Strategy as a Planned Process - Essay Example

Strategy as a planned project BY YOU YOUR SCHOOL INFO HERE HERE Strategy as a planned process Introduction It has been alleged that strategy, as a planned process, is determining an enterprise’s long-term goals and objectives and then establishing specific courses of action and ensuring appropriate allocation of resources necessary to achieve those goals (Chandler 1962, p.13). In order to determine whether this definition is applicable within organisations today, it is necessary to examine the specific variables that have potential impact on the success of an enterprise and then examine how organisational leadership responds to these factors. In today’s enterprises, strategists must be aware of the unique external situations that either serve to enhance or complicate achieving goals. For instance, organisations that operate for profit must be considerate of consumer behaviour patterns, acknowledge competitor activity, understand the impact of currency and exchange rates, and a plethora of additional variables that will, in some fashion, impact goal attainment. Is strategy, in contemporary organisations, determining long-term goals, establishing a specific course of action and then allocating resources most effectively to attain objectives and goals? The literature would seem to support this definition, offering a wide variety of different strategies that are known to be effective for achieving organisational success. This essay conducts a literature review on strategy, spotlighting factors such as assessing external market conditions, establishing strategic human resources policies, structuring governance systems, developing innovations and evaluating competitive activity as a means of either refuting or supporting the alleged definition of strategy. Based on research, it would appear that the aforementioned definition of strategy is valid and this can be supported by examining real-world strategy developments in existing organisations. The surplus of strategic options Chandler (1962) iterated his definition of strategy which suggests that strategic development is a rational process, following a model of planning that follows a logical series of problem evaluations, formulating a goal, predicting performance of various actions when implemented, and then establishing control systems to ensure success of these actions. However, strategists must understand the internal and external conditions that will hinder or improve enterprise performance before any specific course of action will be successful. This is supported by Andrews (1980, p.31) who asserts that strategy is an intellectual process whereby strategists determine “what a company might do in terms of environmental opportunity, deciding what it can do in terms of ability and power, and bringing these two considerations together in optimal equilibrium”. Hence, strategy is a very rational process of aligning internal organisational policy and structure in a fashion that is both feasible and able to achieve the highest return on investment. The Sony Corporation is one example of following a rational model when determining strategic planning, whilst taking into consideration organisational capacity and the role of the external market. Sony is a large multinational corporation that manufactures many different electronics products for domestic (Japanese) and international markets. The product portfolio of the firm consists of gaming technologies, smartphones, televisions and cameras. Sony had once been a market leader with a powerful marketing brand for its historical product innovation known as the Sony Walkman, a pioneering product of which competitors were not capable of replicating which gave Sony a significant market advantage. However, once this product reached its decline stage, Sony was no longer a market leader as rival firms, such as Samsung and Sharp, were offering new technological innovations. In 2012, Sony reported a total net loss of 67.3 billion Yen (Hirai 2012). This followed on the heels of a 2011 loss of 199.8 billion Yen. Sony’s dilemma: the firm was no longer a first-to-market technology innovator and the firm’s main competitors were more adept in research and development, as well as marketing promotion, which built a new type of consumer loyalty for rival firms over that of Sony’s products. Hence, strategists recognised a legitimate problem and began enacting new actions to combat its dwindling competitive position. Sony began to invest more of its financial capital resources into the innovation process in order to regain its market leadership and realised it would have to alter manufacturing capabilities to produce new and revolutionary products. In 2001, Sony had contracted in a joint venture with a Swedish company, Ericsson, in an effort to capitalise on a growing mobile telecommunications industry. In 2012, in an effort to improve revenue production, Sony decided to acquire Ericsson’s share of the joint venture for $1.47 billion USD (Musil 2012). The rationale for this decision was to allow Sony to focus on the smartphone market without having to be considerate of sharing revenues with Ericsson. Sony then restructured this business division to house a higher volume of research and development teams and focus on innovation production in the smartphone industry, following an objective to retain its previous reputation for being a pioneering organisation. Sony, in reference to the definition of strategy as provided by Chandler (1962) followed a rational strategy during a period