A critical analysis of schools of strategic management - Essay Example

A critical analysis of Schools of Strategic Management s Introduction: Strategic management is the way of finding gaps in the current performance of the organization and to design, formulate and implement new steps in order to fill these gaps and to align the organizational functions with the pre settled objectives. It is the method of aligning all the activities being undertaken in the organization such as management, marketing, research and development and Computer information system in a prescribed way to achieve the goals of the organization. In order to effectively undertake the process of strategic planning and implementation different thinkers have presented theories, which have been divide into different schools of thoughts. The paper undertakes a comprehensive critical analysis of the underlying assumptions, perspectives and paradigmatic stance taken in these models. The chosen schools of thoughts are: (1) Design School (2) Learning School (3) Positioning School There are many stages involved in the process of the strategic management. These steps are divided in to three broad categories: 1) Strategy formulation 2) Strategy implementation 3) Strategy evaluation The first step namely the strategy formulation involves the development of the business mission, evaluation of the opportunities and threats faced by the business organization in the business, by using tools such as SWOT analysis, examining the strengths and weaknesses of the business, determining the long term objectives of the business and designing the new strategies to eke in the process of achieving the new targets. It also include the processes to determine the investment direction, the business markets to be addressed, extension of the operations of the business, limitations faced by the business in order to undertake the business activities. Strategy formulation also helps the business in deciding about the matters to be addressed on priority basis. There is not any organization in the world which has unlimited resources. Therefore the business organizations need to evaluate which projects are important and need investment. The future of a business organization is very much effected by the strategic decision of the management of the organization. The classic models for developing strategy, known as the SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis and called the "Design School Model" by Mintzberg et al. (1998) has been presented in the proceeding section. SWOT Analysis: So strategies are SO, WO, ST, and WT Strategies to take advantage of external opportunities. All managers would like their organizations to be in position where internal strengths can be used to take advantage of external trends and events. Organizations generally will pursue WO, ST, or WT Strategies in order to get into a situation where they can apply SO Strategies. When a firm has major weaknesses, it will strive to overcome them and make them strengths. When an organization faces major threats, it will seek to avoid them in order to concentrate on opportunities. As indicated in the Information Technology Perspective, immense opportunities are available to many firms today from wireless communication advances in technology. (David, 180) WO Strategies aim at improving internal weaknesses by taking advantage of external opportunities. Sometimes key external opportunities exist, but a firm has internal weaknesses that prevent it from exploiting those opportunities. For example, there may be a high demand for electronic devices to control the amount and timing of fuel injection in automobile engines (opportunity), but a certain auto parts manufacturer may lack the technology required for producing these devices (weakness). One possible WO Strategy would be to acquire this technology by forming a joint venture with a firm having competency in this area. An alternative WO Strategy would be to hire and train people with the required technical capabilities (David, 180). ST Strategies use a firm's strengths to avoid or reduce the impact of external threats. This does not mean that strong organization should always meet threats in the external environment head-on. A recent example of ST Strategy occurred when Texas Instruments used an excellent legal department (a strength) to collect nearly $700 million in damages and royalties from nine Japanese and Korean firms that infringed on patents for semiconductor memory chips (threat). Rival firms that copy ideas, innovations and patented products are a major threat in many industries. This is a major problem for U.S. firms selling products in China (David, 180). WT Strategies are defensive tactics directed at reducing internal weaknesses and avoiding environmental threats. An organization faced with numerous external threats and internal-weaknesses may indeed be in a precarious position. In fact, such a firm may have to fight for its survival, merge, retrench, declare bankruptcy, or choose liquidation (David, 180). Most managers fail to analyze the current situation of their business and lack a sense of intuition and forecasting. Often it is also a draw back that the strategy of some organizations neglects the change in the functions of some important departments. It is important for a strategy to serve all the needs of departments, which require change. Through a strategy audit it becomes easier to find out which departments and operation require to be revolutionized or updating. By assessing the knowledge possessed by an organization about its competitors and market environment the mangers can effectively take decisions in order to find the most feasible way for their businesses to maximize profits and improve market share. Although the SWOT analysis provides information to the management regarding the departments which require change but it does not provide the information regarding the extent to which the change is required. So in order to make the most of the SWOT analysis it is also important to calculate the extent to which change needs to be introduced to the organization. Although the identification of the problem is a big issue but the finding a solution making sense with business world is the main purpose of change in the organization. Positioning School: The Five forces Model presented by Porter belong to the Positioning School. According to porter, the nature of competitiveness in a given industry can be viewed as a composite of five forces: 1. Rivalry among competitive firms 2. Potential entry of new competitors 3. Potential development of substitute products 4. Bargaining power of suppliers 5. Bargaining power of consumers Rivalry among competing firms is usually the most powerful of the five competitive forces. The strategies pursued by one firm can be successful only to the extent that they provide competitive advantage over the strategies pursued by rival firms. Changes in strategy by one firm may be met with retaliatory countermoves, such as lowering prices, enhancing quality, adding features, providing services, extending warranties, and increasing advertising (David, 126). In this era of immense competition and highly volatile nature of business environment, if a business will react according to its competitor strategy it might face the threat of loosing its market share. The strategy implementation stage requires several actions to be taken by the management in order to get the most of it. The successful implementation of a strategy is directly related to the ability of a manger to motivate employees in the strategic direction and to develop an organizational culture to adopt the change and take it into the daily business practice. It also demands some crucial steps by the managers on personal level. The manger should depict different qualities such as discipline, high level of commitment and motivation, leadership and enthusiasm of making things possible. Successful implementation of strategy is very