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Strategic management and strategy has been developed for 40 years. Many organizations is still failure to develop successful strategies in their sectors.
This essay is intended to provide an overview of "What is strategy" and "What is Strategy Process". It is also intended to discuss the application of strategy and strategy process in contemporary built environment in Hong Kong.
Companies have built into its coprorate strategy a structured policy intended to help achieve a balance between the demands for economic profitability and the social, community and environmental impact of their businesses.
Strategic management like a compass offers a direction to the company as a whole. It provides a guidline to companies that how resources and time should be invested for maximizies the profit for the shareholder. All stakeholders and Company members know where the Company is going on.
Current researchers on strategy do not pay much more attention on construction sector, thus lack of conception of strategy can be applied in construction sector.
ORGANIZATIONS FAIL TO DEVELOP THEIR STRATEGIES
Current researchers Clegg et. al. (2005) stated in his book that many organizations fail to develop successful strategies. It is not new things, Mintzberg (1994) believes that strategic management / planning models for the period from 1960s to 1970s were failed because strategic planning and strategic thinking could be distinguished. Traditional strategic management / planning models were mostly depended on quantitative analysis and the results which directed managers towards what strategy would be taken. These models actually overturned strategic thinking which involves integration of experience, instinct, creativity, and analystical skill. Traditional strategic management / planning did not useless, but strategic thinking and vision development had taken place first.
Mintzberg (1994) stated that another reasons for the traditional strategic management / planning was failed because it was based on some fundamental drawback:
the falsehood about formalization ;
the falsehood about prediction; and
the falsehood about detachment.
The Falsehood about Formalization
This falsehood was based on the notion that formal systems were superior to human systems in terms of decision making and information processing. Mintzberg (1994) believed that though formal systems would be able to process large amount of data than people, formal systems could not integrate or create a new direction from such analyses-only people can perform the latter processes. People think in order to act, but people also act in order to think.
The Falsehood about Prediction
Strategic management / planning model was assumed that one could measure all of the variables which were relevant to the business future, analyze the results, and construct strategies based on the results which would ensure future success. However, even we had the best strategies experience, we were unforeseen economic, social, industry and market shifts. The falashood about prediction unavoidable led to the collapse of traditional strategic management / planning, the strategies could not carry what they promised. i.e successful prediction.
The Falsehood about Detachment
Strategic management / planning was assumed that it was better to be detached from the managers and from the workers when analyzing data when prevent prejudice in the planning process. This simply will separate the strategy makers from the strategy implementers which finally to be a fatal mistake. When problems arose during implementation , both sides will criminate each other as a result caused the failure. In additions, traditional strategic management / planning was often based on the inappropriate accumulated data, i.e. there was not a current data, or data that did not have important background information linked to it. Moreover, managers often ignored the quality of data, thus a lot of blind spots was created.
Miller (1990) stated another point of view as why strategy often fail. He investigated the decline of powerful companies, and his findings helped managers to understand the causes of strategy failure. He named his findings as Icarus Paradox. Icarus was a tragic figure of Greek mythology. The paradox of Icarus was that companies became successful to do something but this would make them overconfident and blind to the dangers that other developments pose to them. These behaviour often leads those companies downfall. He discovered that four major factors that might cause strategy failure: structural memories , monolithic cultures and skills, leadership traps, and power and politics . All of these came out while an organization was experiencing success, especially in its strategic initiatives.
Strategic management / planning are often failure due to the following reasons:
Fail to develop values and culture to support the plans.
Fail to merge organizations.
Fail to prevent legal and ethical problems.
Fail to adequate executing the strategic plans.
Fail to function as a team at the executive level or other levels.
Fail to rapidly doing what is needed to be done.
Fail to support and trust each other at the various levels of the organization
Fail to understand the organization culture.
Many professors & book writers have tried to define strategy. Cummings (1993) define strategy as it is knowing the business you propose to carry out. It stresses that strategy requires a knowledge of the business, an orientation towards action and an intention for the future. The definition emphasizes the link between leadership and strategy formulation.
