Stratergy in business

         Strategy is a deliberate and conscious effort. Action must flow from reason. Effective strategies derive from a tightly controlled process of human thinking. This is the basic philosophy of the design school proposed by Mintzberg. Selznick(1957), brought out the concept of ‘ distinctive competence’, discussed the need to bring together the organisation’s internal state with its external expectations, and argued for building policy into the organisation’s social structure. The school places primary emphasis on the appraisals of the internal and external situations, the former uncovering the threats and opportunities and the latter revealing strengths and weaknesses.  The operation and work activities are strictly modelled. The operational staffs have to follow the blue print designed by the senior staff. There is very little scope for diversion from the blue point and little scope for learning. It also emphasises on the managerial values the beliefs and preferences of those who formally lead the organisation. This command and control mentality allocates all major decisions to top management, which imposes them on the organisation and monitors them through elaborate planning, budgeting and control systems. (Hayes, 1985). This school seriously undermines certain important aspects of strategy formation, including incremental development and emergent strategy, the influence of the existing structure on strategy, and the full participation of other employees than the Chief Executives. While the design school has certain advantages however selection of this strategy once again could and up in a knife-edge. That is simply because of the following reasons. The school provides little scope for learning. The school can be criticised for its promotion of thought independent of action, strategy formation above all as a process of conception rather than one of learning. This can be clearly visualised in a fundamental step in the formulation process, the assessment of strengths and weakness. The SWOT analysis can be seen as a deliberate and planned approach, which is expressed in papers. The strength weakness, opportunities, and threats are varying in nature. This is to say that there is a degree of ambiguity in deciding as to what are the possible strengths, weaknesses, opportunities, and threats for the company. Hill and Westbrook (1997), surveyed 50 companies, and found that “ over 20 of them used a SWOT analysis involving 14 consulting companies.” Yet none of the companies subsequently used the outputs within the later stages of strategy process. The school can also be criticized for the lack of flexibility and increased bureaucracy. The adoption of the company to the changing environmental condition comes under question. This is similar to the classical school proposed by Whittington. A similar philosophy can be observed in the thoughts of the planning school. This is similar to the design school only that the strategies are more detailed. In a way this is an elaboration of the simple, informal model of the design school. The school proposes that the strategies result from a controlled conscious process of formal planning, decomposed into distinct steps each delineated by checklists and supported by techniques. The emphasis on decomposition and formalisation meant that the most operational activities received the attention especially scheduling, programming and budgeting. The top management does the planning and the execution rests up on the junction staff. Here the strategies appear full-blown, to be made explicit so that they can be implemented through detailed attention to objectives, budgets, programmes and operating plans of various kinds. (Mintzberg 1999). Thus strategic planning was reduced to the quantification of goals as means of control. Once the objectives are set the next two stages, as in the design school are to assess the internal and external conditions of the environment. A major element of the organisation’s external environmental analyses was a set of forecasts made about future conditions. Thus Ackoff (1983) comments ‘predict and prepare’ became the motto of this school of thought.   The propositions of the planning school look attractive on paper. The major flaws in the school propositions are termed as ‘seven deadly Sins of planning’. The process that was originally formulated by the top executives was taken over by the lower level staff. The planning staffs cut the executives out of the strategy development process making them obsolete. Little emphasis is given on the true insights of the strategy. There is too much of planning and very little action. Kiechel (1984) concluded that only 10% of formulated strategies actually got implemented. The system gets highly bureaucratic. The executives whose mandate is to implement strategy had very little role in designing the strategy. There is an inappropriate use of planning tools. There is very little emphasis on developing strategic alternatives, leading to default adoption of strategy rather than by choice. The cultural requirement is unfocussed. There is too much reliance on single point forecasting. (Wilson, 1994). The entire system is highly formalised it is not possible to formalise creative thinking. As Lorange (1980) comments, “ because analysis is not synthesis, strategic planning has never been strategy making. Analysis may precede and support synthesis, by providing certain necessary inputs. Analysis may follow and elaborate synthesis, by decomposing and formalising its consequences. But analysis cannot substitute for synthesis.” Thus planning rather than providing new strategies, cannot proceed with out their prior existence. Both the design school and the planning schools put no limits on the strategies that were possible in any given situation. The positioning school on the other hand argued that only a few key strategies as positions in the economic marketplace are desirable in any given industry.

