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“Emergent strategy comes about through everyday routines, activities and processes in organizations” (Johnson, et. al. 2005, Pp 408). It occurs by chance or happens within the organization without any long term planning.
There are four organizational processes of emergent strategy development:
Resource allocation routines
Logical Incrementalism – The development of strategy by experimentation and learning from partial commitments rather than through global formulations of total strategies (Quinn and Voyer, 2003. Pp 408)
Key features of logical incremental approach are
Managers have a general view rather than specific view of future direction
Develop strong, flexible core business and experiment with ‘side bet’ ventures
Top managers utilize mix of formal/informal social and political to pull together emerging pattern of strategies.
Resource allocation routines – strategies emerge through formalized routines and systems of the organization (Johnson, et. al. 2005, Pp 411).
Key features of resource allocation routines approach are
Day to day decision making about resource allocation across businesses
Decisions may be made at a lower level than conventionally thought to be strategic
Managers proposals competing for funds
Collective effects of such decisions guide the strategy.
Cultural Processes – Incremental strategy development can be explained as the outcome of the influence of organization culture (Johnson, et. al. 2005, Pp 416).
Key features are
Over time may result in strategic drift
The model and the way we do things around here mean that managers try to minimize haziness/ambiguity by defining situation as something familiar.
Organizational politics – Political view of strategy development is that strategies develop as the outcome of processes of bargaining and negotiation among powerful internal or external interest groups or stakeholders (Johnson, et. al. 2005, Pp 414).
Powerful individuals may influence identification of key issues and strategies selected
Obstructs analysis and rational thinking
Results in emergent or incremental patterns of strategic development
Emphasis or de-emphasis of data can be source of power
Champions will support new ideas.
Political conflict and tensions may produce new ideas
Emergent Strategy – The case of Honda:
In 1959, Honda Motor Corporation decided to enter the United States motorcycle market. They established the US operations in Los Angeles. The main aim of the Honda was to focus on selling 250cc and 350cc rather than the 50-cc Honda Cubs, which were a big hit in Japan. They think that the Honda 50cc Cubs were not suitable for the US market because in US everything was bigger and more luxurious. The sales of 250cc and 350cc bikes were slow because the bikes themselves were overwhelmed by mechanical problems and the Honda strategy was going to fail (Hill and Jones, 2009, Pp 25).
The Honda officials were decided to sell the 50cc bikes to a broad market of Americans. Honda had also found an experimental channel of distribution, general retailers rather than specific motorbike stores. By 1964, nearly one out of two motorcycles sold in the US was a Honda (Hill and Jones, 2009, Pp 25).
In this case, the company’s carefully planned intended strategy but it was a failure. What ultimately worked was the emergent strategy.
Using the website of a large organisation find its organisational chart. Explain why the organisation is structured in the way illustrated?
Organizational structure clearly defines reporting relationships, decision-making authority and the physical location of employees from various departments.
Organizational Structure – Xerox:
Source: (Xerox, 2011)
Xerox Corporation is a technology and service company. Xerox Corporation is using the worldwide geographic area structure to support its multidomestic strategy. Geographical organizational structure group representatives from each functional department into units formed to serve a specific market or region. A divisional structure by geographic area is appropriate for this firm because the strategies need to be tailored to fit the particular needs and characteristics of customers in different geographic areas. David (2009) says that a divisional structure by geographic area allows local participation in decision making and improved coordination within a region.
Xerox Corporation emphasizes product innovation to best serve customers’ needs and process innovations to simultaneously improve quality and reduce its production costs. Xerox is using multidomestic strategy to serve customers in its three primary markets like production, networked offices from small to large and value added services. The main reason for using this strategy is so the firm can apply its service capabilities to solve unique problems of customers in different geographic locations. Global Services, North America, Europe and Developing Markets Operations are the four business groups that make up Xerox’s organizational structure. Xerox relies on the match between its international strategy and structure of the organization as a key driver of profitable growth (Hitt, et. al., 2009, Pp 325).
The main potential advantages for Xerox of having Geographical structure are:
Customers can feel more at ease when speaking with local representatives who fully understand their language
Customer support representatives will also have greater access to representatives from other functions
Tracking the performance of individual markets and work groups is simplified under this structure
Explain the four tenets of organizational learning?
“The learning organization is capable of continual regeneration from the variety of knowledge, experience and skills of individuals within a culture which encourages mutual questioning and challenge around a shared purpose or vision” (Johnson, et. al. 2005, Pp 421).
