Support and Contention for Rumelts Strategy Arguments - Essay Example

Support and contention for Rumelt’s strategy arguments BY YOU YOUR SCHOOL INFO HERE HERE Support and contention for Rumelt’s strategy arguments Good strategy and talented leadership Organisational culture, transformational leadership, competitive advantage through people First mover advantages, alliances, diversification, five forces. Rumelt attempts to illustrate that the development of a good strategy involves the talents of an insightful leader that fully understands market conditions, internal competencies of an organisation, and then exploits these capabilities effectively to achieve competitive advantage or some dimension of organisational effectiveness that productively guides the business to achieve its objectives and goals. Good strategy, according to Rumelt (2012) is about blending insight and the ability to harness resources and actions and apply them where they will have the most significant benefit and provide for the most efficient effect. A good strategy involves an effective diagnosis of a problem, consists of decisions that guide effective solutions, and builds coherent action to achieve proximate objectives (Rumelt). When a strategic leader has built a good strategy, the organisation achieves excellence and is able to productively compete against other organisations in an established competitive market. A bad strategy is referred to by Rumelt (2012) as fluff, or incoherent decisions that do not effectively analyse capabilities and challenges. Bad strategies involve consistently iterating where the organisation is supposed to be headed without providing objectives and goals about how to specifically achieve this long-term direction. Because organisations consist of various divisions that are all inter-dependent to achieve organisational goals, such as the marketing system, production division and logistics (Kleijnen and Smits 2003), a bad strategist would not attempt to organise activities in these divisions productively to provide the organisation with market value and, hence, the organisation would not be equipped to react effectively to changing market conditions. Therefore, bad strategies are immaterial and inadequate in terms of efficiently allocating resources (both tangible and human-oriented) to achieve strategic objectives. What Rumelt is suggesting is true: that a good strategist does not achieve organisational success by referring to models of strategic management, but must take a practical and pragmatic view of the organisation and determine how best to exploit internal capability and aptitudes to make the organisation more efficient and industrious. For instance, Lippman and Rumelt (1982) identify that for an organisation to overcome any recognised liabilities, strategic leaders must provide the organisation with some variety of firm-specific advantage which often includes effective internal organisation or development of managerial capabilities that are unique to competition. A good strategist does not rely on statistical models that attempt to paint an organisation as being static whereby all organisations can mould their activities according to the stages or steps provided by these models. All organisations have unique firm-specific capabilities and advantages if, when exploited properly, can build competitive advantage. It would be an oversight and ineffective as a strategist to believe that all organisations can be organised according to established matrices, charts or theoretical management tools. Therefore, a quality strategist (a competent leader) is able to holistically evaluate the entire organisation and begin developing proximate (short-term) objectives that are feasible and realistic for achieving organisational goals. In support of Rumelt, as one example, a talented strategist understands the importance and benefits of building a cohesive and dedicated organisational culture. According to theory, when an organisation is able to build a set of norms and behaviours that all members adopt, they work together more effectively and sustain better long-term organisational commitment (Yilmaz and Ergun 2008). A good strategist recognises the weaknesses and strengths of disparate organisational members and then assesses whether training and development would best build a unified culture or whether inherent leadership skills would best create a committed team environment. For example, there is a theory of leadership known as transformational leadership whereby a leader becomes a mentor and teacher, works to inspire greatness in others, opens effective lines of communication (often through decentralisation), and builds a mission and vision by which others consistently recognise where the organisation is actually headed (Fairholm 2009). In this leadership ideology, the strategist leader role models desired behaviours and, as according to social sciences, provide the underpinning by which other organisational members emulate these behaviours (Crisp and Turner 2014). What happens in this case is that the strategic leader begins leveraging their own inherent capabilities as a leader to build motivation in others, prompt teamwork methodology as a set of