What is strategy and how does it affect organizations

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What is strategy?

Strategy is the direction and scope of an organization over the long term which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations. (Johnson and Scholes). Strategy is where help for the company to get in to the long term business, it also help for us to decide which kind of activities are we involve in the markets. Besides that, we can use some strategy that can help for our business in order we can gain the market share. For example, Tesco has use the strategy to broaden the scope of the business to enable it to deliver strong sustainable long term growth by following the customer into large expanding markets at home such as financial service, non food and new markets abroad, initially in central Europe and Asia. There have different strategy for the different level of a business. The different level of the business has the different strategies they need to use because they have to consider their situation inside the company; they are making the different decision.

For the higher management, they have to come out the strategy that can overall to help to expand their business to the multinational or become a successful company, beside that they need to guide their employees to achieve their company vision, mission and goals. It's just similar with the corporate strategy, which is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by investor in the business and acts to guide strategic decision making throughout the business. For the middle management, they are the one who is concerned more with how a business competes successfully in a particular market. It concerns strategy decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities. For example, Tesco have come out with the Club card, a loyalty card for customer to collect the point from purchases and use them to exchange for the goods. It also helps for the Tesco to collect the information about the customer who visited its stores and what they have bought. This will help for the Tesco to know what the customer exactly wants and needs, and also help for the Tesco to create new opportunities. For the operation management, they are concerned with how each part of the business is organized to deliver the corporate and business unit level strategy direction. Operational strategy therefore focuses on issues of resources, processes, and people.

http://www.tescoplc.com/plc/about_us/strategy/

Strategy safari

We are all like blind men and the strategy process is our elephant. Everyone has seized some part or other of the animal and ignored the rest. Consultants have generally gone for the tusks, while academics have preferred to take photo safaris, reducing the animal to a static two dimension. (By Henry Mintzberg, Bruce Ahlstrand and Joseph Lampel) Mintzberg has come out with the ten schools which have been popular over the years and remain deeply embedded in our thinking about the process today. He divided the strategy thinking into three prescriptive, six descriptive and one configuration school. The prescriptive schools are design, planning and position school. For the descriptive are entrepreneurial, cognitive, learning, power, cultural, environmental, and the last one is configuration school. The different schools have its different approach and its contribution for the company. These schools can be use for the company as a strategy to help for their company. Although it's helpful for company but it's also got the limitation for the company to using it.

2.1 Design school

Design school is the original view sees strategy formation as achieving the essential fit between internal strengths and weaknesses and external threats and opportunities. It is a process of conception. The clear and unique strategies are formulated. The internal situation of the organization is used to match the external environment. For the internal situation, they can know their company strength and weaknesses through their organization's mission statement, leadership styles, employee's behavior and organizational culture. For the external situation, they can know their opportunities and threat through the PEST. With knowing well their company situation, they can design with a good strategy for their company. They have many company now are using strategy as grand design. For example, the chief executive of BMW have control the process, reviewing goals and objectives in term of SWOT analyses. With their SWOT analyses, BMW has come out with a strategy which they will aim on specific automobile markets. This markets suit different people within the specific segmentation. They would normally or like to target are Sport convertible (Z3, 3 series, and new Z4), Executive (3series, 5 series), Super executive (7series), Touring/Estate (3series, 5series), Super sports (M series), and 4x4 (X5). They are tried to gain all the market from the competitor like Mercedes Benz. The design school can be reduced ambiguity and useful in relatively stable environment. It supports strong and visionary leadership. The design school can be help to create a strategy for the company but it have the limitations when using it which is the simplification may distort reality. And the strategy has many variables and is inherently complex it will be confuse with the user if they dun understand with the school.

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2.2 Planning school

Planning school grew in parallel with the design school. But, in sheer volume of publication, the planning school predominated by the mid 1970s and, through it faltered in the 1980s; it continues to be important influences today. The planning school reflects most of the design school assumptions except the process were not just cerebral but formal, decomposable into distinct steps, delineated by checklists, and supported by techniques especially with regard to objectives, budgets, programs, and operation plan. Planning school is a formal process, which it takes a rigorous set of steps, from the analysis situation to the execution of the strategy. Planning school can be very useful for the company. Planning school is almost use by the company which through the formal meeting. The plan is built up from a huge number of separate analyses which are then integrated to produce the answer. For example, when company have a problem with their product sales, they will try to organize a meeting to know the problem and then come out with the solution like create a strategy to built up their product sales. Planning school can help the company to give a clear direction and create for a new strategy. Besides that, it also can help the company to plan and enables resource allocation. There are some limitations for the planning school which is can become too static and risk of groupthink because during the meeting, there will be many idea and suggestion coming out, so they have to choose carefully.

