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Cliff Bowman and David Asch have described strategic management as "Strategic management is the process of making and implementing strategic decisions, or put another way, strategic management is about the process of strategic change" (Bowman and Asch, 1987, p. 4). In addition they mentioned that the decision must have no noticeable impact on the organisation.
Mintzberg argues that there is no easy definition for strategy. He says that strategy requires a number of definitions, to be specific, five. He defines strategy with 'Five Ps' (based on Mintzberg 1987). Firstly, strategy is a plan, or something equivalent - a guidance for action into the future, a way to get from here to there. Strategy can also be defined as a pattern, i.e. consistency on the conduct over time. He differentiates plan from pattern as, looking ahead is plan and looking at past behaviour is pattern. I feel both definitions appear to be valid: organisations create plans for their future (i.e. by intending) and germinate patterns of their past (i.e. by learning from the past mistakes). Thirdly, according to him, strategy is a position - creation of a unique and a valuable position, involving a different set of activities. Mintzberg also says that strategy is perspective, that is, fundamental ways of doing things. The fifth 'P' according to him is ploy - a tactic to overreach a competitor. (Mintzberg, 1998)
Even Coulter came with a similar definition of strategy. According to him strategic management is the combination of situation analysis, strategy formulation, strategy implementation and strategy evaluation. (Coulter, 2005)
Figure 1 Basic activities of Strategic Management (Coulter, 2005)
The conception of strategy was born in military campaigns, the result of which, either positive or negative, was mostly the product of the brains of strategists. Since the ancient times, a lot have been told about the strategies of the great military commanders and even about them.
The word strategy has arisen from the Greek word 'stratego', which means military commendar literally. War had classically divided into operational, tactical, and strategic aspects, in which strategy was linked to planning, to the broader environment and the longest time frame. Even though its meaning has been modified or changed over time, since the Napoleonic wars it has encompassed military, political and economic dimensions. The first writings those contained thoughts about strategy were authored by Greeks and Romans. (Simizu, 2006)
In the modern world, most of the conceptions those formed the basis of present understanding of strategy development were developed during the first half of the twentieth century. In 1951, Newman was the first man who demonstrated nature and importance of strategic management and this work was soon spread out and modified by others. In the early 1960s Andrews and Christiansen and Ansoff set the foundations for strategic planning by demonstrating the need to match business opportunities with organisational resources and highlighting the importance of strategic plans. (Feurer, 1997)
Generalisation phase was followed after this early phase, in which researchers tried to find out common patterns of success. The studies culminated in a large number of strategy tools and frameworks that are still used for analysis purposes today. In the 1980s, the focus of strategic planning shifted towards strategic management. (Feurer, 1997)
Theories of Strategy
Richard Whittington gave four approaches to strategy. First, the Classical approach that relies on the rational planning methods dominant in the textbooks, the second one is the Evolutionary approach which substitutes the discipline of the market for the law of the jungle, but draws on the submission to fate of biological evolution. Next, the Processual approach which accommodate strategy to errant processes of both organisation and markets. The last one is the Systemic approach that is relativistic, relating the ends and means if strategy as unavoidably associated with cultures and powers of the local social systems in which it takes place. (Whittington, 2001, p. 2)
Whittington has differentiated these fundamental approaches along the four quadrants in two dimensions; outcomes and processes as in the figure 2.
Keep cost low and options open
Analyse, plan and command
Play by the local rules
Stay close to the ground and go with the flow
Figure 2 Summary implications of the four perspectives on strategy (Whittington, 2001, p. 10)
The basic assumptions on the approaches can be made from their positions in the above figure. Profit maximisation, as a natural outcome of strategy-making, is the major aim of Classicists and Evolutionists, whereas, Systemic and Processual approaches are more pluralistic, envisioning other possible outcomes as well as profit. On the other hand, along the process line, Classical and Systemic theorist agrees that strategy can be deliberate and Evolutionary and Processual theorist believe that strategy can be emergent. (Whittington, 2001)
Contemporary Thinking on Strategy
From Intention to Action: MOST
Craig says that strategy can link the overall goals of the organisation to its actions. He termed the sequence of strategic management as MOST: Mission, Objectives, Strategy and Tactics; which involves a process of increasing specificity and begins with overall organisational goals articulating them in an action-oriented form and then identifying a strategy and the objectives which that strategy seeks to achieve, and finally specifies particular tactics. (See Table 1) (Craig, 1993)
Table 1 MOST (Craig, 1993, p. 25)
Competitive advantage design
Dobson says, ". . . a good 'mission statement' can an actual worthwhile alternative to whole task of corporate planning." (Dobson, 1993, p. 11) Mission Statement is encapsulated of the definition of the firm's strategic mission and can be considered as the first stage of the strategy process. Management guru Peter Drucker argues that a business is defined by its mission and states that asking a question, 'What is our business?' is same as asking, 'What is our mission?'. (Dobson, 1993)
The mission statement shall contain the following:
The purpose of the organisation - a statement of the principle activities of the business or organisation.
Its principle business aims - its mission as regards the position it aims to achieve in its chosen business.
The key beliefs and the value of the company.
Definitions of who are the major stakeholders in the business.
The guiding principle that define the code of conduct that tells employees how to behave.
According to David an organisations at corporate, divisional and functional levels are managed by long-term objective. "Objectives should be quantitative, measurable, realistic, understandable, challenging, hierarchical, obtainable, and congruent among organisational units." (David, 2001, p. 162)
Every objective must be associated with the time line and should be commonly stated in terms such as growths in assets, sales, profitability, market share, degree and nature of diversification and vertical integration, earning per share, and social responsibility. Clearly established objectives provide benefits like, direction, allow synergy, reduce uncertainty, aid in evaluation, establish priorities, minimise conflicts, stimulate exertion, and aid in both the allocation of resources and the design jobs.
