Questions on Strategic Management
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How can issues facing Yahoo! Be described as strategic? To understand and do differentiate strategy from other issues facing Yahoo! We need to look at what Strategy is? What defines as strategy?
Strategy is 'set of actions that managers take to increase their company's performance relative to rivals'. However in the view to access Yahoo! a fuller definition would be helpful.
Strategy is 'the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations.'
We have to identify if issues facing Yahoo!
Is Yahoo! Concerned with the long-term direction of the company.
What we clearly see is that Yahoo! Is lacking in a clear vision for the future, unfocused they have drifted way form what they are, no clear ownership and lack of accountability is eminent in the organization. Yahoo's chief executive Terry Semel has said, "Yahoo needs to refocus in order to maintain a leadership position in the face of strong challenges". Brad Garlinghouse mentions 'radical restructuring', which cannot be implemented over night it would take a considerable period of time, they need to achieve this in baby steps indicate that Yahoo is looking at long term, long term direction.
Is Yahoo! Concerned with the scope of its operations.
The issue of scope of activity is fundamental to strategy. This is about is Yahoo! Concentrate on one area of business activity, or they want to be in many. Currently its 'doing everything and be everything to everyone' Brad Garlinghouse plans suggest to exit non-core business and eliminate duplicative projects and business, which is to concentrate on Yahoo's strategic decision to few core activities. Compressing of the scope of activity is clearly a fundamental aspect of Yahoo's plan.
Is Yahoo! Trying to achieve some competitive advantage.
It's about finding the competitive edge. Yahoo! Has a large audience, the company has a great customer loyalty. Brand has created instant attraction in the click market. But overlapping responsibilities coupled with trying to do too many things have increased Yahoo's operating and maintaining cost is disadvantages for competitive advantage. Yahoo! Was forced to delay the introduction of a key upgrade to the technology in turn forcing it to lower revenue forecast.
Is resource allocation one of the issues facing Yahoo!
'Spreading peanut butter across myriad opportunity' a clear strategic decision facing Yahoo! Its about company is not utilizing its massive resources financial, human and other assets. Careening into wide variety of new business ventures have left Yahoo! Unable to, compete effectively. Duplicating activities and giving different silo like Flicker and Yahoo Photo's, 360 group and social group have being costly duplicating initiatives created unexpected cannibalization (eating its own market share).
Are they trying to find a strategic fit with the environment?
Strategy can be seen as the search for strategic fit with the business environment. Yahoo! Is looking for a stronger faster company, which means that the current over bureaucratic structure doesn't fit/match the quick changing highly competitive web market environment.
Are they building on resources and competences?
It's about exploiting the strategic capabilities, in terms of unique resources and core competences, to provide competitive advantage or to gain new opportunities. Yahoo! Is in the view to turn smoothly spread butter into a deliberately sculpted strategy, which indicated they want to take all the resources and competencies and concentrate and focus on few key business units.
Is Yahoo! Concerned about stakeholder values and expectations.
Strategy of an organization is affected by those who have the power in and around the organization, there values and attitudes influences strategy. Unclear ownership, argue and fight over ownership will have a negative impact on Yahoo! Intern will result in investors and employee's values and expectations. Massive redundancies will alter employee expectations.
Is there a transformational change?
Delayer of Yahoo! To be efficient with, fewer people. Radical reductions in the head count by 15%-20% show that Yahoo! Is in for a transformational change.
Therefore, as I have outlined above under each of the characteristics of a strategy and applied to Yahoo! Its clear that what Yahoo! Is facing is a strategic decision. A corporate strategic decision, which is concerned with the overall purpose of Yahoo and adding value to different part of the business. Which will impact Yahoo's success or failure unlike with operational and tactical decisions the effects of which sometimes provide immediate feedback, likely results of corporate strategic decisions may not be evident for many years but, when felt could result in the failure of the entire business. The strategic decision to shift from advertisement income to charging users directly for personalized services like audio subscription and web page by Yahoo! Resulted in loss of revenue and plummeting of the share price.
Strategy is 'a game about the future' in which the whole company is at stake and which the possibilities for regretting a move or getting back are often not realistic or very costly. Therefore, strategy and strategy planning is the perhaps the most difficult but perhaps also the most important management tasks Yahoo is facing.
(Exploring Corporate Strategy seventh edition page 7-9, by Jonson, Scholes and Whittington)
To what extent do they differ from strategic issues facing your own organization?