of time where the company was struggling substantially to outperform competitors and was unable to achieve sufficient sales revenues. The company realised that terminating the joint venture of Sony-Ericsson was a potential opportunity for profit growth. Following a rational model, the company determined that allocation of financial capital toward buying out Ericsson would provide long-term benefits and profitability. In order to make this strategy successful, Sony then had to create a variety of actions in order to improve cross-functional team productivity which is crucial for developing innovations (Stover 2004). Sony had previously been a very centralised hierarchy that did not foster inter-group collaboration. Sony executives realised that if the firm were to be sustainable into the future, it would have to change management policies and include a broader emphasis on improving inter-organisational communications. Hence, in the case of Sony, the company determined long-term objectives (to achieve higher revenues), determined how best to allocate these resources (altering operations and buying out the joint venture partner), and then developed specific actions (decentralisation and focus on R&D) that would assist in obtaining these rational goals. Sony is a prime example of a firm that strongly supports Chandler’s definition of strategy. It is not only focusing on innovation, in the case of Sony, that supports the rational definition of strategy. Some organisations place more emphasis on structuring their governance Boards to initiate a collaborative system of corporate oversight. Corporate governance is the establishment of differing policies and procedures that guide an organisation. Business decision-making at this level dictates management activities appropriate to achieve long-term goals and establish the compliance measures to ensure that the organisation, holistically, is working toward these goals (Clarke 2004). One such example of governance restructuring as a rational strategy can be illustrated with the UK supermarket chain, Sainsbury’s, which is currently one of the largest grocers in the country, competing against Morrison’s and Tesco. Sainsbury’s executives realised that the company was not properly positioned in its established market and had little means by which to differentiate itself from competitors. As a result, the company developed what is referred to as Steering Committees, groups of internal employees that would be responsible for coordinating new groups inclusive of the brand governance group, community group, the “great place to work” group and the climate change steering group (Sainsburys 2011). Sainsbury’s leadership scanned the external market, recognised a problem with creating a more potent brand identity against competition, and began to focus on building a positive sense of corporate social responsibility as a means of differentiating the firm long-term against Tesco and Morrison’s. At the time, no other competitor maintained this focus and utilised tools to promote this image of corporate philanthropy to consumers. There is a growing trend in retail sales known as ethical consumption, whereby many consumer segments will have loyalty to a firm that illustrates a high ethical stance (Grande 2007). Consumers are actually punishing companies that do not maintain high ethical standards and promote a focus on corporate responsibility (GlobeScan 2009). In fact, the sports apparel company, Nike, experienced a significant consumer boycott after facing allegations of unethical activity (Carrigan and Attalla 2001). Restructuring the governance board to include cooperative steering committees associated with corporate social responsibility, allocating internal labour to enhance this focus and then aligning a new brand positioning strategy in its established market to gain consumer attention supports Chandler’s definition of strategy. The long-term objective of improving Sainsbury’s public image, setting actions that would create vital subgroups necessary to achieve this goal and allocating support staff to engage these practices illustrates the rational process of strategy and justifies Chandler’s determination of strategy’s concept. Today, Sainsbury’s maintains considerable consumer loyalty for being an organisation with the utmost standards of moral and ethical behaviour. It is due to the examination of market conditions and the practice of aligning internal policies and practices to combat market problems that Sainsbury’s achieved more significant profitability and competitiveness, a necessity in effective strategic-focused governance (Charan 2005; Bowen 2004). Mintzberg and Lampel (1999, p.22) further define strategy as a situation in which senior managers “formulate clear, simple and unique strategies in a deliberate process of conscious thought...so that everyone can implement the strategies”. Therefore, this definition would seem to support why having an emphasis on human resource management is a rational strategy as once a problem has been identified, objectives established, and a specific long-term goal determined, it is absolutely critical to ensure that the entire organisation works collaboratively to achieve the goal. It is very common, at the psychological level, for employees to resist change when it is implemented (Ford, Ford and D’Amelio 2008). Strategic-minded organisations recognise the importance of building a unified organisational culture that aligns job role responsibilities with the specific long-term goal or mission that has been established. This