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Strategy means different thing to different people. Almost every management action or decision can be termed "Strategy" (Choo,1992). As Whittington candidly admitted that despite taught strategy for over 15 years, he still knows very little how to do strategizing (Chia, 2004). There is no doubt that the concept of strategy is driven by the diversity and complexity of individual corporate strategic issues that contemporary managers have to deal with. (Choo K. L)
Different scholars have got different opinions in this field. Some states that it is a rational decision making process by which an organisation can utilize their resources to optimum for the opportunities available in the market. Other states that it is the resources of the organisation not the environment which decides the foundation of the strategy. Although they look the strategy from different point of view, but their common intention is to optimize the use of available resources for continuous business development of the organisation (Feurer R. and Chaharbaghi K.).
There are many "schools of thoughts" on strategy, we have chosen few schools of thought for analysis.
The Environmental School sees strategy formation as a reactive process. It is response to the challenges imposed by the external environment. This school grew up with a so called "Contingency Theory". This theory states that there is no best way to organise a corporation, to lead a company or to make decision. It shall depend on various external and internal factors such as size of the organisation, how the firm adapts itself to its environment, availability of the resources to meet the market demand, Manager's view for their employees, Technologies being used, etc. (Mintzberg H., 1998)
In this school of thought the environment becomes the central actor in the strategy making process. Management cannot take any firm decision of strategy to formalise their internal structure for a longer period. It needs a team of experts to analyze the external environment time to time and ensure that the strategy in place is effective. They should always wait and watch the external environment and take immediate action if the strategy needs to be modified.
This strategy is more practical for long term when the external environment is stable and very useful for short term when the external factor is continuously changing. Specially in today's world when the market is continuously changing which makes it very hard to sustain in this competitive market without the strategy of environmental school of thought.
The culture has its own affects or its essence in the formation of a strategy. Culture was discovered by Japanese corporation in 1980's.
Culture in context to an organization is collective process of knowing, sharing beliefs, perception, reasoning, judgement including awareness and proper interpretation. The culture is deep rooted when interpretation and activities are held together. A strong and rice culture in organization is described to Ideology for setting a strong set of beliefs.
Premises of Cultural School
Strategy formation is a process of social interaction, based on the beliefs and understandings shared by the members of an organization
An individual acquires these beliefs through a process of acculturation, or socialization, which is largely tacit and nonverbal.
The members of an organization can only partially describe the beliefs that underpin their culture
As a result, strategy takes the form of perspective above all, more than positions, rooted in collective intentions and reflected in patterns by which the deeply embedded resources, of the organization are protected and used for competitive advantage
Culture does not encourage strategic change; at best, they tend to promote shifts in positions.
Concept of Culture & Strategy
Culture influences the decision making style process on an organization. Culture acts as a lens which in turn establishes people's decision premises. Rich Culture organization believes in consistency hence may discard strategic change.
In overcoming the resistance to strategic change Bjorkman has stated that radical change in strategy have to be based on fundamental change in culture.
Unfreezing of current belief systems
Experimentation and re-formulation
In today's global world with global business area high possibility of cultural clash is expected which influence the strategy and strategic change.
Critique of the Cultural School
Cultural school should be faulted for conceptual vagueness. It can discourage necessary change. It favours the management of consistency, of staying on track.
The Planning School
This strategy formation as a formal process it has originated from the same time of design school and pre dominated by the mid 1970 and lost the strength in 1980. The basic ideas were taken from the SWOT model and cascading properly for the plane of action which shows that most of the basic formation techniques were followed from the design school. These strategies gives clear direction and enable systematic step by step of planning of recourses allocation. The strength and weakness were analyzed by internal auditing. "Top management has prepared an explicit statement of corporate strategy and goals" (1977:31).Group thinking of top management decision may lead to failure if the one of the group member given wrong direction. Strategic Planners have to prepare their plan according to the future reaction of the markets; an inability to predict means an inability to plan. Thus "predict and prepare" (Ackoff, 1983:59) became the motto of this school of thought.
The planning school can be summarized as its strategies gives a resultant of a controlled and continues process of planning through different steps which further is nominated with checklist and details are supported by technical background. The chief executive holds the responsibility
of the complete process in principle but the detailed working lies with supporting staff planners who are in practice. Hence strategies look in this process as if made to be implemented with close lookout in the process of the objective with detailed programming with competitive budgets and working plans for its execution. Also the planning school some or the way dominates the design school as it reflects most assumptions but in a formal process, with details in further steps. Due to which the positions in the industry has changed of senior managers to staff planners which further become the key players of the company.
Since we saw that the industry has made changes in positions, but in practical companies making changes and using of strategic planning or annual strategic planning process, which does not lead to meet the challenges and gets a very little value. Hence the process to meet the new challenges in the companies should be redesigned to support the real - time strategy which will further make to encourage for creativity.
4. The Design School
There have been many processes in strategy formation. We had chosen few schools of thoughts for our analysis. The strategy formation is the process of conception according to the Design School. The basic design school frame works consists of two important aspects one is the managerial value and the second one is the social responsibilities according to Andrews. Establish to fit for the purpose is the motto of the design school. The key success factor of the strategy is to fit between internal capabilities and external possibilities.