Strategic issues encountered by Yahoo more or less relevant to most organizations. However, it is likely that different strategic decision characteristic will be more important in some contexts and in some organizations than the other.
Yahoo! Needs to be a stronger and faster company a company with clearer vision and clearer ownership and clearer accountability, it will need to understand the rapid development of technology, needs to continuously update and improve its search engine features and exploit new market opportunities. It gives a different emphasis for my company that of full service Hair salon providing haircuts, facial treatments and nail services to the needs of a local community.
Hair Salon is operating in a single market, a small local community with a single or very limited product and services. Where as Yahoo! A global diverse company has its presence in all over the world. It's diverse not only with product and services but also with the geographical market. Therefore, the scope of the operation in my hair salon likely to be less of a strategic issue than of what Yahoo has to content with.
The local community that I operate knows how I am and my service. I have created a great customer loyalty through experienced staff that I have carefully hired and try to expand my market share through word of mouth. A part from that I am the only salon in the 25-mile radius, which has given a great competitive advantage. Even though Yahoo! Has created a brand loyalty sustaining the competitive advantage and the market share would be very challenging with massive competitive nature of the market it operates in. Therefore, the ways in which the salon and Yahoo! Handle competitive advantage will differ in making a strategic decision.
I started my business with the capital that I gained for sale of my property and bank debt that I still pay. I have utilized the capital and my exceptional talent in haircutting fully. I want to expand my business to include a tanning spa but my ability to raise capital has stopped me. Whereas if Yahoo! Is in hold of massive assets in terms of financial and human but the unfocused nature and lack of a cohesive vision have created problems to Yahoo! Therefore, the ability and allocation of resources are issues facing both companies but to what extent and access to capital will differ in terms of strategic decision.
Yahoo! Is facing issues with values and expectations of the stakeholders due to unclear ownership. For a private enterprise like Yahoo the ultimate success criteria is value of the company to the owners: the stakeholder value. Therefore, in Yahoo stakeholder value is mother of strategic goals. I have to deal only to my customers and my self. As you can see even though values and expectations exist in both organizations to what extent it affects my salon and Yahoo! Makes a difference in the strategic context.
Therefore, strategic issues facing Yahoo! Compared to my hair salon tend to be complex due to wide geographical scope and the wide range of products and services it has to offer to the differentiated market. The pace of change in the environment as well as competition yahoo is facing needs it to be fast, adaptive and customer responsive to the uncertainty. Strategic issues need to be integrated through out the value chain, a decision to decentralized managers have to cross functional and operational boundaries to deal with all over Yahoo!
Critically examine how strategic issues differ between profit making and a non-profit oriented organization?
There are similarities between for-profit and non-profit organizations. First and foremost, both types of organizations begin with a solid mission statement and a vision statement that drive the strategic planning process and remind all the members of the organization of their foundation. Both are organizations where assets are held and business transacted in the name of the corporation rather than the individuals occupied. To survive and grow, both need to create or bring in more revenue than they consume on operations. Both are involved in producing a good or service for customers. And, of course, both are managed and run by the people who are employed by the organization. We always hear about for profit companies, such as Yahoo! And the strategies they have developed. Even though, non-for profit organizations are not concerned with profit maximization they act to uplift the culture quality of life of the region they operate in, they too benefit from following good strategies since they need generate profits to survive and grow. However, it is the distribution of the remainder of the profits that is one of the differentiating characteristics between for profit and non-profit organizations. Therefore, the key strategic issues facing a, for profit company and non-for profit will differ.
In a for profit organization the profits that are not re-invested in the organization are distributed to the owners of the company as cash. (If they do its to gain more return for the investment). The point is that the profits of a non-profit organization constantly go toward sustaining some cause that society deems as good and helpful and not into the pockets of the investors.
We have to look at the values and expectations; values will be of central strategic significance and plays an important part in the development of strategy. Non-profit organizations charities, churches etc. the sources of funds will be linked to different objectives and expectations of the funder. The mere existence of the non-for profit lies in the hands of the funder or the funding body hence the long-term direction is depended. Therefore, funders are likely to have a stronger influence on the decision making process. These are 'mission-driven' organizations working to increase the quality of life for a specific community or society Where, as a private company are looking at profit maximization working to the best interest of their stakeholders ROCI.
There is no real measure of efficiency other than to carry out its mission and achieve its set out objectives within the money contribution it has raised or received. In contract profit organization are in inconstant need of achieving high efficiency and productivity to deal the customer expectations as well as maximizing in return on capital invested.
