Strategic Planning Schools of Thought on Design, Planning and Positioning
Today's an organization want to achieve success, they should consider all aspects for reaching the desired ends and how to evaluate and avoid difficulties in order to support plan successful strategies. Strategies are actual important in most organizations, any decisions make today can a positive or negative impact on future results. Mintzberg, Ahlstrand and Lampel (2009) discuss various approaches to strategic planning and they identified ten different schools of thought. This paper will concentrate on three schools, including design, planning and positioning schools. Furthermore, I will clarify some points in others schools of thought by particular looking at the overall, key issues and assumptions of this theory.
On the word of Mintzberg, Ahlstrand, and Lampel (2009), they suggest that there are a lot of influential factors affect strategy. The schools will help organization to evaluate their macro and micro dynamics of a company. Three schools of thought which is design, planning and positioning schools of thought are prescriptive in nature. Those schools discuss how a strategy should be formulated. Accordingly, organization based on current situation and its environment to identify directions actions. The next six schools are concerned with a specific aspect of strategy formation rather than strategic implementation such as entrepreneurial, cognitive, learning, power, cultural, and environmental. It may be characterized as descriptive, emergent and subjective. Last but not least, the configuration school integrates the different elements of strategy formation from all the previous schools mentioned.
According to the design school, the value of this strategy formation is establishing a fit between an organization's strengths and weakness and its internal potential and external possibilities. This school also considers the role played by managerial values and social responsibility as important in the process of strategy making (Shekhar, 2009). The leader has a responsibility for a strategy formation. Besides, the strategy should be individualized, simple and explicit. On the word of Mintzberg's framework, a strategy formulated must be consistency between its goals and policies.
In the case of IBM Company, after reporting a net loss of US$16 billion from 1991-1993, Louis Gerstner becomes a new CEO (1993-2002), he saw that IBM urgently needed a new strategy to recovery a profit. New leadership does bring new strategies for a company. By spending several months reviewing the situation and talking with IBM customers, he wanted to develop a customer driven strategy, focus on the need of customers, integrated technology solution in one company and build a new organization culture. Finally the results of IBM's new strategy have been successful.
On the other hand, the strategy must be adaptive to the changes in the environment of organization, maintain competitive and should be feasible. The model places primary emphasis on the appraisals of the external situations such as economic, technology or political that affect an organization and internal situations. Based on evaluation and research, an organization should be discovery threats and opportunities in the environment. In contrast, find out the strengths and weaknesses of the organizations. It relates SWOT model.
For example Walkman - a famous brand of Sony, in spite of its earlier success, but now no longer popular because less design and functions compare with other brands such as Apple, Creative. Besides, a company delays in introducing new products. Thus the company could not adapt quickly to the fast changing external environment characterized by a rapid change in technology and customer needs.
Planning school is a member of the prescriptive schools and a strategy formulation also mention as a formal process. The principal of this school has a separation between strategy formulation and strategy implementation. The planning school agree with almost the premises in the design school. In this school, strategy results from a controlled, conscious process of formal planning, decomposed into distinct steps, each delineated by checklist and supported by techniques (Shekhar, 2009). The leader will take the responsibility of the whole process based on the formulation. Therefore the strategy may be inflexible and can lead to conflicts between the leader and stakeholders or employees in organization. The school looks closely at the SWOT model and also prioritises it strategies by hierarchy. The long-term strategies are the ones, which are at highest order, followed by the medium, and then by the short-term plans. It also requires careful consideration about the scheduling in regards to time management, and efficiency. By applying powerful analytic tools such as rigorous strategic planning methodologies, scenario analysis, managers can forecast the future and can be accurately enough to choose a suitable strategic direction.
For example, within urban regeneration, government aspire to redevelop run down areas. The objective is to redevelop the area, to a proficient standard. There is certain objective, which they need to consider such as the time frame, where the regeneration wants to take place, how much is there budget. These factors and many more need to be organised in order to produce a structured set of objectives. Following this each process can be broken down in to various sub sections for example, an area for budgeting/finance, labour and material. The architecture of this can be broken down into smaller segments for example the budget for each regenerated cost of building, wages, transportation cost which leads to specialised segmented area, and hence could be more productive.
However, if an organisation uses this strategy, there are many opportunities and other possibilities will lose. This is because only the planners implement the ideas and strategies, the stakeholders will not have much choice for the change, therefore they will lose more opportunities.
Mintzberg (2009) argues that planning does not see every eventuality. However, if an organization has relied on its strategy to guide it through change, it may depend on the prepared solutions. This can result in lack of creative thinking and difficulties in solving the problems of the organization.
The positioning school is different from other schools, it also known as an analytical process. According to the positioning school, in contrast with the design school and planning school, there are only a few key strategies or positions in the market place, which is economic and competitive, while there are no limits to strategies in other schools. The key concept of this school is adaptable to find a position that it thinks best withstand the pressure from the existing as well as potential competitors (Minztberg et al, 2009). Positioning school is focus on the selection of position in the market.
