Prescriptive and Emergent Strategic Planning - Essay Example

?Running head: Prescriptive and emergent strategic planning Prescriptive and Emergent Strategic Planning Insert Insert Grade Insert s Name 2 March 2012 Prescriptive and Emergent Strategic Planning Introduction Strategic planning process is part of strategic management that has been applied by business managers over the years. The process involves a formal analysis of the market forces and developing an operational plan to be adopted by the organization in terms of resource allocation and the control mechanism. Strategic management will involve formulating the mission, vision, values, roles, responsibilities, goals, and objectives of the organization and developing policies to be implemented to achieve these objectives (Glaister & Falshaw; Management FAQs, n.d). Strategic planning is one of the management tools. It involves making principles, decisions, and steps to define what an organization will do and how it will be done in relation to the expected future trends in a given market (Management FAQs, n.d). Planners often use economic theories to formulate the operational strategies to be adopted by the organizations. Nonetheless, the future may not fit these economic models and the intended patterns according to these strategies may not be realized finally by the organization. The traditional approach to strategic planning did not consider the dynamics in the business operations. In theory, the operations of an organization can be fully planned whereas in practice it is not possible. Essentially a strategic planning process should involve developing a mechanism to respond to the circumstances that will be encountered in a business environment regardless of whether or not the conditions were known to the planners during the planning process (Management FAQs, n.d). Since the contemporary market is dynamic and the strategic models that are developed based on economic theories may not apply, alternative approaches to strategic planning are often used by organizations. Business organizations operating in the dynamic business environment may often encounter situations that require quick responses that cannot be made through the formal strategic planning processes (The Open University, 2012). An emergent strategy is a situation where the realized pattern is different from the pattern that was expressly intended by the planners (Mintzberg, 1994). The essence of the emergent strategic planning approaches is to manage the dynamics that is observed. The emergent strategic planning does not originate fully from the minds of the planner. Much of it is determined by the factors that are prevailing at a given time that may not favor the realization of the intended objectives and goals. This paper provides an evaluation of the effectiveness of the traditional prescriptive strategic planning in relation to the current economic climate. Another category of alternative strategic planning approaches are also considered with an emphasis on the emergent strategic planning. Prescriptive strategic planning Strategic planning is one of the tough managerial tasks in business operations since it is at times complex and very challenging. It has been pointed out that planning is ‘a formalized procedure to produce an articulated result in the form of an integrated system of decisions’ (Mintzberg, 1994, p.12). The organizations are faced by a series of decisions to make. The organizations have several needs to be accomplished, and which may not be accomplished at the same time owing to the limited resources that these organizations have. The strategic planning will involve making decisions and actions that are more significant towards helping the organization achieve some if not all of the objectives (Management FAQs, n.d). Planning involves bringing mediation and some kind of compromise/agreement between the business and the environment. It involves forecasting into the future and meditating what should be done long before the situation is realized. The prescriptive thoughts to strategic planning hold that a strategic plan in a given organization has positive correlation with the performance of the organization (Glaister & Falshaw, 1999, p.107; Prevos, 2009). The position is that firms that apply good strategic planning are likely to perform better in their operations. Such a claim prompted some researchers to investigate the effects of other internal and external environmental factors on the performance of organizations with different levels of strategic planning practices. One of the researches, conducted by Miller and Cardinal (1994, cited in Prevos, 2009) indicated that there were significant variations in the measures of correlation even though they were skewed towards positive performance (Prevos, 2009). Other researches also verified the claimed positive correlation between planning and performance. The research by Miller and Cardinal further indicated that there were stronger relationships between planning and profitability in the cases that a business organization was faced with an unstable business environment (Prevos, 2009). Essentially, the prescriptive thought of strategic management presumes the causality that one only needs to plan, act according to the plan, and achieve the intended objectives. Traditionally, a prescriptive strategic plan would follow a predefined model. The first step is to develop the statement of the mission of the organization (Strategic Planning Using the Emergent Strategy Model, n.d). The management of the organization has to state why the business is in place, what it is out to do, and how it will be done. The next step is to collect data on the external and internal forces that are likely to affect the operations of the organization and influence the accomplishment of the mission (Strategic Planning using…, n.d). The management considers the macro economic factors using management tools like PEST or PESTEL analysis. It also examines the micro-economic factors like the competitors, consumers or available suppliers and their bargaining powers in the market. A SWOT analysis enables the management to identify the strengths and weaknesses of the organization as well as the emerging opportunities and possible threats (Glaister & Falshaw, 1999). The third step is to formulate long-term goals developed from the stated mission and guided by the information obtained from the above analyses (Strategic Planning using…, n.d). The goals should be achievable and consistent with mission of the organization. The next step is an analysis and evaluation of the possible operational strategies and choosing on the appropriate strategies. The management will be required to set its plans of action and define the short-term objectives. The