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What, then, is strategy? Is it a plan? Does it refer to how we will obtain the ends we seek? Is it a position taken? Just as military forces might take the high ground prior to engaging the enemy; might a business take the position of low-cost provider? Or does strategy refer to perspective, to the view one takes of matters, and to the purposes, directions, decisions and actions stemming from this view? Lastly, does strategy refer to a pattern in our decisions and actions? For example, does repeatedly copying a competitor's new product offerings signal a "me too" strategy? Just what is strategy?
StrategyÂ is all these-it is perspective, position, plan, and pattern. Strategy is the bridge between policy or high-order goals on the one hand and tactics or concrete actions on the other. Strategy and tactics together straddle the gap between ends and means. In short,Â strategy is a term that refers to a complex web of thoughts, ideas, insights, experiences, goals, expertise, memories, perceptions, and expectations that provides general guidance for specific actions in pursuit of particular ends.
Strategy is the course we chart, the journey we imagine and, at the same time, it is the course we steer, the trip we actually make. Even when we are embarking on a voyage of discovery, with no particular destination in mind, the voyage has a purpose, an outcome, an end to be kept in view.
Strategy, then, has no existence apart from the ends sought. It is a general framework that provides guidance for actions to be taken and, at the same time, is shaped by the actionsÂ taken. This means that the necessary precondition for formulating strategy is a clear and widespread understanding of the ends to be obtained. Without these ends in view, action is purely tactical and can quickly degenerate into nothing more than a flailing about. No amount of strategizing or strategic planning will compensate for the absence of a clear and widespread understanding of the ends sought.
How does one determine, articulate and communicate company-wide ends? How does one ensure understanding and obtain commitment to these ends? The quick answers are as follows:
The ends to be obtained are determined through discussions and debates regarding the company's future in light of its current situation. Even a SWOT analysis (an assessment of Strengths, Weaknesses, Opportunities and Threats) is conducted based on current perceptions.
Understanding is ensured via discussion, dialog and even debate, in a word, through conversations. These conversations are liberally sprinkled with examples, for instances, and what ifs. Initially, the CEO bears the burden of these conversations with staff. As more people come to understand and commit to the ends being sought, this communications burden can be shared with others. However, the CEO can never completely relinquish it. The CEO is the keeper of the vision and, periodically, must be seen reaffirming it.
Ultimately, the ends sought can be expressed via a scorecard or some other device for measuring and publicly reporting on company performance. Individual effort can then be assessed in light of these same ends. Suppose, for instance, that a company has these ends in mind: improved customer service and satisfaction, reduced costs, increased productivity, and increasing revenues from new products and services. It is a simple and undeniably relevant matter for managers to periodically ask the following questions of the employees reporting to them:
1.Â Â Â Â Â Â Â Â What have you done to improve customer service?
2.Â Â Â Â Â Â Â Â What have you done to improve customer satisfaction?
3.Â Â Â Â Â Â Â Â What have you done to reduce costs?
4.Â Â Â Â Â Â Â Â What have you done to increase productivity?
5.Â Â Â Â Â Â Â Â What have you done to increase revenues from new products and services?
The Decisions Are the Same
No matter which definition of strategy one uses, the decisions called for are the same. These decisions pertain to choices between and among products and services, customers and markets, distribution channels, technologies, pricing, and geographic operations, to name a few. What is required is a structured, disciplined, systematic way of making these decisions. Using the "driving forces" approach is one option. Choosing on the basis of "value disciplines" is another. Committing on the basis of "value-chain analysis" is yet a third. Using all three as a system of cross-checks is also a possibility.
Corporate planning process;
Corporate staff set guidance
Plans at divisional level
Review at divisional level
Consolidation to a corporate plan
Business units construct plans
As part of the development of strategies and plans to enable the organization to achieve its objectives, then that organization will use a systematic/rigorous process known asÂ corporate planning. SWOT alongsideÂ PESTLE can be used as a basis for the analysis of business and environmental factors.
Set objectivesÂ - defining what the organization is going to do
Internal appraisals of the organization's SWOT, this needs to include an assessment of the present situation as well as a portfolio of products/services and an analysis of the product/service life cycle
Analysis of existing strategies, this should determine relevance from the results of an internal/external appraisal. This may include gap analysis which will look at environmental factors
Strategic IssuesÂ defined - key factors in the development of a corporate plan which needs to be addressed by the organization
DevelopÂ new/revised strategies - revised analysis of strategic issues may mean the objectives need to change
Establish critical success factor of objectives and strategy implementation
PreparationÂ of operational, resource, projects plans for strategy implementation
MonitoringÂ results - mapping against plans, taking corrective action which may mean amending objectives/strategies.
