Strategic Management Planning and Performance of Any Company - Research Paper Example

Management strategy Abstract A choice of approaches to strategy is determined by external factors. Turbulent environment requires emergent approach implementation and stable environment requires prescriptive approach to strategic planning and performance. With regard to contemporary works of scientists on theoretical and practical implementation of strategic management and projecting their claims on case studies of different companies and considering them from a cross-cultural perspective, this research paper is another attempt to underline the necessity of more flexible and multi-sided strategic decision making. In other words, culture plays a crucial role in modern strategic planning and facilitates companies’ adaptation to external and internal changes. A further discussion is developed in an unprejudiced manner, basing on facts and empirical data from the studies of such scientists as Mintzberg (1998), Johnson et al (2008), Child (2005) and others. Nevertheless it is evident that crucial role of culture in strategic management as well as implementation of emergent approach are two core issues of the research paper. Introduction Modern world is developing under conditions of globalization. There are tendencies of convergence and unification in all spheres of human activity. There is a great need to work in favor of mutual human understanding and to reach consequences which will satisfy all parties involved. Business world has to subject to these tendencies. Managers are involved into searching for decisions appropriate for their companies and relevant to their business partners. Diverse world requires managers to appeal to their inner world or conscious, to have deep and profound knowledge of management strategies and ‘management techniques’. Complicated environmental conditions have to be discussed and analyzed in detail by managers. For this purpose it is relevant to involve strategic management, a special discipline which discusses “choosing the right place for defining a unique position, making clear trade-offs, a tighter fit; it involves a comprehensive approach to managing all important aspects of the company's internal environment and it therefore significantly differs from other management techniques” (Child, 2005). This discipline implies activities planning which are relevant to the orientation and functioning of the corporation. Strategic management develops strategies appropriate for stable and turbulent environments. Success of the company depends on appropriate involvement of management strategies, which are developed in accordance with structural, processing, systematic and cultural environmental changes. Strategic management: main concepts In accordance with Mintzberg (1998) strategic management is divided into ten models or 'schools'. These strategies differ with regard to the role of management in a particular context of the company. Management decisions occur in the result of companies’ intention to satisfy the needs of their customers better than their competitors. There are also many other benefits of strategic management, which are discussed in contemporary studies. Results of empirical studies signify that benefits of strategic management are the following: nearly 90% of studied companies gain benefits from strategic management involvement. Those companies who neglect strategic management lose many chances to survive (Johnson, Scholes, Whittington, 2008). It is necessary to underline that modern strategies should be developed in compliance with demands of the modern business world in order a company was able to adapt to unexpected external changes. In such a way, impact will be moderated and company’s performance, its structural organization and stages of development will not be destructed. Mintzberg (1998) makes an emphasis on the following issues: effort and setting of directions consideration; company analysis on the background of environment; reliability of decision-making process; external environment consideration; human resource management advancement; facilitation of communication and mutual understanding and other issues. The main objective of strategic management in accordance with Minzberg is to deal with environmental changes and its impact on the internal organization of the company. Consequently, two main approaches are defined in strategic management: the emergent approach and the prescriptive approach (Lynch, 2006). The main goal of these two approaches is equal: to reach success, but different planning approaches are required. Prescriptive approach is often criticized: this approach sets exact objective though it doesn’t mention that numerous environmental changes are possible. The main concepts of strategic management refer to the steps which have to be taken by the company in order to reach its objectives. There are many different strategic planning models developed in accordance with the needs of different organizations. It is relevant to every company to develop the most appropriate strategic model, combine some of them or choose one. A ‘top-down’ strategic model is the most appropriate for the companies starting from 70s. The steps of this model are the following: “mission-objectives-situation analysis-application-control” (Mintzberg, 1998). “Situation analysis requires other several steps, such as: image of the company-culture of the company-key personnel-structure of the company-location of the experience curve-availability of natural resources- operational effectiveness-market share- brand consciousness - exclusive agreements-financial resources-trade secrets and patents” (Mintzberg, 1998). There are also functional domains in strategic planning, such as “research and development, marketing, production, human resources” and other issues (Mintzberg, 1998). As far as we can see, strategic planning is a complicated company’s activity, combining analysis of different internal and external factors and aspects. Currently, basic concepts and models of strategic management are gradually transformed into more flexible ones. Moreover, they are often considered on a certain cultural background or from cross-cultural perspective. Strategic process and culture Strategic management is also discussed by Stephanie Dameron and Olivier Joffre in the article “The good and the bad: the impact of diversity management on co-operative relationships”. Cultural diversity in strategic management is discussed as a favorable ground for establishment of ‘community based co-operation’ and ‘complementary co-operation’. Diverse cultural issues play a role of communicative basis establishment in the company. To tell the truth, diversity in the business world is the most striking issue and the majority