Distance between Strategy as Practice and Issues - Essay Example

Faculty Spring Strategy Issues Strategy appears to be not just a position a firm has. It is a combination of actionsthat a firm itself and workers do. The phenomena of strategy, how it is to be done, who is involved in it and what exactly is used is essential for both who is on the side of theory and practice. Managers at all levels of the company would like to receive precise and adequate answers to these questions thus their aim is to acquire more skills in strategy practice. On the other hand professionals are sure to face significant difference between the theory and actual practice of strategy. The reason of this gap is that research in a field of strategy is still distant from the study of numerous activities and measures that strategy involves. There is a number of strategy approaches a company uses as a course of action aimed to achieve a specific object and to sustain successful performance. Strategy as practice has become a slice of a wide practice experience in social science and the management over the last two decades and it has been brought into diversified management spheres as management of knowledge, technology, learning of organization, accounting field and many more. Recently practice approach has been engaged into strategy sphere, suggesting it is essential to concentrate on the actual strategic work, the process. This strategic turn may have to two influences, in management of strategy more specifically and the sciences of management in general. In the first place, there is a growing disappointment about with the normative scientific models that tend to be dominant over strategic researches in strategic management. Great amount of theory comes from the studies in micro-economy, which decrease the difficulties of practicing strategy to a little number of related variables. These studies concentrate on corporate and field analytical levels, paying little attention to human actions. Along with their hypothesis of adequate choice, they simplify figures to the ones displayed by a few variables in demography that can hardly be connected to firm performance. The domination of these assumptions in the field of strategic management research is a link of boundaries that has turned the theory of strategy extremely remote and disconnected with the complexity of strategy in practice (Bettis, 1991 and Hamel et al, 1994). In fact, regardless of four decades of research in strategic management, there is still not enough of adequate theory in creating of strategy (Hamel, 2001). There has been a tendency of transfer to specific actions which are reflected in more dynamic explanations rather than static ones which brings much more humanized scent to the theory (Langley, 1999; Mohr, 1982; Weick, 1979). This shift might be originated from the ‘post-industrial’ or ‘after modern’ period in sciences of management. The firms in society which is postindustrial and based on knowledge are significantly individualistic, localized, pluralistic and fragmented, opposing existing entities that standardized and collective (Cummings, 2002; Lowendahl and Revang, 2004; Whittington, 2004). The conditions under massive changes where company may not be viewed as a consistent whole generate challenges to researchers, theorists and practitioners. Expressive relations between theory and practice will be better assisted by theories which are more dynamic and can fully reflect the complication of practice in postindustrial world (Pettigrew, 2001). Of course, strategy in practice is not in a first place in research process to overcome dominance based on economics. More specifically it may be considered as a peak of significant changes in a field of strategic management which can play a crucial role in a practice perspective. There is a considerable distance between strategy as practice and issues appearing within a process itself based on resources and dynamic research. The complexity and distinctions have been a matter of professional discussion in recent years. Basically, there is the legacy of the school of research in strategy process, which made considerable withdrawals from content-based strategic theories through presenting a dynamic vision of strategy as a process where the major role of the management actor is problematized. While the roles of top managers are problematized, it does not put this through into the process of studying what are the specific actions of various managerial actors. More than that, the research process is basically related with explanations at the level of firm analysis, making sacrifices in more detailed analysis of construction of activities (Johnson et al., 2003). The fundamentals of successful strategy of the company include three main factors: a companys position within existing external circumstances, an inside relevant vision of the basic competencies and advantages in the question of competition and finally the process of careful monitoring. Regardless of the position whether it is a individual or company or a corporation it is vitally important to have distinctive understanding of the present position, plans towards future and the instruments helping to achieve these plans. A process of strategic planning uses information that provides overall and realistic outline of the subject using financial and non-financial records thus making accounting primarily important.  