Strategic Management - Essay Example

Strategic Management INTRODUCTION Over several decades, strategic management has become reasonable area of research and managerial practices. In thedevelopment of strategy, diverse authors have deliberated their opinions regarding its formulation and utilisation. Ever since its origin, strategy researchers have been involved in ongoing discussion regarding what strategy truly signify. Over the historical improvement of strategic management area, strategy has assisted business organisations to attain their predetermined business targets (Lowstedt, “Exploring the Concept of Strategy Using a Practice Lens: The Case of A Large Construction Company”). THESIS STATEMENT Based on the above aspect, the objective of the essay is to learn about strategy and the concerns that must be considered by any organisation in order to construct an ideal strategy. In order to learn about strategy, perceptions of various authors such as Mintzberg, Johnson, Scholes and Whittington has been evaluated critically through checking the comparability of their respective perceptions about the notion of strategy. This essay also presents a comparison between ten schools of thought based on strategy formulation recommended by Mintzberg and four strategic lenses as recommended by Johnson, Scholes and Whittington regarding creation of strategy. STRATEGY DEFINED A strategy intends to direct the overall activities of an organisation and impact on its financial viability. It creates best possible fit between an organisation and its objectives (Jones and Bartlett Publishers, ‘Basic Strategy Concepts’). Every organisation has certain form of strategy and the core of such strategy lies in creating future competitive advantages against the rivals. According to Strickland & Thompson (3-6), organisations’ strategy is developed by combining the competitive activities and business methods executed by the managers, which eventually aids in meeting customers’ requirements and guiding organisations toward attaining superior competitive position. In other words, it can be affirmed that the basic plan through which an organisation establishes the way of accomplishing its predetermined business objectives is defined as strategy (Strickland & Thompson 3-6). There are basically two key viewpoints of understanding strategy. One is managerial viewpoint and the other one is critical lens viewpoint. The managerial viewpoint of strategic management often utilises an instrumental prudence in order to assist managers to develop organisational efficiency and corporate productivity. Then again, critical lenses attempt to discover the characteristics of strategic management as an organisational procedure, having substantial political complications in the larger society (Levy, Alvesson and Willmott 92–110). Mintzberg (23-301) argued that strategy concepts and thoughts can be understood by categorising them into ten school of thoughts. According to his viewpoint, the differences prevailing between the schools of thought are highly administered by the fundamental base discipline. The nature of each school is associated with certain core disciplines of strategy. In this similar concern, Johnson, Scholes and Whittington (41-59) suggested that strategy research, organisational learning and business practices have changed significantly over the previous few years and hence, strategy can be best understood by number of lenses. TEN SCHOOLS OF THOUGHT Henry Mintzberg has identified “ten schools of strategic thinking” that serve as useful guide for an organisation to develop strategy. These “ten schools of thought” have been described below. The Design School. The design school identify strategy as a conception procedure. According to the design school of thought, the significance of strategy creation lies in establishing relationship between organisations’ strengths along with weaknesses and their inner potential along with external possibilities. This school also reflects the role play by managerial values and social responsibility that acts as a vital process of strategic thinking. According to this school, the leaders or the managers in an organisation possess the duty for formulating an effective strategy. Furthermore, strategy must be customised, simple and clear in nature. In accordance with the theory of Mintzberg, while developing strategy, organisations must have constancy between the goals and policies. One example of design school of strategy thinking is IBM. In the year 1991 to 1993, IBM faced a loss of about US$ 16 billion. Thus, considering the urgent requirement of strategy in mitigating this adverse financial situation, the CEO of the company reviewed the strengths as well as the weaknesses of the organisation and developed a customer-oriented strategy (Applegate, Austin and Collins 1-31). Organisations that follow design school usually apply models such as SWOT analysis in order to design effective strategies. The Planning School. Planning school considers the strategy formulation as a formal procedure. The belief of this school lies in the separation between strategy preparation and strategy execution. Planning school agree with almost the premises of design school. According to planning school, strategy derive from organised and cognisant procedure of formal planning and decomposed into separate steps that are explained by specification and reinforced through various