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A review of the literature reveals a larger group of strategic 'schools of thought'. Mintzberg, H. et al (2009) suggest ten schools of thought which are the design, the planning, the positioning, the entrepreneurial, the cognitive, the learning, the power, the cultural, the environmental and the configuration school. The learning school model suggests that 'strategies are emergent, strategist can be found throughout the organisation, and the so-called formulation and implementation intertwine'. Mintzberg & Lampel (1999) p25. The fundamental difference between the learning school and the previous schools of thought, namely, the planning school is that it is interested in how strategies form in organisations rather than dictating how to formulate it. Mintzberg, H. et al (2009)
In order to fully understand the difference, a deeper comparison between the two approaches described above can prove useful. The rational planning school "uses a prescriptive approach in which the three core areas - strategic analysis, strategic development and strategy implementation are linked together sequentially" Lynch, in Downs, A. et al (2003) p5, whereas the emergent approach to strategy making is the opposite; "characterized by trial, experimentation and discussion" Lynch, in Downs, A. et al (2003) p5
The central argument of the article is that companies with rigid long-term strategies are unable to create a sustainable competitive advantage in the turbulent and ever-changing financial service firms industries. By providing a number of examples the author aims to demonstrate why companies in that particular industry should rely on the emergent approach to strategy, rather than the prescriptive approach in an attempt to gain a sustainable competitive advantage. The article places importance on the internal focus and by hustling and adjusting the strategy the firm is better equipped to encounter competition and has a better chance to win the business of the potential client. Courtney, H. et al (1997) are supportive of the emergent approach by disapproving the traditional process to strategic planning "when there is greater uncertainty about the future, it is at best marginally helpful and at worst downright dangerous" Courtney, H. et al p6
Lynch continues; "corporate strategy development is complex, unstable and subject to fluctuations, thus making it impossible to undertake any useful prediction in advance" Lynch, R. (2006) p58
Assumptions about Strategy, Business Environment and Organisation
Mr Bhide objects the traditional view of setting barriers against competition, instead, the focus should be on the customers and the innovative ways of reaching to them fast and, therefore, being able to provide services that, even if "slightly off the best prices", will still amount to huge profits over time. An excerpt from the article by the Head of an American bank stresses the point; "I don't view competition as an obstacle...our most significant challenge is internal - making certain we manage our resources so that we are the best in the business". This means that by 'moving fast' when an adjustment in strategy is needed and making the right decisions by staying close to the client and providing them with what is needed, will guarantee the firm huge profits over time.
The author continues by saying that the planning method for strategy, suggested by Porter in the five forces model, which expects the firm to 'study' the environment and planning for a strategy accordingly Hill, C.W.L. & Jones, G.R. (2004) should be changed to an internal view and efforts should be focused on the promotion of different swift actions that should be done internally that will, in turn, result in winning customers.
Despite the fact that firms' emphasis should be on existing and potential customers, rather than on competitors, it is still important, the author argues, to have a clear vision as to what direction the firm is heading in the midst of competition. The importance stems from the turbulent environment the firms are in "It provides a shared understanding of what their firm is about and where is it headed". Lynch's version of the term offers further clarification; "vision-the ability to move the organisation forward in a significant way beyond the current environment" Lynch, R. (2006) p9
The belief that key to success lies with strong execution and forceful opportunism that will provide companies with the edge in the market place is supported by Koopman, J (2001); "the key attribute separating companies that succeed brilliantly, is almost always execution". pl9
The article's key argument is closely linked to the business environment the firms operate in. That is to say that the business environment within the financial service industries is turbulent and ever- changing with a number of opportunities arising constantly and, thus, by having a long-term fixed plan, the firm cannot capitalise on the possible new opportunities. Professor Allen supports the view of long-term rigidness; 'strategy calls for flexibility, responsiveness and adaptability...' Allen, D. (1995)
Literature relating to the subject reveals a number of different views of strategy an organisation can adopt when forming strategy. The suggestion that firms that try to create competitive advantage through internal capabilities instead of studying the environment Johnson, G. et al (2009), along with a description about the resource-based model by Hitt M.A. et al (2003); "each organization is a collection of unique resources and capabilities that provide the basis for its strategy. ..capabilities evolve and must be managed dynamically in pursuit of above-average returns"p2Q, implies that the financial service organisations, as discussed by Mr Bhide, adopt the resource-based view.
Furthermore, a strong link between the emergent approach to strategy and the uncertain view of the world can be made. The way strategy is being formed at many levels, instead of on the top level only as suggested in the prescriptive model, will enhance the firm's chances to take corrective action sooner in the changing markets. Johnson, G. et al (2009)
An argument by Mr Bhide about employee participation in the decision making process that involves account officers and fund managers is in line with this proposal. He argues that the 'collective wisdom' is of great importance as this enables the company to act swiftly to the changing conditions of the market place as these people are working in the customer facing situation on a daily basis and, thus, are aware of the changes in demand.
The main strengths
Firstly, the argument regarding the tumultuous world in which a fixed long-term strategy will not provide the firm with a competitive advantage can be seen as a point that is widely supported by a number of academics. First, Lindblom (1959) published the article The Science of "Muddling Through" which suggested that making policy cannot be done in an orderly manner but involves the "muddling through" part which means that companies have to try to find ways of coping with the turbulent external environment. Mintzberg, H. et al (2009). Quinn (1978) went on to suggest that 'organizations continually adapt their strategies to changing circumstances' Stonehouse, G et al. (2000)pl4.
Secondly, the importance of a vision is stressed in the article which, again, is supported by academics across the field and irrespective of the approach to strategy formulation they are proponents of.
The main weaknesses
Whilst the article has a large number of assumptions and arguments that are supported by industry professionals, real scientific theory is not available within the text. Comments such as; "innovation seldom fails", and "rewards for new product development are often temporary because such products are readily and cheaply imitated...it the prospectus doesn't tell all, defecting employees will..." are example assumptions that have not been supported by any scientific theory.
Also, a broader spectrum of financial institutions could be utilised as examples. The main focus stays with the largest investment banks based in the US (Merrill Lynch, Goldman Sachs and Salomon Brothers) whilst little exposure by way of demonstration is given to smaller commercial banks and, indeed, what the industry trends are outside the US where different values and working practices prevail.