Tenets of Organizational Learning:
Managers facilitate rather than direct – Managers need the skills to facilitate and direct at the same time. Managers should be able to take correct decisions after consulting his team and getting useful ideas and feedback from the employees. This process would not only help the manager to identify problems and opportunities but would also help employees to be motivated and led towards the organizational goals. Leadership in a learning organization means involving employees in decision making.
Information flows and relationships are lateral as well as vertical – Instead of processing information through the existing hierarchical channels; the organization can establish vertical information systems. In this case, the information flow for a specific task (or set of tasks) is routed in accordance to the applied business logic, rather than the hierarchical organization. Following the lateral relations concept, it also becomes possible to employ an organizational form that is different from the simple hierarchical information. Lateral decision processes are established that cut across functional organizational units. The aim is to apply a system of decision subsidiary, i.e. to move decision power to the process, instead of moving information from the process into the hierarchy for decision-making.
Organizations’ are pluralistic – Every organization should entertain fresh and contradictory ideas to emerge which would then become the basis of debate and finally give rise to new strategies.
Experimentation is the norm – An important if not essential part of a learning organization is its ability to create new knowledge and to use it to capitalize on new opportunities open to the organization. This requires questioning the current status quo and how things are done, which allows employees to bring new ideas into the organization. Managers should also be willing to encourage individuals and teams to continuously improve the existing processes and try to evolve new strategies.
Does structure follow strategy or does strategy follow structure?
There are two views on the relationship between Structure and Strategy.
Structure follow Strategy
Strategy follow Structure
The first observation put forward by Alfred Chandler (1962), was based on a study of the development of large corporations in the United States. The focus of the study was on the historical development of the businesses and the different types of organizational structure appropriate at each of the key stages of development.
Chandler and Cain (1979) says that in all sides of an organization’s structure, form the creation of departments and divisions to the designation of reporting relationships, and which should be made while keeping the company strategic intent in mind. He observed that the transition from one form of structure to another usually did not take place as soon as the key strategic issue changed. He suggested that although the entrepreneurs were typically very astute at strategy development and implementation, they tended to know very little about organization structure. From the research he concluded that Structure follows Strategy.
The second view, Strategy follows structure is based on the idea that managers already working within a particular organizational structure will take the structure for granted and only consider strategies that will fit with the existing structure. The reason for managerial reluctance to change structure is associated with the time consuming effort involved in such a process and the fact that some managers will have vested interests in maintaining the structure as it is.
According to Lynch (2006), strategy and structure are interlinked. It may not be optimal for an organization to develop its structure after it has developed its strategy.
Strategy and the structure associated with it may need to develop at the same time in an experimental way: as the strategy develops, so does the structure. The organizations learn to adapt to its changing environment and to its changing resources, especially if such change is radical.
If the strategy process is emergent, then the learning and experimentation involved may need a more open and less formal organization structure.
Finally, an organization must achieve a fit, or congruence, between strategy and structure. Since different strategies and environments place different demands on an organization, they call for different structural responses.
Give an example of an organisation where resource allocation processes (RAP) form part of strategy development?
“The Resource Allocation Process explanation of strategy development is that realized strategies emerge as a result of the way resources are allocated in organizations” (Johnson, et. al. 2008, Pp 411).
Bower and Gilbert argues that strategy is not like a software program that you install and it suddenly all works, it is a fluid process that is shaped by a range of internal and external forces (Bower and Gilbert, 2005).
It is claimed that resource allocation must be viewed as something that gets in the way of implementing ideas but understood as a force that can lead a company in new and unforeseen directions.
The role of resource allocation in strategy making: The case of Intel
The Intel case shows clearly how resource allocation has a direct impact upon the effective strategy of a company. Intel started doing semiconductor memories; more specifically they had a dominant position in the production of DRAMs (Dynamic Random Access Memory).
In 1971 an Intel engineer invented the microprocessor during a funded development project for a Japanese calculator company. Top managers must know the personal track record of the individuals who are making proposals for resource allocation, recognize the strategic issues in danger; reach down to operational managers to work across the division lines (Bower and Gilbert, 2007). Intel’s sales of microprocessors grew gradually in a host of small, emerging applications.
In 1980’s the Japanese DRAM makers intensifies their attack on the US market causing pricing levels to drop (Johnson, et. al. 2005, Pp 430). But, microprocessors consistently had the most attractive gross margins in Intel’s product portfolio, and the resource allocation process therefore systematically diverted manufacturing capacity away from DRAMs and into microprocessors.
From this process, we can recognize the allocation of resources was guiding the company not the deliberate strategy.
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