techniques. The managers or the leaders in an organisation take complete responsibility of the entire strategy formulation procedure. The planning school uses the idea of thinking and origination and accordingly establishes strategic objectives. Thus, it assists an organisation to distribute the resources according to the organisational requirements (Mintzberg 23-301). One key example of planning school is Infosys. In the year 2011, Infosys faced downturn in the market and in order to improve the position, it has crafted strategic plan by considering internal factors and external factors (Kumar and Nagarajan, ‘Infosys Limited: Is It Still The Indian IT Bellwether”). The Positioning School. The positioning school of strategic thinking is different from other schools. The positioning school of thought considers strategy formulation as an analytical procedure. According to this particular school of thought, there are only few major strategies that the organisations can adopt in the marketplace in order to stay profitable and competitive. The key thought of this school is to seek a position in the market, which can provide active support to the organisations in the form of diminishing stress resulting from existing and potential rivals. This school suggests that organisations should develop strategy for attaining superior competitive position in the business market wherein they operate. Accordingly, the procedure of crafting and executing strategy based on positioning school of thought goes through multiple different stages. The basic market positions are carefully chosen based on investigative calculation undertaken by experts who are of great significance to the procedure of strategy formulation (Mintzberg 23-301). One example of positioning school of strategy is Microsoft. One of its product namely Xbox 360 has successfully positioned itself in the gaming industry. Through pursuing competitive advantages in the form of high definition video graphics, online gaming, strong performance and more features among others, the product gained strong position irrespective of several competitors such as Sony and Nintendo. Organisations that follow this school of thought often develop strategy by applying different models such as BCG Matrix and Porters Generic strategy among others. The Entrepreneurial School. The entrepreneurial school of thought considers strategy formulation as a visionary process. According to this school of thought, strategy formulation is concentrated on leader’s vision with the intention of finding new opportunities. Furthermore, authority plays a central aspect in entrepreneurial school. Organisations that follow entrepreneurial school possess a visionary leader who frames strategy and also make changes on the basis of current business environment. Unlike other schools of thought, entrepreneurial school ties the strategy formulation procedure with intuition. This orientation shifts the concept of strategy creation from precise designing, planning and positioning activities to generation of indefinite vision. In such vision, the leaders possess tied control on the implementation of the framed strategy (Mintzberg 23-301). One key example of entrepreneurial school of strategy formulation was Apple Inc, which followed the strategies framed by the former co-founder of the organisation Steve Jobs. The Cognitive School. The cognitive school of thought observes strategy formulation as a mental procedure. Organisations that follow cognitive school often crafts their strategy by evaluating the pattern of customers’ psychological requirements. In other words, formulation strategy under this school concentrates on evaluating the basis of certain purchasing behaviours of the customers and therefore reacts to such situation. The idea of cognitive school is based on human psychology and consumes considerable amount of time in terms of vast research. The cognitive school believe that strategy emerge as ideas, plans, schemas and frames of realism (Mintzberg 23-301). The Learning School. The learning school of thought observes strategy formulation as an emergent learning procedure, wherein employees learn about market situation and deal with any kind of adverse condition. In comparison with other schools of thought, learning school provides the opportunity of formulating effective strategies to any organisational member. The role of leaders according to learning school is to manage the knowledge procedure for crafting an organisational strategy. The principles of this school is relative to positioning school, wherein strategies are developed through observing the past performance and accordingly develop plan for future. The idea of strategy formulation in learning school is based on education and quite time consuming in nature as organisations require learning from past mistakes and then developing strategy accordingly (Mintzberg 23-301). One key example of learning school of strategy formulation is Honda in the American market. The strategy of Honda in American market was to learn the market environment and business activities of other competitors. The company made several mistakes during the business and gained lesson, which was used for creation of strategy (Rumelt, ‘The Many Faces of Honda’). The learning school observes the business market as quite complex and permit strategies to be created when organisations adapt with the market situation and have clear plan and