Business Strategy: Organisational Direction Over the Long-Term - Literature review Example

Introduction As time has led to globalisation, a lot of things are changing dramatically and organisations have adopted strategies that are more flexible with an aim of achieving competitive advantage. Johnson, Scholes, and Whittington (2005) define the strategy as organisational direction and scope over the long-term that achieves advantage in a changing environment by configuring its resources with the main aim of fulfilling the expectations of stakeholders. According to De Wit and Meyer (2004), strategy making involves sense-making, envisioning, reflecting, experimenting, learning and changing the organisation which cannot be neatly programmed or organised. The question on which strategies to use in achievement of a competitive advantage is very common. Some argue that a planned approach to strategies will ensure that the organisation will have a direction and as a result, act rationally. Others argue that an emergent approach to strategies will ensure development of new strategies over time in order to adapt reactively to unfolding circumstances. This shows the usefulness of both planning and emergency approaches. Given the importance of both methods, game theory and scenario planning are essential in finding the balance between the two approaches in order to ensure their effectiveness. Planned and Emergent approaches A planned approach to strategy is said to be deliberate and carefully planned. It involves a periodic and formalised process of establishing organisational goals and objectives for establishment the future allocation of organisational resources. The basic principle behind this approach is that the organisation will achieve effective allocation of resources for the correct purposes and at the right areas in order to be more responsible to the needs of the stakeholders. This approach is relevant to many organisations in formulation of their strategies (Hax, & Majluf, 2006). Emergent strategy involves a set of actions, consistent over time, or a realised pattern that was not intended expressly during the original planning of strategy. Such strategy develops when there is an adoption of a series of actions within an organisation which turn into a consistent behavioural pattern with time, irrespective of specific intentions. This approach is an implication that the organisation is learning what is working practically (Mintzberg, 1994). Game theory As described by Brandenburger (1995), game theory is an emergent approach to strategy. It regarded as an experimental and a response mechanism that is very crucial when addressing unpredictability in the market. We are considering of a situation where we are focusing on market player and the existing potential while analysing key players instead of eliminating them. As a mathematical tool, game theory is used in anticipation of possible scenarios as well as developing appropriate strategies that will deal with them. As Copeland (2007) states, the principle behind game theory is that if any player makes a decision in a game, there is a change of the nature of the playing field everyone. This implies the applicability of this model in business and marketing planning. It assists in modelling, analysing as well as understanding the behaviour of various self-interested parties that come together when making their decisions. According to Pinkasovitch (2009), the approach is also applicable where a multiple of parties are involved in decision making. For instance, it is more applicable where parties are striving to maximise their payoffs while making choice on their strategies, and the final payoff of each party is dependent on the profile of strategies that all agents have chosen. In such case, it will improve strategic making of decision by providing valuable insights to all interactions of the parties (Myerson, 1997). However, this approach is not applicable in all situations and it requires integration with other models that are more focused and individually prescribed. Although a close focus on external environment is important, formulating a strategy with a sole purpose of analysing market players can bar the organisation in addressing real issues that affect internal performance (Hax, & Majluf, 1996). In addition, given that most organisations are already struggling to adhere to strategies that they have formulated, adopting another strategy that deal with analysis of other parties will not be positive. This is also another way hindering business and marketing planning process. Scenario planning As Bishop et al (2007) explains, scenario planning is creates different futures on basis of combination of various factors such as political, legal, economic, social and technical trends which serve as the driving forces. The goal of scenario planning is divergence the world through extrapolation of these key driving forces. The main goal is development of possible views in the future as well as analysing the possible consequences of such views to the organisation. Thus, with scenario planning, the managers are better prepared to face possible developments in future and challenge their assumptions. Its value does not lie much on creation of scenarios but discussions in regard to consequences. Thus, it can be argued that scenario planning provides openness and flexibility to strategic thinking. It encourages development of mutual understanding of central issues and exchange of knowledge in future of the organisation. With a wide use of the approach as a strategic tool of management, it is also important in discussion about a common future. It have a dual purpose of widening the perception about possible future events and increasing the knowledge about environment (that is, encouragement in thinking the unthinkable). Thus, it thinks as well as articulating the desired future making it an important tool for the purpose of marketing planning (Schoemaker, 1995). However, the approach can lead to setting out as well as implementing ineffective goals in future. It is clear that predictability is a challenge especially in regard to external factors where such factors can adversely affect the implementation of strategies. Making accurate predictions and future-gazing is burdened with difficulty. Scenario analysis employs trend analysis as its base, keeping focus in prediction period to, for instance, 10-year mark helps building plausibility tests into the process. Frequent changing of market behaviour is challenging for organisations as management finds it difficult to posses key traits such as loyalty, unmatched customer value and innovation. In combination with difficulty in predictability, this could lead to slowing down of marketing planning process for a variety of market players (Grant, 2003). Balance between two approaches It is evident that currently, the world is experiencing more turbulent environment and as a result, constituents are more demanding there is rapid change in their needs. With the increasing pace of change, putting all your trust in a sole approach such as planning in order to meet over changing needs would be completely misguiding. What is lacking is the openness and flexibility to enable improvisation and responsiveness which is required in complex, dynamic and volatile environments. With openness, flexibility