                            Cost              Strategy      Differentiation

Broad

Market

Narrow

Positioning in simple terms is ‘being at the right time at the right place. This involves studying market and positioning oneself in the market there is very strong commitment towards the strategy. There is a very low degree of formalisation and emphasis is on action and implementation. The positioning school argues that only a few key strategies such as positioning in the economic market are desirable in any industry. It suggests the existence of the first mover advantage. The argument here is that the strategies are generic and specifically common and the positions are identifiable in the market place. The context of the market place here is economic and competitive. It believes that the market structure drives deliberate positioning strategies and drives the organisational structure. Katz (1970) comments, “ the basic strategy for all companies should be to concentrate resources where the company has a meaningful competitive advantage. The school can be critiqued on the same grounds as the design and planning schools. Hamel (1997) criticised the positioning school for the lack of strategy creation, by stating, “ the dirty little secret of the strategy industry is that it dose not have the theory of strategy creation.” This school suggests the selection of one strategy and sticking on to it. This causes inflexibility and narrows an organisation’s vision. As Miller (1992) suggests, the pursuit of one strategy and strategic specialisation causes inflexibility and narrows an organisation’s vision.  This school heavily undermines the process of learning. The focus is very narrow and is confined to economic environment. No emphasis is given on social, cultural, and political environment. There is very strong bias in the thoughts of this school towards the external conditions at the expense of internal capabilities. In the entrepreneurial mode, strategy making is dominated by the active search for new opportunities. There is a strong need for control, independence, achievement, resentment of authority and a tendency to accept moderate risks. This school focuses on opportunities. Problems are secondary. There is a very low degree of delegation and the organisation is defined by power centralisation. Strategy moves forward in such organisations. The CEO seeks out and thrives in conditions of uncertainty. There is a heavy emphasis on growth. It can be safely said that growth is the driving force in such organisations. The process of strategy formation is semiconscious. There is heavy reliance on the experience and intuitions of the leader. The structure and strategy are both malleable in this view. The entrepreneurial strategy tends to take the form of niche, one or more pockets of the market protected from the force of outright competition.  The basic disadvantage of this school is the heavy reliance and the dominance of the leader. The Harvard Business Review on Entrepreneurship (1999) suggests many entrepreneurial ventures do not have a well-defined strategy and severely lack formal control systems, decision-making processes, and clear roles for employees. Informality is fine as long as there is no effort to build a large sustainable business. Once that becomes the goal, it is imperative to have formalised systems and processes. According to Lewis (1992),” great strategies however do not guarantee great execution. A venture may fail if the founders do not hire the best people, attract capital, invest in organisational infrastructure and shape a culture to suite the venture’s strategy.” According to Stevenson (1985), “ interviews with the founders of 100 companies on the 1989 inc. 500 list of the fastest growing companies revealed that entrepreneurs spent little effort on their initial plan. 41% had no business plan at all, 26% had just a rudimentary plan, 5% worked up financial projections for investors, and only 28% wrote a full-blown plan. The entrepreneurial school has highlighted critical aspects of strategy formation, most notably its proactive nature and the role of personal leadership and strategic vision. The entrepreneurial school presents strategy formation as all wrapped up in the behaviour of a single individual. Key decisions concerning strategy and operation are together centralised in the office of the chief executive. Such centralisation can be beneficial in ensuring that the strategic response reflects full knowledge of the operations.  