CH2 - Alternative Approaches To Strategy

Question 1

What are the benefits of the rational approach to strategy?

Answer 1

• Gives organisation long term view, avoids short term behaviour.
• Identifies key strategic issues- encouraging management to consider the business environment helps management to be more proactive
• Goal congruence- ensures the whole organisation is working towards same goals
• Communicates who is responsible for what
• Coordinates SBU’s
• Security for stakeholders, assurance the company knows where it is going
• Basis for strategic control- clear targets and reporting enables success of strategy to be reviewed.
• because formal strategy management is a collective process, it can help develop future management potential and ensure continuity.

Question 2

What are the drawbacks to the rational approach?

Answer 2

• Inappropriate in dynamics environments. Formulating new strategies too infrequent.
• Bureaucratic and inflexible- radical ideas often rejected
• Difficulty getting the necessary participation to implement the strategy. Nature of the approach may alienate the middle and junior management, which the approach requires the support of.
• Impossible in uncertain environments- (to carry out the analysis)
• Rational approach encourages conformity among managers, therefore stifles innovation and creativity.
• Complex and costly for small business with informal structures and systems.
• loss of entrepreneurial spirit. Entrepreneurs break rules and make changes to conventional ways of doing business.

Question 3

What is uncertainty?

Answer 3

The inability to predict the outcome of an activity due to lack of information about the required input/output relationship or about the environment in which the activity takes place.

Question 4

Explain the 2 factors that increase a managers perception of uncertainty.

Answer 4

Complexity- the number of variables which can impact an organisation , how complicated they are and how difficult to understand. Complexity can arise from political, environmental and technological factors amongst others.

Dynamism- the rate of change in the business environment. 2 factors that have increased dynamism are

1. Faster information flows- global impacts quickly
2. Shorter product life cycles-modern competitive strategy leads most firms to invest heavily in R&D to render rival products obsolete.

Question 5

How has high uncertainty impacted business strategy?

Answer 5

• Reduces planning horizon-a firm operating in an uncertain environment is unlikely to plan too far ahead.
• May lead to conservative strategies - management may stick with strategy that has worked in the past, in fear of trying anything new because unable to forecast. This approach is flawed because there is no guarantee old “recipes” will still work in an uncertain environment.
• increases information needs of the organisation- management will require more regular info on a greater range of factors.
• led organisations to abandon rational approach in favour of approaches that take into account the changing nature of the environment in which the organisation is operating.

Question 6

What is strategic drift?

Answer 6

Where organisations fail to keep up with changes in their environment, instead they stick to strategy that worked in the past. The organisation may need to look at radical action known as transformational change in order to survive.

Question 7

Other that the rational approach, what other recognised approaches to strategic planning are there?

Answer 7

Emergent approach
Incremental approaches
Freewheeling opportunism
Political approaches

Question 8

What is the emergent approach?

Answer 8

Mintzberg argues that successful strategies can emerge in an organisation without prior deliberate planning.

The intended strategy branches out into 2, the unrealised strategy and the deliberate strategy.

The emergent strategy joins the deliberate strategy and becomes the realised strategy.

Intended strategy often fails because no company can totally predict an environment/outcome. The emergent strategy is often a response to the unexpected, and the resulting realised strategy can be superior to the original strategy.

Question 9

What is deliberately emergent strategy?

Answer 9

Where focus is on manager at the heart of the strategy. Manager creates the conditions for new ideas to flourish and strategies to emerge.

Question 10

What skills should a manager possess for a deliberately emergent strategy to be successful?

Answer 10

• manage stability- not feel compelled to constantly rethink businesses strategic future.
• Detect discontinuity-ability to detect subtle change in the environment that may affect the business. Key to this is manger must know the business.
• Manage patterns - management should encourage strategic initiatives to grow throughout the business and watch to see how they develop and intervene once this is clear.
• Reconcile change and continuity- new patterns of strategy and radical changes will create resistance and instability in a firm.

Question 11

What is the incremental approach, give two perspectives?

Answer 11

Moving from point A to B - in a number of steps rather than in one step.

Lindblom - muddling through
Quinn - logical incrementalism

Question 12

What is lindblom - muddling through

Answer 12

Criticism of rational model, describes how government administrators “muddle through” year on year rather carry out out strategic initiatives.

In practice managers confuse the goals and strategy of a business

Unrealistic for a strategic planner to sift through every possible option

At best formulation of strategy is a process of evaluating a few slight extension to existing policies.

Lindblom argued that strategic choice takes place by comparing possible options and considering which would give best outcome. This approach doesn’t attempt to identify and review all potential strategies available. Rather it provides a way of monitoring the progress and direction of the company, and allows a change of course if required.
Lindblom didn’t advocate this approach merely recorded its existence. He agreed that in turbulent environments, minor adjustments would not allow an organisation to adapt sufficiently.

Question 13

What is Quinn- logical incrementalism?

Answer 13

More positive view on incremental strategy. A manger must know where they need the organisation to go and than proceed in small steps, adapting to environmental changes along the way. Falls somewhere between rational model and lindblom.
He identified :

Managers generally know where they want there organisation to go.

Strategy is an incremental step by step learning process

Managers consciously keep their decisions small and flexible. In the early stages they avoid over precise statements that might impair the flexibility or imagination needed to exploit new information or opportunities.

Outcome of approach is a deliberate policy of small strategic changes in the framework of a general sense of direction.

Question 14

In the incremental approach the main managerial functions are:

Answer 14

Formal and informal communications- manager is central and attuned to problems/issue confronting the organisation.

Sensing need for change - once this is apparent the will start to develop a general strategic vision for the organisation.

