Strategic Management Concept: definition,history - Essay Example

?What is Strategy? Introduction Strategy seems to be a widely encompassing process that is applied in varied endeavors. In business and management, strategy is defined as “the blueprint of decisions in an organization that shows its objectives and goals, reduces the key policies, and plans for achieving these goals, and defines the business the company is to carry on, the type of economic and human organization it wants to be, and the contribution it plans to make to its shareholders, customers and society at large” (Management Study Guide, 2012, par. 4). Mintzberg (1997) defines strategy as a collaboration of five specified components: it being a plan,a ploy, pattern, position, and perspective. As a plan, strategy was defined as “some sort of consciously intended course of action, a guideline (or set of guidelines) to deal with a situation” (Mitzberg, 1997). As a ploy, strategy found its meaning as “a specific ‘manuever’, intended to outwit an opponent or competitor” ( (Mitzberg, 1997, p. 12). As a pattern, strategy is “consistency in behavior, whether or not intended” (Mitzberg, 1997, p. 12). As a position, strategy is “a means of locating an organization in what organization theorists call an ‘environment’” (Mitzberg, 1997, p. 15). And finally, Mitzberg (1997) defined strategy as a perspective, a concept which is shared by collective minds and focuses on the organization’s “content consisting not just of a chosen position, but of an ingrained way of perceiving the world” (p. 16). Historical Overview These definitions are comprehensive and is indicative of the fact that the concept of defining strategy has been delved with in greater depth and in much detail to scrutinize the smallest element, facet, or component of it being applied in organizational settings. However, although strategy in business and organizations have reportedly gained prominence and popularity as a discipline in the 1950s to 1960s (Bracker, 1980), it exact origin was identified to ensue from ancient Greece as the term was originally noted to come from the Greek word stratego, which means “a general”; which was actually allegedly deduced from root words that meant “army” and “lead” (Bracker, 1980, p. 219). More concisely, the term stratego was specifically defined as “to plan the destruction of one’s enemies through effective use of resources” (Bracker, 1980, p. 219). Concurrently, Bracker (1980) has presented in tabular form the chronological developments of strategy since 1947 including the varied definitions, as written by scholars and practitioners in this field of endeavor. A comprehensive definition noted was presented by Steiner & Miner (1977) as: “the forging of company missions, setting objectives for the organization in light of external and internal forces, formulating specific policies and strategies to achieve objectives, and ensuring their proper implementation so that the basis purposes and objectives of the organization will be achieved” (Steiner & Miner, 1977; cited in Bracker, 1980, p. 221). A comprehensive historical overview with scope and summarized results are presented by Bracker (1980) that started with identifying the origin of strategy at 3000 B.C. and presented the application of strategy to encompass business, military, and government. Different ‘Approaches’ to Strategy As the history of strategy was identified to have evolved through time, since ancient times, it could naturally be understood that there have been varied approaches and models that were developed and evaluated accordingly. From among the noted approaches, the following were identified: regression model, simultaneous equation model, and demand model, to name a few (Bracker, 1980). Aside from those cited by Bracker (1980) as sources from various authors, other approaches to strategy include the practice-oriented approach (based on best practices as experienced by organizations), Porter’s five forces approach (evaluating the organization through its rivals, suppliers, customers, new entrants, and substitutes); the resource-based view and core competency approaches (through assessing the strengths, resources and competitive advantage of the organization), as well as the innovation and value approaches (thinking outside the box and using creative techniques) (Lecture 1, 2012). Likewise, other discourse have identified presenting approaches to strategy as industrial organization approach versus sociological approach; where the former was defined as dealing with “competitive rivalry, resource, allocation, economics of scale assumption, rationality, self-discipline behavior, profit maximization” (Class of 1, 2011, p. par. 2); while the latter was defined as dealing with “human