The process of strategic planning requires five steps which are stated below: The Strategic-Planning and Decision-Making Process 1. Vision Statement The creating of a wide statement on the values, purposes, and future directions of the company is the first and one of the most important measurements in the process of strategic planning.  This very information stands for disclosure of the basic ideology of the organization—what it is, what is the reason of its existence—and its view towards future, meaning, what are the hopes to become in the nearest future, what it wants achieve, or create. 2. Mission Statement Mission statements as a key tool on the way to effective information disclosure stands on eight core components about the organization: targeted and market and clients; list products and services presented; geographical information; technologies used in the process of manufacturing; information describing guarantees of survival, prosperity, and profitability; paradigm; main concept and public image to be achieved. The financial part is described by the company’s annual reports which display a full list of risks and prospects. The long-term financial aims are to represent the company’s commitment to strategic plans within existing competitors and circumstances within market (Johnson, 2006). 3. Analysis Next step in presenting detailed research is the analysis of the business trends of the company’s business trends, opportunities on the external level as well as internal resources and key competencies. In order to perform external analysis companies use Porter’s five forces method in question of competition within industry, which stand to disclose rivalry level among other competitors, possible threats and risks the potential and power of bargaining suppliers and customers (Porter, 1979). In order to perform internal analysis firms usually apply model of industry evolution which defines the existing technologies in use, the performance features of products and their quality, reducing of the costs along with innovations, aggressive tactics for winning share of the market, market saturation and redirection of growing segments of market in order to become a low-cost leader within industry (Thompson, 2009). The other method called value-chain analysis stand to outline a company’s value-creation process which is based on both primary and secondary activities. This is an effective and efficient tool when it comes to evaluation of the company’s costs, competencies and strengths as well as defining moments where the company’s productivity can be increased and where applying of re-engineering might prove useful in economic growth (Thompson, 2009). SWOT analysis (strengths, weaknesses, opportunities, and threats) has become a classic measurement of both internal and external analysis that presents relevant information in order to outline key priorities and apply to the full the company’s capabilities in operation of external opportunities, as well as to define the crucial weaknesses that to be corrected along with threats that already exist (Lai, 2006). 4. Formulation of strategy In order to formulate a long-term strategic plan, companies use Porter’s generic model as it is to help a company to aim at least one of competitive benefits such as leadership of low-cost, diversification, providing best cost, focused low cost and focused diversification (Porter, 1979). 5. Strategy Implementation and Management On the past decade the balanced scorecard or BSC has achieved a status of the most efficient and effective instrument when it comes to monitoring process of strategy fulfillment as it is used to lend a helping hand in building firm connection between expected performance and strategy itself and this tool emphasizes the importance of creating financial aims for business units as well as employees (Kaplan, 1996). The BSC is to make sure that the strategy as the theory is transformed into concrete objectives, adequate and appropriate actions, and financial perspectives and concentrates on four core indicators such as financial factors, learning and growth of employees’ rate, satisfaction of the customer, and business processes on an internal level (Grant, 1997). Metrics of financial performance have been the standard measurement for evaluation a performance of a company. The BSC focuses on the crucial role of financial data in monitoring adequate and measurable strategic goals in financial field on based on integration and coordination which makes it possible for a firm the firm to work efficiently and profitably. The picture presented below would help to better understand the connection between accounting and strategy building. Financial goals company pursuits are as follows: 1. Free Cash Flow This measure is meant to show the real face of the company and is to indicate its soundness and financial health. It is used to make sure all the financial resources are utilized to create additional cash flows which may result in possible investments (Grant, 1997).   2. Economic Value-Added This measurement serves as a tool for creating timely and effective decisions in order to make businesses grow thus increasing the economic value of the company. Firms create economic value-added goals to evaluate their businesses’ value contributions in the most effective way and make the resource allocation process better (Gale, 1981). 3. Asset Management This measurement is to disclose the adequate management of cash – current assets, and current liabilities. The same thing is to be done with working capital and turnovers. Basically the companies use this very practice when they feel they are not competitive among the other companies within market. 