How Strategic Management is Linked with Purpose, Processes and Culture - Assignment Example

What is Strategic Management and how it is linked with Purpose, Processes and Culture? INTRODUCTION This assignment is about strategic management and how the purpose, processes and culture of an organization are linked with it. The strategic direction of the company is highly dependent upon the internal politics, the vision and the rituals that the people form. It would not be incorrect to say that the change in strategic direction would not be successful if the company’s purpose, processes and the culture are not aligned with it. An organization, either small or big, needs to make an analysis of its vision, processes and the organizational culture before deciding to change the strategic direction of the company. This is done in order to make sure that the people are ready for that change. A FIRM’S STRATEGY Strategy of a firm is concerned with the long term corporate goals of the firm. Strategic decisions are usually taken by the top management from time to time in order to give a broad direction to the management. The strategic direction of the firm signifies the scope of activities of the firm in the future. These decisions could be about expansion of geographical location or product range. The firm seeks to search for the strategic fit with the external business environment with the help of its strategy. Usually when there is a change in strategy, there is a change in required resources for the firm. The main goal of the firm is to achieve the right positioning of the organization with the placement of the correct strategy. The resource based view of the strategy can be seen as creating new opportunities through introducing new competencies and resources. This is concerned with exploiting the strategic capabilities of the firm to yield new opportunities or provide competitive advantage. The strategy of the company is changed not only according to the needs of the environment but also according to the expectations and values of those in power in and around the firm. These people in power are also called the stakeholders of the organization who have some or all influence on the strategy. WHAT IS STRATEGIC MANAGEMENT? Change in strategy is when a firm is taking a big step or is about to bring a huge change in its strategy. Either when a firm is deciding to step up in the global arena or stepping into a completely different product line, the company is said to change its strategy. Strategic management is the management of all the issues that a firm faces when bringing a change in its strategic direction. Strategic management is the analysis of all the organizational factors such as mission, politics, culture, processes and rituals that are present in a company. This is done in order to make the change in strategy more of a success than a failure. The management of all these factors before changing the strategic directions is known as strategic management. Strategic Management Strategic management is not at all similar to other aspects of management as it requires dealing with operational control, sales force management, checking financial performance that will help the business increase its value. Strategic management is about the complexity that arises because of non-routine and ambiguous situations in the organization. The manager who can conceive and influence the whole business, instead of the individual parts, has the capability of becoming a strategic manager. The complexity of the strategic management, it is necessary for the management to take decisions which are based on the conceptualization of difficult issues. Strategic management is all about understanding the strategic opportunities for the future, the strategic position of the firm and getting the strategy implemented. There are some elements of strategic management that are interlinked and dependent upon each other. AFFECT OF ORGANIZATIONAL PURPOSE ON STRATEGY The overall purpose of an organization is influenced by many factors such as power structures, stakeholders’ decisions, the strengths of the organization in the market, market share and the target market. However, the managers need to form a view on this purpose and find ways of illustrating it in their operations. Purpose may be only a single line explicit statement which the stakeholders can expect or a formal requirement of corporate governance. The purpose can be expressed through statements such as vision, mission, corporate values and objectives. Corporate Values Large multinational and corporations have increasingly shown interest in expressing their interests and the way in which their organizations operate in the organization’s Core Values. These are the basic rules that guide an organization’s strategy. For example, a wildlife company’s van says “saving wildlife is our job” which shows that their employees have commitment and spirit to save the wildlife. Some great contributors in the field of strategic management have argued that the long-term success of many US corporate companies can be highly dependent upon the strong core values defined by these companies. However, if the company is unable to demonstrate their core values in practice, it is in great danger. Core values are not the ones that the company wishes to deliver, but they are already instilled in the company. Therefore they should be based on facts or else it may backfire. Mission and Vision Statement While the corporate values promise the statement to be true and any service or quality mentioned in the statement is assumed to be true, a mission or vision statement is more related to the strategic direction of the company. It is more concerned with the purpose of the organization for the future. A mission statement is developed to provide the stakeholders and employees with clarity about the purpose of the organization and the future direction that will be pursued. It is to do with building confidence and understanding about how the purpose relates to the strategy of the business. Whereas the vision statement is about what the organization aspires to be in the future. The purpose of the organization is aligned with the view of the future so as to stretch performance and gain commitment. Objectives Objectives are a list of clearly mentioned statements that have specific outcomes and that are needed to be achieved in the near future. Most of the times, objectives are expressed in financial terms. These are the clear components of the strategic direction of the firm which tell that what needs to be achieved in the near future. The company has to change its strategy for achieving these objectives if required. Change in strategy is required when the external environment is changed or there is a change in the objectives. Objectives and Metrics Objectives are usually quantified to measure the success of the achievement of these objectives and how far was the management in achieving all the goals. The performance of the management can be assessed by measuring and calculating the achievement. The objectives are set according to their priorities and the performance is also based on the achievement of those goals that were marked important for the success. Stakeholder’s Expectations The decisions that managers take about the purpose and the strategy of the organization are influenced by the stakeholders such as