interactions, assumptions, bounded rationality, satisfying behavior, profits sub-optimality” (Class of 1, 2011, par. 3). As such, there were approaches that contrast top-down versus bottom-up approaches where the top-down approach manifests strategies being flowed from the top of the organizational hierarchy, to be implemented and followed down the ranks. In the bottom-up approach to strategic management, it was emphasized that inputs, comments, collaborative and participative efforts are enjoined, gathered and collected from the various employees and to be recommended and reviewed by higher management. Conclusion Strategy is therefore a collaboration of five specified components: it being a plan,a ploy, pattern, position, and perspective that incorporates the organization’s mission, vision and goals as explicit guidelines are designed that integrates internal and external factors to enable the organization to maximize their potentials toward the attainment of explicitly defined objectives. Reference List Lecture 1: Definitions, Histories and Contexts. s.l.:s.n. Bracker, J., 1980. The Historical Development of the Strategic Management Concept. Academy of Management Review, 5(2), pp. 219-224. Class of 1, 2011. General Approaches to Strategy Management. [Online] Available at: http://classof1.com/homework_answers/corporate_strategy/general_approaches_to_strategy_management/ [Accessed 3 January 2013]. Management Study Guide, 2012. Strategy - Definition and Features. [Online] Available at: http://www.managementstudyguide.com/strategy-definition.htm [Accessed 3 January 2012]. Mitzberg, H., 1997. The Strategy Concept I: Five Ps for Strategy. California Management Review, pp. 11-24. Steiner, G. & Miner, J., 1977. Management policy and strategy: Texts, readings, and cases. New York: Macmillan. Part 1: The Strategic Role of the Corporate Centre in the Multi-business Firm A corporate center was specifically defined as “an entity at the top of a corporation which controls corporate resources and establishes firm policies, which members do not need to be located at the same office or region” (Raharso, 2010, p. 2). Likewise, in the strategy hierarchy, there are four (4) distinct levels, such as the enterprise level, corporate level, business level, and functional level (Lecture 3, 2012, p. 4). At the corporate level, strategy is deemed to be governed through diversification strategy, parenting strategy or strategic business unit (SBU) management (Lecture 3, 2012, p. 4). As such, the role that corporate center plays in strategy formulation and implementation is crucial as it embodies planning to montoring phases, as required. The strategic role of the corporate center in a multi-business firm was effectively captured by Raharso (2010), where it was thereby evident that as the businesses become intrenched and integrated, the role of the corporate center becomes more intense in terms of intervention and becomes lesser as the degree of diversity in business portfolio tends to be unrelated. Under the center model, it could be deduced that in an integrated business portfolio, the corporate center needs to manifest the following characteristics: “directly steers operating businesses; and globally coordinates operations and functions across regions, products, and businesses” (Raharso, 2010, p. 5). Also, it was emphasized that the role of the corporate center in terms of value creation were specifically detailed across six configurations as follows: centralization force, scope expander, control expert, resource mixer, experience organizer, and idea generator (Raharso, 2010, p. 19). From among the noted functions of corporate management, the following were clearly identified as instrumental in terms of strategic management: “managing the corporate portfolio; managing the individual businesses; and managing linkages between businesses” (Managing the Multibusiness Corporation, n.d., p. 4). As such, the role, functions and responsibilities identified with the corporate center in terms of value creation and in governing SBUs has been evidently supported and validated. Part 2: How the Corporate ‘Parent’ can help both Create and Destroy Value for Strategic Business Units (SBUs) Although corporate ‘parent’ seem to manifest crucial role in terms of creating value for SBUs, it was also revealed that they could either propose value-adding activities or contribute to value destruction (Lecture 3, 2012, p. 7). As emphasized by Goold, et al. (1998), “the parent can therefore only justify itself if its influence leads to better performance by the businesses than they would otherwise achieve as independent, stand-alone entities” (p. 308). The corporate ‘parent’ was therefore deemed to apply strategies that could potentially lead to