of organizations tend to consider it as a ‘communicative bridge’. Another perspective is to consider culture to be a motive force of strategic management though some scientists criticize this claim and underline that cultural diversity is “a zone of uncertainty from which one can profit” (Hendry and Pettigrew, 1992, p. 137). If strategic managers develop their strategies from this perspective then diverse issue may be beneficial to one or another company, only there is a need to develop a particular consideration about every diverse issue. For example, employees’ cooperation in the company may be successful on the diverse cultural background of the company. Company becomes a ‘multi-unit’ or ‘multifunctional institution’ (Whittington, 2002, p. 20). Consequently, internal structure of the organization turns into ‘a multi-sided creative atmosphere and a perfect sphere for innovations’ (Whittington, 2002, p. 20). On the diverse cultural background, strategic management may be rather influential. It is easy to prove connection between strategy and culture. Thus strategy is a company’s means to adapt its internal structure to environment (Whittington, 2002, p. 23). Culture exerts influence on strategic management in the following way: first culture is essential in human behavior and thinking formation. Consequently, decision making is affected. If we pay our attention to the concept of culture we will see that this concept has a lot of definitions as well as two different approaches are applied to the study of culture: culture-centered and personality-centered approaches (Hofstede, 1991, p. 18). The first approach considers culture in a broader context at the same time, personality-centered approach is more appropriate for involvement culture in the discussion about strategic management. Cultural diversity of the business world requires quantitative analysis of culture in order to find similarities between different approaches to culture. Strategic decision making is considered to be pacified by culture. Moreover, considerations about strategic positive and negative aspects are also differing in a certain cultural context (Hoffman, 2007). Thus in cross-national studies of strategic management it was found out that in companies where representatives of different nations were employed, strategic planning, its characteristics (plan types, planning perspective etc.) and content were multi-sided and more interesting than in companies where representatives of one or two nations were employed. A process of strategic planning and strategic management stages performance varies between different nations. It is found out that strategic planning and performance in Nordic business world is not influenced by culture; Anglo culture exerts influence on national companies rather essential and German companies are almost not influenced by culture (Hofstede, 1991). Basically, cultural values of a certain nation are decisive instruments in strategic management. Therefore on the basis of these claims from the study conducted by Hoffman (2007) it can be concluded that culture is not a decisive element of strategic planning and performance though it moderates relationship occurring in the process of strategic decision making. For example if corporate culture equals roles of employees and managers in decision making, then the process of strategic planning will be positive. The following conclusion is also worth to be mentioned: “Planning impact and importance have a positive performance effect in cultures having lower levels of uncertainty avoidance; whereas, planning importance has a positive effect on performance where masculine values predominate” (Hoffman, 2007, p. 33). Consequently, cultural context of international or multinational companies should be multi-sided in order to develop a “multidimensional planning system and multiple performance indicators” (Hoffman, 2007, p. 35) in order to reach success in the international arena. Practical implementation of strategic models Potential changes in the market and technological innovations make strategic managers decide what kind of approach, prescriptive or emergent is the most appropriate for their company. “The prescriptive approach is a consequential, deterministic process of company’s internal and external environment analysis, leading to creation of a long-term plan”(Mintzberg, 1998, p. 76). In accordance with Hendry and Pettigrew (1992) companies benefit from implementation of systematic strategic planning. Prescriptive approach to strategic planning allows companies to develop predictive strategies and be ready for potential internal or external changes of the company. Nevertheless currently it is often argued that prescriptive approach is the best. A modern business world is developing and companies have to work out their strategies with regard to potential changes and not to refer to a current situation in the business world. Moreover, prescriptive approach may limit employees’ or managers’ complete involvement in the process of strategic planning. Creativity of the company may be seriously impacted in case prescriptive approach is chosen. There is another approach which may be beneficial for organizations. It is an emergent approach. In turbulent business world it is more relevant to refer to this kind of approach. Mintzberg tends to this approach. He claims that “strategies can be unplanned, developing incrementally over time as businesses actions adapt to a changing reality” (Mintzberg, 1998, p. 76). Strategy requires knowledge development, adjustment and planning/performance variations. In order to gain competitive power, a company should rush into their structural changes’ adjustment. Creativity and responsibility, flexibility of strategic planning and performance will make the company competitive. It is easy to support this claim if we look at the most successful company, such as Microsoft, which has never limited its development by mission, goals and objectives. It is more appropriate for them to develop and extend their strategic planning. Emergent approach introduces two relevant concepts, such as ‘diversification or restructuring’. For example, it is easy to trace reliability of emergent approach on the example of PowerCo, an international company producing electricity. In case strategic process is complicated by structural changes of the company, corporate culture requires employees’ training and strategic development. Depending on the fact that human resources are the main important resource of any company, there is a need to develop management strategies taking into account this fact. For example, in, employees have an ability to upgrade their working experience and work at their working skills. Consequently, strategic decision will be developed under conditions of ‘employer-employee respect’ and justified policy (Pettigres, 2000, p. 58). Diversity in the company is developed under conditions of respectful attitude to males and female. It is possible to illustrate strategic management in PowerCo with regard to Pettigrew et al. (2000) 1) Environmental changes and other external factors are taken into account by strategic managers of PowerCo. 