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The Importance Of Organizational Culture To Strategic Management Management Essay

This academic essay is regarding to the importance of organizational culture to an understanding of strategic management. Organizational culture is one of the important parts of the strategic thinking and it can impact on company’s employees, customers, suppliers and other different targets. The owner of the company can create their own strategy on the alignment of unique organizational culture with a competitive space. It also involves how organizational culture affects its strategic decision, options and actions. The purpose of this essay is to explore the relationship between organizational culture and business strategy, and use unique organizational culture to create powerful strategies and become its competitive advantages in current competitive environment, then make organizations and companies successful.

‘Culture of an organization refers to the unique configuration of norms, beliefs, ways of behaving and so on that characterize the manner in which groups and individuals combine to get things done’ (Eldridge and Crombie, 1974). It also can define that the set of important assumptions that members of an organization share in common. There is other definition of the organizational culture involves assumptions, adaptations, perceptions and learning. Examples such as Walt Disney’s or Nokia’s, they have three layers. First layer includes artifacts and creations, such as annual report, a newsletter, wall dividers between workers and furnishings. Second layer includes values, or the things that are important to people. The third layer is the basic assumptions that tell individuals how to perceive, think about and feel about work, performance goals, human relationships and the performance of colleagues. This becomes the three layer model of organizational culture.

In nowadays world-wide, every organization has its own culture. The organizational culture just like an individual’s personality, can influence opinions, actions and strategic choice within the firm (Pears and Robinson, 1997).

In recent years, the concept of strategic management has increased attention scholars and practitioners. The taken-for-granted nature of culture is what makes it centrally important in relation to strategy and the management of strategy. There are two main reasons for this. First is managing culture. Because it is difficult to observe, identify and control that which is taken for granted, it is difficult to manage. And the second reason is the culture as a driver of strategy (Brown, 1998). The culture and strategy of the organization is considered critical because in the world-wide, the wide range of competitive challenges that currently face organizations. Having the unique and high quality organizational culture can lead the corporation making suitable strategies, then establish their own competitive advantages and get success. There are few points to prove that the organizational culture is important to the strategic management.

Organizational culture is very impacting. It can affect the success or failure of a company. One strong organizational culture can become one of the most sustainable competitive advantages of a company or organization, and this is difficult to copy. There is the diagram (1) shows that the culture’s influence on strategy development. Firstly, there must have cultures in the organization, and this type of culture can lead to the development of strategy. Next, the thoughts or ideas can become implementations for the organization. Finally, we can see the organization’s performance or results from strategies (Johnson and Scholes, 2008). There is also one example can explain why the organizational culture is important can influent strategies. The Southwest Airlines is an organization where the links between strategy and its execution are related to its culture. The culture is strong, because there is consistency in what people see, hear and feel about it, and employees are clear how things are done and are willing to help the airline achieve its goals. Therefore, the strong organizational culture of the Southwest Airlines lead to stretching and addresses short-term and long-term goals for the company, and clearly articulated. In addition, the organizational culture of the Southwest Airlines is relaxed. The company encourages informality and wants employees to have fun with their jobs. The Southwest Airlines believes that employees are very valued, with CEO acknowledging births, marriage and death by notes and cards. Staffs are encouraged to pitch in and help out, especially at check-in, giving Southwest turnaround times less than half the industry average (Southwest Airlines, 2012). Therefore, according to the organizational culture of the Southwest Airlines, it can seen easily that the positive organizational culture is now a prerequisite for success rather than a competitive advantage, such as hiring top-quality employees and unique products and service provide for customers all are crucial for the strategy management of the company or organization.

The good organizational culture is one of the important roles for strategies in organization or company, and it can affect different targets of corporation. For instance, if there is one group has very good quality customer service and is important in the culture, then individuals are willing to adopt this behavior. If, this culture in the group is adhering to the set of procedures in dealing with customers is the norm, therefore, this type of behavior would be expected, recognized and rewarded (Gibson and Ivancevich, 2003).

Firstly, organizational culture can affect employees and employees’ performance of the company. Employees are one of the most important determinants and leading factors that determine the success of an organization in a competitive environment. This is especially true for service organizations that rely heavily on their good behavioral employees to provide friendly and courteous service to their customers in this competitive environment. For instance, Starbucks is more than just coffee. They are in the people business. The success of the Starbucks is depending on the people they hired, retain and develop. At Starbucks there is a little green booklet, called The Green Apron Book, which are the guiding principles for all the people who work at the company. It is a simple book, but no one ever complaints about its simplicity. The ten guiding principles include: ‘know who you are, know why you’re here, think independently, build trust, listen for the truth, be accountable, take action, face challenge, practice leadership and dare to dream’. It is easily can know they are the roots of Starbucks organizational culture through these guiding principles, and make every employees in the Starbucks can know clearly about company’s mission and vision, then show their best performance to customers. Therefore, the employees’ turnover of Starbucks includes 20% management and 80% lower tier. That means the Starbucks has its turnover rate of 120% lower than the average turnover and employees of Starbucks have 82% of satisfaction rate (Behar and Goldstein, 2007).

