Vital Factors in the Company's Strategic Management - Literature review Example

Critical Evaluation of Strategy Management The organizations presently rely on their management to evolve strategies so that it can achieve its objectives laid out in the mission and vision. The present paper looks into the influence of three factors: purpose, process and culture on the management of the company. 1. Purpose, Process and Culture – Its influences on strategic management in a company The purpose of the any company is mainly influenced by governance structure, stakeholder expectations, social responsibility and ethics. The company has to formulate policies to remain in the competition to compete within the industry, run the organization and also provide benefits to the stakeholders of the company. Scholes et al (2010) mentioned that management is influenced by various factors that work under pressure and sometime make decisions leading to catastrophic end like in the case of Enron where grave fraudulent was witnessed within the management with misappropriation in accounting statements. It is further explained that corporate governance chain could be useful in order to bring down misalignment of incentives & control and self interest while highlighting the issues relating to responsibility, shareholders, role of institutional investors, unequal division of power between different players in the chain, access of information at different levels and using measures and targets reflecting their own interests rather than those of end beneficiaries. Further it is stated that company board must be concerned with the strategy as it is responsible for success or failure and also for the benefits received by the shareholder. This clearly explains that decisions of managers with regard to purpose and strategy of their organization is very much influenced by the expectations of the stakeholders which is a serious challenges in case of larger organization that may have good number of stakeholders. Purpose influences the management to use various theories or models to ensure that the mission, vision and objectives are achieved. Further it is pertinent to mention here that purpose of the organization motivates the management to adopt policies pertaining to private or public ownership of equity, sale of all or part of the business, acquisition or merger with another business, mutual ownership and partnership and privatization of public sector bodies which in not only influenced by the presence of shareholders or other stakeholders but also social and ethical responsibility towards the society. So the company has to survive and work harder to provide monetary benefits to the shareholders. The corporate social responsibility (CSR) which is concerned with the ways in which organizations can exceed its minimum obligations to stakeholders through regulations which include paying attention to contractual stakeholders and community stakeholders. The various factors influencing the purpose of organization i.e. corporate governance, external and internal stakeholders, social and ethical responsibilities, etc. in turn influence the strategic management of the organization. The managers will need to form a view on the purpose and express core values of the organizations through mission and vision within which strategies are developed. The purpose of an organization greatly influences the strategic management which is fueled by stakeholder expectations within the governance structure, corporate governance to avoid scandals, misappropriation in accounting statements, meeting the objectives, mission and vision of the company. The managers have to formulate their strategies considering the aforementioned issues and achieve optimum results. Scholes et al (2010) mentioned that the business environment cannot be understood without knowing about its development and growth. Many well established and leading industry companies refer to the core values of the organization that have embedded in their culture greatly influencing their path to success. Scholes et al further states that the capabilities of an organization that provide competitive advantage may have historical roots and have built over a time in a unique ways which have become part of the culture and their management strategy. According to Edgar Schein (quoted in Scholes et al, 2010:189) “organizational culture is a basic assumptions and beliefs that are shared by members of an organization that operate unconsciously and define in a basic taken for granted fashion an organization’s view of itself and its environment”. Culture plays a vital role in the management decisions wherein there are companies that do not deviate from its roots, the way it was conducted or managed in earlier and strive hard to manage the organization with the historical values and functions like IKEA way. In the process of explaining the importance of culture on strategic management, Scholes et al mentions about strategic drift which is the tendency for strategies to develop incrementally on the basis of historical and cultural values. The problem that gives rise to strategic drift is the problem of hindsight leading to incremental change in the past strategy, core rigidities wherein the change or modification in past strategy is literally impossible, relationships becoming shackles impeding the