The Nature, Purpose, Formulation and Changes in Organisational Strategy - Essay Example

The Nature, Purpose, Formulation and Changes in Organisational Strategy 0 Introduction: Strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage within an organizational structure. Each strategy the firm uses specifies desired outcomes and how they are to be achieved. However the fundamental objective of using any strategy is to create value for both the internal and external stakeholders. Strategies are formulated to be successful and they always precede the taking of the initiatives to which they relate to. Success of the strategies depends upon the intent and mission with which they are formulated. An effectively formulated strategy ensures that the resources, capabilities and competencies of the firms are integrated and allocated properly so that their alignment with the external environment works to the advantage of the firm. A basic requirement for the effective usage of strategies to the organizational advantage is the collection and analysis of a host of information about so many variables including markets, customers, technologies, changes in the worldwide financing structures and methods and also changes in the world economy. With this background this paper discusses the nature and organizational purpose of strategies. While detailing the rationale behind the strategic changes the paper also brings out a note on the formulation of strategies based on some strategic thinking process. 2.0 Fundamental Features of Organisational Life: There are various elements that make the orgnisational systems function effectively. Out of these systems some are considered important and contribute more towards the organizational success. As such these elements are complex in nature and need to be prioritized than the others. These elements form the basis of an organizational framework and add value to the organizational existence and purpose. These elements take the form of context and conceptual framework, vision of an organization, strategy, organizational culture and structure, organisational behaviour, skills and material resources available with the organization. It may be noted that all these elements are interwoven and interact with each other and it would be difficult to analyse the purpose and value of them individually. Thus it can be said that strategy is an organizational process inseparable from the structure, behaviour and culture of the company in which it takes place. 3.0 Organisational Purpose of Strategies: "Purpose is derived from a person's or organisation's values and beliefs. It is defined in emotional and relational terms, and remains a constant even when the environment changes over time". (Ilia Van Roon) The strategies define the goals of an organization in terms of the direction in which the organization should march ahead. Goals are formulated in response to and in tune with the changes in the competitive environment in which the firm operates. The goals are often defined in quantitative or qualitative terms that drive organizational efforts to success. Thus strategies have the purpose of defining the organizational goals in both monetary and non-monetary terms. "Organisational vision yields an understanding of what the organisation intends to do; strategy is a translation into how the organisation intends to realise its vision" Successful organizations always are purpose driven, having identified the organizational purposes, aligned their goals, actions, responses and relationships with the purposes. Strategies defining the organizational purposes are required to motivate the people by using goal oriented language to relate the people's cognitive and emotional sides to make them understand the organizational purposes and coordinate their efforts towards achieving them. 4.0 Nature of Strategy: The strategy of a firm is the match between its internal capabilities and its external relationship. It also describes about the nature of its responses to its other stakeholders like the customers, suppliers, competitors and also how the firm deals with its socio-economic and environmental issues. Thus the nature of strategy can be identified with its capabilities to provide a sequence of united events which amounts to forming a coherent business behaviour which is very essential for the success of any firm. "In the last two decades, the pretensions and prestige of the subject of strategy have been such that strategists have stressed not only the central importance of the issues with which they deal but also the relevance of strategy to all aspects of business behaviour." John Kay (1993) The nature of strategy is such that it not only concerns itself with the key issues of an organization like employee management, financial and accounting management or marketing management, but also extends itself to every aspects of the business behaviour. It involves choosing certain type of activities and at the same time fixing the priorities for those activities and their approaches towards the organizational success. Strategy also encompasses the activity of coordinating the scarce resources and deploys them in the proper order to make the firm's performance excel over the competitors. Allan Kaplan adds that strategy "involves differentiating between disparate activities, deciding which are primary and which are designed to support others." The nature of Strategy also involves the function of differentiation of the purpose of the activities connected with the organization and breaking them down into primary ones and those which are designed to support others. 