value destruction. The explanation provided by Goold, et al, (1998) include governance of senior management to the specific SBUs as against their own corporate management team; the extent by which information they received from SBU managers seem to be biased to present more favorable information to corporate management; and apparent critical examination of cost effectiveness. As disclosed, “extra costs and negative influence are therefore pervasive features in all multibnsiness organisational hierarchies and can only be offset by substantial value creation in targeted areas” (Goold, et al., 1998, p. 309). Concurrently, value creation purportedly occurs only in three specifically identified conditions, to wit: “the parent sees an opportunity for a business to improve performance and a role for the parent in helping to grasp the opportunity the parent has the skills, resources and other characteristics needed to fulfil the required role the parent has sufficient understanding of the business and sufficient discipline to avoid other value- destroying interventions” (Goold, et al., 1998, p. 310). Given these conditions, it was noted that central parents manifest tendencies for value creation when the following situations are present: “weaknesses in business managers are causing underperformance; the business managers face opportunities that even a competent management team will find difficult to seize without help from the parent ; and the parent possesses some special resources that open up new opportunities for the businesses” (Goold, et al., 1998, p. 311). Conclusion The role that corporate centers play in strategic management is crucial as it encompasses various functions that create value and that could actually destroy value of SBUs. Understanding its role, function, and ways of performing assists in appreciating how corporate centers could improve the overall and collaborative performance of these SBUs, as a whole. Reference List Lecture 3: Portfolio Approaches to Stragegy Formulation. s.l.:s.n. Managing the Multibusiness Corporation. N.d. [Online] Available at: www.csun.edu/~degravel/MGT693/Pwpt Chapters/ch16.ppt [Accessed 3 January 2012]. Goold, M., Campbell, A. & Alexander, M., 1998. Corporate Strategy and Parenting Theory. Long Range Planning, 31(2), pp. 308-314. Raharso, A., 2010. The Role of Corporate Centre in Building Strategic Growth. [Online] Available at: http://download.sbf.org.sg/Mentorship_18jan2011/4.pdf [Accessed 3 January 2013]. The Inside-Out Approach to Strategy Formulation Introduction The inside-out approach to strategy formulation is synonymous with the resource-based theory where an evaluation of an organization’s position is made by assessing the internal strengths and resources at the onset. This was actually contrasted with Porter’s five force approach where it was deemed that external forces impinge on the organizations’ operations and pave the way for directing the design of strategies which would address these external forces and enable the achievement of identified goals (Lecture 4, 2012). The current discourse hereby presents a critical evaluation of the inside-out approach to strategy formulation as its context of emergence, underlying logic, theoretical underpinnings, as well as the strengths and weaknesses of the approach. Context of Emergence, Underlying Logic and Theoretical Underpinnings The inside-out approach or resource based view approach to strategy formulation was noted to have emerged from the works of Penrose (1959), Prahalad and Hamel (1990), Rumelt (1991), and Barney (1991), to name a few. The underlying logic was premised on the assertion that the organizations’ “internal capabilities determine the strategic choices it makes in competing in the external environment” (Faculty of Business Administration, n.d., p. 126). The theoretical underpinnings include discussions on the organizations resources (tangible and intangible); competencies; core competencies; and distinctive capabilities. Likewise, the claim of authors Prahalad and Hamel (1990) was that “strategic means creating a chasm between ambition and resources.,,(where) an organization with a relatively small amount of resources but with big ambitions can leverage their resources to achieve a greater output for its smaller inputs” (Faculty of Business Administration, n.d., p. 127). In addition, these authors asserted that “the critical task of management is to create an organization capable of creating products which customers need but have not yet been imagined” (Faculty of Business Administration, n.d., p. 129). The examples provided include Toyota’s electric and petrol-hybrid car as exemplified by their product, the Prius; and Apple’s innovative products that revolutionized mobile