Strategy Formulation and Cogency of Arguments - Case Study Example

STRATEGY FORMULATION AND IMPLEMENTATION Strategy Formulation and Implementation "The process researchers have shown again and again the real world messiness of strategy formulation and implementation. The implication is that it is impossible to analyse everything up front and predict the future, and that the search for economically optimal decisions is futile"(Johnson, G. Scholes, K., and Whittington, R., 2010, Exploring Corporate Strategy, Text and Cases, Prentice Hall, p.17). 1. Introduction. There is no guarantee that a given strategy will be implemented effectively despite ensuring that there is proper planning policy. Less than half of the strategies that are formulated get formulated (Mintzberg 1994; Miller 2002; Hambrick and Canella 1989). It is therefore very difficult to give an optimal decision that will ensure that a given strategy will be implemented effectively in the foreseeable future. Strategy formulation can be described as the phase of strategic management that encompasses planning and decision making that will enhance establishment of the organization’s goal and of strategic plan. Strategy formulation can be described as that phase of strategic management that involves the use of organizational and managerial tools to direct resources towards attaining strategic results. From these definitions of strategy formulation and strategy implementation, it is clear that strategy implementation will fail as a result of the failure of strategy formulation. Decisions that are made to process formulation of a strategy are prone to be affected by internal and external factors. 2. Literature review of content and process approaches to strategy Implementation issues relating to planned and emergent strategy. Before proceeding with review of literature is important to talk about ‘strategy,’ which is a widely term. Due to the fact that strategy in this paper is referring to the ‘strategy’ that is used in strategic management. Most of the definitions that have been put forward to describe strategy are very easy and lack comprehensiveness (Mintzberg et al., 1998). It is for this reason that he argues that several definitions should be incorporated to define strategy, and he called them the 5Ps for strategy. The environment is frequently increasing in vitality making it difficult for the prevalence strategic planning. Strategic planning systems are therefore influenced by various factors as indicated by various studies. Some studies have indicated that an environment which is turbulent enhances decentralization of strategic decision making process (Lindsay and Rue, 1980; Grinyer et al., 1986; Wilson 1994). The fact that strategy planning involves the prediction as well as uncertainty about the future and the only way to curb this is to shorten the horizons of planning, makes it difficult to come up with an optimal decision (Lindsay & Rue, 1980; Javidan, 1984). Organizations are also bureaucratic which makes it difficult for the strategy planning process to thrive in this type of environment (Courtright et al., 1989). Messiness of strategy formulation and implementation is prevalent since communication of strategic plans are not effectively conveyed. Many organizations have taken the framework for the formation and implementation of strategies as a formal strategic planning system. It is a necessity that strategies should be formulated in a formal system, it is very possible for formulation and implementation of strategy to be done in an informal manner (Steiner, 1997). Some organizations are very complicated making the process strategy formulation impossible to coordinate and plan. There is also a lot of difficulty in putting together aspects of information such as the external environment, internal decisions, information about competitors, power relationships and organizational behaviour (Quinn, 1978; Mintzberg, 1990). Senior personnel of an organization such as managers are not certain about the future but it is possible for such mangers to be sure of the future (Schwartz, 1996; Ansoff, 1991). There instances where the environment makes it extremely difficult to predict the future, hence formulation strategy can be used to compensate such unpredictability. It is very negligent to use the pat to predict the future in real world business, which makes strategy formulation and implantation very difficult. Many theories and schools of strategy theories exist, but many of these concur with the fact that explicit strategy formation as the best approach. Mintzberg argues that implicit strategy formation is the best since there is no requirement of formality unless in special circumstance. He goes on to stress on “emergent strategy,” this he described in his 5Ps for strategy model (Mintzberg, 1990; 1987a; Ansoff, 1991). Strategy is used synonymously with plan, which implies that there are two distinctive features of strategies: they are made in advance based on assumptions and predictions, and they are established consciously and decisively (Mintzberg et al., 1998; Mintzberg, 1994b). Some studies have suggested that strategy implementation will be as a result of actions and not designs (Cherp, Watt, & Vinichenko, 2007). It is on such sentiment that the question on whether an organization will implement a strategy that it has formulated arises. The figure above indicate the 5ps of strategy as explained by Mintzberg, at the commencement there is intended strategy. As time progresses this intentions re not realized, which are called unrealized strategies. Deliberate strategy is a constituent of the realized strategy, which has the realized intentions and emergent strategy, which means that the patterns realized were not explicitly intended. From this analysis of the 5Ps, deliberate strategy can either be positive or negative while emergent strategy can also be positive or negative. Formulation and implementation of a strategy is therefore uncertain since outcomes of deliberate and emergent strategy are not known. Mintzberg suggested that it is very difficult or impossible to formulate an explicit strategy in an unpredictable environments, unless the process of trial and experience has run its course. The process of trial and error can be very expensive as well as risky making formulation and implementation of strategy messy. The notion of trial and error is not justifiable since it is not prudent to learn from mistakes. The only way that strategy implementation can be successful is when there is an absolute congruence between several elements such as organizational structure leadership and resource allocation. It is therefore very difficult to perfect such aspects and in return the process of strategy implementation becomes very difficult. Strategic planning will determine whether the strategy implementation will take place