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In view of the complex environmental conditions confronting organizations and the rapid changes taking place within this environment, many organizations will no longer be able to rely on traditional ways of managing themselves. The importance of strategic management will increase dramatically and organizations need, as a matter of urgency, to implement strategic management systems within their respective organization. It is very important for managers to understand the importance of strategic management and planning. Organizations need long-term vision and direction, and flexibility to change as their operating environment changes. Decisions need to be made with the big-picture in mind and understanding their long-term implications but the strategic planning process can be tricky and even cluttered.
As it is arguing "successful business strategy is a mixture of luck and judgment, opportunism and design. Others argue that strategy is more of an art than a science." The argument Reflect the different points of view about how business strategy formed in firms.
On analyzing the statement "successful business strategy is a mixture of luck and judgment, opportunism and design", it is possible to think about the Chaos theory that actually implies that there are no universal, permanent, and unchangeable rules and it is practically impossible to fully predict the functioning of a system or organisation. This is why it should be said that the Chaos theory admits the opportunity to the intrusion of some unpredictable factors that cannot be forecasted beforehand. Consequently, the supporters of this theory stand on the ground that the successful management should based not only on a pure logic and rational analysis of the possible development of events or progress of an organization but it is also necessary to take into consideration the role of luck, a chance, or event that can change the situation dramatically and which could not be predicted. At the same time, it does not necessarily mean that it is necessary totally rely on a piece of luck and opportunism. It avoids potential bias from opportunism and luck elements.
In actuality, the careful planning and analysis of the development of a company, the creation of the strategic plan of its development are essential. Moreover, the ability to analyze, and thoroughly planned design, on the other hand, equals notions. These arguments refer to scientist and artist point of view. Strategic management and its strategy are reflected as art science.
This essay is to provide academic and practical evidence to support this argument. The share of luck in the general success of a business strategy is not the most significant, though sometimes its role may be defining. Nevertheless, a properly developed strategic plan, ability to make logic and reasonable judgment and develop effective design is crucial and basic for the eventual success of a company and its management.
From the point of science view, strategy can be seen as a managerial science and can be taught and learnt widely. The perspective contends which have been defined by Fred R. David (2009) that firms need to systematically assess their external and internal environments, conduct research, carefully evaluate the pros and cons of various alternatives, perform analysis, and then decide upon a particular course of action. As a result, a new science, strategic management, emerged as critical approaches to define business strategic decision. However, the "strategy scientists" reject that the strategies should indicate any human emotion, creativity and policies.
Science is defined by Morries (1992), as the "systematic observation of natural events and conditions in order to discover facts about them and to formulate laws and principles based on these facts."
The view of School of positioning represent the business strategic management is formulated by an analytical process. The main idea of the School is to places the business within the context its industry, and looks at how the organization can improve its strategic positioning within that industry (12manager.com). Michael Porter is the representative person of this School whom raise the strategic system which allow the company to gain the competitive advantage. Porter has explained the three generic strategies are: cost leadership, differentiation, and focus. Companies that engage in generic strategy of total cost leadership are trying selling products at low prices as well as limit the cost, according to Mintzberg et al (1998). One example of cost leadership strategy is Toyota, where "are very good not only at producing high quality autos at a low price, but have the brand and marketing skills to use a premium pricing policy," Marketing Teacher (2009), online. On the other hand, the generic strategy of differentiation is to focus on offer products and services that are exclusive. Such organisations relying on offer products at higher quality, distinctive design, technologically innovative, and at a superior performance, which is based on brand and customers loyalty, and that serve as an acceptable reason to sell expensive products (Burgelman et al, 2004).
Examples of business using a differentiation strategy: Dolce & Cabana with luxurious bags designs and other spectacular products; Rolex as a prestige brand; Apple with high technological and innovative i-pods, i-phones, and laptops; and Mercedes-Benz Vehicles with innovative and exciting new automotive models technologically advanced. Overall, organisations may pursue a strategy of be one or either cost leadership focus or differentiation focus (Mintzberg et al, 1998). For example, Orange is well know provider services of mobile phones communication, where customers are provided with excellent network coverage and reliability, and charging only what customers have used (Barwise et al, 2004).