Secondly, the organizational culture can impact on customers or companies clients. For this point, organizational culture can affects customers or clients’ attitude, behaviours and even choices. Any companies’ culture is connected very close with customers and clients of the company. From this point, the service culture is important part of the whole organization. For example, if you decide to stay at the Four Seasons Hotel, you will feel what an incredible experience is. Once you walk onto the hotel, you can not help but notice that every single person working there --- the front deck staffs, the receptionists, the concierge, the restaurant staff, everybody works in the Four Seasons, seems to excel at service. It becomes a more remarkable experience for guests. The reason why the Four Seasons got such excellent impact on guests and clients is the Four Seasons learn the Golden Rule from the Sharp company’s organizational culture and of its future. This rule interacts every employee in the Four Seasons provides excellence service experience for customers and build customer loyalty. Therefore, the Four Season was the first company to put shampoo in bathrooms, to offer 24 hours room service, and to create floors where smoking was not permitted (Parker, 2012). For this kind of loyalty and commitment to the Four Seasons brand, and to its world –renowned service culture, help the Four Seasons established the very strong customer loyalty and attract customers who come from all over the world to feel and experience the service culture in the Four Seasons worldwide. The diagram (2) shows that the total revenues that the Four Seasons Hotel in Thailand achieved from 2009 to 2011. The statistic presents that the total revenues increased every year. This prove that customers willing to choose luxury hotels and resorts to stay, they more focus on how worth after they pay the money.

Thirdly, suppliers and partners are important roles that organizational culture can impact on. Dell Computer is the good example to explain this point. Michael Dell was the founder who founded Dell Computer with a simple vision and business concept. Dell’s “winning” culture is emphasized cost efficiency and competitiveness and lead the Dell got success (Thompson and Strickland, 2005). Dell management believed it had the industry’s most efficient business model. The company’s strategy was built around a number of core elements: build-to-order manufacturing, partnerships with suppliers. Because Michael Dell believed that it made much better sense for Dell Computer to partner with reputable suppliers of Personal Computer parts and components than to integrate backward and get into parts and components manufacturing on its own. The wining culture make Dell always picked the best one or two as suppliers and then stuck with them as long as they maintained their leadership in technology, performance, quality and cost. Management also believes that long-term partnership can benefit Dell company, and can reputable and benefit suppliers as well. For instance, Dell’s long run commitment to its suppliers made it feasible for suppliers to locate their plants or distribution centers within few miles of Dell. It can short distance and the delivery time between Dell company and suppliers, then can save transportation costs and other fees. It is a win-win situation. Therefore, suppliers of Dell Company are not too much, but it makes Dell successful.

Another important role is the corporate social responsibilities that organizational culture can impact on. Corporate social responsibility is part of organizational culture and a value in the organizational culture. Different organizational cultures have framed different definitions about the corporate social responsibilities. For example, Singapore airlines took place over seven years and examined the company’s strategy and competitiveness, in particular its organizational culture that support the delivery of excellent service, achieve sustainable competitive advantages. The strong corporate culture of Singapore Airlines also can strongly affect their corporate social responsibilities. Singapore Airlines believes that supporting the corporate social responsibility can benefit the communities that Singapore Airlines serve throughout the world. It is an essential part of being a good corporate citizen. Such as Singapore Airlines contributes to numerous educational programs and events; focusing on national events, arts and heritage activities; in addition, reduce carbon footprint from airplanes is the important part of the responsibility that Singapore Airlines is able to take. That’s why the Singapore Airlines can get high level awards each year (Singapore Airlines, 2012).

According to these four examples above, it can clearly shows that there are varieties of effects on organizational culture. The effects of organizational culture depend on whether the company has a strong culture or a weak culture. One the one hand, one strong organizational culture can focus on the environment it creates for employees. Because this can encourage and develop a very efficient and strategic competitive advantage for a company. A strong organizational culture can focus on establishing and sustaining the management of company, and make employees believe that they are one the very crucial parts of the company. For example, Japanese firms such as Toyota is one of the organizations has very strong and influential cultures. One the other hand, a company’s culture can be weak. In weak culture companies, there is little cohesion and glue across organization units and organization members typically have no deeply felt sense of corporate identity. Although they may have bonds of identification and loyalty toward their department, their colleagues, their union, or their boss. The principles also can be unclearly, it can cause the bad effects on employees of the company, and all staffs of the company can not go along with the same direction.