technology, such as the iPhone, iPod, iPad; to name a few. Stengths and Weaknesses The strengths of the inside-out approach are hereby detailed: (1) “the RBV’s core message is appealing, easily grasped and easily taught” (Kraaijenbrink, et al., n.d.); (2) it is deemed a progressive leap towards strategic management (Faculty of Business Administration, n.d.); (3) simple and straightforward making it viable and comprehensible. The weaknesses include the following: (1) no sufficient information on how resources can allegedly develop or evolve through time (Faculty of Business Administration, n.d.); (2) the disctinct and crucial role of human resources are underplayed; (3) does not provide management implications (Kraaijenbrink, et al., n.d.); and (4) the applications were deemed too limited (Kraaijenbrink, et al., n.d.); among others. Comparison with other Approaches The inside-out approach was actually compared with those approaches promulgated by authors such as Edward Chamberlin (1933); Edith Penrose (1959); Birger Wernerfelt (1984) and Jay Barney (1991) in their focus and orientation of thrusts on the resource-based view approach (Lecture 5, 2012, p. 4). Although all sharing similar orientations and perspectives, these authors differ in terms of focusing on theoretical frameworks and underlying arguments. For instance, Wernerfelt (1984) was specifically noted to focus on “unique resources and skills that ensure organizational competitive advantage and long-term survival… (where key resources include) knowledge, technology, skilled staff, machinery, brand names, efficient processes” (Lecture 5, 2012, p. 7). On the other hand, the work of Barney (1991) was noted to argue that “all the resources that the firm has access to may not be strategically relevant, since some may actually prevent an organization from conceiving and implementing a valuable strategy” (Faculty of Business Administration, n.d., p. 138). As such, to gain sustainable competitive advantage,four characteristics or attributes were deemed necessary: “(1) it must be valuable; (2) it must be rare; (3) it must be difficult to imitate; and that (4) there must be no strategic substitute for this resource” (Faculty of Business Administration, n.d., p. 138). Conclusion The current discourse has effectively presented a critical evaluation of the inside-out approach to strategy formulation by briefly providing a description of the approach, in conjunction with its context of emergence, underlying logic, theoretical underpinnings, as well as the strengths and weaknesses, as well as comparative thrusts of related approaches. By analyzing the advantages and disadvantages of this particular approach, scholars who reviewed it recommended the following: “(1) demarcating and defining resources; (2) providing subjective and firm-specific notion of resource value; and (3) delving into a more deeper understanding and research on the RBV as a theory of sustained competitive advantage” (Kraaijenbrink, et al., n.d., p. 44). Reference List Lecture 4: The Outside-In Approach to Strategy Formulation. s.l.:s.n. Lecture 5: Inside-Out Approaches to Strategy Formulation. s.l.:s.n. Faculty of Business Administration, n.d. The Internal Environment: A Resource-Based View of Strategy. In: s.l.:American International University-Bangladesh, pp. 124-150. Kraaijenbrink, J., Spender, J. & Groen, A., n.d.. The Resource-Based View: a Review and Assessment of its Critiques. Munich Personal RePEc Archive, pp. 1-44. Prahalad, C.K.; Hamel, G. 1990. The Core Competence of the Organization. Harvard Business Review. Vol. 26, No. 1, pp. 22-40. The Potential Importance of ‘Culture’ in Achieving Strategic Success Introduction As contemporary organizations become more complex with the expansion to different international spheres, strategy formulation and implementation need to incorporate cultural underpinnings and orientations that add to intricacies. Studying the concept of culture is wide and encompassing and transverses various academic disciplines. Relating culture to strategy is likewise deemed more challenging and continuously evolving. The current discourse aims to address and critically apprise the potential importance of culture in achieving strategic success. As such, one would initially provide a comprehensibly applicable definition of culture as it pertains to the organizational setting. The cultural context perspectives would likewise be presented in terms of context of emergence and basic assumptions. Finally, the relationship between strategy and culture would be determined in terms of underlying concepts that consider both relevant in contemporary organizational settings. Organizational Culture According to Martires and Fule (2010), “organizational culture is the atmosphere