behavioural norms, and therefore establishes competitive advantage through human capital development. Though organisational culture development is only a singular example of how to best leverage competencies and capabilities to position the organisation more productively, it does illustrate that there is merit in Rumelt’s argument that genuine and practical strategic management skills are not built from a theoretical model or set of statistical findings. A legitimate good strategist is able to explore all fundamental inter-dependencies, strengths and leverage opportunities within an organisational dynamic, effectively allocate resources to strengthen competencies, and in turn achieves long-term goals by setting short-term (proximate) goals that can best assist the organisation in responding to market conditions. Hence, the notion of bad strategy would be a leader without the insight to examine where an organisation can improve or would begin developing unrealistic objectives without thoughtfully considering whether the organisation is actually positioned to achieve these goals (both operationally and human-related). As previously identified, this is a fluff approach to strategic leadership which will, in the long-term, make the organisation ill-equipped to achieve any fundamental or profitable goals. Rumelt attempts to illustrate that a genuinely good strategist understands the holistic inter-dependencies of a firm and works diligently to get the organisation where it needs to go by leveraging all resources in the most effective method possible. If the strategic leader begins relying on theoretical models of management, matrices, and other charts achieved through quantitative evaluation, they are being idealistic and it is not probable that any proximate objectives that might be developed through this approach will achieve any meaningful advantage for the firm. A good strategist must understand all dimensions of what drives organisational cohesiveness and work consistently to allocate these resources in a method that is sensible, workable, and viable for equipping the firm with incomparable competitive advantages. This requires focus, insight and determination to achieve. In opposition of Rumelt’s argument It might not be practical to assume that static models of strategic management cannot be applied to a real-world organisation and, hence, reliance on these models might be of advantage to an organisation. Rumelt points toward innovation and ingenuity as a good strategic leader and applying this ingenuity to the unique dynamics of what drives organisational strengths and advantages. However, as respected theorist Michael Porter has identified, there are some static models of strategy that have given organisations considerable competitive advantages when they are utilised. For instance, Porter’s Generic Strategies Model clearly points out that a firm has several opportunities to compete effectively in established markets. This model indicates that a firm can choose to differentiate, develop a cost leadership strategy, focus on niche target markets, or innovate to achieve a more productive market presence (Miller 1992). The Generic Strategies Model provides for constancy in established markets where a firm competes, suggesting that by selecting one of these strategies, a firm can gain important and non-imitable competitive advantages. For example, a firm seeking differentiation might rely on marketing and promotion in order to build a brand that is unable to be replicated by competition and provides target consumers with a perception of uniqueness against other competition. In a rapidly globalised market where replicating competitive offerings is becoming easier and easier, the only real asset that cannot be copied is a firm’s brand image (Nandan 2005). To illustrate, a company may invest sizeable financial capital into promotions which position the firm against competitors according to an internal quality orientation, such as with Toyota. Rather than attempting to build human capital competencies as a means of competitive advantage (an innovation at the internal level), the company simply relies on the operational function of the value chain to build a unique competitive brand in an established market. The Generic Strategies Model, therefore, serves as a viable tool (a static tool) by which a good strategic leader is able to respond to market conditions productively and gain important revenues and reputation in this market. Using a differentiation approach along this model, the good strategic leader does not need to be holistically insightful and evaluative of strengths and weaknesses (both tangible and human-oriented), but instead aligns a single unit of the firm to build a potent and powerful market position. Unlike Rumelt’s arguments, ingenuity is not a prerequisite for achieving competitive advantages along Porter’s Generic Strategies Model. In reference to the Blue Ocean’s model of strategy, this model attempts to assert that an organisation can attain competitive advantage by creating demand rather than attempting to fight over it amongst a sea of competitive forces (Kim and Mauborgne 2005). For example, a firm might invest a great deal of financial and