plans will outline what to be done, when it will be done, how, and by whom it will be done. Thus, the step also involves the allocation of resources to the different projects or programs to be carried out. The next and usually the final step involve monitoring and evaluation of the performance (Strategic Planning Using…, n.d). This includes exercising control to examine if the activities are carried out as scheduled and making the appropriate changes. This step may lead to a redefinition of the mission of the organization if the earlier statement cannot be accomplished. The effectiveness of such plan in helping achieve business objectives is still under debate among economist. This is particularly because researches have had mixed results with some indicating a positive relationship to the performance of the organization (Glaister & Falshaw, 1999). Glaister and Falshaw (1999) conducted a research to examine the nature and practice of strategic planning by the UK companies in the service and manufacturing industries. The research indicated that most of the firms had stated missions with over 90% having set medium and long-term objectives (Glaister & Falshaw, 1999). A greater proportion of the personnel interviewed were positive about strategic planning. On the other hand, the research also indicated that a good fraction of the firms had no individual assigned to undertake SWOT analysis (Glaister & Falshaw, 1999). Thus, while there seems to be some element of truth in the correlations with performance, other analysts observe that the positive correlation is not necessarily a causal relationship (which is true). Some underlying factors could be necessary to explain the relationship. Nonetheless, there seems to remain some positive consequences that are of benefit to organizations. The recently developed resource-based view of strategy seems to give credit to the prescriptive approach by asserting that good performance can be achieved through effective resource endowment Resource-based view can be applied in areas like formulation of a diversification strategy (Wernerfelt, 1984). Alternative strategic planning processes- Emergent approaches A plan is generally static in nature and designed to work under some predefined fixed condition (Strategic Planning Using…, n.d). However, conditions may change very soon after a plan has been developed. Strategic planning as management tool lost its fame in the 1970s when the tool failed to deliver the expected results (Glaister & Falshaw, 1999). Besides, a plan needs to be developed with a focus on how the others (competitors or consumers) will respond (Warren, 2008). Generally, firms in different industries are mutually dependent. A competitive strategy by one firm will trigger a counter response by another firm (Porter, 1998, p.17). Different schools of thoughts have emerged that drift slightly from the prescriptive strategic planning approach. The proponents of these alternative approaches observe that in as much as the traditional formal analysis and planning are essential and play important roles in business management, they may not be reliable always (The Open University, 2012). The strategic writers such as Mintzberg (1994) point out that the assumptions of formality and order in the development a strategic are often impractical. The effective strategies will be developed in response to the interaction that the business organization will have with the business environment. The scholars observe that in the dynamic business environment, the business organizations ‘may need to respond to events and information more quickly than a formal strategic planning cycle allows’ (The Open University, 2012). They propose an emergent strategy as alternative to planned strategy. An emergent strategy refers to the pattern of actions that is eventually developed and adopted by an organization disregarding the mission, goals and objectives that had been defined by the management of the organization (Mintzberg, 1994). The strategy does not consider the specific intentions that had been formulated. The fundamentals of emergent strategy are that some of the future circumstances in the market may not be predicted precisely using the theoretical methods of economics. As such, it may be impossible to implement a proportion of the intended strategy. This is termed the unrealized strategy (Strategic Planning Using…, n.d). One of the important requirements of planning as a decision-making tool is that the decisions in question needs to ‘be drawn together periodically into a single, tightly coupled process so that they can all be made (or at least approved) at a single point in time’ (Mintzberg, 1994, p.11). The emergent strategy develops with time as the intended strategy of the organization encounters and tries to accommodate the changing reality. An organization should be quick to identify its unrealized strategy. When this is realized, the management of an organization will try to modify its intended strategy by merging the deliberate strategies (the intended strategies that have been realized) and the emergent strategy (Strategic Planning Using…, n.d). The result will be termed the realized strategy. Discussions It is then necessary to understand which of the approaches is appropriate. Generally, strategy will start with an identification of changes. An effective strategy will allow for change, identify the changes as soon as possible, and then act before the competitors exploit the opportunity and it becomes unprofitable (Lovallo & Mendonca, 2007). An example of an industry that experience rapid changes is the communication technology industry. Changes have occurred with the introduction of third generation computers and mobile phones and companies had to respond to the changes rightly and in good time. Some companies that acted promptly got it right. The management at Apple was quick in identifying change and had a timely release of the iPod (Lovallo & Mendonca, 2007). The introduction of iPod had several benefits to Apple including an increase of over 80% sales in of mp3players (All about Steve Jobs.com, 2012). It has to be emphasized that it may be wrong to conclude that the emergent strategies and the planned strategies cannot co-exist in a given organization. The effective allocation of resources to projects and programs in a given organization will involve an integration of both the emergent and intended strategy (The Open University, 2012). It would be appropriate to apply umbrella strategies in which the management uses the intended/ deliberate strategy on the broad scale but allows the finer details to emerge as the conditions necessitate (Mintzberg, 1994). This will also encourage the learning process in the company as it maintains its course. The