The competitive advantage is forces on which is the best way to gain higher profit and higher competitive position and based on the economic and competitive strategies (Mintzberg et al., 2005). All these generic strategies depend on the hard economics which means the theory only follow the laws and principles. However, the progress is forces on the systematic way without thinking of any politics, culture, social elements, etc. For example cost leadership strategies may have more relevant hard data as compared to quality differentiation. Also it closes doors on creative thinking and innovation that reduces opportunities of organization's success (Mintzberg et al., 2005).
Art and Science are the two basic elements for the strategic management concept; the aim of the concept is to achieve the objective by using cross-functional decisions, strategic management is all about to gain and maintain competitive advantages, therefore, Porter's five forces competitive advantage model has a great impact on business decisions from a business strategic point of view (David, 2009). Porter's each elements illustrate the biggest factors refer to business decision making. As can be seen the model, which contains five different factors, business managers can use this model to develop further understanding of the context in which the firm operates.
(Source from: Porter, 1998, Mindtools.com)
There are a few examples which firms has refers to the model; Apple, a well known global technical brand, it has a strong customer demand base on the online stores as well as the retail store selling. Apples ideas are let customer feel like their home, for instance, there are Apple stores which you can plan games, experiences their new products and also joined a little workshops which shows customer how to operation the new PC systems, applications and so on. In other words, Apple has built a good relationship with their customers, which allow Apple to create more opportunities to their customer, this is also refers as customer power (Weat, et al, 2006).
Furthermore, Apple built a strong relationship with their suppliers, also known as supplier concentrated (Porter, 2001 & 1985). This allow Apple make strong demand and have better equipped compete power with other brand, such as HP or Sony.
Another example could be the online book store-Amazon, the first online book internet launched ever, it broke the traditionally book shops ideas and offers more flexible choices to its customer, that is, as a online book shop distributor, it offers 24 hours online shopping, search books, DVD or other items by just move your figure tips, save times for the busy working peoples. Therefore, Amazon has integrated three functions, distribution, store, and customers (Weat, et al, 2006). This allows customers review books as well as selling second-hand books online. As a result, Amazon as gained a more competitive power than other book shops, it also called
Finally, by building a good relationship with their supplier-manufacturers in Poland, IKEA certainly knows how to save money by cutting their production costs and increase their economic of scale from their suppliers. As a result, this allows IKEA closer to their customers that customers could buy goods directly either from the website or catalogues in their warehouses stores. IKEA achieved huge success from customers and suppliers, and because of that, it has been able to compete with others traditional furniture stores.
Above example all addressed from the Science strategic point of view, the companies all thought and learnt widely, and assess their external and internal environment from analysis then decided which suitable action to choose and so on. However, some argues that it should refer more from human emotion, imagination (Fred R. David 2009).
As can be seen from the examples, however, it did not cover from every aspects of the model, it illustrate the general of how does firms has applied the model to their real life business, that is, Porter's model have a strong analysis of competitive advantage at industry level compare with others, in addition, the model does provide a very detailed on how does a business performing internally. Some argues that there are few limitations which only refers to an individual business strategies rather than business as a whole or any large corporation (Weat et al, 2006), what is more, in today's fast changing world, it might be not possible to stay within existing markets, new markets are necessary to be created and brought on board. Therefore, businesses should apply the model appropriately depends on their market sectors, and of course use the model as a measurement/practical tool but specific problem solving answers.
All in all, Porter's five forces model of competitive analysis is a widely used approach for developing strategies in many industries. As one of the most important model under Science concept, it has used different techniques and ideas in comparison with Art; Art therefore, is more towards to thinking, mind strategy, creativity and limitation. However, this is no right or wrong, when business should choose/use Art or Science from a strategic point of view, both concepts have their benefits and limitations, it will purely depends on the business environment/situation by its own.
In contrast, Mintzberg's notion of "crafting" strategies embodies the artistic model, which suggests that "strategic decision making be based primary on holistic thinking, intuition, creativity, and imagination." Mintzberg and his followers reject strategies that result from objective analysis, preferring instead subjective imagination. Mintzberg refers strategic planning as an "emergent" process whereas strategy scientists use the term "deliberate" process, based on Mintzberg (2003).
The human ability to know is referred to as 'cognition'. As strategists want to know about the strategic problems facing their organizations, they need to engage in cognitive activities. The cognitive school sees strategy formation as a mental process. It analyzes how people perceive patters and process information and concentrate on what is happening in the mind of the strategist, and how it processes the information. It defines: "what I'll see when I believe it," Mintzberg, Henry (2003).
