Environments and Organizations - Essay Example

Environments and Organizations Environments have a great impact on companies. In current thinking organisations are socially constructed systems that share values and meanings (Burrell & Morgan, 1979; Pfeffer, 1981; Weick, 1979), and the mission of the management is to promote and develop these shared meanings in order to achieve their objectives of fitting the organisation in its environment. It is this fitting act that is strategy. Another accepted concept of strategic management is that organisations and environments are real in nature, measurable and at different ends of the spectrum. The art is in finding equilibrium between the two and that is strategy. With this perception strategist proceed to find successful combinations of the organization/environment through strategy. This paradigm has been challenged by Smirchich and Stubbart (1985) who claim that current theories wrongly perceive that environments dictate strategies and that environments themselves are a creation of actions of organisations. They argue that all actions by all people in the organisation contribute to the development of the environment. This is almost diagonally opposite thinking. They break the existing assumption that organisation is entrenched in and confined within the environment. Ordinarily strategists make imaginary linkages between events, objectives and activities and create the environment. But for Smirchich and Stubbart both the environment and the organisation are results of what they term as “enactment”. They support this radical thinking by stating that the social interactions of the important members of the organisation produce both the organisation and the environment. This novel virtual framework simulates and creates the environment. Resultantly it is the patterns of activities that are labeled as organisations and environments and paves the way to find new strategies. It becomes the job of the strategist to find meaning and interpretations of these activities or enactments to determine strategies. The enactment theory decidedly discards the idea of a concrete, material organisation/environment nexus and adopts a socially created symbolic world (Winch 1958). There is no such thing as an industry and it is the pattern of activities that end up as manufacturing or distribution. This gives rise to new methodologies of managing in the enacted world. The managers do not set objectives; rather they seek answers to questions like what to do and where to go. This creativity forms the strategy by thinking out of the box. This is what gives shape and meaning to desires rather than trying to fit a mould that might be meaningless. They forgo traditional thinking and try novel methods thereby creating unprecedented values. Enactments are really about doing things differently and will mean discarding past practices, forgetting previous learnings, innovating and persuading the masses to go along with thinking and acting out different perspectives. The managers may be limited in their outlook as they are unable to critique their own actions therefore outside consultants help to single out facts and make them think inwardly of their own actions. 2 Competitive Advantage The heart of strategy lies in its competitive advantage (Porter M.E. 1980). When a firm becomes different by offering value, quality and some attributes through which it offers some uniqueness then it will become an above average performer in its industry. But to arrive at this stage the firm must make difficult choices. In a later essay Porter M.E., (1966) redefined strategy to be a combination of differently performed activities. While the activities remain the same, the approach taken to perform or enact them is the strategic decision that pays off. This brings about strategic positions that are unique by themselves and set the organisation apart from its rivals. All positioning is directed to entice the consumer. The uniqueness appeals to the customer. But for this it must fulfill the customer’s needs or wants. Hence strategies are to be consumer oriented. Positioning demands some sacrifices. Organisations have to make choices in order to position themselves and positioning comes out of best set of activities suited to produce those results that satisfy the consumer. These activities have to be performed in a different way to produce unique results enabling the organisation to position itself or its products for a destined set of consumers. Choices means trade-offs and this results in giving up some activities in preference for others. This is a difficult choice as it restricts the organisation to a particular set or sub-set of segmentation. But excellence cannot be achieved without trade-offs. An organisation cannot perform two separate set of activities to position itself with two set of standards as it will then fail to compete with its rivals. Trade-off is important as it limits the organisation’s offering but they certainly raise the level of the offer to such heights that the rivals cannot match it. Here is where the concept of Fit comes into play. A fit is when ideally all activities relate to each other in a tight way and when each is as strongly linked to the other like a chain. Further more each link in the chain is equally strong so that the fit is complete and such a fit cannot be copied. Consistency, complementary activities and optimal effort are the ingredients of a fit. This is what brings sustainability in strategy. A strategy has to be sustained for very long periods for pay-back and it should be inimitable by competition. This can happen only when activities are performed differently. Porter is also of the firm view that the leaders play a decisive role in shaping strategy. Porter has described three generic strategies; cost leadership, differentiation and focus that are the foundations of competitive advantage or difference. A cost leader lowers cost through different activities while a differentiator asks for a premium due to the unique features of its product or service. The two can combine to form another generic strategy that offers unique feature while remaining a cost leader. The fourth strategy of focus is aimed at serving a niche segment limiting to serve a segment with its needs giving up other opportunities. A good example of adopting generic strategy is easyJet which started on the model of Southwest as a low cost airline. But it has now ventured into code sharing with others, which is a deviation in strategy. Thus it now aims to serve a wider market with a differentiation while retaining the overall cost leadership strategy. It can thus be seen that set rules of strategy can be broken or bent with adoption of new strategies. This could well serve as the new model to follow by low cost airlines. This further cements the fact that when activities are performed differently, they lead to sustained competitive advantage. 4 Conclusions Porter’s views are from the prevalent school of thought in management strategy. He is traditional and bases the tangibles as the five forces of power that need to be satisfied through strategy. However, Smirchich and Stubbart have taken a different view of strategy and they believe that the power lies in the hands of the organisation that can shape the need or demand. They work in almost a virtual environment that defines both the organisation and the environment out of their own actions. In conclusion it is difficult to deny tradition but equally impossible to ignore radical thinking. One common thread runs through both views that for a strategy to be successful, things have to be done differently. This gives rise to hope that in the not too distant future there will be a blending of thought on a more common platform. 5 Bibliography Burrell, G., & Morgan, G. Sociological Paradigms and Organizational Analysis: London: Helnemann. 1971 Pfeffer, J. Management as Symbolic Action; The creation and maintenance of organizational paradigms. In L. L. Cummings & Barry M. Staw (Eds.), Research in Organizational Behavior (Vol. 3, pp. 1-52;. Greenwich, CT: JAI Press. 1981 Porter, M. E., Competitive Advantage. New York: Free Press: 1980 Porter M.E., What is Strategy, Harvard Business Review, 1966 Smirchich, L. and Stubbart, C., Strategic Management in an Enacted World, University of Masschusetts, Amherst, 1985 Weick, K. B. The Social Psychology of Organizing. Keadlng, MA: Addlson-Wesley. 1979 Winch, P. The Idea of a Social Science and its Relation to Philosophy, London: Routledge and Kegan Paul. 1958 Read More