that pervades the various groups comprising the organization as a result of its various components like mission and vision, goals and objectives, structure, human and non-human resources, technology, clientele, interpersonal and intergroup relationships, product or service…Organizational culture is a set of symbols, myths, ceremonies that reflect the underlying values and beliefs of the organization or its work force” (p.227). Deal and Kennedy stressed the role of shared values in creating a climate for success. Several elements of strong corporate culture include: (1) a widely shared philosophy; (2) a concern for individuals; (3) a recognition of heroes; (4) a belief in ritual and ceremony; (5) a well understood sense of the informal rules and expectations; and (6) a belief that what employees do is important to others (Deal & Kennedy, 1982, pp. 3-85). From these elements, one could already deduce that organizational culture and strategy share similar components in terms of examining and integrating the crucial ingredients that form the conceptual framework for the organizations’ existence: mission, vision, goals, as well as adherence to corporate values and beliefs, evidently shared and understood by its human resources. Cultural Context Perspectives The context of emergence was noted to have been spurred by the ascendancy of Japan and the apparent decline of the West (Lecture 8, 2012, p. 7). The basic assumptions include: “(1) the 'strengthening' of corporate culture enhances organizational performance by securing greater commitment and flexibility from employees; (2) successful (or ‘excellent’) companies are said to be ‘dominated’ by key values, such as service, quality, and innovation, which, in turn, provide competitive advantage; and (3) organizational culture concepts are contrasted with harder ‘scientific’ approaches to organization” (Lecture 8, 2012, p. 7). Relationship between Strategy and Culture According to Huwe (2012), “executives and employees agree that both strategy and culture are critical to business success. What’s interesting, though, is the gap that emerges. While executives believe that strategy is significantly more important, employees find the two to be almost equal” (Huwe, 2012, par. 1). This is interesting to note since from the perspectives of management and the executive team, who have been emphasized as promoters and designers of strategy, strategy were deemed most important while relegating culture to a latent signficance. This point of view was further explored by Myatt (2012) who averred that “the popular position today seems to be culture trumps strategy” (Myatt, 2012, par. 1). He actually eventually asserted that “creating a healthy culture is a matter of making it a focus point within the corporate values, vision, mission and strategy” (Myatt, 2012, par. 3). Finally, Myatt (2012) aptly concluded that “it’s not really strategy vs. culture, but an aligned strategy and culture that matter” (par. 7). It has been likewise revealed that the underlying connections between culture and strategy include: (1) decision-making styles; (2) culture (as dominant values) & organizational practice; (3) culture as a strategic resource; and (4) diversification strategy and culture clash (Lecture 8, 2012, p. 14). It is however evident that both concepts are equally crucial to ensure a more pronounced success through collaborative and participative efforts of the organizations’ human resources and maximizing the utilization of the rest of its resources. Management, as in charge of corporate governance, should have an oversight of both strategy and culture as these contribute to the attainment of organizational goals. Conclusion Leadership is seen as a crucial component for steering the organization towards successful attainment of goals and through building a high involvement organizational culture. One firmly believes that building a high involvement culture should form part of the strategy formulation process and continuous monitoring would ensure sustained and continous success. Reference List Lecture 8: Strategy and Culture. s.l.:s.n. Deal, T. & Kennedy, A., 1982. Corporate Cultures: The Rights and Rituals of Corporate Life. Massachussettes: Addison-Wesley. Huwe, M., 2012. Strategy and Culture: Working Together?. [Online] Available at: http://www.forbes.com/sites/microsoftdynamics/2012/08/02/strategy-and-culture-working-together/ [Accessed 4 January 2012]. Martires, C. & Fule, G., 2010. Management of Human Behavior in Organizations. Quezon City: National Bookstore. Myatt, M., 2012. Culture vs. Strategy - What's More Important?. [Online] Available at: http://www.forbes.com/sites/mikemyatt/2012/05/29/culture-vs-strategy-whats-more-important/ [Accessed 4 January 2013]. Read More