Strategy in the Organization - Literature review Example

STRATEGY IN THE ORGANIZATION Insert STRATEGY IN THE ORGANIZATION Whittington (2000) approaches corporate strategy from four generic points of view. The first view, the classical approach, is one among the most influential strategic approaches despite being the oldest. It is based on the methods of planning that dominate most of the textbooks on strategic management and related disciplines. The second point of view is the evolutionary approach, which is inspired by the concept of biological evolution, particularly its fatalistic metaphor. In the approach, the biological evolution’s law of the jungle is substituted by the market discipline. Another approach based on the business processes has emphasis on the stickiness and imperfection of human life. The strategy pragmatically accommodates strategies for the fallible processes, both for the markets and organizations. The final view is the systemic approach, which is in essence relativistic. The approach regards the means and ends of strategy as being inescapably connected with the powers and cultures of the social systems in the local setting where the strategy is implemented. The four strategic approaches, according to Whittington (2000), have fundamental differences emerging along two distinct dimensions. The first dimension is based on the outcomes of the strategy while the second dimension is based on the processes by which the strategies are made. In a nutshell, the two dimensions examine the purpose of the strategy and the processes involved in the implementation of the strategy respectively. In the assumptions by evolutionary and classical approaches, the maximization of profits is viewed as the intended outcome of implementing a strategy. On the other hand, the processual and systemic approaches project a more pluralistic approach, viewing other outcomes that are possible from a strategy as much as the profits. Regarding processes, differences arise in the pairings. On the same front are the processualist and evolutionary approaches which view strategy as coming from processes arising by chance, conservatism and confusion. Similarly, theorists of systemic and classical approaches have converging views that strategy can be deliberate despite their differences over the outcomes from the two strategies. Taking a closer look at each of the four strategic approaches, the classical approach contains the textbook answers. This means, it views strategy as a process that is rational. It should, therefore, involve deliberate calculations and analyses strategically intended to maximize on the long-term advantage. In the classical approach, deliberate effort is made in the gathering of information and in the application of the most suitable techniques. In this view, both the organization and its environment are made plastic and predictable, shaped by the organization’s top management using carefully formulated plans. The classical approach relies on good planning in the mastering of the internal and external business environments. Success and failure in the long-run, is determined by the objective decision making and the rational analysis employed in the classical approach (Armstrong, 1991). On another strategic front, the evolutionary approach view the future-oriented planning adopted by the classical approach as irrelevant. According to the approach, the business environment is very unpredictable and implacable to anticipate anything effectively. According to the approach, the hostile, dynamic and competitive nature of the markets means that it is not possible for organizations to plan for their long-term survival. In essence, only the firms that strategize to maximize on their profits will eventually survive the harsh environment. The businesses are likened to the species in biological evolution where the fittest organisms for survival are ruthlessly selected through competitive processes. The unfit organisms have little power to adopt to change quickly enough and therefore cascade towards extinction. Based on this notion, it is therefore, the markets and not the managers that are involved in making important choices for the organization. In this view, successful strategies emerge from the judgment of the natural selection process. The only possible role played by the managers in the strategy, therefore, is to ensure that they steer the organization so that it efficiently fits to the demands of the business environment at the particular point in time (Lieberman, 2009). The processualist approach agrees with the evolutionary approach that doing long-term planning can be particularly futile. However, it portrays a less pessimistic approach concerning the business organizations that do not optimize their operations to fit to the environment. According to the approach, processes for both the markets and the organizations are not perfect enough for the strategizing of the classical theory or for the survivalism of the evolutionary approach. Generally, people have different interests, limited understanding, wandering attention, and often act carelessly. This makes it difficult for them to unite in carrying out perfectly calculated plans, that is, they are likely to forget the plans as their circumstances change with time. The processualist approach, therefore, has it that strategy stems from the pragmatic processes of learning, bodging and compromise rather than from rational methods. The emergent strategy should not necessarily be optimal since the markets have selection processes that are rather lax. This means, there is nobody that is likely to know which strategy is optimal and nobody is likely to stick by it. The failure to come up with and implement a strategic plan that is perfect is not likely to lead to any competitive disadvantages of a fatal nature (Vinzant & Vinzant, 2001). Finally, strategy matters in the systemic approach even though it is not in the same sense as in the classical approach. The theorists show much less pessimism than in the processualist approach about the capacity of people to develop and execute plans of action that are rather rational. They are also more optimistic compared to the evolutionary approach about their abilities to define appropriate strategy in defiance of the market forces. The systemic approach is of the opinion that the practices and objective of strategy depends on the specific social system on which the strategy is made. In this case, the strategist may deviate from the norm of maximizing profits in a quite deliberate move because the social background on which they operate brings forth other interests other than profits. Such interests may include managerial power, professional pride or national patriotism. Despite the rationale being disguised, pursuing of the other interests rather than profits is considered perfectly rational. In other occasions, the strategists may deviate from the rational calculations of the text book just because the cultures in which they carry out their operations are not compatible with such rules. In the systemic approach, country and class influence the strategy. The approach generally reflects the social system in which the strategy is made. The social system defines the interests and rules by which the strategy survives (Pindur & Rodgers, 1995). Mintzberg and Lampel (1999) examine ten schools concerning the formation of strategy. The design school views the formation of strategy as a means to the achievement of the fit between external threats and opportunities and the internal weaknesses and strengths. In design, the senior management of the organization is involved in the formulation of clear, unique and simple strategies in an intentionally executed process that is neither informally intuitive nor formally analytical. The strategy aims at everyone in the organization to implement it. Reportedly, the design school came to combine with other approaches in various contexts. Another school is the planning school which builds on the design school. The strategy goes beyond the mere thought to take a formal approach. The strategy is formulated in a stepwise manner, with checklists and use of relevant techniques especially in budgeting, formulation of objectives, operating plans and programs. In essence, the senior managers are replaced by staff planners who are involved in the strategy process. The third school is the positioning school which reduces strategy to generic positions. The selection of the positions is done through the formal analysis of the situations in the industry. Planners, therefore, take up anlytical roles. Academics and consultants took advantage of this to promote their theories and ideas. The analytical perspective grew to include game theories, value chains and strategic groups. Another school, the entrepreneurial school based the process of business strategizing on the organization’s chief executive. The strategy in this case depends on the intuition of the chief executive. The strategy, therefore, shifted from precise designs and plans to visions often seen broadly through metaphor. The school is based on the maxim that in the least, all organizations would require the creative vision of a leader. The leader in this case, establishes control in the implementation of his or her vision. Another school, the cognitive school, considers the cognitive bias as seen in the formation of strategy. Cognition is also involved during the processing of information, mapping of the knowledge structure and in the attainment of concepts. The use of cognition in the making of strategy uses creative interpretation and not just the mapping of reality in an objective manner even if it is distorted. The learning school advocates for retrospective strategy making that involves continuous learning for the parties involved. The learning school views strategy as something emergent with the strategists being everyone throughout the organization (Freeman & Donaldson, 1984). The formulation and the implementation of strategy under this school intertwine. The power school advocates for strategy making using power. The power has two orientations with micro power seeing the growing of strategy within the organizations as something political, that is, involving persuasion, confrontation and bargain among the individuals dividing the power. On the other hand, macro power looks at an organization as a body that uses the power it has over other organizations and in alliances and among its partners to negotiate for collective strategy to promote its own interests. The cultural school, advocates for focus on integration and common interest. Strategy, therefore, is viewed as a social process that is rooted in culture. Culture can be of significant impact in the development of strategy as seen in Japanese management success of the 1980s. However, culture has also been seen to discourage strategic change. The environmental school may not be viewed in the light of strategic management. However, it is very invaluable in evaluating the demands of the environment on organizations. The environmental school considers contingency theory in which the possible responses from organizations facing specific environmental conditions. The environmental constraints may to a large extent limit the making of strategic choices. A concept known as institutional theory examines the pressure experienced by institutions that may hinder the implementation of strategies. The school is seen as constituting the cognitive and the power schools. Finally, the configuration school involves more integrative literature and practices. From one view, a more descriptive and academic view, the school