Theoretically, researchers and theorists presented two extremes for possible models of structures. They are the organic structure and mechanistic structure. The model of an organic structure would be a flat and cross-functional team, with lowÂ formalisation, possessing comprehensive information and relying on participative decision-making. The model of mechanistic structure would be the opposite and would beÂ characterisedÂ by extensiveÂ departmentalisation, high formalisation, limited information andÂ centralisationÂ -Â (Robbins, 1996).Â Therefore the organic model of structure would have the maximum width (span) but the minimum height (level), while the mechanistic model or structure would have the reverse, minimum width and maximum height.
Even though applied research onÂ organisationalÂ structures has continued in most industries, the main barrier is attributed to the highly diverse characteristics of most
Business projects and high uncertainties. These factors made it very difficult to establish a convincing structural model, which will be a sign of all diversities and uncertainties.
Even though existing structural and contingency theories onÂ organisationsÂ indicate that there is no ideal firm structure suitable for allÂ organisations, the question is which structure is appropriate for different size organizations? LargeÂ organisationsÂ will need a wide span of control to manage with the number of activities and a small number of levels to deal with the complexities therefore largeÂ organisationsÂ look as if they need organic structures. Whereas the mechanistic structure would be more appropriate for smallerÂ organisations.
SuccessfulÂ structures sustain success of an organisations vision, mission and goals. A successful structure assists employees in "getting the job done", helping them achieving goals set. Depending on the structure or type of structure will have an effect on the level of teamwork within an organisation? Well-formed organisational structures will deal better with external factors effecting the organisation such as governments etc. Changes in the external environment will be dealt with and adjusted in a much more efficient way if a good structure is in place. In fast changing environments where for example technology is changing quickly, the structure of the organisation should help the firm to identify opportunities and threats and therefore change. In a steady environment a successfully structured organisation should be able to take advantage by identifying new opportunities and therefore becoming more efficient overall. However no matter how solid the structure organisations are not always efficient and effective at the same time due to constantly changing environments and therefore for a good structure to be successful and for an organisation to be efficient and effective then a stable environment needs to be present.
A solid organisational structure will make a firm effective when it supports the organisations main activity. Therefore if the organisations main activity is obvious (e.g. Starbucks producing coffee) then a mechanistic structure can be used and therefore using this opportunity to be efficient. However if the main activity is less obvious then an organic structure should be taken on in order to support the effectiveness and innovation of the organisation.
Organisational structures are one of the most important factors in organising communication within a firm however whatever structure preferred there will always be room for conflict within communications. A way of solving this in the short run would be to introduce formal and informal mechanisms e.g. meetings, rewards, new rules, parties, lunches etc. The aim here is to get rid off factors, which get in the way of employees "getting the job done" and therefore assisting the organisation in becoming more effective.
There is and never will be a perfect structure for any organisation. All structures have their own strengths and weaknesses. When there is a problem of any kind within an organisation, it can be solved by changing the structure, however by doing this creates.
Other problems in other areas of the organisation and therefore firms are constantly changing there structures in the search for their "perfect structure" and in the long run becoming less efficient and effective. This essay shows that the structure of an organisation tends to be more organic the bigger the project of an organisation but not in terms of duration of the project. It also shows that for an organisation to be more effective it needs to react to change in its external environment by changing the structure in order to adjust to this change but as shown its not always the answer as it will cause new problems in different areas. Therefore the structure of an organisation has a huge impact on its effectiveness but depending on the type of structure used by the organisation and how this structure is managed depends on the effect it will have overall on its efficiency and effectiveness.
Core competencies and capabilities of the electricity suppliers
Resources are not productive on their own. A brain surgeon is close to unseals without a radiologist, anaesthetist, nurses, surgical instruments, imaging equipment, and a host of other resources. \we use the term organisational capabilities to refer to a firm's capability to play the violin, ice stake, and speak Mandarin, so the organisation may have the capability to manufacture widgets, distribute them throughout the Baltic states, and hedge its resulting foreign exchange exposure. The literature uses the terms Capability "and "competence" interchangeably. The key differences are the adjectives used to modify the terms. Thus, Selznick used distinctive competence to descry those things that an organisation does particularly well relative to its competitors. Igor an off used the same term to analyse the basis ofÂ firm's growth strategies. Hamel and Prahalad coined the term core competences to distinguish those capabilities fundamental to a firm's performance and strategy. The value of the terms "distinctive competence" and "core competence" is that they direct our attention toward competitive advantage. Our interest is not capabilities per se, but in capabilities relative to other firms. Many companies can produce personal computers; the critical issue is whether they can produce PCs with a cost, quality, and speed that can match Dell Computer. Establishing competitive advantage requires that a firm identify what the firm can do better than its competitors.