5.0 Strategic Thinking: In this highly competitive business environment it is important for the successful mangers and executives to look for the possibilities beyond the traditional ways of functioning. The innovative business leaders consider strategy as a 'thinking process' rather than a planning process. The basic ideologies on which the strategies are based, is the development of useful methodologies for the achievement of organisational goals and the adaptation of such methodologies in relevance to the particular circumstances. Strategic thinking gives effect to vision and it operationalises a general direction of the organization. According to Allan Kaplan the development and refinement of strategy is achieved through the constant interplay between doing, planning and evaluation. Thus strategic thinking does not stop with formulating the strategies. It also has the additional responsibility of acting further to go beyond the given set of purposes to identify new ways of giving effect to organizational vision. In this process the strategic thinking should learn to monitor the effect of the existing values, take lessons from its contribution to the success of the organization. The strategic thinking should have the ability to evaluate the impact of successes and failures and assess which of the strategies that work and which of them do not work. After a careful evaluation there should be a process of rethinking, replanning and re-strategizing the methodologies already developed to suit the changing environments so that they contribute to the ultimate success of the organization. Thus strategic thinking is a continuous process which goes along with the organizational performance for a constant monitoring and evaluation to offer alternative strategies depending upon the effectiveness of the strategic methodologies already developed and deployed. There are five basic principles on which the strategic thinking can be developed. They are Looking behind the symptoms: This implies that the managers should have the ability to identify the reasons for the success or failure of all the existing strategic plans and have a rethinking and re-planning on the basis of such meaningful evaluation. Making the combination of intuition and data work: This involves the creative mind of the organizational leaders to combine the available present and historical data with their intuition to arrive at better strategies for achieving the organizational goals. Reconstructing the value of synergy: By constant monitoring and evaluation of the performance of the existing strategies, the managers should evolve a system that automatically restructures the synergies out of any given opportunity. Defining the customer values: Customer satisfaction is at the root of the success of any organization. By stepping in to the shoes of the customers, the managers should b able to identify the customer needs efficiently and find out ways of improving organizational performance in the direction of enhanced customer satisfaction by redefining the strategies. Balancing the short term and long term objectives: Since any organization would have both short term and long term objectives, it is for the managers to formulate strategies in such a way that a proper balance is struck between the short term and long term objectives of the organization and they are prioritized in accordance with the organizational needs. 6.0 Formulation of Strategy: Rex C.Mitchell defines the strategic management process as "Strategic management is an ongoing process to develop and revise future-oriented strategies that allow an organization to achieve its objectives, considering its capabilities, constraints, and the environment in which it operates." Thus the strategic management consists of three essential phases namely diagnosis, formulation and implementation. Diagnosis includes situation analysis encompassing an analysis of the internal environment of the organisation, analyzing the organization's external environment and identifying the major critical issues facing the organization. Hence strategy formulation is based a proper diagnosis of the strategic needs of an organization. Strategy formulation can be defined as the process of "determining appropriate courses of action for achieving organizational objectives and thereby accomplishing organizational purpose". (E coach) There are distinct steps involved in the formulation of strategies: 1. Review of the current key objectives and strategies of the organistion, that are identified at the diagnosis stage 2. Identify a range of alterative strategies that can be employed to suit the corporate level, competitive and functional needs of the organization. 3. Evaluate the relative merits and demerits of the alternative strategies with respect to their feasibility and adaptability to the organisational values 4. Decide on the best alternative that can be implemented to make the recommendation. The strategies of an organization are to be formulated to cater to the needs of the corporate level requirements, to meet the competitive challenges and also to guide the functional needs of the organization. The corporate level strategies may include the growth strategies, stability strategies, human resource strategies and portfolio strategies. The strategies to meet the competitive challenges are to include the marketing strategies and various other internal strategies of pricing, product differentiation, branding and optimal product mix. "Competitive strategy is about being different. It means deliberately choosing to perform