deliberate strategies lay down the purposeful direction while the emergent strategy indicates that the organization is ready to learn and adapt to the practical situation (Mintzberg, 1994). Similarly, the adoption of emergent strategies does not indicate that the organization does not have proper management or that the top managers are not competent in executing their roles. Normally, the line managers and other low-level employees will be better positioned to identify the changing patterns that are recorded in the market. Having made the observations, the lower-levels employees may provide recommendations to the top management on the appropriate course of action to be taken in response to the changes. Thus, the application of emergent strategy by an organization will just indicate that the organization has developed systems and routine practices to enable them respond and adjust to the emerging opportunities and threats in a given market in and within a given industry (The Open University, 2012). This is particularly observed in large firms that involve complex decision processes. The decision-making processes in these organizations have to be made at the different management levels. The mixed pattern of actions realized from the emergent strategy and the intended strategy will define the actual strategy of the organization. As Minzberg observes, the ‘emergent strategies are not necessarily bad and deliberate ones good; effective strategies mix these characteristics in ways that reflect the conditions at hand, notably the ability to predict as well as the need to react to unexpected events’ (Mintzberg, 1994, p.25). One case that shows how situations warrant an emergent strategy is a study that was conducted by Burgelman (1994, cited in The Open University, 2012) about Intel Corporation that decided to withdraw from the manufacture of memory chips (DRAM). The research showed that this was not an intended strategy but a reaction to the conditions that were observed in the market. Besides, it was not an initiative of the top management of the company. The organization finally decided to withdraw following decisions that had been made by smaller managers (The Open University, 2012). The smaller managers had earlier begun to shift resources away from this production line in response to the market conditions that were prevailing. Conclusions In spite of the mixed observations, it is still worth noting that strategic planning (from the prescriptive view) still plays significant role in helping achieve organizational objectives. It provides a sketch upon which the realized strategies will be based to help keep a particular course of direction. However, the planners must allow change to occur and be ready to learn and adapt to the changes. Thus, the best approach is to employ umbrella strategies in which the intended strategy provides a broader outline while the finer details are allowed to emerge with time. The actual strategy will be developed from interplay between the formal intended strategy and the informal emergent strategies, which are developed as circumstances dictate. It is not necessary that the final allocation of resources should follow the official strategy. This allocation will be determined by the prevailing factors at the future time. Reference List All about Steve Jobs.com. 2012. Short Bio. (Online). Available at: http://allaboutstevejobs.com/bio/shortbio.php [Accessed March 1, 2012] Glaister, K., & Falshaw, J., 1999. Strategic Planning: Still Going Strong? Long Range Planning, Vol. 32, No. 1, pp. 107 to 116. (Online). Available at: http://www.cuaed.unam.mx/puel_cursos/cursos/d_gcfe_m_dos/modulo/modulo_2/m2-12.pdf [Accessed March 1, 2012]. Lovallo, D., & Mendonca, L., 2007. Strategy’s Strategist: An interview with Richard Rumelt. The McKinsey Quarterly, No. 4, pp.56-67. Management FAQs. N.d. Strategic Management. (Online). Available at: http://www.pim.com.pk/faq.htm [Accessed March 1, 2012]. Mintzberg, H., 1994. The Rise and Fall of Strategic Planning. New York, NY: The Free Press. Porter, M., 1998. Competitive Strategy: Techniques for Analyzing Industries and Competitors: with a New Introduction. New York: Free Press. Prevos, P., 2009. Strategic Management and Serendipity. (Online). Available at: http://hypotheticorp.org/wp/research/essays/serendipity/ [Accessed March 1, 2012]. Strategic Planning Using the emergent strategy model. N.d. (Online). Available at: http://www.mpbcpa.com/library/articles/management_consulting/planning/strategicplan1.pdf [Accessed March 1, 2012]. The Open University. 2012. 4 Strategy as rational planning: Emergent strategy. (Online). Available at: http://openlearn.open.ac.uk/mod/oucontent/view.php?id=400222§ion=4.1 [Accessed March 1, 2012]. Warren, K., 2007. Strategic Management Dynamics. Chichester: John Wiley & Sons. Wernerfelt, B., 1984. A Resource-Based View of the Firm. Strategic Management Journal, Vol. 5, pp. 171-180. Reflective Journal Strategic planning was and remains to be an important management tool in spite of the mixed responses and observations from researchers and scholars. Firms need to lay down the intended strategy in order to provide a purposeful direction. However, the firms have to understand that the actual course of action may be different from the intended strategy. This is caused by the inability of the prescriptive model to fit to the unpredictable future business environments. This necessitates the integration of the emergent strategy as well to effect organizational success. The firms must allow adjustment and adopt some strategies that are developed as the circumstances unfold. Firms need to be quick in identifying the changes that are observed in the market and they should act as quickly as possible before the opponents develop their strategies. The firms have to be ready in taking risks through testing methods that have not been applied by others. It is not appropriate in economics to wait for others to take a course of action in order to determine if this decision is profitable. Even if it proves profitable, it will be too late since the competitors shall have occupied a better position. A careful integration of the emergent strategy and the intended strategy will give the effective realized strategy of the organization. The organization’s management should identify the unrealized strategy and the realized strategy and incorporate the latter to the emergent strategy while redefining the unrealized strategy. The top management in an organization has to understand that the allocation of resources will not necessarily follow the fixed strategy. They also need to involve lower-level managers and employees in helping identify the changes that are likely to be encountered and the appropriate responses. Read More