A profit company is created when investors collectively transfer assets and talent to start the company. The company, which is in fact a fictitious individual in the eyes of the law, takes title and ownership of the assets, etc. and gives, in exchange for the assets, ownership shares in the company to those who contributed the assets. However, with a non-profit, individuals come together and provide assets and talent to start the corporation. But, these people who create the corporation do not receive any legal ownership in the corporation and, further, have no guarantee that they will be able to retain control of the corporation once formed. All of the assets are now to be used to advance that cause or provide the service for which the non-profit business was created
Some characteristics are found in profit and no profit organizations but the frequency of strong impact is much higher on a no profit organization. Hence, the strategic decision that profit and no profit company makes will differ.
"We are reactive instead of charting an unwavering course â€¦ tactics"
Critically analyze the accuracy of the statement that formal planning systems are irrelevant for firms.
This is about strategy development process. Through which strategies actually develop in an organization. This process can be grouped into two main types. First is the notion of strategy development as deliberate management intent, which has been 'planned', that is formally created ahead of events. This is the concept of intended strategy. It is literally 'strategy as design'. Second is emphasized on the emergence of strategy from internal and external factors existing in and around the organization. Where strategy emerge from day to day decisions and activities. This is the concept of emergent strategy. Quinn has termed it as "logical incremental". Both approaches must be examined within the context of an increasingly dynamic, highly competitive and global business environment.
The statement "We are reactive" suggest that Yahoo! Is following a planned or intended strategy. Being reactive is a characteristic of planned strategy. Which follows systematic process where analysis of organizations internal performance and external environment will result in long term plan. Senior management is in charge of defining the final objectives and the plan is then put into action. With logical and analytical analysis will allow organizations to formulate strategies to meet new opportunities and barriers. This approach will enable organizations to manage and organize complex activities on different business units quite effectively and efficiently. Intended strategic formulation is based on existing strengths and capabilities of an organization to optimize its growth.
On the contrary, in times of rapid change and turbulence it fails to find alternatives and adapt that Yahoo! Is facing. Unplanned changers are a shock, so the strategy doesn't have a logical answer it tends to be reactive to change and the reaction this might not be timely as in the case of Yahoo! Or the result might be no action at all. The fact that logical approach implies that strategy development is always deliberate and everything strategy will be realized according to plan. Besides, perspective indented strategy formulations consist assumptions that are unsustainable to today's changing business world. Unpredictable acts of events will regularly force originally strategy of its course. Additionally, this method doesn't allow organizations to absorb any learned element to strategy so can limit organizations ability to response flexibly in today's changing environment. Further, this model fails to complement the modern team culture where everybody is part of a team and everyone can participate in the strategy building decisions that might result in dissatisfaction and low motivation.
"Charting an unwavering course" implies that Yahoo! Need to follow a more emergent approach to strategy. Instead of meeting a premeditated plan; strategy evolves through a process of learning, adjustment and experimentation. An emergent approach leads to more creative and responsive strategy making which is well suited to the hyper-competitive and unpredictable environments of today this is what Brad Garlinghouse mentions in "charting an unwavering course" that's dealing with constantly changing market. In contrast with the prescriptive approach which focuses on creating a fit between established strengths and new opportunities, the emergent approach intentionally creating a misfit between these factors. Hence, it's more suited to transformational change in organizations as well as managing helping to reduce resistance to change among employees.
On the other side of the coin, when planning and implementation two simultaneous strategic process are taking place it runs the risk of confusion and being too slow. These mean valuable opportunities might be lost. Additionally, without analytical analysis objectives lack clarity and a basis of evaluating performance. Also conflicting strategic choices by different groups might hinder strategic development.
Emergent strategies do not mean that management is out of control it is just more open, flexible, responsive and willing to learn. This is an important strategy in a complex, uncertain and changing environment. It best case scenario, it enables management to act before everything is fully understood.
Nonetheless, such a strategy has the risk of lack of direction. A greater use of strategic planning tools for internal and external analysis would certainly facilitate improved organizational learning and enhance strategic thinking even while following an emergent approach. Deliberate strategies help to manage, to impose intentions on the organization and to provide a sense of direction.
The prescriptive and emergent processes, rather than being mutually exclusive, can be complementary to each other.
All in all, most viable strategies in today's business world should have customized elements of prescriptive and emergent characteristics in order to manage the complexities of their business.
Analyze your own organizations approach to its strategic planning process.