activities differently or to perform different activities than rivals to deliver a unique mix of value". (Porter Michael E 1980) Gary Hamel & C. K. Prahalad state that the essence of strategy lies in creating tomorrow's competitive advantages faster than competitors mimic the ones you possess today. Functional strategies may include the breakdown of broader corporate and business strategies in to workable strategies for different functional areas within the organization. The formulation of the strategy should focus on the organizational environment and should help the people fulfillment of the organizational mission. The strategy formulated should enable the organization reach the objectives of the organization with ease. For formulating the strategy for an organization there are specialized tools available. The tools that can be used are Critical Question Analysis, SWOT analysis, Business Portfolio Analysis, Porter' Model for industry Analysis and resource based model. By an efficient use of any or a combination of these tools it is possible to formulate the strategy of an organization effectively. Though these strategy development tools are related they can function independently to each other. In any organization the organizational culture forms the basis for the formulation of strategies. In order to be successfully implemented, the organizational strategy needs to be supported by the culture of the organization. The corporate culture is important because of its like to corporate strategy formulation and implementation. 7.0 Strategic change: W.J.Ferrier (2001) comments, that in a hyper competitive market, firms often aggressively challenge their competition in the hopes of improving their competitive position and ultimately their performance. Quite often this calls for changes in the strategies being followed by the organization. "Strategic change management is the process of delivering the strategy of an organisation in a controlled, efficient and effective manner". (Tapster Rock) Strategies are organic in that they must be adapted over time as the external environment and the firm's resource portfolio change. (M.Farjun 2002) In any organization by doing things recurrently people start to assume that this is the way the things should be done. When people begin adopting ways of working by assumptions without going through the process of explicit discussions of issues, then that becomes the organizational culture. When the organization becomes successful this culture becomes stronger. However, when the external environment in which the organization is functioning changes this culture poses a problem for the managers to cope up with the changes. There the strategic changes come in handy. "Leaders who recognize the need for strategic change must determine whether a particular approach is likely to be successful, and then are faced with the task of implementing the change to its conclusion." (Stanford Graduate School of Business 2007) 8.0 Conclusion: The strategic management process is intended to be a rational approach to help a firm respond effectively to the challenges of the modern day business environment. In order to effectively coordinate this process a detailed analysis of both the internal and external environments is required to be done. Based on the analysis strategic thinking can be developed to formulate the strategies that are required at the corporate level, for the competitive environment and also for the functional areas. The formulation of strategy is preceded by a diagnosis of the orgnisational needs. Similarly a careful monitoring of the strategies is ensued by a strategic thinking process for making any amendments to the strategies depending on the changes in the internal and external environments. This calls for an efficient strategic change management. Thus competition requires firm to make choices which are strategic in nature and includes selection of a strategic intent and strategic mission, determination of which strategies to implement, choosing an appropriate level of corporate scope and designing governance and organizational structure. (A. Jones 2001) References: 1. A. Jones (2001) P&G to Seek New Resolution of Spy Dispute Financial times September 04th http:www.ft.com 2. Allan Kaplan Development Dossier: The Development of Capacity Non-Governmental Liaison Service UN-NGLS http://www.un-ngls.org/documents/publications.en/develop.dossier/dd.05/dc.features.htm 3. E Coach Strategy Formulation http://www.1000ventures.com/business_guide/strategy_formulation.html 4. Gary Hamel & C. K. Prahalad Strategy and Competitive Advantage webpages.dcu.ie/scallanc/Competitive%20Advantage.ppt 5. Ilia Van Roon Business Writing Capture.Delivr.Excel http://www.capturedeliverexcel.com/index.htm 6. John Kay (1993) The Structure of Strategy http://www.johnkay.com/strategy/124 7. M.Farjoun (2002) Towards an Organic Perspective on Strategy Strategic Management Journal Vol. 23 pp 561-594 8. Porter, Michael E. (1980). Competitive Strategy: Techniques for analyzing industries and competitors. New York: Free Press. 9. Rex C. Mitchell Strategy Formulation www.csun.edu/hfmgt001/formulation.doc 10. Stanford Graduate School of Business (2007) Executing Strategic Change in Dynamic Environments Executive Education http://www.gsb.stanford.edu/exed/esc/index.html 11. Tapster Rock So What is Strategic Change Management http://www.tapsterrock.com/change.html 12. W.J.Ferrier (2001) Navigating the Competitive Landscape: The Drivers and consequences of Competitive aggressiveness Academy of Management Journal Vol. 44 pp 858-877. Read More