Strategic thought and its practice - Essay Example

?Strategy The success of an organization depends on the level upon which it achieves its main goal and various sub-goals. This requires that an organization formulate strategies for attaining its goal and sub-goals. Strategy simply put, refers to an action plan specifically designed to achieve a certain goal. Petraf (1993, pp 179) explains that a strategy provides a comprehensive way of pursuing economic ends by providing a long-term scope and direction through which an organization configures its scarce resources in the challenging environment. This is to say that a strategy sets a direction for focusing efforts. This way, a strategy enables an organization to achieve a business advantage by meeting the needs of its market or various markets and to fulfil the expectations of stakeholders. It should be noted that an organisation cannot depend on one strategy all its lifetime. Rather, there are conditions that stimulate or necessitate change in strategic thought over time and the need for strategy implementation in order to achieve the new goals of the business, and to facilitate the realisation of the organization’s mission. This means that conditions of strategic thought and practice are of great interest to the management of every organization, state, and group of workers. This paper explores the conditions of strategic thought and practice amongst firms. It also analyses strategic decisions at the inter-firm level. Conditions of strategic thought and practice amongst firms The main conditions of strategic thought and practice amongst firms are institutional dynamics, industry conditions, employee unity or disunity, and broader social conditions and political dynamics. These are discussed in the following sections. Institutional dynamics The changes taking place in an organization is an important condition for strategic thought and practice/implementation. This is because the strategy formulated by the leaders of an organization not only considers the changing external environment but also the internal environment of the organization. The strategy should therefore provide the best means of responding to the new mode of operation of the business. This means that the strategy developed must provide a direct response to specific changes in the business operations of the organization, for example expansion of business or change in the type of business. Examples of this include a shift from retail trading into chain store, from single product into diversification or from supplier to manufacturer. A new strategic thought could also be a response to the changes or expansion in the market of the given business. Where there is change or expansion of market, the business should ensure that its new strategy that will enable it respond to the demands, needs and preferences of this market. Changes within an organization not only revolve around its business strategies but also its governance. Changes taking place within the leadership or governance of an organization either make it more or less effective in achieving its business goals and implementing its business strategies. Young (2010, p154) concurs with this by stating that the emergent patterns of governance affect the effectiveness of a business regime and this is important for solving problems in its business environment. This implies that if the changes in the organization are making its more effective in implementing business strategies, the leaders of the organization are in a position to develop complex business strategies meant to achieve a higher competitive advantage for the business. For example, such a business could formulate a strategy for penetrating into international markets, expanding the product base for its local markets or formulate new and more productive work strategies. Industry conditions Industry conditions describe the nature of the business environment an organization operates in. It includes the characteristics of its customers, number of competitors and power of the organization verses that of its competitors. Ohmae (1982, pp 47) points out the company, its customers and competition as the three main players that should be considered for the formulation of an effective strategy. It is impossible for an organization to brush of these factors as it formulates and implements its strategic plans because they directly affect the business environment and operations of the organization. For example, an organization should take the power of its competitors into consideration to ensure that it formulates a strategy that will outsmart them. Otherwise, an organization may fail to gain any advantage from its strategy however perfect the implementation. In support of the above point, D’Aveni (1994, pp 36) states that the main importance of strategy is coping with competition. This means that in the process of its strategic thought and practice, the management of an organization should position the organization in such a way that its capabilities provide the highest defense against the forces of competition. In this case, a strategy is a tool through which an organization anticipates for changes in the factors underlying these competitive forces and respond to them appropriately with the anticipation of exploiting the change before their competitors can do so. Employee unity or disunity Unity or disunity is another important condition for strategic thought and practice. This condition is vital because teams, and not individuals, are the primary accountability mechanism for business strategies and this means that all team members should be able to comply with the agreed decisions. A workforce that is unified in their purpose is unstoppable in the marketplace. This is mainly because all the employees are loyal to the mission statement of the organization and are motivated towards the implementation of the designed strategy for the achievement of this. Under such a condition, it is easy for the management of the organization to formulate and implement a business since it will not be working with a workforce composed of people with varied interests. It is easy to maintain unity in small business organizations as compared to large ones. Usually, there are many business dynamics involved in maintaining unity among the workers of an organization. This means that when formulating a business strategy for such an organization, its leaders have to be more careful and pay great attention to variations in interests among its workforce. If this variation is profound, it can totally disrupt the implementation of the business strategy. This implies that it is important for the leaders of an organization whose workforce is not united should seek to unite its workforce before formulating a business strategy. One of the ways of doing this is encouraging passionate debates where all the workers express and share ideas and fears more freely. They should also be encouraged to engage in healthy conflicts instead of avoiding them. Broader social conditions and political dynamics The broader social conditions and political dynamics provide patterns for institutional dynamics. This is because social and political