2) PowerCo introduces one of the main principles of Pettigrew, such as development of employees’ abilities which are unavailable among companies-competitors. Thus they train their engineers in asset management. 3) Moreover, PowerCo develops a positive corporate strategy and philosophy. 4) External factors are taken into account by strategic managers and they involve their employees into Government Grants. In such a way, PowerCo strategic management is based on emergent approach. The company instantly reacts to changes in the labor market. Thus it develops and updates knowledge of the employees in order to reach heights in the business world. This strategy is appropriate, while it describes company’s attitude to current demands of enabling computer managers to gain knowledge in accounting. Another practical implementation of strategic management can be discussed on the example of studies conducted by Hofstede (1991) and Trompenaars (1993). Trompenaars considers culture as an integrative mechanism of any company or organization and in accordance with it external environment and time limits have to be considered. Hofstede underlines superiority of individual approach to strategic decision making and performance. Consequently, it is more relevant to apply prescriptive approach. These claims will be projected on business conduct in Saudi Arabia and UK. Saudi Arabia is a culturally-oriented country though its companies tend to implement flexible practices into their strategic planning (Hofstede, 1991). Still, organizations of this country tend to apply prescriptive approach to strategic decision making. Conservative nature of managers’ behavior and their principles such as superiority, following deadlines etc enables companies to follow prescriptive approach and to predict success of the company. Deliberation, respect and reliability make Saudi Arabia develop their strategic decisions under stable conditions. Unlike Saudi Arabia, UK companies tend to apply emergent approach. They make business in the international arena and it is quite obvious that there is a need to adapt their strategies to the demands of the modern business world. UK companies are conservative in business conduct. British traditions are also deeply rooted in the business world, but a spirit of innovations and flexibility is influential in strategic management. Potential business partners may be sure that generally accepted strategic models are not of primary concern for UK companies. Interests of their business partners and customers’ needs are the main goal of any UK company (Trompenaars, 1993). As far as we can see, strategic models are closely connected with culture. Cultural context is a determinant factor of strategic planning and performance. Once companies tend to flexibility, they apply emergent approach; in case they are conservative and stable they tend to apply prescriptive approach in strategic planning/performance. Another well-known case study of Nokia Company is another example of emergent approach application to strategic management. In the middle of 70s, oil crisis caused a great impact on Nokia Company. Nokia had to look for new strategic decisions. In order to survive, the Company developed a ‘growth vision’. The main strategic objectives were: internationalization, increased share of high-tech products and competitiveness of the original businesses maintenance (Johnson, 2008). Consequently, it was relevant to Nokia to apply emergent approach. Another case study is discussed by Rodrigues and Child (2008). A company chosen by the scientists is Telemig, a Brazilian company. It ceased its existence in 2000 when a lot of external and internal changes were introduced. Authors suggest co-evolutionary perspective that refers to ‘co-evolution between perspectives and their environments’ (p. 32). Volberda and Elfring (2001) make an emphasis on the necessity of innovations in strategic management. There is a gap in studies of strategic management schools methodological basis. Authors present a broad consideration about strategic planning/performance. Nevertheless, their study underlines advantages of traditional strategic management approaches. The authors ground their study on works of different authors; they either agree or criticize statements of others. In one way or another, the idea of cultural integration and flexibility is of primary concern for authors. They provide an interesting comparison of relevant strategic management concepts and biological concepts: “current biologists show little interest in Linneus’ plant taxonomy, which can be found in museum display cases or other storage places” (p. 244). Consequently, they claim that scientists should be interested in approaches relevant to the external factors of their realities. Conclusion As far as we can see, strategic planning and performance is successful in case of appropriate approach is chosen. Cultural background of any company is rather influential factor in strategies’ development. There is a need to study strategic management from a cross-cultural perspective because of global tendencies in the business world and diversity issues management. In case prescriptive approach is chosen, a modern company may lack considerations about emergent external changes. Therefore it is relevant to apply emergent approach in order to perform successfully in a turbulent business arena. Works cited 1. Cesnovar, T., 2006. The Impact of Strategic Management on Business Outcomes - Empirical Research. Journal for East European Management Studies 11(3): 227+. 2. Child, J., 2005. Organisation: Contemporary Principles and Practice. Blackwell Publishing. 3. Dameron, S. and Joffre, O., 2007. The good and the bad: the impact of diversity management on co-operative relationships. Int. J. of Human Resource Management 18 (11): 2037–2056. 4. Hendry, C., Pettigrew, A., 1992. Patterns of strategic change. Development of Human Resource Management 3 (3):137+. 5. Hoffman, R., 2007. The Strategic Planning Process and Performance Relationship: Does Culture Matter? Journal of Business Strategies 24 (1): 27+. 6. Hofstede, G., 1991. Cultures and Organizations: Software of the Mind: Intercultural Cooperation and its Importance for Survival. New York: McGraw Hill. 7. Johnson, G., Scholes, K., Whittington, R., 2008. Exploring Corporate Strategy, Text and Cases. 8th edition. 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