shareholders, government, customers, employees and the suppliers. Therefore this poses great challenges for the strategic managers to form strategies are aligned with the interests of the stakeholders. This means that stakeholders have the greatest influence on the strategy; therefore the strategy should be such that highly meets their expectations. The expectations of the group of stakeholders will differ which is a normal phenomenon, but a compromise will have to be reached. A compromise is usually reached by using the stakeholder mapping matrix. In this matrix, the priority is given to those stakeholders’ expectations whose influence and interest in the organization is the highest. The purpose and the strategy of the organization are developed with regard to the power and the interest of a stakeholder. HISTORICAL PERSPECTIVES AND CULTURE Historical Perspectives Historical and cultural aspects of the organization can help the managers in deciding the strategy of the business. Those capabilities of the organization which provide competitive advantage may have built up overtime and have historical roots in the organization. These capabilities may have become a part of the organizational culture. This culture which has historical aspects may be very difficult to change even if the firm’s strategy forces it to change. Therefore the strategy developed by the strategic managers should not go against the organizational culture. Strategic Drift It is a tendency of the organizations to drift incrementally on the basis of cultural and historical influences when developing strategies. Changes in strategies are made gradually. The strategies are developed according to the steps taken in the past which were successful. The drift in strategy is usually incremental. This means that the main strategy or the crux of the strategy does not change while minor changes are brought upon it. There are three reasons for this Alignment with Environmental Change: Changes brought about are usually incremental to keep in line with the external changes according to the changes in the market. Success of the Past: A strategy which has been successful is most probabilistic to remain a part of the main strategy for a long period of time. This strategy may have helped the organization build its competitive advantage. Round about a Theme: Managers may become hesitant to wander too far from the base strategy that defines the organizational values. The experiments are limited to a theme which has been successful in the past. However, an organization cannot solely depend upon strategies that change upon the change in environment. If the strategic drift continues, a downturn in financial performance, loss in market share and a decline in share price could result. Organizational Culture The organizational culture consists of four parts, value, beliefs, behavior and paradigm. Values are easily identifiable as organizational mission, strategy or objectives mentioned by the organization. Beliefs are not vague like values, but they are certain rules under which the organizational member take decisions. Behaviors are the routine actions of the members of the organization which show how the workers behave in certain situations. Paradigm is the state of mind in which the workers are in the organization. Paradigm shift is very necessary when strategy is changed but not easy. Organizational Culture linked to Strategy Organizational culture is the shared beliefs and the rituals that overwhelm a working place. These cultural values are not followed deliberately but people follow them on a regular basis. These are the routines and the predefined ways of performing tasks at the organization that have accumulated overtime. Any attempts to change this culture can result in tough resistance from the workers. Therefore it has an important influence on the change and development of a strategy. National and Regional Cultures Work, equality, power and authority are shaped by powerful cultural forces which are concerned with the common history, religion and even the climate over many years. The companies operating in many countries need to understand the cultures of their employees and should consider the fact that the difference in religion, climate and history can affect the success of the strategy. Therefore the strategy should be made in consideration to the values and expectations of the workers from each territory. Organizational Field It is a community in the working class that interacts more frequently amongst themselves than the outsiders and they have created a shared system of values. This community develops a recipe which is a set of norms, assumptions and routines held in common within this community and a methodology on how to manage tasks. If these beliefs of the organizational field become institutionalized, it will become difficult for the managers to implement a change when there is a strategic shift. This issue can be dealt with legitimacy which is either developing rules and policies, meet the expectations of the organizational field or take as granted the recipe. Culture’s Influence on Strategy In relation to the strategy and the management of strategy the taken-for-granted nature of culture is very important. This is because it is very difficult to manage culture and the culture is a driver of strategy. Many managers find themselves in the organizational culture and are forced to developed strategies according to the culture. Managers are more likely to develop strategies in terms of existing cultures rather than changing them. When a culture has a negative influence on the implementation of strategy and the performance is declining, the managers must try to improve the implementation process. This will cost less, improve efficiency and tighten controls. If rendered ineffective, strategy change should be considered which is in line with the existing culture. For example, the market for their business might be extended by the managers but assume that the new market is similar to the old one. Even if the management wants to change the assumptions and the routines of the people in an organization, they are unable to do so because this culture has been rooted since many years. Hence, now the only option the manager has is to change the strategy. Political Influences on Strategy Organizational politics is important for the development of strategy. Some researchers suggest that the strategy being followed by an organization is the result of the power politics and bargaining that goes on between the coalitions and important executives and the major stakeholders. These executives, the stakeholders and the coalition continually try to reposition themselves so that they can get the maximum control of their resources which is necessary for the success in future. Influence on Strategy while Development Political activities by the powerful people in and out of the organization often influence the strategy negatively getting in the way of rational thinking and thorough analysis. It is suggested by a political perspective on strategic management that the analytical processes and the rational processes may not be as dispassionate and objective as they appear and they are highly associated with the development of strategy. Objectives of the organizations that are set are often reflecting the passions of the powerful people in the organization. Politically