"Business strategies result not from rigorous analysis but from a particular state of mind. In what I call the mind of the strategist, insight and a consequent drive for achievement, often amounting to a sense of mission, fuel a thought process which is basically creative and intuitive rather than rational," according to Wit & Meyer (2004).
According to Norman & Ramirez (1993), Strategy is the art of creating value. It provides the intellectual frameworks, conceptual models, and governing ideas that allow a company's managers to identify opportunities for bringing value to customers and for delivering that value at a profit. In this respect, strategy is the way a company defines its business and links together the only resources that really matter in today's economy: knowledge and relationships or an organization's competencies and customers. Strategists do not reject analysis. Indeed they need to understand when should a process be Art, Not Science? We argue that artistic and scientific approaches no need to be at odds but must be carefully harmonized.
Art is often described as "judgement-based work," "craft work," or "professional work." It is primary based on holistic thinking, intuition, inspiration, creativity, and imagination. The common thread in such work is variability in the process, its inputs and outputs.
According to Norman & Ramirez (1993), Art is needed when customer value distinctive. For example, when all customers do not want the product or service to perform or be performed the same way. Customer service should be implementing in an art. Satisfying individual customers might require frontline employees to go to "off script" and do what employees feel is the best. Scientific process management reducing variability but sometimes variability cannot be avoided. If a firm is operating in a highly variable environment and produces variations in products or services, the firm need to learn how to bring the environment under control. For example, for years Ritz-Carton has a set of rigid rules about how employees should serve guests, but as its customers became more diverse, the hotel chain's executives recognized that standard approaches could not address all its customers' needs. Artistic processes were necessary because customers' valued variety and the actions for delivering that variety could not be specified. So the Ritz gave front desk managers, concierges, and restaurant waiters more freedom to exercise judgement but maintaining carefully defined standards for cleaning rooms and maintaining facilities. The results: employees impressed customers with personal touches,
Art is also needed in changeable environments. For example, industrial design integrating the customer's needs with a compelling design takes imagination and experience. Business development spotting new opportunities and envisioning how the business could exploit then can't be reduced to a formula. Strategic hedge fund management required judgement-based work while computer models can spit out risk estimates, making final bets often entails personal calls. All of these require new skills. These skills can only be developed, in leadership's judgement, through a lifelong commitment.
The creation of many products and services involves both artistic and scientific processes. In such case, the output of the scientific processes should provide a stable platform on which artists can then apply their craft. The two kinds of processes need to be separated, because then have different goals and metrics of success.
The argument between art and science is that strategists must decide for themselves, certainly art and science are not mutually exclusive. In deciding which approach is more effective, art and science do not need to be at odds but must be carefully harmonized. Strategic management is both an art and a science and that successful strategic management requires a judicious blend of the two.
Luck is overall recognized and unexplainable phenomenon. It's as a research topic in the philosophical literature for decades and has received some attention in the management literature. It is a complex concept that has received extensive exposure in the philosophical literature. However, as a variable relating to an individual's professional success, it has seen little exposure in the management literature, and any previous work in that literature has defined luck only in the most general terms. Luck depends on many factors. Moral luck differs from epistemic luck, and each has complex sub-dimensions. These are explained, and in that explanation, four other constructs are shown to relate to luck, namely, attribution theory, locus of control theory, victimization and, finally, professional success. Several research hypotheses are offered, and possible explanatory models are presented relating these constructs, as stated by Elenkov, D & Fileva, T (2006).
The purpose of luck is to initiate a discussion on the impact and perception of luck on professional success. Researches involving luck failed to use a rigorous, philosophically based, theoretical definition of luck. Also, research lacked attempts to relate behavioural constructs that could naturally flow from a rigorous definition of luck to professional success or luck in business. Luck's sub-dimensions will be defined, and from these definitions, hypotheses will be offered relating luck to several other behavioural constructs that have been well established in the management literature. As a result of these hypotheses, further empirical research on the hypothesized relationships can be initiated.