Andrew (1971) defines strategy as the pattern of major objectives, purposes or goals and essential policies or plans for achieving those goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be.
We noted that the strategy is concerned with the purpose that will be achieved. It is also implied that the fundamental nature of the business must be addressed by strategy in the future. Strategy will be sensitive to values, culture and business opportunity. Managers are responsible for making choices about the scope of their business and the future nature.
Ansoff(1987) defines a strategy as is a rule for making decision. He distinguishes between strategy and policy. A strategy can apply similar principles but allows difference decisions under different circumstances. A policy is a decision that is made in the same way under the same circumstances arise.
Ohmae (1983) defines strategy as the way in which a corporation endeavours to differentiate itself positively from its competitors, using its relative strengths to satisfy customer needs. It addresses both the need to build capabilities and the competitive aspect of strategy. It mentions customers and their needs satisfaction as a driver of strategy.
Innovation is one of a strategy introduced by Ian Stewart and Peter Fenn (2006). Innovation is a benefit for a company in exploitation of ideas. It is an important role to play to seek in competitive advantage. There are some tools for strategic innovation including "The Value Chain", "Game Theory" and "Delphi Technique".
Allio (2008) pointed out that managers do not have ready access to information as a result strategies that miss the mark, fail to engage stakholders or cannot be implemented. He suggests that managers needed a "strategic databank". The strategic databank shall contain Internal Performance Data, Industry / Market Data and Stakeholder Data. It helps managers fact-based decisions about strategic direction, forge better and priority.
3. STRATEY PROCESS
The are various perspectives on strategy that lead to different definitions of strategy. Therefore, we used a broad conception of strategy that were introducted by De Wit and Meyer (2004) "as a course of actions for achieving an organization's purpose". The strategy involves all decision making in a company regarding its objectives, purposes, goals and all actions incorporated to pursue an opportunity or solve a problem (Andrews, 1971).
A strategy has three main dimensions that are recognized as the strategic process, strategic content, and strategy context (De Wit and Meyer,2004). In this essay the strategy process is the most relevant to our research as it deals with the managers' decision making and behaviour. The strategy process is traditionally in the literatures described as a two step process that encompasses strategy formulation, where the manager decides what to do, and strategic implementation which refers to the actions taken.
However another model brough forth by De Wit and Meyer (2004) describes a more multi dimensional view of the strategy process describing three overlapping and integrated steps of the strategy process, namely the strategic thinking, forming and strategic change.
To identify a problem is a first step to the project manager needs to take before any counter measures can be taken. This step may also be referred as the step of sense making or recognizing. It requires a rather extensive external and internal scanning of information to find the source of strategic problem. Having the problem identified is not sufficient to create counter measures. By further diagnosing, analyzing and reflecting on the information gathered, the structure and the source of the problem should surface and make corrective action more efficient.
As soon as sufficient information and knowledge about the problem is collected the manager need to formulate a strategy by examining the options available and determine what option that is most suitable and then take the appropriate action. This stage of the strategic thinking is termed solving and has two main elements : conceiving and realizing. As the problem has been defined, the manager's next task is to conceive a set of options that are available and chose the one that brings the most benefits in the situation. In the final step of the strategic thinking process the manager ensures a proper realization of the selected strategy by consciously planning and supervising the implementation activities (De Wit and Meyer, 2004).
A strategy process can be explained as follows:
(a) To define the organizational purpose : To clarify the purpose of business, to prepare a mission statement and determine the corporate value.
Environmental analysis. It involves the collection of information and analysis of the business environment. It includes analysing the external and internal environment.
Strategic Choice / Selection
Objectives. It can provide a more detailed expression of purpose and a basis to monitor the performance.
(b) Strategies. It describe how the objectives can be achieved.
(c) Options Analysis. Alternative strategy options can be identified. Options require to be appraised when the best can be selected.
(a) Actions. An activities shall be specified and tasks required to enable strategies can be implemented.