important. This is the most crucial step in the whole process since it involves many factors besides the ability of manager. This includes the adoption of change by the employees, their commitment levels, and the enthusiasm towards their jobs. According to Ajayi " Several factors such as distance time, culture, history, demographics and the internal and external forces are needed to adjust in order to undertake an effective change process." (p.51) Most often the business organizations fail to achieve their desired targets since they fail to implement their strategies in a successful manner or fail to get support from their employees. The whole process will take time so if the business wants to be competitive in the market its management needs to think ahead of its rivals. This before time strategy planning and implementation can only make the business leader of the market. In today's environment when the economic conditions are changing and many Asian economies are emerging as market leaders in world economy it has become impossible for the businesses to suitably address the external threats. "Back in 1970 Alvin Toffler in Future Shock 1970) describes a trend towards accelerating rates of change. He illustrated how social and technological norms had shorter life spans with each generation, and he questioned society's ability to cope with the resulting turmoil and anxiety. In past generations periods of change were always punctuated with times of stability. This allowed society to assimilate the change and deal with it before the next change arrived." (Wikipedia) Hence the only way to compete in today's business environment is to think before the time. "Swift changes in information and communication technology (ICT) over the last decades have had a revolutionary impact on how today's business organizations work, co-operate and compete. Information systems, Telecommunication and the Internet challenge the thinking on organizational structures and industry boundaries and fuel the debate on globalization. The growth and following rupture of the dot-com bubble shows how businesses must continue to struggle how to best take advantage of the new technological possibilities." (Impact of e-economy, 2004). In the volatile business environment of the 21st century the most important requirement of today's business is constant changing and updating with the external conditions. Change can be referred to as Internal, External, and business process re-engineering and transformation programs. The external change includes the changes in market, technology, and competitive environment, global and political environment etc. Internal changes involve the actions, which the organization has to take in order to put up with the external changes. These include the business restructuring and the transformation programs. The well-planned strategy to undertake change combine all of the above elements in the suitable ratio to undertake the process effectively and in timely manners. On the other hand an unplanned change introduction can worsen the things rather than improving. Therefore it is important for the leaders and mangers to undertake the change activities in a strategical way to reap the fruit of change introduction in the organization. A change project undertaken without a suitable strategy can increase the operating cost of the business without improving the operations and performance of the business. With the increasing globalization the competition in the industries is also increasing the market and the domestic stakeholders have been transformed into global market and global stakeholders. In order to adapt change it is important to find answers to the questions such as what should be the direction of change Which departments need to change Does the business need restructuring Who are the competitors What are the factors effecting the tastes of the customer What are the new threats the business will have to face in case of the invention of new technology With the advent of Information technology and the increasing globalization the external forces are constantly putting pressure on the organizations to undertake updating activities. The Learning School: The advent of the learning school counted as an important enhancement in previous array of strategic theories. In this view, strategies are emergent, strategists can be found throughout the organization, and so-called formulation and implementation intertwine. According to Ribbens (1997): "The strategies, and their related structures and organization culture, provide the parameters for future organizational learning" (p. 62). According to (Shrivastava 1983) the strategic decision making of the organization specifies the need of organizational learning practices. Just like the problem of 'egg and hen', which came first at earth, it is also difficult to decide whether the organization should adopt strategies from its learning process or undertake learning process according to its strategy. A learning organisation intentionally designs the structures and strategies in order to enhance and maximise the learning of its employees. (Dodgson, 1993) With the changing environment of business and advancing technology the notion of the Learning organisations has gained much more importance. Learning has become an important characteristic of an organisation in order to compete in the global business. Learning is a volatile and dynamic concept through which the process of updating in an organisation takes place. With the growing size of the corporations and continuous innovations in the field of technology the individual learning has transformed to the notion of the organisational learning. The notion of learning plays an important part in the progress of an individual just like that the learning on the organisational level plays an important part in the growth of an organisation. The organisational group of people can define the organisational learning as the sum of the learning activities of the individual, which takes the shape of combined effort. (Dodgson, 1993; Fiol & Lyles, 1985). An organisational learning program should be designed in the way that it is not lost when the members of the organisation leave the organisation. The learning system of an effective learning organisation not only serve the purpose of the present employees but also cater the needs of the future employees by the accumulation of histories, experiences, norms, and stories. In the highly competitive environment of the business in today's high pace changing business environment enhancing the learning capabilities of business is the solution of half of the problems (Prahalad & Hamel, 1994). Equally important is the creation of an unlearning organisation which essentially means that the organisation must forget some of its past. Thus, learning occurs amidst such conflicting factors (Dodgson, 1993). References Ajayi, O. "Leading Change," EXPRESS EXEC.COM, Capstone Publishing, United Kingdom. P. 47-51 Cook, D. & Gerald, F., "Strategic Human Resource Management and Firm Effectiveness in Industries Experiencing Decline," Human Resource Management 25, no. 3 (fall 1989): 77. David, Fred R., "Strategic Management: Concepts and Cases'" Seventh Edition. p. 5-25 Dodgson, M., (1993). Organisational learning: A review of some literatures, Organisation Studies, 14/3: 375-394. Fiol, C.M., & Lyles, M.A., (1985). Organisational learning, Academy of Management Review, 10/4: 803-813. Impact of the e-Economy on European enterprises. (2004). European Union. Available from: Prahalad, C. K., & Hamel, G., (1994). Competing for the future, MA: Harvard Business School Press. Ribbens, B.A. 1997. Organizational learning styles: Categorizing strategic predispositions from learning. International Journal of Organizational Analysis. 5(1), 59-73. Shrivastava, P. (1983), A typology of organizational learning systems. Journal of Management Studies, 20(1), 7-28 Wikipedia, Strategic management, 2006, Available from Read More