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Correlation between Corporate Culture and Corporate Strategy

Google vs. Apple and Daimler vs. Siemens

by Henning Wenzel (Author) Sebastian Voigt (Author)

Term Paper 2013 42 Pages

Business economics - Business Management, Corporate Governance

Excerpt

Executive Summary

The character of a company´s culture or work climate is gaining in importance. Culture is a product of the core values and business principles that executives espouse, the standards of what is ethically acceptable and what is not, the work practices and behaviours that define “how we do things around here”, its approach to people management and style of operating, the “chemistry” and the “personality” that permeates its work environment, and the stories that get told over and over to illustrate and reinforce the company´s values, business principles, and traditions. A company´s culture is important because it influences the organization´s actions and approaches to conduct the business – in a very real sense, the culture is the company´s “operating system” or organizational DNA.1 All in all, culture as a concept is difficult to define and differs from company to company. The crafting of a strategy represents a managerial commitment to pursue a particular set of actions in growing the business, attracting and pleasing customers, competing successfully, conducting operations, and improving the company´s financial and market performance.2 Even companies with same strategic and business concepts and comparable success differ in their approaches regarding the corporate culture. What becomes clear is that there is a correlation between culture and strategy. Hence the consistency between strategy and culture is a long-term competitive advantage and a key to corporate success. To counteract preventive a possible misfit between the corporate culture and the strategy, consideration of corporate culture as part of the concept to strategy implementation is essential.

Table of Contents

Executive Summary ... II

Table of Contents ... III

List of Abbreviations ... IV

List of Figures ... V

1 Introduction ... 1
1.1 Objective ... 2
1.2 Methodology ... 2

2 Corporate Strategy ... 3
2.1 Definition of Strategy ... 3
2.2 Strategic Process ... 4

3 Corporate Culture ... 6
3.1 Definition of Corporate Culture ... 7
3.2 Levels of Corporate Culture ... 8
3.2.1 Basic assumptions ... 9
3.2.2 Values ... 10
3.2.3 Norms ... 10

4 Correlation between Culture and Strategy ... 12
4.1 Strategy Implementation ... 13
4.1.1 Strategy around Culture ... 13
4.1.2 Strategy by Culture Adaption ... 14
4.2 Company Examples ... 16
4.2.1 Company 1 – Google Inc. ... 16
4.2.2 Company 2 – Apple Inc. ... 19
4.2.3 Distinctions between Google Inc. and Apple Inc. ... 22
4.2.4 Company 3 – Daimler ... 23
4.2.5 Company 4 – Siemens ... 25
4.2.6 Distinctions between Daimler and Siemens ... 27

5 Conclusion ... 28

Bibliography ... VI

ITM-Checklist: 360-degrees analysis ... XI

List of Abbreviations

CEO ... Chief Executive Officer
e.g. ... For example
i.e. ... That is
iMac ... Personal Computer from Apple
p. ... Page
R&D ... Research and Development
SWOT ... Strengths, Weaknesses, Opportunities, Threats

List of Figures

Figure 1: The Strategy-Making, Strategy-Executing Process ... 4
Figure 2: Stages of strategic development ... 5
Figure 3: 7S-Model ... 7
Figure 4: Three levels culture. ... 9
Figure 5: Iceberg model of culture. ... 11
Figure 6: Google Inc. locations worldwide. ... 16
Figure 7: Google headquarter ... 18
Figure 8: Evolution iMac. ... 20
Figure 9: Target system by Daimler ... 24

1 Introduction

Strategy is about key issues for the future of organizations. For example, how should Google – originally a search company – manage its entry into the market for mobile phones? Should universities concentrate their resources on research excellence or teaching quality or try to combine both? How should a small video games producer relate to dominant console providers such as Nintendo and Sony? All these are strategy questions. Naturally they concern entrepreneurs and senior managers at the top of their organization. But these questions matter more widely.3 Middle managers also have to understand the strategic direction of their organization, both to know how to get top management support for their initiatives and to explain their organization’s strategy to the people they are responsible for.4 Associated with that, every organization has a corporate culture. Cultures begin with leaders who transmit their own values and assumptions on a group. Has this group success and accepted the basic assumptions, then it becomes a culture that sets the acceptable forms of leadership for future generations of members. The analysis of culture sheds light on subcultural dynamic processes within the company.5 A major reason for the growing interest in corporate culture is that the concept is useful for analysis at the enterprise level, as well has led to a better understanding of internal operations with the concurrence of various subcultures and occupational groups. Many of the problems, earlier simply dismissed as "failure of communication" or a lack of teamwork, can be now much more accurate as a disorder of intercultural communication.6

1.1 Objective

Every company has a culture. Strategy without regarding this culture in any way is not successful or future-proof and characterized by failures. Many companies who want to act sustainably are aware of that.