effectively. Strategic planning does not just entail planning for the future it also aids an organization to create its future (Goodstein et al., 1993). Some decisions become futile while one is trying to predict the future because of believe that they can be changed. The top level management is given the task of forming and maintaining a strategy, it therefore becomes very difficult for them to propel a strategy if there is some resistance within an organization. A meta-analysis conducted by Mcllquham-Schmidt (2011) indicated that strategic planning does not have a positive effect on the performance of an organization. The best way in which strategic planning outcomes can be accorded is comparing external environment variable and internal organizational conditions. Strategic planning will involve the internal communication, coordination and integrating different capabilities of activities in an organization, which is opposed to the outcome of the strategy (Hutzschenreuter & Kleindienst, 2006; Grant 2003). If optimal decisions are to be made, there should be an effective communication inside and outside the organization (Brinckmann et al., 2010). In regard to formation and implementation of strategy it becomes almost futile since achievement of optimal communication processes is not easy. 3. Comparative analysis of selected models and cogency of arguments. Mintzberg’s model on the relationship between strategy formulation and strategy implementation can be used to analyse why it is difficult to make a futile decision in the implementation of a strategy. In this model organizations tend to implement a strategy before they vividly articulate goals, objectives or mission. From this model it is clear that strategy implementation comes before strategy formulation. The strategies that unfold in this manner are called emergent strategies. If at all the emergent strategies are going to be implemented, the organization concerned has to allocate necessary resources for their sake of implementing the emergent strategies even though he organization did not chose these strategies. It is very common for most organization to utilize emergent and deliberate strategies, but the only way it can enhance performance is by making sure that these two strategies are implemented. If an organization intends to achieve its goals and objectives effectively, it must not only formulate the strategies but implement them effectively. There are four possible outcomes that can be realized as a result of strategy implementation. 1. Success: this will be achieved when a strategy is appropriate and implemented perfectly 2. Roulette: this arises when a poor strategy is ell implemented 3. Trouble: this a situation where a suitable strategy is poorly implemented. 4. Failure: this is when a poor strategy is poorly executed. In order to diagnose why a strategy did not succeed in roulette, trouble or failure scenario an analysis of both formulation and implementation should be considered. The general framework for strategy implementation is that the first stage of implementation is to identify the decisions, activities, and relationships dire to achieving the activities. Any senior manager in an organization is who is willing to implement a strategy has to take into consideration the six-implementation task. The first component is to make sure that the organization possess the structure necessary to transform a strategy into reality. The second component is to make sure that the organization has the necessary resources to propel implementation of a strategy. Third consideration is to make sure that the organization is installed with internal administrative support systems. It will be also very important for the top managers responsible in driving the strategy forward to devise reward that are linked to objectives and strategy. The fifth component is to make sure that the corporate culture is shaped to suit the strategy. Lastly, strategic leadership should be exercised. The six component will from time to time make the implementation of strategy be ‘messed’ by planned and emergent strategy. 4. Business examples. Johnson, Scholes, & Whittington (2010) sentiments on the manner in which formulation and implementation of strategy is messed up in real world a business example is going to be analysed. The business example to be used is a case study on Enterprise Resource Planning (ERP) at Bharat Petroleum pg. 414. The main reason why Bharat Petroleum embarked on ERP was to enable them gain control in operations through improved information in areas such as inventory and product dispatch. The implementation of the ERP system was not conceived simply as an information system project. The head of this project that was supposed to implement it was not an information system specialists, but a human resource professional. The team was made up of 60 members and only 10 of them were from information systems. Implementation was also carried out with assistance from Price Waterhouse Coopers (PWC), 24 SAP consultant, a team of 70 in-house SAP qualified consultants and 6 full-time change coaches. Implementation was scheduled to take 24 months, with pilots selected carefully on the basis of proximity to the project team (based in Mumbai), salience of the process and IT readiness. Many initial tethering problems were encountered. Informal processes were not fully incorporated into the new SAP system, with awkward consequences. Due to this plant managers felt that ERP’s formalization process did not contribute greatly to increasing discipline amongst staff. The case study of Bharat Petroleum tries to give a comprehensive analysis of the fact that formulation and implementation of strategy is very difficult in real world business. One might question the fact that implementation of ERP was headed by human resource personnel instead of an information system expert. This business example concurs with Johnson, Scholes, & Whittington sentiments that it is impossible to analyse everything upfront and predict the future, and that the search for economically optimal decision is futile with in regards to formulation and implementation of a strategy. References Ansoff HI. (1965). Corporate Strategy. McGraw-Hill: New York. Ansoff HI. (1991). Critique of Henry Mintzberg’s ‘The design school: reconsidering the basic premises of strategic management’. Strategic Management Journal 12(6): 449–462. Courtright JA, Fairhurst GT, Rogers LE. (1989). “Interaction patterns in organic and mechanistic Systems”. Academy of Management Journal 32: 773–802. Mintzberg, H. (1994), The rise and fall of strategic planning: Reconceiving roles for planning, plans, planners, New York: The Free Press. Miller, D. (2002). “Successful change leaders: what makes them? What do they do that is different?”, Journal of Change Management, 2(4), 359-68. 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