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It is an incomplete story when strategy is only seen as the outcome of a rational planning process usually prompted by top management, Hill et al (2004). The purpose of this assignment is therefore to validate the merits of the above statement drawing from existing concepts, theories and real world examples that argue in support of or against it.
In Hill, Jones and Galvin (2004), traditional definitions stress that an organisation's strategy is the outcome of a rational planning process. It is essential to set the tone of this assignment by providing some brief descriptions of extant rational model.
2.0 Defining Strategy
Everyone seems to recognize how important strategy is to a company. Yet there is considerable debate on just what strategy is and how to create it. Few examples of previous definitions of strategy are provided as follows:
Jablonsky (1991) defined strategy as, "â€¦a rational process in an instrumental sense, since the procedure involves the calculated relationship of ends and means. That calculation, in turn, includes the search for some measure of commensurability between means and ends. When that does not occur, strategists normally chose one, or a combination, of three options: increase the means, adjust the strategic concept, or change the ends."
Johnson and Scholes (2012) also defined strategy as "â€¦ the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations"
These definitions view strategy as a process that galvanizes major change so that an organization can achieve outstanding results. For an organization, strategy is about understanding what it does, looking out over the long-term future to determine what it wants to become, and most importantly focusing on how it plans to get there.
For example, consider Skywalk (one of the domestic airlines in Nigeria); its primary business is to provide chartered air services to clients within the country. As the company looks into the future, one of its long-term priorities is to become the leading airline of choice and maintain its brand name throughout the country. Skywalk's strategy therefore focuses on how to grow its business and brand, through achieving superior cost advantage, while maintaining unequalled service delivery.
What is rational Planning?
Insert definition from literature
The RP strategy utilizes analytical approach to develop plan and implement actions to support objectives (mostly centered on profit maximization). The underlying assumption of RP strategy is that the business environment will continue to remain stable; in this case, an organization will be able to forecast changes in the market and make early adjustments.
The key features of rational planning are; the strong inclination to rational analysis, separating concept from implementation and profit orientation, Sloan (1963).
Comparing different strategy development approaches
Whittington (2001) summarized the implication of four approaches to strategy - classical (rational planning), evolutionary, processual and the systemic. The 'classical' is seen as a universal norm; recommending a rational, disconnected and chronological approach to strategy development. The 'evolutionary' recommends open options; recognizing the unpredictability and fast-paced nature of environmental changes which negate attempts to pre-empt the future. The 'processual' leans towards incremental adjustments (''slowly testing the waters'') while gradually building core competencies. Systemic approach adopts a relativity position and lays more credence to the inherent social system as the key driver of the ends and means of strategy.
RP is built upon historical trend and not forward looking. It draws from the strengths and weaknesses of previous alternatives to make future projections. In other words, in relation to an organization, the main focus of RP is internal; this will function well in a formal setting like the military and to some degree in a monopolistic setting as well as in organizations operating in a mature and stable environment.
RP is viewed as a more (and widely adopted) approach to strategy development. While this may have a short term cost advantage when compared to the rigors associated with other approaches; this approach may not be sustainable in the long term when an organization is competing in a fast paced environment, the total cost associated with any late realization could be significant and may threaten the survival of such organization. In a way, RP strategy lacks connection to future environmental realities.
Conversely, the approach adopted by the learning and the environmental schools as noted by Mintzberg's (1985), has high potential for recycles and early cost exposures; but this will be compensated as the organization continuously improve through the learning curve (and may become 'best-in-class') and will be better equipped to handle the challenges of a fast paced environment.
Nevertheless, there are many factors that underpin the choice of strategy development that will best suit a business environment. One of the many influencing factors is the external environment that continuously shape the marketplace. There are vast arrays of factors totally out of the organisation's control; for instance, Nigerian government's recent regulation to the oil majors to eliminate gas flaring or pay huge fines that are capable of eroding their profit margin in few years.