change of strategy that may lead to the growth of company and lagged performance. It is further mentioned that strategies develop on the basis of the organizations historical management perspective and successful historical strategy tend to continue over a longer period of time which largely remains unchanged or changes very incrementally mainly because of alignment with environmental change, success of the past and experimentation revolving around the historical mode of management. It is pertinent to mention that history of an organization can help the managers in understanding its strategic position. The path dependency explains the role and influence of history as it is where the policy paths have been evolved leaving everlasting effects on subsequent events and decisions. The culture of an organization consists of four layers i.e. values which are mentioned in the mission statement of the company, belief, behaviors regarding the daily activities of an organization and taken for granted assumptions forming the core of an organizations culture. It is further mentioned that the taken for granted nature of culture is the one making it centrally important in relation to strategy and the management of strategy because it is difficult to observe, identify and control that which is taken for granted and is difficult to manage. Moreover, organizations can found themselves surrounded by its culture making it difficult to change their strategy outside the control of that culture. Scholes et al mentioned that managers may try to improve the implementation of existing strategy in times of declining performance by trying lower cost, improving efficiency, tightening controls, etc. The culture of an organization includes stories i.e history, symbols, power structures, organizational structures, control systems, and rituals and routines. Thus, culture has direct and indirect influence on the strategic management of an organization and managers need to consider the cultural web of an organization before making any change or amendment to strategy as it may also result in change of all the factors included in cultural web. The cultural analysis of an organization provides a complementary basis of analysis to an examination of strategic capabilities; it also sensitizes managers about the future strategy and provides the basis for management of strategic change. Strategy is an important part of the management which involves complex and tedious processes including the involvement of various people concerned with the organization. Scholes et al (2010) explains two broad areas of strategy development which are associated with intended strategy and emergent strategy. The process of strategy development is strongly associated with a strategic leader; an individual upon whom strategy is believed to be dependent. The process includes intended strategy development which includes strategic vision, leadership and command, strategic planning and externally imposed strategies; emergent strategy development that includes logical incrementalism, resource allocation routines, cultural processes and political processes and finally the process includes challenges and implications with intended and realized strategy, learning organization, uncertain and complex conditions. Further Scholes et al mentions that political view of strategy development which is the outcome of the processes of bargaining and negotiations among powerful internal or external interest groups which is often seen as negative influence on the strategy development Moreover cultural processes also influence the strategy development which include the basic assumptions and beliefs shared by members of an organization. The different processes of strategy development suggest discrete or mutually exclusive and is likely to differ over time. The process of strategy development has certain impact on the practice of strategy by the managers in their organization. As the strategy development is influenced by various factors like political forces, intended and emergent strategy development, realized and unrealized forces, the strategy is tend to be changed accordingly to suit the external as well as internal forces along with the objectives of the organization. Strategy is the business of top management and therefore it is necessary that top management are kept away from the operational responsibilities in order to facilitate them to focus on overall strategy. The strategists, which include people who formulate and execute the strategy, include Chief Executive Officer, top management team, non – executive directors along with strategic planners and consultants are also the people who are involved in process of strategy development and thus it is assumed that strategist play a vital role in the development of strategy and its processes. The various people involved in the process of strategy development play diversified role ranging from analyzing, prioritizing and generating options, transferring knowledge, promoting strategic directions, implementing strategic change, etc. The strategy developments processes allow the management of arrive at appropriate strategy essential for the effective management of the company helping the managers in strategic decision making which helps in building multiple, simultaneous alternatives, track real time information and aim for consensus. The strategy development process helps in formulating and devising effective management strategy for the company basing on it mission and vision. The process of strategy development results in management strategy that helps the managers to achieve the purpose of the organization in line with the organizational culture and core values. Thus process, purpose and culture have direct and indirect influence on the strategic management of an organization. 