2.3 Positioning school

Positioning school is basically a micro economic approach. It is updated by the Boston consulting Group in the 1960s and 1970, and Michael Porter in the 1980s. It prescribe what approach is likely to work best in which circumstances, reducing the number of variables examined to a management number of very important consideration, such as relative market share, market growth and industry attractiveness. It describes two or three generic strategies, such as cost leadership, focus and differentiation, and urges the adoption of one of these. The positioning school is an analytical process. It places the business within the context of its industry and looks at how the organization can improve its strategic positioning within that industry. For example, Ryanair's is position itself to as low cost airline and everyone can fly. Ryanair's have given the low fares to stimulate demand, particularly from fare conscious leisure and business travelers who might otherwise have used alternative form of transportation or would not have traveled at all. Positioning school provides content in a systematic way to the existing way of looking at strategy, and it is focus on hard facts. The limitation for positioning school is just similar with planning school which is predicting is difficult. It wills neglects power, politics, culture, and social elements. Besides that, positioning school is biased towards large firms.

2.4 Learning school

In all of the descriptive school, the learning school become a veritable wave and challenged the omnipresent prescriptive schools. Dating back to early work on "incrementalism" as well as conceptions such as "venturing", "emergent strategy", and "retrospective sense making", a model of strategy making as learning developed that differed from the earlier schools. Strategy can come from many different initiatives, as the organization learns what works. The management must pay close attention over time to what does work and what does not work. They incorporate lessons learned into their overall plan of action. The learning school is good for a company because when the worker is learn from their experience; they will come out with a new strategy that can help for the company. For example, 3M Company have come out with a new product which is using learning school name post-it sticker. It has been selling to all over the world and using by everyone. The post-it sticker idea is actually come from one of their worker which is learn from his past time experience, he discover that the paper with the glue can actually help for them to memorize the thing they want to remind while paste on the place they can easily see it. There have some limitation for the learning school which is it could be lead to having no strategy or just doing some tactical manoeuvring. It will not very useful in stable conditions and not useful at all during crises.

2.5 Power school

Power school is thin but quite different theme in the literature has focused on strategy making rooted in power, in two senses. Micro power sees the development of strategies within the organization as essentially political, a process involving bargaining, persuasion, and confrontation among inside actors. Macro power takes the organization as an entity that uses its power over others and among its partners in alliances, joint ventures, and other network relationships to negotiate collective strategy in its interest. Power school is a process of negotiation. With the negotiation, the company can come out with the strategy that useful for their company. It can help for the strongest people to survive in the corporate jungle when they have the bargaining power. Besides that, it can help to break through obstacles to necessary change and also help to decrease resistance after a decision is made. For example, world bank, it is own by world so it has the power to negotiate with every country, and every country must follow what they say, this will lead to the world bank come out with their own strategy. However, there are limitation for the power school which is politics can be divisive, use a lot of energy, cause wastage and distortion and is costly. It can be lead to aberrations and overstates the role of power in strategy formation.

2.6 Cultural school

Cultural school is focuses on self interest and fragmentation, the other focuses on common interest and integration-strategy formation as a social process rooted in culture. Culture became a big issue in the American literature after the impact of Japanese management was fully realized in the 1980s and it become clear that strategic advantage can be the product of unique and difficult to imitate cultural factors. For using Japan and American culture as example, we can know that Japanese is progression in much aspect but American is specialized in chosen area in their career path. For the length of employment, we can see that Japanese is work for lifetime but American is varied but mainly short. For their appraisal Japanese is loyalty for their company but American is based on their performance. With the compare of Japanese and American culture, we can come out with a strategy formation by using culture school for our company. Culture school can help to explains resistance to strategic change and help to deal with mergers and acquisitions. It is very important for the company to know, because with known well their company culture will help for them to create the new strategy.

3.0 Conclusion

Scholar and consultants have to continue probe for the important aspects for each school, and for the same reason that biologists need to know more about the tusks, trunks and tails of elephant in order for them to clear with the strategy safari. But more importantly we must more beyond the narrowness of each school. We need to concern out there rather than pushed by concept in here, whether in consulting or in research. In other word we need better practice, not neater technique or theory, because it won't help much if we just reading from the book. With the practicing we can more clear and understand about the school and it can help for us in our future. In addition to probing its parts, we must pay more attention to probing its parts, we must pay more attention to the integral beast of strategy formation. We shall never find it, never really see the whole. But we can certainly see it better.

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