There are many different ways in which strategy could be understood, developed and implemented. All of these views have there own merit. Using analytical tools such an internal and external environment, research data like competitor analysis and planning systems like cash flow and budgeting will be useful to create design strategies. Which Yahoo! No doubt have used when developing its strategy. However, it's critical to understand how experience and culture influences an organization. Like for my salon founder a naturally talented and creative individual is still a dominant influence on strategy. Strategy by idea is another concept, where a new idea might emerge through the organization from the variety of experience and behaviors that are found across the organization.
Our salon, strategies are based on following of past strategies which has being influenced by the founder through his experience and the vast expertise, more of the same, we are in the view why fix when it isn't broken. We are driven by taken for granted assumption and the ways of doing things embedded in the culture of our salon. The best that can be expected is what Herbert Simon termed 'bounded rationality' which results in managers 'satisficing' rather than 'optimizing'; they do the best they can within the limits of their circumstances, knowledge and experience. (Exploring corporate strategy seventh edition page 45) the strategies are developed as the outcome of the founder and his experience, which influence strategic decision.
In order to grow and thrive in the future there has to be strategic planning with all aspects of people and salon management. Salons can often survive; certainly do well for periods of time in conditions of relative stability, low environmental turbulence and little competition. However, virtually none of these conditions prevail in the current world for great lengths of time. Investment in a process that leads to a well developed strategic plan will mean the difference between retaining your best clients and your best stylists and will mean the difference between successful profitable growth and steady decline.
Therefore, we need to reassess our strategic thinking; we address our problems in much the same way as we dealt with a previous issue seen as similar. For example the recent profit downturn was interpreted, as decline in overall market condition where as the true fact being no new trend setting by our stylist. We lack hair-cutting techniques that are required by the Young Urban Professionals. It is therefore helps to understand of where innovative strategies come from and how organizations cope with dynamic environments. It also poses question about whether the top management really have control over strategic direction.
Discuss ways in which the planning process could be improved?
Whether you are a fan of Porters five forces or the concept of Blue oceans strategy or other relevant tools of analysis, a strategy process has simple logical sequence, like A comes before B, B before C. before you look for the blue ocean and sail out on it, its wise to know your limitations of your boat, and also practical to be able to navigate and know about the water you are about to experience. (Something about strategic panning by Bjarn Nielsen 2006)
Systematic strategic assessment helps to find, and decide, the handful of really big issues facing the salon. It is the size and impact of these strategic issues that gives rise to the importance of the strategic plan and to improve their performance. Performance is about creating value for the main beneficiaries of the company. Strategic thinking and planning can help to keep the focus on value creation, and not on management tools or practices for their own sake. For example, a SWOT Analysis is a useful tool in one of the essential improving the salons planning processes.
Our planning process has to follow, formal, well documented, clearly communicated, and simple procedures.
1. Commitment from people who will be affected by the plan
This is the start and to ensure support for planning, and the implementation of the plan. Example - stylist, the purchasing manger.
2. Long term strategic objectives to improve service of the salon
These objectives should clearly promote the enduring purpose of the company. This means knowing and identifying for whom the salon exists, (the target market) and what services we seeks to provide. The intended clients must be defined in segments group. The services offered must also be client oriented. By creating a mission, vision statement to the salon.
3. Creating strategic options
Analysis of key strategic issues and short-listing, according to worth and creating of alternative strategies. By examining alternatives, it is likely that the salon will find alternatives that are superior to the current approach. Our expert stylist spend to much time on washing client hair, we can analysis few alternative approaches to dealing either tell your clients to wash there hair and come, hire a new hair stylist, hire a trainee or cut the price and offer haircuts without wash. The business will encounter environmental changes; if Alternative, contingency, plans have been considered for these changes, the organization can respond more effectively.
4. Evaluate and Decide on strategies
Effective formal planning uses systematic methods for evaluating the various alternatives. Evaluate to ensure that they do not go against any objectives. Ensure that all major strategic issues are addressed.
5. Monitoring of the strategies against the long-term objectives.
Need a method of running the plans as it gets executed. The plan should provide for customer feedback. To allow for corrective action, the monitoring system should address the same objectives and factors determined as significant through the planning process. Too often there is a disconnection between the plan and its reality.
Put simply - find and decide what to do about the handful of really big issues facing the business. The strategic planning process and tools, such as SWOT analysis, will find the strengths, weaknesses and opportunities, threats. These approaches, with their value-based management focus, will ensure that our business will have long run superior performance, and we will also be at less risk of failure.
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