The process of formulating and implementing strategies goes through several different phases. The generic positions are selected based upon analytical calculations carried out by the analysts who are of vital importance to the process of strategy construction. The analysts pass the results of their calculations onto the respective managers who then officially control any further choices made and a strategy is then articulated and implemented.
For example, Microsoft began by launching Xbox 360 into the market in 2001. A company therefore need to have competitive advantage in its new machine to persuade customers of rival products to change. Xbox 360 was trying to gain market share in the computer game market than its main rivals, Sony and Nintendo. By offering the best video graphics, plays game on-line, more accessories and superior performance. Microsoft has been success into a new position, evidently they making a lot profit on Xbox it has become a popular gaming console today.
Strategies that follow this school are supported by the development of several different models. Firstly, the Boston Consulting Group (BCG) matrix that concentrate the market position of different products. Secondly, the experience curve and the Profit Impact of Market Strategies model which identifies the number of strategy variables. There is also Porter's model of Competitive Advantage (1985) which highlights the five different forces in an organisation's environment which influence competition. However, Porter's five forces model is only suitable in a stable market. This would be useless to a positioning analyst working in an unstable industry as it would be impossible to tell who has what market share.
In his 1985 book, Porter introduced a framework he called the value chain. It suggests that a firm can be disaggregated into primary and support activities. Primary activities are directly involved in the flow of product to customer. Support activities exist to support primary activities. Firms achieve profit margins based on how the value chain is managed. The value chain helps to identify sources of strategic advantage and an organization achieve profit based on how the value chain is managed.
Strategies developed under this school are generic, specifically common, identifiable positions in the marketplace. In addition, when compared with other schools, it is less highlight on political effects, such as internal and external on the strategy formation in an organization. In addition, this school closely relates to the learning school, it takes into consideration past events before implementing strategy.
Next, this paper will talk about learning school. The strategy as a learning process, both individuals and collectives learn about the situation and dealing with various kinds of situations. In contrast with planning school, this school gives anybody within the organisation the ability to develop organisational strategies. The role of the leader in this case is to manage the process as a whole in order to create a new strategy. The premises of this school are relative to positioning school, the strategies of this school are developed through looking at the past, and then developing plans for the future. Finally we will consider perspectives and guiding the overall strategies for the organisation.
An example of how the learning school is imperative is in the case of Honda in the US, as they tried to break into the American market. Honda's strategy was to learn how business was conducted in America before implementing a strategy. They made mistakes in the process but learnt from them. The learning school sees the world as too complex to allow strategies to be developed all at once as clear plans or visions. Hence strategies must emerge in small steps, as an organization adapts or learns.
Last but not least, the formulation and implementation processes involved are very closely intertwined and often become indistinguishable.
In the entrepreneurial school, the strategy formation process is focused on the leader and based on strategic vision. In addition, the power is centralized in the hands of the leader and the strategy is searching for new opportunities.
As Shekhar (2009) point out, some deficiencies include dependence on single individual and narrow focus of strategic management, as power is vested with a single individual who might be enmeshed in operating details and may lose focus of ground realities. Further, the vision formulation happens in the start-up firms. In contrast, large firms rarely re-evaluate or reframe their vision (McLarney & Shelley 1991). For example the success of eBay has come from its implementation if an initial ideal. By developing a community of customers, integrate suppliers and customers or among them to sharing their products and services for the whole eBay community.
According to these hypotheses of environment school, to continue to existent, an organization need respond to a change in the environment. A change normally takes place either in a certain aspect of the environment such as technology, economy, political or other causes. In addition, the environment is so uncertain, particularly at a global level, that it may be impossible to plan a long term strategy. Therefore an organizations need to develop strategies that are best suited to their strengths and weaknesses in relation to the environment in which they operate (Lynch 2009, p.8). For example Google faced a highly competitive environment when they launch a research engine, the competitor such as Yahoo, Ask. The changing of economic growth in many markets had affected the customers' decision to find out a new products and services. Therefore a company need to cope with those changes. In fact, the organization may be seeking a new value and opportunities in order to create more operating effectively, but a fast changing environment will affect a current or future strategy. Therefore, strategies have to be devised to cope with uncertain environment. On the other hand, this school also emphasis on the role of leadership in an organization and organization's structure in the process of strategy formation.
From this paper, we can see the important of implementing strategic management of an organisation to gain competitive advantage. There are no single strategy will apply in all cases. It may be depend on organization culture, resources, environment, vision, mission, objective, leader and other factors. Applying Mintzberg's schools could help an organization about evaluation, development, implement and transformation on strategies. Using the schools, organization can be able to identify their objectives, its strengths and weakness, to help expand on potential, developing on their opportunities and strengths. There is not one strategy perfect, the choice of strategy also depends on the circumstances. Any strategy should consolidate and develop, based on key elements of several of the schools and adapting these to meet their specific needs and requirements. Vision and leadership are also play an important role in an organization, to maintain the dynamism for innovation and keeping ahead of the market. Having successful achieving these goals, it will transform and give an organisation higher strategic competence.
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