neutral information is not always used in the process of the strategic debate. Information that is presented in the development process of strategy may be emphasized or de-emphasized according to what the most powerful people in the organization want to be seen as important. The powerful persons or coalitions may also influence the important issues being presented while deciding the strategy of the organization. These powerful groups or people in the organization may also influence the strategies that are eventually selected or the manner in which they are opted. Only those strategies may not be selected which help the firm overcome competitive pressures but they are influenced by different stakeholders. The higher the competition for resources and influence is among the powerful groups or people, the higher is the chance that the strategy will be developed for the interest of the stakeholders. The relative influence or power of the stakeholders on different parts of the organization is another deciding factor of the organizational strategy. For example the sales and product development department will be highly influenced by the customers and the finance department will be highly influenced by the owners or banks. The access levels to the information of the organization are also an influencing factor as the person having the access to most sensitive information will be more influencing the strategy than a person who has lower level access. The strategies are set with help of negotiations and bargaining because if different views about the strategy prevail in the organization then it is unlikely that any agreement will be reached. Secondly, the change in strategy will give power to some of the organizational members who are not currently powerful which can be threatening to the organization. Often new ideas come up in this battle for setting the strategy which is best for the firm and becomes the basis for competitive advantage. Therefore the exercise of power and political structure in the organization is pretty important for the setting of strategic direction PROCESS AND AFFECTS ON STRATEGY Resource Allocation Processes (RAP) The strategy development is deeply influenced by the way the resources are allocated in an organization. In a large complex organization, according to RAP explanation, the incremental view of strategy development is difficult in a top-down perspective. The negotiation levels play a huge role in the implementation of a strategy. If the information is only top-down flow, then it is more likely that the strategy will fail as the management is unable to take the feedback. Cultural Processes These processes are those that are taken-for-granted by the people working in the organization. These cultural processes define the working environment and show how the workers view the organization. The cultural web also emphasizes a strong influence on the strategy of the organization. When there are multiple processes running in the organization, the managers face difficulty in developing the strategy. In large organizations, planning systems exist along with the RAP. With these processes there will be some level of political activity. However, if the strategy development in the organization has a dominant mode, it is likely that there are other processes that are obvious too. Multiple processes of strategy development may be better for the organization than the singular strategy. Control Processes Control processes can be divided into two groups. The controls either emphasize control over inputs or over outputs. The input control processes are concerned with the resources consumed in the strategy such as human resources and financial resources. An analysis of these inputs is required for the strategy. Output controls processes ensure satisfactory results for the new strategy. Strategy Workshops This is a methodology that is executed by the top management who set the corporate strategy. The organizational leaders usually retreat away from the office in order to reconsider the strategy developed. In these workshops, some senior managers and middle managers are also present. The strategy is communicated to them in order to identify any further issues or any mistakes that the management might be making. These workshops have proved to be helpful for the success of new strategies as the middle and senior managers are closer to the customers, suppliers and the employees therefore they have a better idea of the internal and external environment. However, if the workshop is conducted by the same team of members every time or by those managers who set the strategy, the workshop will not be successful as it will not have any positive effects on the strategy. The process of workshop in the organizations which conduct them, can be positive on the strategy and hence on the bottom-line or profits. Strategy Projects These are projects that are organized to implement the strategies developed by the strategic manager. These projects explore the opportunities and the issues that have been ignored in the strategy development process. The organizations that have this process before the implementation of the strategies can have a favorable result after the implementation of the new strategies. Communicating the Strategy This is one the most important processes in the strategic management. After deciding the change in strategy, the strategic decisions need to be communicated to the employees and all the stakeholders. If successfully communicated and in a good manner, the communication can have a positive effect on the organization. However, if the message medium is not correct or the message is not tailored to different needs of the stakeholders, the strategy might fail as the stakeholders might resist the change. For a successful communication of aq strategy, there should be the following elements present. Focus The communications should be narrowed and not unnecessary detail or complex language that is difficult to understand by the audience. The key components of the strategy should be focused in the strategy rather than the unnecessary ones. Impact The communication should have an impact on the stakeholders therefore the message should have powerful visuals and words. Simple words and no visual aid will make it difficult for the workers to understand the strategy. Therefore the impact of the message can have a huge effect on the strategy implementation. Media The medium selection is the most important decision when deciding to broadcast the strategy to the stakeholders of a business. Mediums such as emails, voicemails and newsletters help avoid rumors in the organization and the standard message is received by the stakeholders. Mediums such as notice boards and verbal announcements can cause disruptions to the message and wrong strategy can be transmitted to the stakeholders. CONCLUSION When changing the strategic direction of an organization, the management can face many issues and problems. The biggest resistance is from the people and it is about the change as no one likes a drastic change. However, with proper strategic management measures and analysis, many of these issues can be eliminated and the risk of failing the new strategy is reduced. The managers should never forget that people are the most important part of the change process and the chances of success of strategy become very high. Read More