(b) Monitoring and Control. Performance shall be monitoring and the progress shall meet the objectives, taking corrective action if necessary and reviewing the strategy.
Gluck , Kaufman and Walleck studied 120 companies for the evolution of strategic management.
They recommended that strategic planning in most organizations should have 4 phases.
First phase is a basic financial planning. Organizations in first phase emphasize to prepare and meeting an annual budget. Financial target should be established and costs and revenues are monitored carefully. This is short-term, and it is major to focus on the functional aspects in the organization. Most organizations in this phase develop few other characteristics relating to the future.
Second phase is forecast-based planning. Organizations in second phase usually extend of the time-frame covered by the budgeting process. Some manager will tend to seek more sophisticated forecasting and to become aware of their external environment and its effect on their organizations. Therefore, organization in second phase has more resource allocation effectivelly and more timely decisions relating to organization's long-range competitive position.
Third phase is externally oriented planning. Third phase is characterized by the attempt to understand basic market phenomena. Organization search for new way to define and satisfy the customer needs. Moreover, third phase differs from the earlier phases that the corporate planner is expected to generate a number of alterative action for top management. Top management evaluate strategic alternatives in a formalized manner to planning and actions.
Fourth phase is strategic management. Fourth phase is defined by the merging of strategic planning and management into a single process. This integrated approach is accomplished through the presence of three elements: pervasive strategic thinking (managers all levels have learned to think strategically), comprehensive planning process, and supportive value system. (Glueck, Kaufman, and Walleck 1982)
A risk-based approach was introducted by Norman T sheehan (2010) to strategy execution. He explained that a firm will suffer loss when the risk was not managed. In order to reduce the risk, managers should improve their strategic execution capacity to fully integrate strategy mapping with compliance, control and risk management activities.
4. STRATEGY AND STRATEY PROCESS IN CONTEMPORARY BUILT ENVIRONMENT
Construction market changes
Industrial structure has been changed. Small number of large international contractors compete for a range of work. Local medium size contractors are difficult to sustain their position. Many local contractors need to merge, expand or become sub-contractors.
Demand for public sector has fallen. Contractors for whom relied on public sector work to adopt more varied strategy. Private sector such as building and property market are often volatile.
Clients in private sector have become professional and require an appropriate response from contractors.
There are great diversity in procurement methods on offer in recent year. In order to maintain a stronger market position, many contractors are willing to enter intor partnering arrangement.
In order to maintain long term relationship between the various parties, partnering or partnership would be encouraged. A family of standard contracts should be used such as New Engineering Contract (NEC). In order to protect moneys such as retention, a mandatory trust fund could be set up which is held temporary by one party on behalf on another. Adjudication can be used as a normal method of dispute resolution.
The concept of strategy is complex than it might at first appear and has a number of aspects. Definitions of strategy tend to emphasize one or two of these aspects but cannot succinctly include all of them. Practitioners and academics have all studied strategy and written about strategy. The perspective of each of these groups is relevance to the manager but each also has its limitations.
While an understanding of the origin of the ideas may be intellectually stimulating, the practical problem for a manager is to understand the nature of the particular strategic dilemma that he or she must address. The manager must select ways of thinking which are helpful in deciding what actions to take now to resolve the dilemma and ensure success in the future. A broad knowledge of the relevant thought should help to achieve this but the ability to select and pursue useful ways of thinking may be as valuable as breadth of knowledge.
The simple view of strategy as a grand plan worked out by some mastermind at the centre of the enterprise is too simplistic. A degree of suspicion is necessary and the nature of cause and effect is often more complex than may appear at first glance.
The classical concepts of strategy still usefully form a start point for strategic thinking but are no longer sufficient. Any competent manager has both to be able to understand other ways of thinking about strategy and have the skill to be able to judge which perspective is most valuable in particular situations.
The greatest generals understood the current state of the art of war for their time but also knew when to break the rules. They entered their battles with a strategy but were still able to act spontaneously on the battlefield. These should perhaps be the ideals for the modern day business manager.