looks at organizations as a configuration involving a cluster of coherent behaviors and characteristics. The school integrates the characteristics of the other schools, with each of the configurations finding its own place. For instance, the organizations that are machine-like have planning as a prevailing strategic factor in times of stability while the more dynamic configurations adopt entrepreneurship for startup and strategic turn around (Albach & Bloch, 2000). For the organizations which are described by such states, change is described as rather dramatic transformation, that is, by significant leaps from one state to the next. From the literature and transformation practices that emerged, more literature and transformation practices that are practioner oriented and more prescriptive came up. Since the two different sets complement each other, they are said tyo belong to the same school, the copnfiguration school. The concept of strategic management has continued to grow and develop in different environments. Many organizations are currently grappling with various approaches, mostly at the same time. From my studies of the organization under consideration, it is clear that several strategic approaches and schools of strategy are employed by the various management officials in different departments while in other occasions, the same individual may apply different approaches in different environments. To get a clear image of the organization under study, it is a banking institution with many branches distributed throughout the country and beyond. The bank is headed by the president who is the chief executive officer and the senior most person in the management hierarchy. There are several other managers involved with strategic decision making for the whole company and for the various divisions that make up the company. The classical approach is a very pronounced strategy in the organization especially in the financial department. The managers in charge of planning and finance have been involved in decision making processes where they formulate formal and rational processes that are carefully overseen by the top management. They involve formal gathering of statistical data, from previous company performance and external sources. The data is then formally analyzed and simulated using known scientific methods. The techniques to be used in the implementation of the strategy are communicated to the involved staff and any relevant trainings and subsequent follow up done to ensure the program is a success. In most cases, there are also formal methods used in testing the progress. Even though perfect results have not always been obtained from the statistics, it continues to be used in the company and greatly preferred on the financial division. The evolutionary approach is also very prominent in the company. In the wake of information and communication technology, the firm had to adopt the technology due to the need to improve its efficiency but mostly because of the pressure from other competitors who had adopted the technology and were threatening to wipe the company out of the market. There are many other services that the company has started to offer mainly because of competition from the market. It is therefore clear that the company adopts the evolutionary approach even though it is mostly reactively rather than proactively. To a significant extent, the company has managed to remain competitive due to the evolutionary approach in its strategic management. The organization had not adopted the processualist approach for quite sometime. However, the latest trends indicate that the organization is increasingly listening to its staff and allowing them to implement some of their original ideas, some of which may be considered rather innovative or bold. It has also been more acceptable that the efforts of the individual staff may not be perfect therefore giving room for sensible mistakes. Moreover, the organization has been adopting the various schools of strategy. The most prominent ones are the planning, the positioning and the entrepreneurial schools. The planning school is very common in the implantation of the various strategic plans, especially the ones that are constrained by timelines. The entrepreneurial school is very prominent with the company’s president whose intuition and experience has shaped most of the company’s activities and operations. The positioning strategy is evident in the various consultations done by the company on various issues. On interviewing most of the staff of the company in an attempt to find out the most suitable strategy, majority showed support for the classical approach. They mainly showed their support due to the fact that the strategy is measurable and gives room for the experts that are well versed in various matters to use their skill and experience. References Albach, H. and Bloch, B. 2000. Management as a science: emerging trends in economic and managerial theory. Harvard Business School, Harvard Armstrong, J. M. 1991. The Value of Formal Planning for Strategic Decisions. Strategic Management Journal, vol. 5, Issue 3 Freeman, T. and Donaldson, M. 1984. Approaches to Strategic Management. Cambridge University Press, Cambridge Lieberman, M. B. 2009. Strategic Management Theories and the Linkage with Organizational Structures. The journal of Social Sciences, Vol. 11, no. 3 Mintzberg, H. and Lampel, J. 1999. Reflecting on the strategy process. Sloan Management Review, NY. Pindur, W. and Rodgers, S. E. 1995. The History of Management: A global perspective. Journal of Management History, vol. 3, Issue 4. Vinzant, J. C. and Vinzant, H. B. 2001. Strategic management spin-offs of the Deming approach. Emerald Education Publishing, London Whittington, R. 2000. What is Strategy – and does it Matter? Oxford University Press, London Read More