vision. According to learning school, the formulation and implementation procedure of strategy is closely entangled and frequently becomes vague. The Power School. The power school of thought denotes strategy formulation as a negotiation procedure. According to power school, there are two directions of power namely micro level power and macro level power. The micro level power observes strategy formulation as an inner procedure, which infers bargain, encouragement and conflict between different actors. On the other hand, macro level power observe strategy formulation as an object, which utilises the power over the business associates, joint ventures or other network based relationship in order to negotiate collective strategies according to organisational interests. This concept recommends that the power of an organisation can be used in order to formulate strategy. Such power comprises strong brand reputation as well as huge figure of capital among others. Basically, this strategy exerts certain type of power over the customers (Mintzberg 23-301). One key example of power school is Vedanta Resources. The organisation has used its network with political leaders in order to obtain the authority of performing mining operations (NDTV Convergence Limited, ‘Vedanta Cuts Political Donations in India by Half’). It used macro level power in order to develop strategy and to gain profitability in the market. The Cultural School. The cultural school of thought observes strategy formulation as a social procedure. According to this particular school of thought, organisational culture helps in formulating strategies in an effective manner. Organisations that follow cultural school of thought often involve several groups of people and departments in order to craft strategy. According to cultural school of thought, strategy formation is observed as fundamentally collective and cooperative procedure. Furthermore, it also considers strategy as a reflection of organisational culture. To a certain extent, cultural school of thought bears the resemblance with entrepreneurial school of thought in the sense that culture and vision drive organisations while creating strategies. It focuses on social procedure while developing strategy. The premise of culture school is that strategy formation is subjected to interactions with the society and the beliefs that are mutually shared by the organisational members (Mintzberg 23-301). One vital example of cultural school of strategy formation can be found in Toyota. In Toyota, the organisational culture plays a vital part in development of successful strategy. Toyota has developed its own way of producing vehicles, which is named as ‘Toyota Production System’. This reflects the strong corporate culture prevailing within this company. Such culture based strategy has assisted the organisation to become one of the leading automobile manufacturers in the world (Takeuchi, Osono and Shimizu, ‘The Contradictions That Drive Toyota’s Success’). The Environmental School. The environmental school of thought considers strategy formulation as a reactive procedure. According to environmental school of thought, strategy must be designed by adjusting with the external business environment. It considers evaluating external environment, which is quite vital for constant existence and survival for organisations. Furthermore, since environment is unpredictable at national or international level, organisations require to develop strategy, which is best matched towards the attainment of the desired business targets (Mintzberg 23-301). One key example of crafting strategy by environmental school of thought is Dell. During the economic recession, the consumer purchasing power and the demand of expensive computers had reduced considerably. Thus, by considering the adverse economic environment, Dell came up with low pricing strategy and manufactured inexpensive computers. Such products appealed several customers along with the rival organisations towards the development of low priced computer systems. The Configuration School. The configuration school of thought observes strategy formulation as a transformation process. It is worth mentioning that organisations following this particular school of strategic development always attempt to change the strategic patterns based on the nature of the business environment. Configuration school of thought considers strategy development as an innovative procedure and encourages organisations to keep up with the changes in the operational context. Thus, organisations need to be very flexible with respect to business operations in order to follow the configuration school of thought while crafting strategies (Mintzberg 23-301). One key example of configuration school of thought can be apparently observed in Google. Google has reacted with the current trends of consumer electronic products such as laptops, tablets and smartphones among others and thus decided to use diversification strategy by entering in the operating system segment. STRATEGY LENSES Strategy lenses are also regarded as crucial thought of strategy development that are created by Johnson, Scholes and Whittington (41-59). These four strategic lenses have been described below. Strategy as Design. According to design lens, the idea of strategy is crafted by the senior management through cautious as well as objective assessment and planning. It considers that strategy