and creative thinking, there will be emergence of innovative strategies, an approach that will ensure superior performance in the organisation. Thus, in order to ensure a clear focus in implementation of strategic thinking within an organisation, there is a need for synthesis and balancing of the two approaches (Grant, 2003). These calls for an integrating need in order address long term strategic intent of the organisation with shorter term operational realities. In addition, emergent strategies are developed to look backwards at series of action. Thus, emergent approach caters for development of organisational strategies that emerges bottom-up. On the other hand, planning approach caters for top-down strategies as well as formulation before being deployed. Thus, it is essential to see these two approaches within an organisation at the same time, or at different degrees but at the same time. In general, planning usually caters for routing activities which call for efficient organising. It is less suitable for non-activities and as a result, the emergency approach will be required in order to do new things. But to be able to apply the practice, both approaches are required. Thus, balancing the approaches is very essential for the success of organisation and it is ensured by combination of the two approaches over time (De Wit and Meyer, 2004). Effectiveness of planned and emergent approach Brandenbyrger (1995) stated that there is no right answers that an emergent approach is more superior or less important as planned approach to strategy, and vice versa. This implies that the two approaches are crucial, but what is important is to find the balance. Organisation is faced by different situations such as overwhelming pressure where they will be required to take a quick action and in order to recover the events that were unforeseen. For instance, where an organisation will need to address natural outcomes such as floods that cause rapid and unexpected interruptions in its operations, emergent approach will be very essential. On the other hand, an organisation may aim to expand the business into a new region in the next three years where a planned approach will be essential. Based on emergent approach in regard to game theory, a game may be attempted in different perspective. According to Mintzberg (1994), an emergent approach takes a dive from the normal linear approach. It calls for an approach that is more reactive and experimental and accepts the change in the business environment as opposed to planned approach. If a process is too much planned, it may compromise the units that enhance vision, intuitive thinking and creativity. Thus, sometimes the strategies need to have broader visions in order to comply with the rapidly changing environment. This implies that an emergent approach is not about future direction but patterns of evident from past events, and it is a way to control but not a process of planning but involves, maximum innovation and improvisation with minimum control (Pinkasovitch, 2009). A planned approach is more about a formal process that is well structured essential in guiding through analysis of structural units in organisations. The planned approach has a direct focus and it thinks and articulates the organisation’s desired objectives, anticipates change instead or leading it and it is a formal process and control for producing articulated results as an integrated system. In general, as a planned approach, scenario approach facilitates management of complexities and uncertainty of current global world by putting into consideration various strategic options. Most importantly, its more focus on internal and external perspectives is essential in increasing the ability to identify blind spots and weak signals. Based on its tool-based design, the approach facilitates it application in practice through quick performance. The approach considers the challenges faced by organisations in current strategic planning by combination of traditional scenario planning, real-option reasoning, strategic thinking and strategic planning. This enhances the day to day management of volatility, dynamics and complexity of current business as well as its application in different time horizons. In general, these approaches have implications for organisational practice. They serve as valuable tools for creation of strategy where they require planners to rethink their normal one-dimensional approach and consider viewpoints of external stakeholder groups. In an increasingly volatile, complex and dynamic world, the approaches seem promising and demonstrate the practice for open innovation which is crucial for successful organisations. Thus, mixing of planned and emergent strategies is crucial in assisting the organisation in controlling its course while also encouraging the learning process. While organisations pursue the two approaches, its broad outlines are planned while details are also allowed to emerge within them (Mintzberg, 1994). Conclusion There are not right answers whether emergent approach is more superior or less important as a planned approach, and vice versa. This is because both approaches are essential and the most important thing is finding the balance. Integration of planned and emergent strategies is important in assisting the organisation in controlling its cause while also encouraging the learning process. The integrations ensure that broad outlines are deliberate while also the details are allowed to emerge with them. Thus, it would be misguiding to rely solely on one approach in the current environment in determination of the appropriate strategies and objectives for meeting the ever changing needs. This calls for more need to integrate shorter term operational realities with longer term strategic intent. In deed these two approaches to strategies can be applied within the organisation at the same time. May be what can vary is their application in different degrees at different times. However, they should not be taken as mutually exclusive or independent. Thus, the two approaches are crucial for the success of organisation. References Bishop, P, Hines, A and Collins, T 2007, “The Current State of Scenario Development: An Overview of Techniques”. Foresight, vol. 9, no. 1, pp. 5-25. Brandenburger, A M 1995, “Right game: use game theory to shape strategy”, Harvard business review, vol. 73, no. 4, pp. 57-71 Copeland, M.V, 2007, The Game Maven of New Haven, accessed from De Wit, R, Meyer, R 2004, Strategy: Process, Content, Context - an international perspective. (3rd ed.) Thompson Learning, London. Grant, RM 2003, “Strategic Planning In a Turbulent Environment: Evidence from the Oil Majors”. Strategic Management Journal, vol. 24, pp. 491-517. Hax, AC, & Majluf, NS 1996, The Strategy Concept and Process, A Pragmatic Approach. Upper Saddle River, NJ: Prentice Hall. Johnson, G, Scholes, K & Whittington, R 2005, Exploring Corporate Strategy, (7th Ed.), Harlow: Prentice Hall. Mintzberg, H 1994, The Rise and Fall of Strategic Planning. New York, NY: The Free Press Myerson, RB 1997, Game Theory: Analysis of Conflict, Harvard University Press, Cambridge, MA. Pinkasovitch,A, 2009, Why is Game Theory useful in business, accessed from Schoemaker, PJH 1995, “Scenario Planning: A Tool for Strategic Thinking”, Sloan Management Review, vol. 37, no. 2, pp. 25-40. Read More