A strategic focus on capabilities rather than products also observable in canon's development. Canon's technological capabilities lie in the integration of microelectronics, fine optics, and precision engineering. To identify a firm's capabilities, we need to have some basis for classifying and disaggregating its activities'. Michael Porter value chain distinguishes between primary activities and support activities'. Although the concept of an organisation possessing the capability to perform certain activities is straightforward, understanding the structure and determinants of capability is much more complex. Capabilities require the expertise of various individuals to be integrated with capital equipment, technology, and other resources. But how does this integration occur? Virtually all productive activities involve teams of people undertaking closely coordinated actions without significant direction or verbal communication. Richard Nelson and Sidney Winter have used the term capabilities to refer to these regular and predictable pattern of activity made up of a sequence of coordinated actions by individuals. Such routines form the basis ofÂ most capabilities. At the manufacturing level, a series of routines govern the passage ofÂ raw materials and components through the production process to the factory gate. Sale, ordering, distribution, and customer service activities are similarly organised through a number of standardized, complementary routines. Even top management activity include routines: monitoring business unit performance, capital budgeting, and strategic planning. Routines are to the organisation what skills are to the individual. Just as the individual's skill are carried out semi-automatically, without conscious coordination, so organisational routine are based on firm-level tacit knowledge that can be observed in the operational routine, but can not be fully articulated by any member of the team, not even the manager. Just as individual skills become rusty when not exercised that arise only rarely. Hence, there may be a trade offÂ between efficiently management. The same organisation may find it extremely difficult to respond to novel situations. Whether we approach capabilities from a functional or value chain approach, it is evident that broad functions or value chain segments can be disaggregated into more specialist capabilities performed by smaller teams ofÂ resources. What we observe is a hierarchy of capabilities where more general, broadly defined capabilities are formed from the integration of more specialised capabilities. Within the firm, specialised capabilities relating to individuals tasks are integrated into broader functional capabilities: marketing capabilities, manufacturing capabilities, R&D capabilities, and the like. At the highest level of integration are capabilities that requires the integration of R&D, marketing, manufacturing, finance, and strategic planning. Although higher-level capabilities involve the integration of lower-level capabilities, it is important to recognize that capabilities cannot be integrated directly. Capabilities can only be integrated through the knowledge of individual persons. This is precisely why higher-level capabilities are so difficult to perform, New product development requires the integration of a wide diversity of specialised knowledge and skill, yet communication constraints means that the number of individual s who can be directly involved in the process limited.Â Â A common solution has been the creation of cross-functional product development teams. Though setting up such teams would appear to be a straightforward task, research into new product development confirms that a key problem is the team's ability to access and integrate the vast range of specialised knowledge that needs to be imbedded within the product. The linkage between resources and capabilities is complex. Hamel and Prahalad observe that outstanding capabilities are not always the result of superior resource endowments. A firm's resource base has only an indirect link with the capabilities that that firm can generate. The key, according to Hamel and Parhalad, is the firm's ability to leverage its resources.Â Â Having diagnosed the sources of an incumbent's competitive advantage, the imitator can mount a competitive challenge only by assembling the resources and capabilities necessary for imitation. The ability to buy resources and capabilities from outside factor markets depends on their transferability between firms. Even ifÂ resources are mobile, the market for a resource may be subject to transactions costs-costs buying and selling arising from search costs, negotiation costs, contract enforcement costs, and transportation costs. Transactions costs are greater for highly differentiated. Business that requires the integration of a number of complex, term-based routines may take years to reach the standard set by industry leaders. Conversely, where a competitive advantage does not require the application of complex, firm-specific resources, imitation is likely to be easy and fast. The nature of these dynamic capabilities may vary according to the dynamism of market situation. In high-velocity environments, dynamic capabilities rely extensively on new knowledge created for specific situations. Acquiring new or additional resources requires that a firm purchases the desired resources on external factor markets or, if the resources are not transferable, builds them internally. Developing resources such as company reputation is installed customer base may be difficult and long term, but at least the size and scope of the challenge can be understood. Capabilities pose a bigger challenge. If capabilities are based on routines that develop through practice and learning with limited management direction, what can the firm do to establish and develop its capabilities?