Another emerging threats to multinational companies operating in Nigeria are community crisis and corporate social responsibilities issues; which have demonstrated threats on some of the companies like Shell Petroleum Development Company and Julius Berger Construction Company. Shell suffered severe loss of oil production in its Niger Delta stake, while Julius Berger has several abandoned projects - both companies suffered loss of revenue. It is an indication that the business continuity of these companies will soon be threatened if their existing strategies are not properly evaluated and adjusted to handle these environmental and social dynamics - this is a solution offered by the learning and the evolutionary schools of thought.
Other factors include political, technology
2.0 Development of Strategy - 'Why' and 'How'
It is not enough for a company to develop a successful product or service. Without a strategy, an organization is rudderless and vulnerable to business changes as well as to competitive threats. A sound strategy, skillfully carried out, fosters significant structural shifts in the way a company does business that distinguish it from its competitors. By providing a guidepost for a company's ongoing evolution, strategy provides the necessary information and direction for managers to define their work and help their organization remain competitive. (citation).
Strategic objectives allow a company to measure how it is performing in key result areas; those areas where the company must achieve superior results to achieve its long-term strategy. Key result areas often come directly from a company's direction statement.
For example, if Skywalk's vision is to increase its customer base, then it will want to measure success in that area. Areas for which a company might set strategic objectives are market position, customer loyalty, quality, service, innovation, and human capital.
Management must decide how it will measure success in the key result areas and then set objectives for those measures. For example, if customer loyalty is a key result area, it might be measured by a customer satisfaction index. The corresponding objective might be: "Raise the customer satisfaction index from 89 to 96 in the next five years."
Broadly speaking, strategy is achieved through two fundamental processes: planning and implementation. Many companies involve both senior management and units in the strategic planning processes. Units are involved because they house tremendous knowledge about an organization and can make informed recommendations about what a company should be doing and where it should be going. Furthermore, when units are included in the planning process, they are more likely to support and implement the plans that are created.
In short, units are the implementation centers of an organization. They have the leadership, people, skills, and money needed for effective execution. They have the ability to implement a plan and they wield the power to undermine a plan.
Organizations that fail to include units in the strategic planning process typically receive results inferior to those that do. By undertaking the planning process together, senior management and units ensure that a company's strategies corporate and unit are tightly aligned and that successful implementation can follow.
3.0 Theories, Concepts and Examples of Strategy
Strategy can be viewed as a blend of art and science. It is an art in that it requires creative thought, an ability to identify alternative future states, and strong communication skills to inspire and engage those who will implement the strategy. It is a science in that it requires managers to collect and analyze information that they can then turn into action
Strategy is a planned action to achieve a desired result, it has a beginning, it has a middle (which is a process) and an end, what you intend to achieve depending on the objective(s) of the organization within an enabling environment. As with most processes it can be managed, its course of action can be predicted and planned for, expertise can be developed, and tools built. However, strategy can be uncontrolled and requires a deliberate effort to make it through. For example, effective strategy cannot be achieved by mere changing jobs and organizational structures (which is the internal factor affecting the organization), without changing the approach in which the management systems that support the work performs, the environment which the organisation operates or without changing the skills, mentality and attitudes of the people who perform that work (which is the external factor affecting the organization).
However strategy in an organization cannot successfully be implemented until the employees/stakeholders who manage it understand when the planned action will commence, who is involved in the decision making, how and where the action will unfold and most importantly how they as individuals will be affected. Successful Strategy implementation requires both excellent programme management as well as people management. Strategic implementation fails when there is no clear understanding of the organisation objective(s), lack of up-front planning and prioritization, cultural issues or absence of leadership.
Rational planning on the other hand is problem definition, goal definition and information gathering based on the previous happenings and events. It is called in organizational behavior, is a process for making logically sound decisions. It is a decision making process which is only possible in a stable environment. After going thoroughly through the process of defining the problem, exploring for all the possible alternatives for that problem and gathering information, it is been evaluated and the possible options based on previous experience to anticipate the consequences of each and every possible alternative is been thought of. At this point optional criteria for measuring the success or failure of the decision taken will be considered.
According to smit and Rade (2002) People's views on planning and decision making differ widely. However within the broad field of planning, strategy policy-making is becoming ever more important.