A serial, remedial, and fragmented process, in which decisions are made to solve the problem rather than to exploit the opportunities, with little regard for ultimate goals or even connections between different decisions is strategy as viewed by the learning school. (Braybrook, 1963). According to Quinn (1980), “ the real strategy tends to evolve internal decisions and external flow together to create a new, widely shared consensus for action among key members of the top management team.” The learning process proceeds in emergent fashion. Strategy should be viewed as a learning process both individual and collective. The key to learning school is its foundation in description rather than prescription. This style is particularly beneficial in professional organisations that operate in a highly dynamic and complex environment, for example in hospitals. Here, strategy formation may have to be a process of collective learning simply because no central authority has the power to impose strategy on the whole organisation. Complex, dynamic and unpredictable environment makes it difficult to converge on a clear strategy. Under such circumstances the learning process becomes almost mandatory. The learning approach allows the organisations to respond to an evolving reality in individual steps instead of having to wait for a fully determined strategy.  Strategy formation is shaped by power and politics, whether as a process inside the organisation or as the behaviour of the organisation itself in its external environment are the views of the power school of strategy. These strategies tend to be emergent and take the form of positions rather than perspectives. Micro power sees strategy making as the inter play through persuasion, bargaining, and direct confrontation in the form of political games. Macro power sees the organisation promoting its own welfare by controlling or co-operating with other organisations. Power and politics have never been absent from organisations and neither from strategy formulation. The view here is that strategy is a process of bargaining and compromise among conflicting individuals, groups and coalitions. Almost all imaginable organisations, private and public, are at least mildly or occasionally political. Only the smallest or most autocratically run might be able to avoid it for a time.  Strategy formation is about power and politics but also not only power and politics. The role of factors such as culture, leadership, delegation, is all undermined. The problem of collusion in a society of large organisation has to be addressed. Politics however ensures that all sides of an issue are fully debated, where as other systems of influence may tend to promote only one. Politics by obliging people to fight for their preferred ideas encourages a variety of voices to be heard on any issue. Politics is a necessary change stimulator; change that is blocked by the more legitimate systems of influence. Authority concentrates power up the hierarchy, often in the hands of those responsible for the existing strategy. Mintzberg (1998) claims that culture is the mirror image of power. Mintzberg (1998) points out the interconnectedness of politics and culture in an interesting fashion by stating, “ power takes that entity called organisation and fragments it; culture knits a collection of individuals into an integrated entity called organisation.”  The cultural school believes that strategy formation is a process of social interaction based on the beliefs and understanding shared by the members of the organisation. An individual acquires these beliefs through acculturation or socialisation, which is largely nonverbal and emotive. The beliefs, values and norms are very much abstract and the members can partially describe them. Hence the school proposes that strategy takes the form of perspective above all. Hence strategy is deliberate. Culture influences the style of thinking favoured in an organisation as well as its use of analysis, and thereby influences the strategy formation process (Wright 1979). According to Snodgrass (1984), “ culture acts as a perceptual filter or lens which in turn establishes people’s decision premises.” As Prahalad and Bettis (1986) view, “ an organisation develops a ‘dominant logic’ that acts as a logical filter, leading to a focus on some data for strategy making while ignoring others.  The cultural approach does not encourage strategic change as much as the perpetuation of the existing strategy, it on the other hand promotes the shifting of positions within the organisations overall strategic perspective. As said by Mintzberg (1998), “ if the positioning school has been faulted for false precision then culture school has to be faulted for conceptual vagueness.”