conditions are a source of external pressures that push for the development of new business strategies. The social environmental covers the values and norms of many important demographic trends, social networks and subgroups of the people living in the area a business thrives in. Although they are less concrete, these social conditions are as important as economics, politics and infrastructure. In order to fully exploit a given niche, a business should formulate a strategy that will enable it to target almost all segments or most productive segments of the market. For example, many microfinance institutions across the globe target women because their consumption of their products is higher than that of males. This means that in this type of business the female market segment is more productive and the best strategies should be formulated to attract and retain them. The strategy should also address or seek to overcome barriers to the consumption of these products for example challenges emerging from local cultural norms concerning the role of women in the economy. Social entrepreneurs can also stimulate systemic change in business strategies by introducing new practices, business models and organizational structures that others adopt (Martin and Osberg 2007, pp 31). An example of this is the introduction of hospices. This social innovation changed how the medical system and healthcare organisations deal with end-of- life care. This means that those healthcare institutions that wanted to maintain a high competitive advantage had to adopt this strategy to avoid losing customers to institutions that were ready to offer comprehensive care for the terminally ill. Changes in social conditions can therefore be said to reinforce new patterns of behaviour and facilitate their spread by changing norms, incentives, rules and costs. Businesses in turn have to adopt to the changing preferences and demands of such customers by developing responsive strategies. Changes in the political environment also creates an important condition for strategic thought and practice. Bloom and Dees (2008, p 48) explain that political dynamics affect the jurisdictions in which a business operates in. They could also lead to the formulation of new rules and regulations which businesses must abide in their operations. Such changes may make it difficult for a business to continue thriving and profiting in the same environment without a change in its business strategies. Such dynamics therefore bring about the need for new strategies aimed at enabling a business to survive in the new political and economic environment. However, not all political dynamics are unfavorable to businesses. In fact, some of them make the business environment more favorable and businesses are motivated to formulate new strategies for exploiting the new conditions. An example of this is the creation, development and growth of the European union. Since its formation, the EU has freed citizens and businesses of many restrictions by allowing a free movement of goods, services and good across the region. This means that businesses had the chance to exploit expanded market and the new economic and working conditions created by the political transformations. Strategic decisions at the inter-firm level Strategic decisions are decisions that deal with the whole environment in which a given firm operates, all the resources of the firm and the people who form the firm. It also includes an interface between the two. Strategic decisions are important in enabling a firm organise and relocate existing resources, and even possess new resources. In this way, strategic decisions help a firm to harmonize its resource capabilities with the opportunities and threats it faces. However, strategic decisions are not only made at an individual firm level. They are also made at inter-firm levels. Just like in the national and geopolitical levels, strategic decisions at inter-firm levels is a political process. According to Ulf and Ulf (1997, p 362), a political-process-oriented approach to decision-making is usually applied when it dealing with an asymmetric network of firms. This is done based on the aspect of resource interdependencies which acts as the chief motivator of inter-firm exchange and the development of a multi-dimensional view of power. A central theme in the inter-firm strategic decision-making is that during the decision process, the structural transformation as well as the adoption of new innovations within inter-firm networks is normally influenced by political activities. In this type of decision-making, the importance of subtle moves aimed at influencing the beliefs and perceptions of other actors within the network is particularly stressed on. As pointed out by Robertson (2004, pp 10), one of the importance of inter-firm strategic decision-making is the development of an inter-firm competitive strategy. Unlike firms that are less dependent, firms that are more dependent do not necessarily prioritise the balancing of dependencies because they may jeopardize privileges that they cannot attain within a less asymmetric structure. This shows that strategic decisions at the inter-firm levels is more complex since it is hard to deal with the protected interest of some firms within the network. Conclusion Strategic thought and its practice is of great importance for any business that is aiming to thrive and profit from it its current and diverse socio, economic and political environments. These environments are constantly changing and this requires that business organisations develop strategies for exploiting opportunities and dealing with the threats presented by these dynamics. Such strategies provide a guide on how an organisation should configure its scarce resources in the competitive environment to ensure that it meets the demands, needs and preferences of its market and achieve a competitive advantage. The main conditions that have been identified as conditions of strategic thought and practice amongst firms are institutional dynamics, industry conditions, employee unity or disunity, and broader social conditions and political dynamics. These conditions provide the basis for strategic decision-making. References Bloom, P. and Dees, G. “Cultivate Your Ecosystem.” Stanford Social Innovation Reveiw. (1) pp. 47-53. 2008. D’Aveni, R. Hypercompetition: Managing the Dynamics of Strategic Maneuvering. Free Press. New York. 1994. Martin, R. and Osberg, S. “Social Entrepreneurship: The Case for Definition.” Stanford Social Innovation Review (Spring). pp 29-39. 2007. Ohmae, K. “The Mind of the Strategist: Business Planning for Competitive Advantage.” Penguin. New York. 1982. Petraf, M. “The Cornerstones of Competitive Advantage: A Resource-Based View.” Strategic Management Journal. (3) pp 179-191. 1993. Robertson, D. A Dynamic Model of Inter-Firm Competitive Strategy. ICCS 2004 Conference. Boston MA. 2004. Ulf, E. and Ulf, J. “Decision Making in Inter-firm Networks as a Political Process.” Organization Studies. (3) pp 361-384. 1997. Young, O. Institutional Dynamics: Emergent Patterns in International Environmental Governance. MIT Press. Cambridge, MA. 2010. Read More