development is a logical procedure wherein the strengths and the limitations of an organisation are weighted prudently by logical and evaluative methods in order to establish clear strategic course. The perspective of design lens is quite similar to planning school and positioning school of thought as these schools consider strategic development to be is logical and organised procedure (Johnson, Scholes and Whittington 41-59). Strategy as Experience. The experience lens believe that strategy is developed as a consequence of organisational experience and cultural procedures. This lens considers that future strategies of organisations are heavily impacted by the experience of managers and other organisational members regarding the past strategies taken. According to experience lens, strategies are not driven by straightforward evaluation, rather to certain extent, the strategic activities are embedded in the organisational culture. While design lens consider strategy formulation as a rational procedure, experience lens consider that strategy can be crafted through bargaining and cooperation procedure. Experience lens resemble with cognitive and learning school because these school of thoughts also consider that strategies can be developed by learning and experience gathered through time (Johnson, Scholes and Whittington 41-59). Strategy as Ideas. The idea lens considers strategy development as innovative procedure and explains why certain organisations are creative and can keep up with the quick changing business environment. The idea lens focuses on the fact that organisations should encourage diversity in the culture, which helps to create new thoughts. Idea lens do not consider strategy as a planned activity, which usually emerge from the senior management, rather strategy should emerge within organisational members as they react to uncertain situations and changing business environment with diverse creativities. The idea lens is quite associated with cultural school of thoughts as both concentrate on the aspect of innovation, which can be gained through cultural diversity (Johnson, Scholes and Whittington 41-59). Strategy as Discourse. Discourse lens observe strategy formulation as making choices between diverse potentials and then stimulate self-assurance for the choices taken. The discourse lens concentrates on language, by which managers provide their individual feelings and obtain authority and legitimacy for carrying out a strategy (Johnson, Scholes and Whittington 41-59). CONCLUSION Based on the above discussion, it can be affirmed that the modern organisations are quite aware of developing strategies in order to attain success in the business markets wherein their conduct their respective operational functions. Specially mentioning, the formulation of strategy is quite similar to a long run assignment and it should be related with the respective business issues. It comprises certain vision, planning, analysis and learning among others. Strategy development also signifies transformation and social interface. In today’s contemporary business environment, proper formulation of strategy is essential for gaining success in the market. However, the effectiveness of strategy depends on the thoughts or the basis by which the strategy is formulated. The ten school and strategic lenses, both provide significant insights regarding the way strategies should be formulated. Nevertheless, it is worth mentioning that organisations must adjust themselves while selecting any approach of strategy formulation. Furthermore, concerning the challenges of 21st century business environment, ten schools of thought provides extensive view of strategic formulation in comparison with strategy lenses. These are quite useful when the development of ideal strategies come into play based on internal and external environment of business. Thus, it can be concluded that ten schools are more useful for organisations to develop strategies in today’s modern day context. Works Cited Applegate, Lynda M., Robert Austin and Elizabeth Collins. “IBMs Decade of Transformation: Turnaround to Growth.” Harvard Business School (2012) 1-31. Print. Johnson, Gerry, Kevan Scholes and Richard Whittington. Exploring Corporate Strategy: Text and Cases. United Kingdom: Pearson Education Limited, 2005. Print. ‘Basic Strategy Concepts’. Jones and Bartlett Publishers, n.d. Web. 13 Apr. 2014. Kumar, Arun and Meenakshi Nagarajan. Infosys Limited: Is It Still the Indian IT Bellwether? Emerald Emerging Markets Case Studies, 2013. Web. 13 Apr. 2014. Levy, David L. Mats Alvesson and Hugh Willmott. Studying Management Critically. Great Britain: SAGE, 2003. Print. Lowstedt, Martin. Exploring the Concept of Strategy Using a Practice Lens: The Case of A Large Construction Company. Chalmers University of Technology, 2010. Web. 13 Apr. 2014. Mitnzberg, Henry. Strategy Safari: A Guided Tour through the Wilds of Strategic Management. United States: The Free Press. ‘Vedanta Cuts Political Donations in India by Half’. NDTV Convergence Limited, 2014. Web. 13 Apr. 2014. Rumelt, Richard P. The Many Faces of Honda. UCLA Anderson School of Management, 1995. Web. 13 Apr. 2014. Strickland and Alonzo J. Thompson. Strategic Management. United States: McGraw-Hill Education. Print. Takeuchi, Hirotaka, Emi Osono, and Norihiko Shimizu. The Contradictions That Drive Toyota’s Success. Harvard Business review, 2008. Web. 13 Apr. 2014. Read More