CONCLUSION:

It can be safely concluded that no one style of strategy formation and development is right. This means strategy needs to be managed in a different way. The need is to build on recognition of the innate ability of the managers to draw on their experience, but to develop the capacity for this to be used more flexibly and in a questioning, learning organisation. (Senge 1990). Chaos theorists argue that the organisational world appears to be so turbulent and chaotic that it is not possible to predict what will happen or when, so traditional approaches to strategic management are simply not relevant. There is no point in formalised planning approaches with predetermined fixed objectives and analysis that may take weeks or months to work through. According to Levy (1994), “ in chaotic systems, small disturbances multiply over time because of the non linear relationships and the dynamic, repetitive nature of the system. As a result such systems are highly sensitive to initial conditions, which makes forecasting very difficult.”  The idea that top managers can formulate strategy implemented by others becomes redundant because top managers are less in touch with such a complex and turbulent world than those in the organisation. The notion that there needs to be a consensus and agreement around the issues facing the organisation can also be questioned, the environment is too complex and rapidly changing for this to be likely. (Stacey 1992). Gaining competitive advantage is the basic reason for the need of a strategy. Without competitors there would be no need for strategy, for the sole purpose of strategic planning is to enable the company to gain, as effectively as possible, a sustainable edge over its competitors. However, every advantage of a strategy has an associated disadvantage. Hence any discussion on strategy inevitably ends up in a knife-edge. It can be safely said that strategy development is unique to every organisation. The argument whether structure should follow strategy or the other way round is once again ambiguous. However a malleable structure and strategy sounds impressive. It is imperative for the businesses to understand without ambiguity the associated disadvantages of strategies and try to address them or be prepared to make some serious sacrifices emerging from those disadvantages. As said earlier strategy selection is unique to every organisation, adoption of strategy is more of an internal decision rather than the external. However the influences of the external factors cannot be undermined.

REFERENCE:

1. Braybrook D, Lindblom CE, “A Strategy of Decision” Free Press, New York, 1963.
2. Ackoff RL, “ Beyond Prediction and Preparation”, Journal Of Management Studies, January 1983.
3. Chandler A, “Strategy And Structure” Chapters In The History Of American Enterprise, Cambridge Mass, MIT Press, 1962.
4. Hayes RH, “ Strategic Planning-Forward In Reverse?” Harvard Business Review, November- December 1985.
5. Hamel G, “ Killer Strategies That Make Shareholders Rich”, Fortune, June 23, 1997.
6. Harvard Business Review On Entrepreneurship, Harvard Business School Press, Boston, 1999.
7. Hill T, Westbrook R, “ SWOT Analysis: Its Time For A Product Recall.” Long Range Planning, 1997.
8. Johnson G, Scholes K, “Exploring Corporate Strategy” 6th edition, FT Prentice Hall, London, 2002.
9. Johnson G, Scholes K, “Exploring Corporate Strategy” 5th edition, Prentice Hall, London, 1997.
10. Katz RL, “ Concepts And Cases in Corporate Strategy”, Eagle Wood Cliffs, Prentice Hall, New Jersey, 1970.
11. Levy D, “ Chaos Theory And Strategy: Theory, Application And Managerial Implications”, Strategic Management Journal, 1994.
12. Lewis G, Morkel K, Hubbard G, Davenport C, Stockport G, “Strategic Management” 2nd edition, Prentice Hall, NSW Australia.
13. Lewis S, “ Microsoft Corporation”, in International Directory of Company Histories, ed. Paula Kepos, Michigan, St. James Press, 1992.
14. Lorange P, “ Corporate Planning”, An Executive View Point, Eagle Wood Cliffs, Prentice Hall, New Jersey, 1980.
15. Mintzberg H, “ Opening Up The Definition Of Strategy”, In Quinn B, Mintzberg H, Robert J, “ The Strategy Process” Prentice Hall, Eagle Wood Cliffs, NJ, 1999.
16. Miller D, “ The Generic Strategy Trap”, Journal Of business Strategy, January- February 1992.
17. Prahalad CK, Bettis RA, “ The Dominant Logic: A New Linkage Between Diversity And Performance”, Strategic Management Journal, 1986.
18. Quinn JB, “Managing Strategic Change” SLOAN Management Review, (summer 1980b-3-20).
19. Snodgrass CR, “Cultural Influences On Strategic Control Systems Requirements”, University of Pittsburgh, Graduate School Of Business, 1984.
20. Senge P, “ The Fifth Discipline: The Art And Practise Of The Learning Organisation, Doubleday/Century, 1990.
21. Stacey R, “Managing Chaos” Dynamic Business Strategies In Unpredicted World, Kogan Page, 1992.
22. Sleznick, P, “ Leadership In Administration: A Sociological Interpretation, Ivanston, IL: Row, Peterson, 1957.
23. Stevenson H, Gumpert D, “ The Heart of Entrepreneurship”, Harvard Business Review, March-April, 1985.  
24. Sookun M, Lecture Notes, Dated 9th July 2003.
25. Wilson I, “Strategic Planning Isn’t Dead- It Changed” Long Range Planning, 27, 4, Aug 1994: 12- 24.
26. Wright P, Pringle C, Kroll M, “ Strategic Management Text And Cases”, Needham Heights, MA: Allyn And Bacon, 1992.
28.  