If we look at companies that possess outstanding capabilities, it is clear that these capabilities often have their origins in the circumstances that existed at the time of those companies' foundation and early development. How did Wal-Mart develop its super-efficient system of warehousing and distribution? This system was not the result of careful planning and design, but rather of the fact that, because of its rural locations, the company was unable to get reliable distribution from its suppliers, and so it established its own distribution system.
THE EFFECT OF PRIVATISATION AND DEREGULATION;
Following the privatisation of theÂ UKÂ electricity industry in 1989, there has been a rapid rise in the number of gas fired power stations. Between 1989 and 1998, over 20 new gas power stations were built. Official figures suggest that by 2020 more than half of theÂ UKÂ electricity industry will be generated from gas. The so called 'dash for gas' has been an important reason for the swift decline of theÂ UKÂ coal industry.
The argument in favour of gas fuelled power stations include:
They are quicker and cheaper to build than coal power stations
They employ fewer staff and are therefore cheaper to run; for its employees, the gas industry is less dirty and dangerous than the coal industry
They produce electricity more cheaply than nuclear power stations
They are cleaner for the environment; they produce almost no sulphur dioxide (which contributes to acid rain) and little carbon dioxide. They therefore help the government meet its internationally agreed targets in these areas.
InÂ Britain, an important reason why new gas fired power stations have been built has less do with environmental protection and more to do with the structure of the electricity industry. After privatisation, the generating companied who produced the electricity were split from the distributing companies who sold the electricity to consumers. Because they did not want to e totally reliant on the generators, they decided to produce some of the electricity themselves. Gas was the cheapest option available to them.
It is seen as a wasteful use of a natural resource. Assuming no new discoveries, at the end of 1995 theÂ UKÂ had only 10 years of gas reserves left at the current rate of consumption. These reserves will soon be used and, then, theÂ UKÂ will become dependent on imports- making the cost of electricity and domestic gas possibly more expensive.
The rapid run down of the coal mining industry and coal power stations has had a high human and social cost. Many people have become unemployed as pits and power stations have closed. The speed of the change has made it very difficult for the individuals and communities to adjust.
Although it is accepted that building a new gas fired plant is cheaper than building a new coal burning plant, new power stations were not needed because the older coal burning stations has many years of service left.
Most people believe that an increase in the use of renewable energy is a vital component of sustainable development policies. At the Climate Summit inÂ KyotoÂ in 199, theÂ UKÂ government called for a reduction in CO2Â emissions of 20% and a target of 10% of electricity needs to be generated from renewable sources by the year 2010.
There are five main sources of renewable energy- water power, solar power, wind power, geothermal energy and bio fuel (i.e., organic matter such as wood, agricultural produce and human or animal waste).
Once HEP schemes are in operation, the electricity is relatively cheap to generate. However, the cost of construction is often very high. Another major disadvantage is the disruption and dislocation caused to people living in the area, and the loss of farmland.
Solar power has the potential to provide a significant proportion of the world's energy requirements. It has been estimated that an hour of sunshine providesBritainÂ with more energy than it obtains from all the fossil fuel it burns in a year. However, the problem is converting the Sun's rays into useful forms of energy.
Solar power stations are relatively expensive to build and install. For this reason they are generally only found in high income countries. As well as their high cost, they also have the disadvantage that they can only produce power during the daytime.
Energy conservation will involve more efficient use of energy- in homes, in business and in transport. It reduces the demand for energy and, therefore, the emission of greenhouse gases. It also cuts people's fuel bills. In theÂ UK, the 1995 Home Energy Conservation Act set a target of a 30% reduction in domestic energy consumption within 10 years. Local councils were given the task of using a mixture of guidance, advice and financial grants to achieve this aim.
The main domestic energy savings come from better insulation and also from draught exclusion. Double glazing, together with wall, loft, and hot water tank and pipe insulation can cut the energy used by more than 60%. If all homes inÂ BritainÂ were as energy efficient as those being built under current regulations, the country would easily meet its target for a 20% reduction in CO2Â emissions by 2010.
TheÂ UKÂ government increasingly uses the tax system as a means of cutting fuel consumption. In particular, 'carbon taxes' on mot vehicle fuel are designed to reduce the use of cars and Lorries and to persuade people to buy more fuel efficient vehicles.