Organizational culture is the common rules, the common beliefs and sharing the same aspiration that fostered by the organization employees. It has huge exciting force, spirit charisma and energy allure, and it lead all employees go along with the same direction in the company. The organizational culture is the motive power of the organizational sustainable strategic development. Compare with the cultural organization, the economic type organization only chase the economic goals, but cultural organization can develop for the life of the organization and obtain the sustainable competitive advantages (Davis, 1984) Therefore, the strong organizational culture can strongly affect company’s strategic decision-making, strategic options and the action of strategies. And how organizational culture can promote better strategies execution with those decision-making, options and actions of the company?

Decision making is one of the important parts of the organizational management. During the management processes, must make different decision-making continually. In addition, the quality of decision-making is closely connected with management performance and results, especially the strategic decision-making. Organizational culture can affect every decision-making process. For example, to different internal and external environment views can affect organizational employees’ acknowledge to the problem. The same problem can be ignored in one of the organizational cultures, but the serious of problem can be focused on in the other type of organizational culture. So, when believes of the serious problems that do not at the same time, it will affect the form of decision making and process, also affect the approaches of decision-making. If most members’ attitudes are negative, then the mode of decision-making is able to become the bad decision-making mode (Breen, 1973).

The good organizational culture not only can help the company make suitable and good decision, but also can form a good leadership to lead the development of the company. In the global business world, organizations face a growing need to understand the leadership as it is exercised in different cultures (Jeremy, 2012). Nowadays, the business is global, and each business organization has a culture formed by the business organization. And how cultures can come into play and affect the leadership of the organization, there is one case easily can imagine. There is one British manager who was trained at an American business school and is asked to run the Argentine manufacturing facility of a Japanese firm. So what leadership should this British manager works to develop. American? British? Japanese? Or Agentine? From this case, this manager should understand the culture within which he/she works and how his/her employees perceive leadership. And this manager also needs to develop bespoke leadership attributes, tailored to the unique culture within which he or she works.

Therefore, different organizational cultural groups may vary in their conceptions of the most important characteristics of charismatic or transformational leaderships. In some cultures, one might need to take strong and decisive actions in order to be seen as a leader. That the leadership behaviours and attributes that are reported to be effective or ineffective across cultures, especially where they are related to charismatic or transformational leadership. For instance, there are lots of specialties related to charisma as contributing to outstanding leadership. There is concern in some cultures that people tend to lose their balance and perspective as a result of an excessive focus on achievement created by charismatic leaders.

In conclusion, organizational culture is important for the strategic management. And for the organization, having one suitable and strong organizational culture is very crucial. It is the directions and competitive advantages for the strategic management. In addition, creating a strong fit between strategy and culture is necessary. It is the strategy maker’s responsibility to select a strategy compatible with the “sacred” or unchangeable parts of prevailing organizational culture. It is also the strategy implementer’s task, once strategy is chosen, to change whatever facets of the organizational culture hinder effective execution. Therefore, it is very important to improve company’s organizational culture (Thompson and Strickland, 2001).

Firstly, the company should change a problem culture for their strategic management. The important step is to diagnose which facets of the present culture are strategy-supportive and which are not. Then, managers have to talk openly and forthrightly to all concerned about those aspects of the culture that have to be changed. Make sure everyone will understand are intended to establish a new culture more in tune with the strategy. For instance, when the old hotel need renovate to one completely new and luxury hotel, all physical equipments and management structures, vision and mission will be changed. For this period, managers should use correct attitudes and communication skills to help employees through the change of the hotel. Secondly, the company should symbolic culture-changing actions. The best companies and the best executives expertly use symbols, role models, ceremonial occasions and group gatherings to tighten the strategy-culture fit. For example, low-cost leaders like Wal-Mart and Nucor are renowned for their spartan facilities, executive frugality, intolerance of waste and control of costs. Finally, the company should build ethic and spirit of high performance into the organizational culture. Because a strong organizational culture founded on ethical business principles and moral values can become a vital driving force behind continued strategic success. And build a spirit of high performance into the culture can make culture become results-oriented, and it uses people-management practices that inspire workers to do their best.

Trough the analysis, it is easily can see that the organizational culture is the symbol of the business company, and it plays a role of driver to lead the company become unique and form competitive advantages in this such competitive business environment as well. In order to develop, improve even protect this competitive advantage of the company, each role in the organization should try best to play, whoever managers, executives, captains and staffs. Developing and improving one strong organizational culture in order to assist strategic management and make organization successful.

Appendix

Appendix (1)

Culture’s influence on strategy development

Corporate Performance

Implementation

Development of strategy

Culture

If unsatisfactory

Step 1

Tighter Control

Step 2

Reconstruct or develop new strategy

Step 3

Abandon paradigm and adopt new one

Source: (Managerial Recipes for Strategic Success, 1979)

Appendix (2)

Source: (Four Seasons Thailand Annual Report, 2011)

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