'Luck' is a good fortune which is not predictable and caused by chance. A successful business strategy should consider of the role of luck. The Chaos Theory (Lorenz 1990 & Poincare 1900) which is one of the typical strategies which has been edited into the School of Configuration. Kellert (1993) has stated that Chaos Theory is the Qualitative study of unstable a periodic behavior in deterministic nonlinear dynamical system. Therefore, this theory can be implied into use of business strategy planning, due to there is no unchangeable, unique and permanent business environment in practical world. There would be a chance or opportunity in the dynamic situation which cannot be predicted.
When talking about competitive advantages in the managerial world the word Opportunism can carry some bad connotations since for Political Sciences, it means abandoning the Party's principles to increase individual power and influence. It could also be associated with doing business with discriminative or inequitable intensions; but as long a company follows the rules of negotiation that protect the welfare of governments (set by the GATT/WTO), the searching of new opportunities to exploit the company's capabilities makes possible the improvement of its strategies and it gains valuable benefits that make it stronger against competitors, (Bagwell and Staiger, 2002).
To search for opportunities and make the most of them, companies must be persistent and give long-term support to market researchers, financial advisors and the R&D department, among others, according to Carden (2009).
During this times of recession, for example, an Opportunistic Investment Approach can show that whilst risk-averse investors tend to avoid volatile markets, opportunistic investors have seen it as a distinct advantage which has presented them with many interesting possibilities, like picking up some high quality investments at bargain prices and positioning their portfolios well in equity markets both here in the UK and also globally, (Barclays Stockbrokers, 2009).
One of the advantages of Capitalism is that it is an immensely powerful economic engine, driven by people working, motivating, planning and strategizing for their own personal benefit; and in that way this makes an economic activity the gain of everyone. In that perspective, being pushy, aggressive, creative, wiliness and opportunistic are the skills every entrepreneur brings to their economic activities, and thanks to them we have nowadays all the innovative products and services: from iPods, Google, Windows, Fords, Airbuses to YouTube and Facebook. They see opportunities as a better ways to do things or alternative approaches toward activities, but at the same time they are taking huge risks and working hard for their targets. As an example of a long-term visionary is Steve Jobs, after Apple, he launched Next Computer and then Pixar; independently to where he applies his talents, hi is focus on the future, (Butche, 2009).
The controversy relies in the fact that the creation of new businesses means the end of others, for example: newspapers have been damaged because the ways we share information today makes printing press less popular. In contrast, the opposite behavior of those entrepreneurs who identify new markets or invest in new products, are the technical capitalists with short- term values and a constant look for optimization of existing businesses, thinking in the achievement of the highest possible performance or profitability, rather than a real economic efficiency for the business. As an example, the Japanese business culture of group orientation, consensual behaviour and the importance of personal relationships secures the stability of a business relation, the tendency to opportunistic behaviour is remarkably lower than elsewhere, (Haak & Hilpert, 2003).
Strategy management requires judgement, business in the global environment always facing competition, especially in the current economic recession situation. Organisation facing challenging to survival, growth and profitability, organisation may develop and revise their current business strategy or set up a new business strategy. Business need collect different business strategies, evaluate and analysis, then make judgement to choose which one is more suitable, feasible and acceptable to the organisation.
The judgement for future strategies normally based on past strategies experiences, organisation would like to stay in the area which is well-know. There is strong emotional attachment to that resort, how to make the judgement for business strategy is strong influence from the received wisdom and culture, the judgement involved the risk and uncertainties, the real problem is the lack of explanatory or predictive, How to judge and choose different business strategies in tough situations? How to judge for the multiple conflicting strategies? How to deal with risks and uncertainties involved in judgement? Is simple matter of luck and chance? Judgement of business strategy is critical to business strategy; any wrong judgments and decisions will lead the organisation collapse even it is very successful in the past.
For example, IBM was one of the most successful and profitable companies in the 1970s, IBM start to develop personal computers in the early 1980s, and invest to develop electronics technology for PCs network, IBM is a simpler manufacturing, when the market for main-frame computers decline rapidly, IBM have largest corporate loss with very high overheads. From the rapid turnaround of IBM can see strategy requires judgement, the management of IBM cannot predict the innovation on PCs affect the manufactory and customers, it led IBM to a wrong direction, IBM rise of the personal computing and new technology caused this company changed from the most successful company to a largest ever losses. It does not matter how good it is in the past, success is not to continue in the future, now IBM changed into a consultancy services, sold its laptop business to Lenovo. Some argument is that IBM knew strategy need judgement and experience, because the company was large, conservative, conventionally centralised organization, the main board judge and decide business strategy, based on their experience and conservative corporate culture, they believe the new business strategy will led the company progressed incrementally, if someone can draw attention to IBM arising from personal computers, and top management can take strategy more seriously, IBM might not have the problems. Strategy needs judgement but the limitation of personal knowledge, skills, experiences and organisation's culture, and the risk and uncertain of the market still will led the strategy fails, (Business Analysis 2007/2008).