        BIBLIOGRAPHY

1. Braybrook D, Lindblom CE, “A Strategy of Decision” Free Press, New York, 1963.
2. Ackoff RL, “ Beyond Prediction and Preparation”, Journal Of Management Studies, January 1983.
3. Chandler A, “Strategy And Structure” Chapters In The History Of American Enterprise, Cambridge Mass, MIT Press, 1962.
4. Hayes RH, “ Strategic Planning-Forward In Reverse?” Harvard Business Review, November- December 1985.
5. Hamel G, “ Killer Strategies That Make Shareholders Rich”, Fortune, June 23, 1997.
6. Harvard Business Review On Entrepreneurship, Harvard Business School Press, Boston, 1999.
7. Hill T, Westbrook R, “ SWOT Analysis: Its Time For A Product Recall.” Long Range Planning, 1997.
8. Johnson G, Scholes K, “Exploring Corporate Strategy” 6th edition, FT Prentice Hall, London, 2002.
9. Johnson G, Scholes K, “Exploring Corporate Strategy” 5th edition, Prentice Hall, London, 1997.
10. Katz RL, “ Concepts And Cases in Corporate Strategy”, Eagle Wood Cliffs, Prentice Hall, New Jersey, 1970.
11. Levy D, “ Chaos Theory And Strategy: Theory, Application And Managerial Implications”, Strategic Management Journal, 1994.
12. Lewis G, Morkel K, Hubbard G, Davenport C, Stockport G, “Strategic Management” 2nd edition, Prentice Hall, NSW Australia.
13. Lewis S, “ Microsoft Corporation”, in International Directory of Company Histories, ed. Paula Kepos, Michigan, St. James Press, 1992.
14. Lorange P, “ Corporate Planning”, An Executive View Point, Eagle Wood Cliffs, Prentice Hall, New Jersey, 1980.
15. Mintzberg H, “ Opening Up The Definition Of Strategy”, In Quinn B, Mintzberg H, Robert J, “ The Strategy Process” Prentice Hall, Eagle Wood Cliffs, NJ, 1999.
16. Miller D, “ The Generic Strategy Trap”, Journal Of business Strategy, January- February 1992.
17. Prahalad CK, Bettis RA, “ The Dominant Logic: A New Linkage Between Diversity And Performance”, Strategic Management Journal, 1986.
18. Quinn JB, “Managing Strategic Change” SLOAN Management Review, (summer 1980b-3-20).
19. Snodgrass CR, “Cultural Influences On Strategic Control Systems Requirements”, University of Pittsburgh, Graduate School Of Business, 1984.
20. Senge P, “ The Fifth Discipline: The Art And Practise Of The Learning Organisation, Doubleday/Century, 1990.
21. Stacey R, “Managing Chaos” Dynamic Business Strategies In Unpredicted World, Kogan Page, 1992.
22. Sleznick, P, “ Leadership In Administration: A Sociological Interpretation, Ivanston, IL: Row, Peterson, 1957.
23. Stevenson H, Gumpert D, “ The Heart of Entrepreneurship”, Harvard Business Review, March-April, 1985.  
24. Sookun M, Lecture Notes, Dated 9th July 2003.
25. Wilson I, “Strategic Planning Isn’t Dead- It Changed” Long Range Planning, 27, 4, Aug 1994: 12- 24.
26. Wright P, Pringle C, Kroll M, “ Strategic Management Text And Cases”, Needham Heights, MA: Allyn And Bacon, 1992.