This assignment will explain the terms of the strategic process and the definition of corporate culture as well as the correlation between corporate culture and strategy.

1.2 Methodology

Besides the introduction and the objectives, the structure of this assignment bases on the explanation and definition of corporate strategy and corporate culture in chapter 2 and 3. This gives an overview about the specifics that these two significant elements of a company have. The correlation between those elements is described in chapter 4. This involves strategy implementation a key factor of successful management. In addition the corporate cultures of four companies and their correlation to the strategy are explained. The assignment closes with a conclusion in chapter 5.

2 Corporate Strategy

A company´s strategy is management´s action plan for running the business and conduct operations. The crafting of a strategy represents a managerial commitment to pursue a particular set of actions in growing the business, attracting and pleasing customers, competing successfully, conducting operations, and improving the company´s financial and market performance.7 In choosing a strategy, the management of a company is in effect saying why they decided themselves among all the many different ways of competing for this chosen strategy, as they have decided to employ this combination of competitive and operating approaches to move the company in the intended direction, strengths its market position and competitiveness, and boost performance.8 The strategic choices a company makes are seldom-easy decisions, and some of them may turn out to be wrong but that is not an excuse for not deciding on a concrete course of action.9

2.1 Definition of Strategy

Alfred Chandler one of the lading strategy theorists defines strategy as: “The determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals."10 On the other hand Michael Porter says that: “Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value."11 Porter transfers ideas from the industrial economics in the teaching of strategy and can explain with the help of the reference framework developed by him, how to establish competitive advantage and success differences between companies.12 With the book “Corporate Strategy”, Harry Igor Ansoff developed the strategic management to a further technology, which applies to master it with the help of tools. These tools include the SWOT analysis as well as the product market matrix and sophisticated phase models. For this reason Ansoff became a pioneer in strategic planning.13

2.2 Strategic Process

The managerial process of crafting and executing a company´s strategy consists of five interrelated and integrated phases as it is shown in the following figure.14

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Figure 1: The Strategy-Making, Strategy-Executing Process (own figure).15

Based on the strategy components a corporate strategy is build on a vision, mission and business objectives. The task of strategic management is to convey the vision into the mission. The business objectives are based on the mission, which in turn are resulting into the strategic programs (see figure 2).16 A strategic vision describes the route a company intends to take in developing and strengthening its business. It lays out the company´s strategic course in preparing for the future. The distinction between a strategic vision and a mission statement is defined as followed: A strategic vision portrays a company´s future business scope (“where we are going”), whereas a company´s mission typically describes its present business and purpose (“who we are, what we do, and why we are here”).17 According to this, strategic vision becomes real only when the vision statement is imprinted in the minds of organization members and is than translated into hard objectives and strategies.18

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Figure 2: Stages of strategic development (own figure).19

Referring to the topic of this work and regarding to figure 1, culture is an important part of phase 4 during the process of implementing and executing the strategy. A company´s present culture and work climate may or may not be compatible with what is needed for effective implementation and executing of the chosen strategy. When a company´s present work climate promotes attitudes and behaviours that are well suited to first-rate strategy execution, its culture functions as a valuable ally in the strategy process. When the culture is in conflict with some aspect of the company´s direction, performance targets, or strategy, the culture becomes a stumbling block.20 The correlation between corporate culture and strategy is discussed in detail in chapter 4.

3 Corporate Culture

The most common view is that culture is about human relations in the organization.21 The corporate culture is an important part of the so called “soft factors”. By increasing dynamic market conditions, a strong communication, cooperation and team capable behaviour of employees are necessary. The goal is to improve the adaptability of the company on the market, the sense of togetherness and the identification of the employees with the company. So these factors gain increasing importance compared to the “hard factors” of strategies and instrumental design of organizational structure.22 The concept of corporate culture gained attention in international management practice and research from the late 1970’s. It was particularly the success of Japanese companies with their different management style that brought awareness to the “soft factors“ that were strongly contributing to companies’ success.23 A central finding was, that the advantage was not about laying in a technology or to be structuraly more efficient but in some unspoken rules and implicit norms that influenced the actions of the company.24 During this time, a great corporate culture debate began in which also the “7Smodel” was developed by the two McKinsey consultants Tom Peters and Robert Watermann in 1982 (see figure 3).25 By the “7S-model” they defined seven variables, which stand in relation to the organization problem and depending on each other. This included the structure, strategy, people, management style, systems and procedures, guiding principles and value system (i.e. corporate culture) and the existing and desired strengths or special knowledge of the company.26