Strategy in an organisation identifies the approaches to be used for accomplishing the objectives. A company's strategy must answer three questions.
What business are we in?
How to compete within the business?
By what means will the strategy be implemented?
(Craig, 1993, p. 28)
Tactic is a procedure, action, or manoeuvring that goes into winning competitive wars. The link between the strategy formulation and its implementation through the tactical decisions and actions of every member of the organisation is very important here. (Craig, 1993)
Who is a Strategist?
It is not easy to be strategic. A strategist will always search for something that is different (unusual). Here is what being a strategist means: A strategist is able to set all assumptions aside-
Whether one is predictable or not?
If all of your advice and counsel come wrapped in the traditional language and concepts of the communicator or not?
A strategist strives to look at things from different perspectives, intentionally, and to resist being put in a single category, or letting one totally different decision dictate or forecast future decisions. A strategist offers a range of actions or decision options, which the boss chooses from. In other words, if he can adopt more management-oriented perspectives on what he contribute to the organization. Therefore, "the head of an organisation or business owns the strategy of the organisation - and that leader's first job is to be the organisation's chief strategist."
Being a strategist is just a state of mind. (Lukaszewski, 2009)
A strategist must:
Try not to make assumptions
Strive to be different
Look ahead to tomorrow
Maintain confidence and knowledge about his goals and strategy
Focus on those things which really matters
Strategic choice and Implementation
"Strategy choice involves understanding the underlying bases guiding future strategy, generating strategic options for evaluation and selecting from among them." (Johnson, 1999, p. 20) It is very important to choose a correct strategy. Based on the contemporary thinking the correct strategy must be chosen. The choice should be made from the available options, that can be either products, markets and services, or to improve resources and capability, or on the method of how to proceed. Then after linking into the available strategic options the choice must be made considering all the other external and internal criteria. The market must be studies properly and the right product must be launched in the market, according to the market requirements. The choice can be any of the following:
Do nothing (i.e. continue the present strategy)
Withdraw from the market
Consolidate (i.e. attempt to hold the market share in the existing market)
Market Penetration (i.e. increase market share of the same market)
Product or Service development
Diversification (i.e. identification of directions of development taking organisation away from both present market and present product.
In the words of Shull, "A decision brilliantly conceived can prove worthless without effective implementation". (Shull et al., 1970, p. 15) Even the management guru Peter Drucker says, "Converting the decision into action is a major element in the decision process. Yet a decision will not become effective unless the action commitments have been built into it from the start; until then, it is only a good intention" (Drucker, 1967a, p. 96). Therefore, an effective implementation is a very important part of strategic management.
Before implementing strategy, the strategist must have clear answers to the following two questions:
What decisions and actions can be taken by the managers who are implementing strategy?
How can these decisions be organised to meet the criteria of logic, action, and contingent prescription?
In answering these questions and making right decisions, the managers or strategist must be guided two critical principles; 'principle of intended rationality' and 'principle of minimum intervention'. (Lawrence, 1984)
Why Strategies Fail?
Nilofer, CEO of Rubicon Consulting has given five reasons why strategy fails in all kinds of sectors, i.e. construction, IT, manufacturing etc.
The Blame Game
It has been observed many times that a strategy moved into execution and then fails. The post-mortem involves blame like poor leadership, incorrect execution, bad market data, change in costumers demand, off timing and hundreds more. But most of the times it something else which is the cause of the failure and that is a strategy creation process that's ran out off track. It's because of way strategy is being seen and the way it is developed within an organisation not because people, management, or other issue
Lack of Team Involvement
For large companies strategy is an annual activity done by selected group of people in a conference room, but in small organisations, it mostly comes only from the people those are at the higher level. "Strategy is tricky - it's both a thing and an action".
Strategy as a thing, direction and vision, every individual in a company owns it. As an action it requires selected people (generally managers at higher level) to carry it out within the organisation. Therefore, lack of such involvements is one of the causes of strategy failure.
Here We Are -- But Where Are We?
We need to know from where today's strategy models have come from and how do they operate. This will give the reason of why the lack of key structural members can almost always predict failure.
Both the basic forms of traditional strategy, i.e. predictive and emergent, are highly codified and well-documented and used at CEO's level. The cause failure in both is the failure to integrate feedback loops to enable adjustment on the fly.
The logic behind execution is that the companies simply fail to execute strategy. Topics like, "The New Science of Strategy Execution: How Established Firms Become Fast, Sleek Wealth Creators and Execution: How to Break It Down and Get It Done" support this notion. This shows us the direction of the missing result, and still misses the mark by suggesting that better results can be obtained by a systematic approach.
The way the companies make decisions and choose which tool to use and also when and how, is very important. This may determine how effective the tool will be.
Wrong decision-making is one of the most important reasons for the failure of strategies. The structure of an organisation plays a vital role in decision-making. Decision-making is nothing but choosing a right kind of strategy that depends on the type of the organisation, as mentioned earlier in Section 5. In the large companies the Strategic and Development department is responsible for the decision-making process whereas in the small organisations the CEO of the company or the managers at the higher levels makes the decision.
In this summary report, I have covered the issues related to the strategic management for which both the senior as well as junior executives can take responsibilities. My report presents that strategic management is one of the most important approaches for the growth of an organisation and to achieve its goals. The purpose of this project, and this summary document, is to assist the executives to address the issues for which they are uniquely responsible.