According to Trego and Tobia Keep strategies clear, simple and specific (Trego and Tobia, 1990:p16-17).This cannot be possible in the conglomerate construction environment because strategies have been formulated on the controlled process of the human thinking. The core technique has been followed by most of the strategist is SWOT Strength, Weakness, Opportunities and Threat.
'Simplicity is the essence of good art'; According to Andrews. Simplicity is not important aspects of forming the strategic process, the important aspects to achieve the organizations goals. The basic steps to assess the strength and weakness is the structured process of careful consideration of checklist formulated by relevant source to make sure that the organization know the strength and weakness. 'As the left foot follows the right' by Chandler (1962), that structure follows strategy and decides what is to be controlled and how to be monitored. Strategy formation is the integrated system. The design school is focused on process but not concentrating on products but it was interlinked indirectly so that the strategy require expertise designer to design.
Strategy formation is the process of conception by applying simple plan in to action according to internal capabilities and external possibilities. Design school framework is SWOT technique which would fit for the stable market condition. The motto of the design school strategy is "Establish to fit".
5. POSITIONING SCHOOL
Somewhere around 1980's the focus of the strategy shifted from the planning towards the management process (Feurer, R., Chaharbaghi, K., 1997), which can be interpreted as the analytical process. The basic approach of this school of thought is, there is no need to take any risk to venture in the market, the market should be studied and do to the necessary homework. (Porter M.E., 1980) .Mintzberg further elaborated a systematic mathematical research should be done to establish a relationship between external conditions and internal strategies of the organization (Mintzberg H., 1998).
As per Ansoff (Ansoff, H.I., 1965) the business opportunities need to be matched with available resources of organization and in turn demonstrating the usefulness of the strategic plans.
There are a number of analysis tool for example Porter model which provided a insight to the different competitive environment of the industry, which was based on the five competitive forces which establishes the allure of any given industry (Porter M.E., 1980). The Boston Consulting group came up with there growth stable matrix or Boston Box which was widely used by the American companies in the early eighties for their strategy and business expansions (Henderson, B.D., 1979).
This school of thought was very advantageous to the strategy consultant as they arrive with no particular knowledge of the company, go thought the database, chart down a certain generic strategies, sum it up and than leave (Mintzberg H., 1998), which shows that the strategy is more biased towards the economic data than the politics and does not take into consideration the current market scenario. A review of the technological capabilities should be included in the assessment of the organization (Harrison F.E., Pelletier,M., 1998).This type of strategy is more biased towards the traditionally large organizations.
The drawback in this is that there is no initiative to take risk and enter market, but is the other way round, i.e. stay home and calculate (Rumelt, R.P., 1974). It does not consider the prevailing culture in the organization and external political environment.
There are no forces in the organization itself which interact among themselves to work for the dynamic growth of the organization which is major constraint in these thought.
6. The Power School
Strategy formation of power school is through the process of negotiation between power holders within the company, and /or between the company and the external stake holders. Thus politics associated with the exploitation of power in other than purely economic ways. This may clearly include secret moves to overthrow competition, but it also includes cooperative arrangements designed for the same effect such as alliances.
There are two branches of power schools;
Micro power deals with politics within the organizations such as political, process of bargaining, process of convincing and confrontation among inside individuals in the form of political games. E.g. the conflicts that resolves around the strip of a division.
Macro power deals with the use of power by the organization such as the things with distinct existence that uses its power over others and among its partners in alliances, joint ventures and other networks relationships to negotiate "collective" strategies in its interests. e.g.; an organization on the verge of bankruptcy that pressures a government for loan guarantees.
The advantages or contributions of power schools are;
It can help to let the strongest people to survive in the corporate world.
It helps to make sure all the aspects of an issue are fully discussed.
It helps to break the obstacles for any changes.
Even after making a decision, it helps to reduce its resistance.
It is useful to understand the strategic alliances, joint ventures and helps to do the stake holder analysis.
The disadvantages or limitations of power schools are;
It tends to the rather limited view that all strategy can be viewed as a power of struggle or a power exchange.
As politics is having disagreement; it uses a lot of energy which causes wastages and misrepresentation and it is costly too.
It can leads to moral or mental lapse.
It can lead to having no strategy or just to do some tactical manipulation.
It exaggerates the role of power in the formation of strategy.
The above schools of thought suggest that strategy as practice in built environment is complex and vast decision making process and cannot be understood fully from a single positive perspective. There is no universal school of thought which can be utilized to manage an organisation in all the situations. Each school has got their own advantages and disadvantages. Strategising is not just setting long term goals or vision, building competencies and capabilities defined by the different schools. The selection of the school of thought shall depend upon the size of the organisation, resources available with them, Owners/funders, Managers, Employees, Unions, Partners, Customers/Users, Suppliers, investors, Government and regulators, Competitors and the opportunities available in the market, etc. Mintzberg H. (1998)