2. Process, Purpose & Culture - Comparison with other authors According to Scholes et al (2010) the purpose of an organization will be influenced by the expectations of its stakeholder which is to provide benefits to them. Similarly Handy suggested that the purpose of a business was to make profit and use it to do something good (www.scribd.com). Scholes et al (2010) mentioned that different key personnel influence the organizational purpose and strategy depending on their power and interest along with ethical considerations. Hamel and Prahalad (as quoted in Morden, 2007:180) mentioned that activities of organization should be characterized by a clear and consistent purpose through strategic intent which comprises of sense of direction, discovery and destiny. Tomlinson (2007:11) stated that “strategic purpose is the guiding light and the system that gets implemented must be aligned with the purpose of the organization as a whole”. Daft (2009:60) in contrast to Scholes et al (2010) states that the purpose of the organization may be referred to overall goal, mission or objectives which in turn facilitate the management to derive the purpose of organization. Bryson (2004:38) states that identifying the purpose of organization does more than justifying the existence of organization and agreement on purpose also defines the arenas within which the organization will collaborate or compete outlining the future course of the organization. Peter Drucker (as quoted in Verweire and Berghe, 2004:95) acknowledges that defining the purpose and mission of the organization is difficult but reiterates that defining purpose is crucial as it enables the management to develop strategies and to manage the organization for performance. Scholes et al (2010) identified three main influences on organizational purpose which are governance structure, stakeholder expectations and social responsibility and ethics whereas Verweire and Berghe (2004:96) have identified four main influences which consists of corporate governance, stakeholders, business ethics and cultural context. With regard to process, Allison and Kaye (2005:20) mentioned that successful strategic planning process supports an organization involving its stakeholders in reaching consensus about what end results the management is trying to achieve inclusive of vision, purpose, goals and objectives. Langford and Male (2001:80) mentioned that strategy implementation process will be carried out by strategists who are responsible to decide on what should be done in order to implement the management process which is similarly mentioned by Scholes et al. Further it is mentioned that strategic development process includes various management personnel dealing with company matters and is also influenced by political and societal forces. Mintzberg presents a very comprehensive, complex and contrarian view of the practice of strategic planning and argues that strategic planning is the antithesis of strategic thinking. According to Mintzberg, strategic thinking is a creative act of synthesis and strategic planning is a process of analysis (Judson et al, 2005:5). Scholes et al (2010) provided the strategy development process through emergent strategy development through logical incrementalism by experimentation and learning from partial commitments rather than through global formulations of total strategies and along with resource allocation process by the way of realized strategies whereas Mintzberg (as quoted in Rabin 2000:277) mentions that the concept of emergent strategy is to capture the strategy which is not yet evolved even though not intended by the firms leaders. According to Ginter et al (2002:448) strategy development process is a top down – bottom up process as compared to top management involvement in Scholes et al (2010) where CEO’s, top management executives, non executive directors along with strategic planners and consultant are involved in development process and where the management is separated from operational activities maintaining only too level profiling in the development process. According to Campbell et al (2002) culture is the organizational equivalent off a human’s personality whereas Hunt (2010) states that culture should be considered as critical as structure and strategy in establishing the organizational foundations of high performance, both of which are different to the views mentioned by Scholes et al (2010) wherein it is stated the organizational culture is basic assumptions and beliefs being shared by members of an organization which is also opined by Parnell (2003). According to Scholes et al (2010) cultural and institutional reforms influence the strategic development and management of the organization. The historical perspective plays a vital role in the strategy development of the company and suggests that culture sometimes literally makes it impossible to