4. Financing Decisions and Structure of Capital This element means that financing faces limitations to the optimal structure of capital which is to put company’ cost of capital to minimum. Firms usually create this structure when their capital costs are higher than average costs of other companies and additional investments are needed (Sidney, 1987). 5. Ratios of Profitability This measure is an actual face of companies’ efficiency and also it indicates aspects that are inefficient requiring actions to correct them by management; they are to measure sound relationships with sales, assets, and net worth as well. Thus firms are obliged to create their financial goals in order to work more effectively. 6. Indices of Growth Growth indices are to assess growth of sales and market share as well as to determine strategic plan towards comprehensive trade-off of increase taking into consideration cash flows reductions, and returns on money being invested. Firms have to create growth index aims when overall rate of growth has stayed behind the norms within industry (Gale, 1981). 7. Assessment of Risk and Management A firm has to assess their strengths and weaknesses through evaluating and identifying risks in management and estimating the possibility for them to appear and their effect on economic state (Pfosich, 2006). Organizations have to make this kind of assessments while anticipating uncertainty in their business. 8. Optimization of Taxes The role of managing the level of tax liability is vital in operating business and understanding that mitigating risk decreases taxes that are expected (Lawrence, 1994).  More than that new initiatives along with development of products programs have be assessed against the implications of taxes. Generally speaking, performance is to be assessed on basing on after-tax period. Corporations and big companies use this measurement while working in environments of different taxes, where they can take advantage of incompatibility in regulations of taxes. The way strategic planning can vary due to the measurements listed above can be seen in Table 1 Table 1 (Strategy as Practice) and Table 2: Table 2 (Interim report) Using accounting facts and figures is a primary approach in successful strategic planning and building long-term agenda of measurements for successful performance. Stena AB is a world-leading shipping business providing services on all levels beginning from shipbuilding sphere up to chartering, crewing as well as technical support along with marketing and financial aspects. Through constant innovation programs and efficient high quality service Stena AB has been performing as successful and competitive organization. Stena AB is using Flag of Convenience practice. Flags of convenience or shortened FOC is a way of running business when ship’s owners are to register their ships in a nation that they might belong to. This phenomenon is most helpful helps to bypass regulations and rules of their home country, for not so good reasons. The effect of this practice is faced by the mariners who eventually have to work on these vessels. When talking about strategic planning of such corporations as Stena AB some dangers and risks have to be considered. They are as follows: 1.   Working conditions FOC ships have the tendency to present standards of working conditions much lower as compared to vessels which are not under this program. The main cause of this fact is that these vessels are less regulated. Ships operating under FOC are sure to face a dispute between national jurisdiction and rules that should be applied. Thus much worse standards are likely to be displayed on vessels of this kind. Seamen are usually under the risk of having to work conditions which are extremely dangerous and they are likely to work without adequate insurance or compensation.  2.   Basic rights One of the most important of the disadvantages of FOC is that this program does not protect a seafarer’s basic rights such as right to join or even form trade unions, right to demand appropriate wage and a right to be provided with sound working conditions etc might not be available on ships that are operating under Flag of Convenience. This can make working on such ships considerably much more dangerous and not worth the effort taking a seafaring position of any level.  3.   Regulation of legal trade FOC ships run under jurisdiction of the country where vessel had registered. Nevertheless, the vast range of different manipulations discussed in legal documents might involve such ships into illegal trade affairs and ships under FOC have been engaged in every illegal and dangerous activity such as drug smuggling and human trafficking. Mariners usually are even unaware they are involved in such criminal businesses while they are working on the ship. Experiencing such circumstances and facing the lack of rights and protection a seaman is likely to be accused of the crimes he wasn’t aware to be a part of. This feature of the FOC program makes its position extremely critical within shipping industry.  4.   Pay scale The rules and regulations followed on a FOC vessel can vary greatly depending on the country of vessel’s registration. These are sure to contain aspects like pay scale of vessel’s crew. Due to this, the ship owners can deceive their workers for their sound salary. A lot of such situations have been reported very often when mariners were not paid their appropriate salary or were not paid timely. However there is only unprotected employee who is suffering and unfortunately it seems no way this problem can be eliminated.  