involves opening lines of communication (decentralising), enacting rigorous training procedures, and teaching managers to be inspirational and visionary to gain followership and avoid change resistance (Fairholm 2009). One such case of using human resources as a strategic activity can be witnessed with Air Asia, a low-cost, no-frills airline carrier. Air Asia realised in a very saturated market that the company would require excellence of service in order to experience higher levels of consumer loyalty, thus focusing on organisational culture development to ensure motivated and unified work teams dedicated to service excellence. With emerging competitors in this industry building differentiated corporate identities, competition is intensifying (O’Connel and Williams 2005). Air Asia evaluated the competitive activities of main industry rivals and determined that achieving a long-term goal of gaining consumer loyalty would require proper allocation of human resources with a focus on service delivery and competency. From a marketing perspective, Air Asia saw internal culture development and HR policy toward this end as being a viable method of resource allocation and specific internal courses of action necessary to build a solid and respected marketing brand. The case of Air Asia also supports Chandler’s definition of strategy as being considerate of establishing a long-term goal and allocating resources more effectively to build a consumer perception of service excellence that gave the company, long-term, a better competitive presence. Conclusion Strategic planning, as a rational process, involves being analytical internally and establishing a variety of formalised procedures to achieve a determined, long-run goal. Strategy development is setting priorities, determining the best methodology of resource allocation, altering operational components of the organisation, and ensuring that all employees and other stakeholders work diligently toward achieving the mission and goal. Whether utilising human resources development as a strategy, focusing on an internal restructure to create better product innovations, or even creating a unified organisational culture that focuses on improving corporate social responsibility as a marketing tool, there are a wide variety of strategies available that fit Chandler’s definition of strategy. Once an organisation evaluates a problem stemming from the external environment, determines a long-term goal to attain a better market position or marketing brand identity, it is equipped to understand its strengths and weaknesses and then adapt to bring the organisation better performance and/or profitability. Hence, as identified by Chandler (1962), the classical definition of strategy as a rational process considerate of long-term objectives and proper allocation of resources is very befitting a complete characterisation of strategy. Chandler’s definition is very practical and relevant to today’s organisational environments and does an excellent job at explaining the role of strategy in an enterprise context. References Andrews, K.R. (1980). Directors’ responsibility for corporate strategy, Harvard Business Review, November/December, cited in H. Mintzberg (1990) The design school: reconsidering the basic premises of strategic management, Strategic Management Journal, 11, p.173. Bowen, W. (2004). The board book: an insider’s guide for directors and trustees. London: WW Norton and Company. Carrigan, M. and Attalla, A. (2001). The myth of the ethical consumer – do ethics matter in purchase behaviour?, Journal of Consumer Marketing, 18(7), pp.560-577. Chandler, A. (1962). Strategy and structure: chapters in the history of industrial enterprise. New York: Doubleday. Charan, R. (2005). Boards that deliver. San Francisco: Jossey-Bass. Clarke, T. (2004). Theories of corporate governance. Abingdon: Routledge. Fairholm, M. (2009), Leadership and Organizational Strategy, The Public Sector Innovation Journal, 14(1), pp.26-27. Ford, J.D., Ford, L.W. and D’Amelio, A. (2008). Resistance to change: The rest of the story, Academy of Management Review, 33(2), pp.362-377. GlobeScan. (2009). CSR in the economic crisis. [online] Available at: http://www.globescan.com/news_archives/salon_lon-0109/ (accessed 16 March 2014). Grande, C. (2007). Ethical consumption makes mark on branding, The Financial Times. [online] Available at: http://www.ft.com/cms/s/2/d54c45ec-c086-11db-995a-000b5df10621.html#axzz2kT95cwFY (accessed 14 March 2014). Hirai, K. (2012). Letter to Stakeholders: Operating Results in Fiscal Year 2011, Sony Corporation. [online] Available at: http://www.sony.net/SonyInfo/IR/financial/ar/2012/message/page02.html (accessed 18 March 2014). Mintzberg, H. and Lampel, J. (1999). Reflecting on the strategy process, Sloan Management Review (Spring), pp.21-30. Musil, S. (2012). Sony completes Sony Ericsson buyout, launches new brand. CNet. [online] Available at: http://www.cnet.com/news/sony-completes-sony-ericsson-buyout-launches-new-brand/ (accessed 17 March 2014). O’Connel, J.F. and Williams, G. (2005). Passengers’ perceptions of low cost airlines and full service carriers: a case study involving Ryanair, Aer Lingus, Air Asia and Malaysia Airlines, Journal of Air Transport Management, 11, pp.259-272. Sainsburys. (2011). Annual report and financial statements – J Sainsbury Plc. [online] Available at: http://www.j-sainsbury.co.uk/media/171813/ar2011_report.pdf (accessed 17 March 2014). Stover, M. (2004). Making tacit knowledge explicit, Reference Services Review, 32(2), pp.164-173. Read More