Build political support from key figures -rather than present full strategy and risk opposition.

Gain commitment to initial trial of strategy, erode consensus of the old way of doing things.

Consensus will build and press the strategic change forward incrementally

Question 15

What is freewheeling opportunism?

Answer 15

Alternative to having no plan or little plan. Term used to describe reactive process of management as an alternative to strategic planning.
Suited to risk takers. This suggests a flexible and dynamic approach, opportunities taken as they arise, fast reaction to environmental changes.

Question 16

What criticisms can be made of Freewheeling opportunism?

Answer 16

May encourage managers to pursue their own agenda, which may conflict with company aims

May restrict ability of the company as a whole to respond to major environmental changes

May result in pursuit of short term profit rather than long term strategy.

Question 17

The book strategy safari attempts to define strategic management. It identifies 10 schools of thought. What are these and what 2 main categories can they be put into?

Answer 17

2 main categories are:
prescriptive schools- explain how strategy should be formulated.
Descriptive schools- how strategy actually are formed.

Prescriptive schools:

Design school (conception) - strategy development seen as a rational process which seeks to establish a fit between internal capabilities and external possibilities

Planning school (formal) - strategy is developed by specialists using rigorous strategy planning methodologies.

Positioning school - strategy is a combination of offensive and defensive moves based on the premise industry structure drives strategy position which drive organisational structure.

Design/planning schools closely linked to rational model.main tool in design school is swot. Positioning schools uses tools such as Boston consulting group, porters generic strategies & porters value chains.

Descriptive schools:
Environmental school (reactive)-strategy develops as a responsive to environment it operates in.

Cognitive school (mental) - strategy development is an act of understanding how the mind works and processing information is the key to understanding strategy development.

Entrepreneurial School (visionary)- strategy developed is dependent on the vision of one entrepreneurial individual

Power school (negotiation) strategy results from power struggles within the organisation and in the marketplace

Cultural school (collective) strategy development is a process of social interaction that takes place within the context of beliefs and shared values of members of the organisation.

Learning school (emergent) strategy emerges as a result of trial and error and learnings within the organisation

Configuration school (transformation) strategy is a conscious act of transforming and organisation from one state to another.

Question 18

Strategy and structure- which comes first?

Answer 18

When discussing positioning approach, it’s considered industry structure drives strategic position which in turn drives organisational structure.

In design school however it is viewed that strategy proceeds structure. The more widely held belief is strategy dictates structure and that structure must support strategy.

Regardless of view it is accepted that strategy and structure are linked and are both key determinants of an organisations success.

Question 19

What influences have a bearing on organisational structure and design?

Answer 19

• The organisations strategic objectives- if coordination between specific parts or the organisation is important, structure should facilitate relationships between them.

*nature of environment business is operating in now and in the future.
Product based structures more flexible, more suited to dynamic environments

• diversity of the organisation- needs of small company different to multinational.
• future strategy - changing structure to suit future acquisitions
• tech available - because of effect on patterns of work, formation of structure and groups, nature of supervision and managerial roles. New tech has resulted in fewer management levels because it allows clerks to take an a wider range if functions.
• people in the organisation and their managerial skills

Question 20

Why might the formal top down approach be unsuitable for small businesses?

Answer 20

• lack of management skills
• Differences in goals, often inseparable from goals of owners. May just want satisfactory income rather than growth
• limited scope of product/market choices. Business often have narrow scope based on skills and knowledge of proprietor. Management may be reluctant to move away from core business.
• limited resources- small business lack the resources for sudden growth and strategic leaps often envisaged by the rational model. An unsuccessful strategy could destroy the business.
• organisational structure - strategic implementation demands the setting of an appropriate structure and team to carry it out. Small business may not have the personnel or owner might not want to give up absolute control.

Question 21

Since profit is not their main objective, public service and not for profit organisations face difficulty in developing strategy due to the difficulties in using traditional private sector approaches to objective setting.
Why is the discussion of objectives likely to be problematic?

Answer 21

• likelihood of multiple and conflicting objectives
• more difficult to measure objectives-how can one measure if a school is educating pupils well?
• may be more equal balance of power between stakeholders
• people receiving the service are not always people paying for it. E.g. Governments and NHS trust determine a hospitals funding, not the patients. Consequently there may be pressure to perform well in league tables at the expense of other objectives

Question 22

What approach can be used to address the problems that public service and not for profit organisations have in objective setting?

Answer 22

The “3 Es approach” of the audit commission

Effectiveness- looks at the outputs ( the goal approach).eg in a hospital- have the waiting lists reduced? Have mortality rates gone down?

Efficiency- looks at link between outputs an inputs (the internal processes approach). Looks at how well inputs have been used to achieve outputs. E.g. What was the average cost per patient treated.

Economy- looks at the level of inputs. E.g. Did we spend more on drugs this year or nurses wages?

Think about effectiveness as “doing the right things”
Think about efficiency as “doing things right”

Question 23

In the not for profit and public sectors, what are the implications of the problems faced in objective setting?

Answer 23

• hard to develop consistent strategies if objectives are in conflict with one another
• hard to decide between strategic options. Options are evaluated against objectives of business before management will devote resources. However if one option provide a good financial return while another provides an area with much needed jobs, an organisation with both financial and social responsibility objectives will find it difficult to chose.
• development of appropriate performance measures. More objectives means more control measures. If they’re competing there is danger conflicting signals and worse- too much focus on one at the expense of the rest. E.g. A school has many objectives- ensuring good citizens, emotional development etc. One measure schools tend to focus on is exam results. This distorts the behaviour in the school towards exam results at the expense of other equally worthy objectives