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Figure 3: 7S-Model (own figure).27

In this connection they defined the employee and customer orientation as the allimportant criteria and overall the concept of culture as an economically important variable.28

3.1 Definition of Corporate Culture

Culture as a concept is difficult to define and many different definitions have been given in the past. Perhaps the best-known definition in international management is that by Hofstede: „Culture is the collective programming of the mind which distinguishes the members of one human group from another. (...) Culture, in this sense, includes systems of values; and values are among the building blocks of culture.“29 Edgar Schein defines organisational culture as: „The basic assumptions and beliefs that are shared by members of an organisation, that operate unconsciously and define in a basic taken-for-granted fashion an organisation’s view of itself and its environment.“30 In this connection, it is important to notice that culture includes both conscious and unconscious values, ideas, attitudes and symbols that shape human behaviour.31 Additionally, culture can be thought of as consisting of both visible and invisible elements.32

However, every company has its own unique culture. The character of a company´s culture or work climate is a product of the core values and business principles that executives espouse, the standards of what is ethically acceptable and what is not, the work practices and behaviours that define “how we do things around here”, its approach to people management and style of operating, the “chemistry” and the “personality” that permeates its work environment, and the stories that get told over and over to illustrate and reinforce the company´s values, business principles, and traditions. The meshing together of stated beliefs, business principles, styles of operating, ingrained behaviours and attitudes, and work climate define a company´s corporate culture.33 A company´s culture is important because it influences the organization´s actions and approaches to conducting business – in a very real sense, the culture is the company´s “operating system” or organizational DNA.34 The corporate culture is a variable that evolves over time and the current state depends on developments in the past.35 The next chapter will explain the different levels of corporate culture.

[…]


1 Cf. Reid, J., Hubbel, V. (2005), p. 1.
2 Cf. Thompson et al. (2010), p.6.
3 Cf. Thompson et al. (2010), p. 386.
4 Cf. Johnson et al. (2011), p. 23.
5 Cf. Thompson et al. (2010), p. 387.
6 Cf. Schein, E.H. (1995), p.17.
7 Cf. Thompson et al. (2010), p.6.
8 Cf. Thompson et al. (2010), p.6.
9 Cf. Markides, C. (2004), p.5.
10 Cf. Besanko et al. (2007), p.1.
11 Cf. Porter, M. (2004), p. 60.
12 Cf. Schuh, G., Kampker, A. (2011), p. 65.
13 Cf. Ansoff, I.H. (1965), p. 65.
14 Cf. Thompson et al (2010), p.24.
15 Cf. Thompson et al. (2010), p. 24.
16 Cf. Brecht, U. (2005), p. 34.
17 Cf. Thompson et al. (2010), p.28.
18 Cf. Thompson et al. (2010), p.31.
19 Cf. Brecht, U. (2005), p. 34.
20 Cf. Thompson et al. (2010), p.397.
21 Cf. Schein, E.H. (1995), p. 27.
22 Cf. Schuh, G., Kampker, A. (2011), p. 201.
23 Cf. Morschett et al. (2009), p. 204.
24 Cf. Peter, T, Watermann, R.H. (1984), p. 133.
25 Cf. Schuh, G., Kampker, A. (2011), p. 260.
26 Cf. Schuh, G., Kampker, A. (2011), p. 261.
27 Cf. Peter, T, Watermann, R.H. (1984), p. 133.
28 Cf. Feldner, J., König, R. (1999), p. 2.
29 Cf. Morschett et al. (2009), p. 133.
30 Cf. Johnson et al. (2011) p. 168.
31 Cf. Terpstra, V. and David, K. (1991), p.34
32 Cf. Schein, E.H. (1995), p. 15.
33 Cf. Thompson et al. (2010), p. 386.
34 Cf. Reid, J., Hubbel, V. et al. (2005), p. 1.
35 Cf. Fichtner, H. (2008), p. 31.

Details

Pages
42
Year
2013
ISBN (eBook)
9783668157514
ISBN (Book)
9783668157521
File size
3.5 MB
Language
English
Catalog Number
v315514
Institution / College
University of applied sciences, Cologne
Grade
1,7
Tags
company culture work climate strategy traditions principles

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Title: Correlation between Corporate Culture and Corporate Strategy