5.   Insufficient compensation One of the violations of the rights a seaman might face is in absence of suitable compensation in case of unfortunate accident that is likely to occur in these circumstances. Operating under enormously dangerous conditions of vessels with lack of regulation and protection on their working places mariners always find themselves under risk of possible accident. And if accident happens to occur, a vessel working under flag of Convenience might feel free to refuse to pay the appropriate compensation to the seaman and/or his family when accident leads to more serious consequences.  6.   Improper work schedule Many sad cases been reported when a seafarer was not allowed a necessary time for rest as compared to the standard guidelines. These guidelines are created taking into consideration the specific working conditions such as being exposed to sea and the health of the employee. But this facility can be absent on the ships under FOC.  7.   Future prospects Mariners working on FOC ships are always under a certain level of threat and risk; they never seem to be aware what they might face next and what they might be involved in. Unfortunately, they don’t have proper protection against any injustice or even cruel actions being done to them constantly. Working under FOC program can ruin their career in numerous ways such as illnesses as a result of carelessness to their health, injuries or even mental disorders. As a result this may lead to termination of the career of seaman before time being at a young age. This is considered to be the worse aspect for the mariner working under the FOC program. As Stena AB is working under FOC program the management has to be aware of the weaknesses of this program as it appears to display malfunction of rights protection. The structure of this corporation is very complex and it involves large numbers of staff working on each level. So when it comes to strategic planning it is vitally important to imply measurements in order to ensure safety and confidence for each worker regardless of the position being occupied. The lack of security and care may lead to irreversible consequences and numerous juridical proceedings. And this might have a crucial effect on corporation and cause its elimination especially for those being leaders of the industry. When talking about building long-term strategic plan within shipping industry strategy as a practice is important in as it makes it easy to identify business opportunities, helps to form an objective view in order to resolve business problems, provides a guideline in order to display improvement on internal and external levels of cooperation, helps greatly in controlling activities in business, helps to reduce negative effects when threats arise to minimum, assists in making sound and adequate decisions, provides guidelines in resources allocation, providing management with methods to cope with problems. Shipping corporations and firms are provided with full hierarchy of interconnected strategic approaches to work on all the levels such as corporate, functional and business strategy. When it comes to formulating a sound strategy for a shipping corporation one has to be able to answer many questions which are interrelated with one another: what should be done? When should it be done? And how exactly should it be done? The creating and implementing the shipping strategies using strategy as practice approach management should consider detailed strategic analysis, formulating strategies, implementation and further control and monitoring of strategies. To look for opportunities for business, a shipping company has to find answers to the question of how the structure of the organization must look like in order to sustain prosperity (Lai, 2010). Reference George, R. (2015, January 10). Retrieved April 13, 2015, from http://www.theguardian.com/world/2015/jan/10/shipping-disasters-we-never-hear-about Interim report (n.d.). Retrieved April 13, 2015, from http://www.stena.com/en/Documents/Stena_AB_Group_Q3_2014_interim_report.pdf Strategy Map Examples. (n.d.). Retrieved April 13, 2015, from http://www.smartdraw.com/software/strategy-map-examples.htm Hiroyuki, S. (n.d.). Management Strategy of Container Liner Shipping in the Age of Globalization. Retrieved April 13, 2015, from http://www.tliap.nus.edu.sg/tliap/project_scg/docs/reports/strategy.pdf Shaughnessy, T. (n.d.). Flags of Inconvenience. Retrieved April 13, 2015, from https://www.law.upenn.edu/journals/jil/jilp/articles/1-1_Shaughnessy_Tina.pdf Dangers of Flags of Convenience (FOC) to Seafarers. (2011, November 7). Retrieved April 13, 2015, from http://www.marineinsight.com/misc/maritime-law/7-dangers-of-flags-of-convenience-foc-to-seafarers/ Kono, P. (2010, January 1). Graziadio Business Review | Graziadio School of Business and Management | Pepperdine University. Retrieved April 13, 2015, from http://gbr.pepperdine.edu/2010/08/the-role-of-finance-in-the-strategic-planning-and-decision-making-process/ Lai, K. (2010, January 1). Business Strategy in Shipping. Retrieved April 13, 2015, from http://link.springer.com/chapter/10.1007/978-1-84882-997-8_5 Strategy as Practice: A New Perspective. (n.d.). Retrieved April 13, 2015, from http://www.sagepub.com/upm-data/9742_36220ch1.pdf Shipping. (n.d.). Retrieved April 13, 2015, from http://www.stena.com/en/our-business/Pages/shipping.aspx Read More