human capital into the innovation process, developing products and services that are completely unique in a market which allows a firm to break away from competition. One such example of this was with the Blackberry company, formerly known as Research in Motion, who was a pioneer in providing a market with smartphone technologies before such competition as Apple, Inc. Blackberry provided a completely unique product with benefits and features unparalleled in consumer communications technologies industries which made the product attractive to target consumers and successfully differentiated the firm (Blackberry 2013). Strategists at Blackberry did not need to align the entire organisation, including its entire value chain and rely on social science theories to build a committed organisational culture to attain competitive advantage, instead the firm was able to rely on a static model (closely aligned with Porter’s Generic Strategies Model) to be a first mover in an established market. Through investing solely in innovation in product design and function, the firm positioned the business as a pioneer, thus building a powerful and competitive reputation in the consumer mobile technology markets. The ingenuity was to align research and development, marketing and production to provide ground-breaking products with less emphasis on building cultural cohesion internally or evaluating various human-oriented strengths and weaknesses. The example of Blackberry contests Rumelt’s argument that a static model cannot provide a viable and profitable strategy for a firm. Demand, in this instance, was created simply through innovation and allocating financial and human expert-related resources toward this singular objective. Hence, there is considerable merit to Porter’s model and the Blue Ocean model which defies the notion, provided by Rumelt, that a firm’s strategic leader must be imaginative and ingenious in aligning resources and organisational structure with unique strategies to achieve competitive advantage. In the case of Blackberry, there were clearly opportunities to forego complex and precise evaluations of all divisions, human competencies, building team-focused behavioural norms, and a plethora of other inventive strategies to gain a positive market presence. A firm can create both demand in desired target segments and enhance organisational profitability by utilising static models of strategic management. Rumelt’s argument that good strategic leadership cannot be borne of emulating existing models of competitive advantage and strategic management simply does not hold water when considering how Toyota managed to build demand through differentiation and how Blackberry became an innovator to achieve the goal of revenue production in an established marketplace. Porter’s model, time and again, has proven that a firm that seeks low cost leadership strategy, differentiation or other focused strategies have managed to outperform competition. The Blue Ocean Model, additionally, does not suggest that a firm must align all internal activities and behaviours to achieve competitive advantage, only that a firm can create demand through innovation. These models do not instruct a strategic leader to approach organisational alignment or build human capital according to artistic or imaginative approaches, but provide a static model by which to structure internal activities to create demand and position a business productively against established competition in a market. Hence, Porter’s model and the Blue Ocean Model cannot be dismissed as irrelevant or impractical in a real-world strategic management situation. They are viable for many organisations which creates criticism and opposition to Rumelt’s position on good versus bad strategic leadership. References Blackberry. (2013). Blackberry Pearl 8100 Features. [online] Available at: http://worldwide.blackberry.com/blackberrypearl/8100/features.jsp (accessed 20 July 2014). Crisp, R.J. and Turner, R.N. (2014). Essential social psychology, 3rd edn. London: Sage. Fairholm, M. (2009). Leadership and organisational strategy, The Public Sector Innovation Journal, 14(1), pp.26-27. Kim, W.C. and Mauborgne, R. (2005). Blue ocean strategy: how to create uncontested market space and make the competition irrelevant. Boston: Harvard Business School Press. Kleijnen, J. and Smits, M.T. (2003). Performance metrics in supply chain management, Journal of Operational Research Society, 54, pp.507-514. Lippman, S. and Rumelt, R. (1982). Uncertain imitability: an analysis of inter-firm differences in efficiency under competition, Bell Journal of Economics, 13, pp.418-438. Miller, D. (1992). The generic strategy trap, Journal of Business Strategy, 13(1), pp.37-41. Nandan, S. (2005). An exploration of the brand identity-brand image linkage: A communications perspective. Brand Management, 12(4), 264–278. Rumelt, R. (2012). Good strategy, bad strategy: the difference and why it matters. New York: Random House. Yilmaz, C. and Ergun, E. (2008). Organisational culture and firm effectiveness: an examination of relative effects of culture traits and the balanced culture hypothesis in an emerging economy, Journal of World Business, 43, pp.290-306. Read More