change the past strategy in the company which has been proved successful over the years. Wilson (1992) mentioned that organizational culture and change are closely related and states that to achieve changes in organizational performance, manipulation of organizational culture by attention to its structure are the first factors. But however, Scholes et al (2010) mentioned that change in culture, which has been successful for the past so many years, may be difficult as it is the core values of the organization upon which company has been able to reach where it is, therefore Scholes et al have different opinion as compared to Wilson. Though change is necessary to improve the performance of organization, the historical background of the company makes it difficult in amendments to the existing culture. Pietersen (2002) mentioned that culture is the one constant that never changes and a company that refuses to adjusts its values and behaviors in response to changes in the business environment will become dysfunctional which is also opined by Scholes et al (2010) as change is inevitable and companies need to adapt change in order to survive in ever changing environment however keeping in touch with the historical backgrounds; because organizations return quickly to the status quo even when procedures and strategies are altered. According to Kim et al (2005), organizational culture was ignored as an important factor in accounting for organizational performance because it encompassed taken for granted values, underlying assumptions, expectations, collective memories and definitions present in an organization duly opined and agreed by Scholes et al (2010). It is further stated that each culture is generally reflected by unique language, symbols, rules and ethnocentric feelings according to Kim et al (2005) whereas Scholes et al included stores, symbols, power structures, organizational structures, control systems, ritual and routines in the cultural web of an organization. Conclusion The purpose, process and culture are all important factors in the strategic management of the organization. The purpose defines the objectives, goals, mission and vision; based on which the management along with strategists plan and develop a strategy which will be implemented in order to achieve the purpose of the company. The main purpose of any organization is to make profit for all the stakeholders of the company which includes external as well as internal stakeholders. Further organizational culture has an important role to play in the strategic management as it has been in existence from the time of the establishment of the organization, upon which the core values and mission of organizations have been developed. Thus it is evident that purpose, process and culture have direct and indirect influence on the strategic management of the company. References 1. Bryson J.M (2004) Strategic planning for public and nonprofit organizations: a guide to strengthening and sustaining organizational achievement, Ed. 3, John Wiley and Sons, US 2. David C. Wilson (1992) A Strategy of Change: Concepts and Controversies in the Management of Change, Cengage Learning EMEA, US 3. David Campbell, George Stonehouse, and Bill Houston (2002) Business strategy: an introduction, ed.2, Butterworth-Heinemann, US 4. Exploring Corporate Strategy, (8th Edition) 04, http://www.scribd.com/doc/24174561/Exploring-Corporate-Strategy-8th-Edition-04 5. Hunt, J, Schermerhon J.R and Richard S Osborn (2010) Organizational behavior, Ed. 8, Wiley, US 6. Jack Rabin, Gerald Miller, W. and Bartley Hildreth (2000) Handbook of strategic management, Ed.2, CRC Press, UK 7. Judson J. Lawrie and Transit Cooperative Research Program, National Research Council (U.S.). Transportation Research Board, United States. Federal Transit Administration, Transit Development Corporation (2005) Strategic planning and management in transit agencies, Transportation Research Board, US 8. Kim S. Cameron and Robert E. Quinn (2005) Diagnosing and changing organizational culture: based on the competing values framework, John Wiley and Sons, US 9. Kurt Verweire and Lutgart Berghe (2004) Integrated performance management: a guide to strategy implementation, Sage Publications, US 10. Langford D.A and Male S (2001) Strategic management in construction, Ed.2, Wiley-Blackwell, US 11. Michael J. Allison and Jude Kaye (2005) Strategic planning for nonprofit organizations: a practical guide and workbook, Ed.2, John Wiley and Sons, US 12. Parnell. J.A (2003) Strategic Management: Theory & Practice (Biztantra), Dreamtech Press, USA 13. Peter M. Ginter, Linda E. Swayne, and Walter Jack Duncan (2002) Strategic management of health care organizations, Ed.4, Wiley-Blackwell, US 14. Richard L. Daft (2009) Organization Theory and Design, Ed.10, Cengage Learning UK 15. Scholes, K Johnson, G, and Whittington, R. (2010), Exploring Corporate Strategy: text and cases, (8th ed.) Enhanced media edition, Harlow: Prentice Hall. ISBN: 978-0-273-71192-6 16. Tomlinson R.F. (2007) Thinking about GIS: geographic information system planning for managers, Ed.3, ESRI, Inc 17. Tony Morden (2007) Principles of strategic management, Ed.3, Ashgate Publishing, Ltd, UK 18. Willie Pietersen (2002) Reinventing strategy: using strategic learning to create and sustain breakthrough performance, John Wiley and Sons, US Read More