows operating system. However, if Microsoft sticks with their same old Windows 3.1or 95 even now, they will face severe problems. Apple has introduced many products in the market at the beginning of 2000 and currently they surpassed even Microsoft as far as market capitalization is concerned. In short no product may guarantee success for an organization for longer periods. New products may bring success only for a particular period of time. The needs of the customers are changing day by day because of the advancements in science and technology, and hence the existing products need some polishing or updating to make it suitable for the current needs. Thus Microsoft introduced updated versions of Windows periodically to cater the changing needs of the users. In short, no business strategy may give eternal success. Business strategies should be changed periodically based on the changing business climate. Rational or critical thinking is the core of every business strategy. No business can exist longer in the market based on strategies motivated by irrational thinking. In business objectives are important. In order to achieve the objectives, suitable strategies are essential. Suitable strategies can be formulated only with the help of critical thinking. For example it is not possible for a construction business group to invest heavily in the real estate sector at present because of the economic recession going on. The fact that people are reluctant nowadays in spending more on real estate sector is the rationale behind such thoughts. On the other hand the same business group can think about heavy investments in construction sector, once they see evidences of improvement in economic situations for achieving their long term goals. In short, critical thinking helps the entrepreneur to formulate appropriate strategies time to time. Capabilities based competition is one of the core principles which motivate organizations while formulating business strategies. In order to compete in the market the organization must well assess their own capabilities along with their competitor’s capabilities. Such assessment will help the organization in formulating strategies for their future business also. So the competing automobile companies in India need to find an alternative to counter the competitions from NANO. In short, business strategies should be formulated based on the capabilities of the organization rather than going after the trends. According to Henderson (1989), “Strategy is a deliberate search for a plan of action that will develop a business's competitive advantage and compound it. For any company the search is an iterative process that begins with a recognition of where you are and what you have now” (Henderson, 1989, 141). It is difficult for a small company to make business strategies just like bigger companies. Bigger companies always may have ample resources and they can take more risks while formulating strategies. They can focus entirely on the long term goals and temporary setbacks may not affect them much. On the other hand, it is difficult for the smaller companies to formulate strategies focusing entirely on the long term goals. Survival is a major problem for the smaller companies and they need to give ample importance to the short term goals also along with the long term goals while formulating their business strategies. In short, it is not necessary that two companies engage in similar business may develop similar strategies. Strategies depend on many things and the availability of resources is one among them. When globalization was entered the global market, many companies tried to exploit it without studying too much about it. Globalization was an entirely new concept and the pros and cons of globalization were unaware to the organizations initially. China kept a distance from globalization initially and escaped from the initial onslaughts. However, when everything settled down, China accepted globalization with both hands and exploited it maximum. “Strategy helps an organization to take decisions on long range forecasts” (Importance of strategy in business environment, 2011). Parker Pen is another company which faced severe problems because of the lack of knowledge about globalization when they tried to exploit the global market without proper business strategy. Parker Pen has made lot of marketing miscalculations in a globalized market environment which resulted in the sudden dip in their sales. The advocates of globalization at parker pen have misread the globalized market which resulted in problems for parker pen. Parker pen failed to consider the peculiarities of a global market and they adopted a uniform marketing and business strategy everywhere in the world which resulted in big failure. In early 1984, the parker company has launched a global marketing campaign in which everything was to have one look, one voice, and with all planning to take place at headquarters. Everything was connected with the selling effort was to be standardized. This was a grand experiment of a widely debated concept (Marketing across cultures, n. d., p.194) Parker Pen company interpreted globalization as a process of standardization. They concluded that same product will be sold out everywhere using the same marketing strategies. They failed to consider the cultural and economical differences of consumers of different countries. For example, the expensive mobile phones like iphone may not move well in poor countries like Somalia compared to America. Moreover, David Beckham could be a better brand ambassador in England whereas in India instead of Beckham, Sachin Tendulkar could be a better brand ambassador. In short, Parker Pen tried to implement unique business strategies everywhere and failed to account for the economic, cultural, political and environmental differences of different countries. They failed to understand the core principle that even for the same product, different business strategies required in different markets. “The formulation of strategies also depends heavily on the gathering of information about external environment, market trends, competitors, developments in technology, and prospective customers”(Jacowski, 2010)When most of the major auto manufactures introduced expensive cars in the Indian market TATA group thought differently. They have calculated that majority of the Indian population are incapable of purchasing expensive cars and they introduced world’s cheapest car NANO priced only $ 2000, in the Indian market. In the initial 3 months alone, TATA succeeded in capturing one million booking for their NANO car. Now they are trying to export it to foreign markets after watching the huge success of it in the Indian market. In short, recognitions or identification of market opportunities at the right time will always help organizations to develop better business strategies. In order to make an organization capable of competing based on their capabilities they should focus on; shift in their strategies to achieve aggressive goals, organise around the chosen capability and make sure employees have the necessary skills and resources to achieve it, make progress visible and bring measurements and reward into alignment and do not delegate the leadership of the transformation. The business strategies must be changed based on the requirements of the changing world. Globalization, Privatization and Liberalization policies have forced organizations to change their business strategies to exist in the market. The successful old strategies may not be suitable for the requirement of the modern world. For example, it is very difficult for a small scale industry to survive is an MNC start functioning around them. So they have to change their strategies to exist in the market. The success of the organization remains in how well they are capable of utilizing their resources to survive in the market. Conclusions Strategies are bread and butter for business organizations. It is difficult for an organization to function effectively without adequate strategies. Strategies help organizations in keeping the organization in the right path of growth. Strategies depend on many factors like the culture, economy, politics, competition, size of the organization etc. It is difficult to predict which strategy is better for an organization. However, it is possible for an organization to formulate better strategies based on the market trends, market analysis, changing business climate and philosophies etc. References 1. Exploring corporate strategy, (2008), Pearson education 2008 2. Henderson B.D. (1989).The origin of strategy (1989) HARVARD BUSINESS REVIEW November-December 1989 3. Importance of strategy in business environment, (2011) Retrieved from http://www.mbaknol.com/strategic-management/importance-of-strategy-in-business-enviornment/ 4. Jacowski, T.(2010). The Importance of Strategy in Business Management. Retrieved from http://ezinearticles.com/?The-Importance-of-Strategy-in-Business-Management&id=5271735 5. Marketing across cultures,(n.d) Retrieved from http://www.sam.sdu.dk/undervis/90434.E04/Spoergsmaal_til_Case_Tekst_Parker_Pen.pdf 6. Markides. C. C. (1999). In search of strategy. Sloan Management review. Spring 1999 7. Mintzberg et al (1998) Strategy Safari, Chapter 1, London, FT Prentice Hall 8. Strategy formulation, (n. d). Retrieved from http://www.referenceforbusiness.com/encyclopedia/Str-The/Strategy-Formulation.html . Read More