For example, Enron, it achieved its business success not only through expansion strategy or successful transformation, but also by fraud. From Enron company business strategy can see their strategy include design and judgement, it mix of judgement and luck, it include luck does not mean the strategy success because of good luck and failed with bad luck, (Business Analysis 2007/2008).
The purpose of a business strategy is to direct action to a desired outcome. Successful business strategy is a mixture of luck and judgement, opportunism and design. And even with hindsight, the relative contributions of each cannot be disentangled. In Jonson and Shcole's (2005) book "Exploring corporate strategy" had formulated and structured three general ways of how organisations build their corporate strategy. There are the design, experience and ideas lenses. And they can be combined to develop each organisation's unique strategy.
Strategy design considers both internal and external factors which will affect the business by identifying its internal strengths, weaknesses and external opportunities and threats and therefore enables the organisation to adapt to the environment in which it operates.
Clear and unique strategies are formulated in a deliberated process. In this process, strategy design refers the process to originating and developing a plan. Design management is carried out to make up and direct the organisation. In terms of strategic choices on where to compete and how to compete, taking Honda as an example, in 1959, the smaller manufacturer of motorcycles began exporting to the US where it had already been dominated by other big competitors when it broke out of the Japanese market. 5 years later, Honda made one in two motorcycles sold in the US. In 1975, Boston Consulting Group (BCG)'s report explained that Honda had sought a high scale of production in order to benefit from economies of scale and learning curve as its strategy and the reasons for their success, Mair (1999).
For example, Amazon.com, when online shopping has become extremely popular in recent years, as a well-known market leader, Amazon's unique strategies designed have helped them to enhance its competitive advantage. Where cost-leadership strategy is used to differentiate them by offering the same quality of products at best price. This enables them to sell more than their competitors and leads to their corporate success, Kormushoff et al (2009).
Another example is Porsche, one of the smallest independent car manufacturers. It sells less than 50,000 cars per year. Yet it is one of the most profitable earning a 12% sales margin before tax. And its strategy is differentiation focus that has been design to fit the strength of its brand name. Porsche do not make cheap and a full range of cars, specialising in stead in high performance sports cars. This is their secret of success. (Mainwaring, 2007, Business Analysis).
Globalisation is defined as a process of increasing the connectivity and interdependence of the world's markets and businesses, it can provided an opportunity for the businesses ,it is more integrated international approach than the now-familiar multinational strategy. Globalisation is become more and more common feature of the world economics.
A global strategy is mainly supply-driven to developed and at the expense of a more market or customer-driven strategy in order to achieve the benefit of globalization described above management has to recognise when industry conditions are favourable as suggested by Yip (1989) four industrialisation drivers should be analysed.
To achieve the benefits of globalisation, strategic managers have to recognize the industry conditions and must understand and cope with industry globalisation drivers.
Therefore, the growth of globalisation creates both treats and opportunities for individuals companies and countries. A new global force is now emerging to confront national or multinational business and this is where multinational enterprises must focus their efforts in analyzing the opportunities of survival, growth and profit in foreign environments.
In argued the terms involved in the concept of strategy, was concluded that there is no isolated definition for strategy. A mixture of elements involved can lead to a better understand of strategy, however, there is no one unique form to explain the term. The theoretical approach of strategy can be very diverse and difficult to understand. There are many ideas, models, concepts, theories and so on, which have tried to clarify strategy. In addition, strategy is adjustable by nature on the contrary of inflexible set of directions. For businesses strategy can be a combination of opportunism, design, luck and judgment. Although, others have opposite argument that strategy is more of an art than a science.
As a result, businesses today have used the most common definition of strategy which is based on a prescriptive view, or the three schools of strategy. The prescriptive schools have focused mainly in the process of business operation of goods and services, which are design, planning and positioning. Strategy is the most important part in the development of business operations, without an effective and efficient strategic plan, a business can be in danger of failure.