Loading...

Strategy development processes and Strategic decision making in high-velocity environments

Term Paper 2015 10 Pages

Business economics - Business Management, Corporate Governance

Excerpt

Table of Contents

1. Introduction

2. Strategy and its ultimate intention

3. Literature review on strategic development processes

4. Discussion on strategic decision making in high-velocity environments
a. Quantitative versus qualitative data
b. Forecasting and long-term planning
c. Proactiveness challenges reactiveness
d. The role of structure
e. Continuous innovation

5. Managerial implications

Reference List

1. Introduction

Strategy itself is an ambiguous concept with a multitude of questions to be considered, for instance, whether the process of strategic thinking should be predefined or rather an intuitive act. If Google, one of the most successful companies in the world, is taken as an example, it does not become any clearer what approach is recommended to follow, as the company decides to shut down products that seem popular, in order to invest in alternative projects. Have globalisation and economic deregulation created an environment too complex to be captured in a strategic framework?

This essay will first analyse strategy development processes with a focus on deliberate and emergent approaches, and secondly continue with a critical discussion about the applicability of these techniques in a high-velocity environment. Finally this essay will provide managerial implications for an effective approach to strategy development. Taking Google as an example illustrates how a company achieves to integrate essential features from both, the deliberate and the emergent strategy, which bears strong resemblance to the most deliberate approach among those classified as emergent - logical incrementalism.

2. Strategy and its ultimate intention

According to Chandler (1962), strategy is the determination of long-term goals, the courses of action that facilitate achieving these goals as well as assigning the necessary resources. Researchers have mostly agreed that strategy’s main ambition is the stimulation of the organisation’s success, but have widely disagreed about how such success should be defined. This essay will follow the approach of assessing the effectiveness of a strategy by assessing its influence on the organisation’s performance, which can be defined by growth and profitability (Wirtz et al, 2007).

3. Literature review on strategic development processes

The two prevailing schools of thought can be captured in either a deliberate strategy development process, which is often associated with formal planning and the intention to create a detailed strategic plan for the future, or an emergent strategy development process, which focuses more on reacting to prevalent market changes and therefore evolves from a multitude of decisions (Fredrickson and Mitchell, 1984).

Wilson (1998) argues that a deliberate strategy provides a holistic view of the market as well as the organisation and therefore enables the managers to make strategic decisions based on facts rather than intuition. Further, Porter (1987) states that long- term objectives have to be defined in order to align all operational activities, the culture and the company’s entrepreneurial activity as well as the allocation of resources. Formal strategic planning includes features such as a full formulation of the plan, strategic meetings on a regular basis and the use of rational analysis with an emphasis on the separation of the formulation and the implementation of the strategy (Prahalad, 1983). Furthermore, a deliberate strategy does not evolve unconsciously or in an unplanned way, but through an organisational intention (Coulter, 2005).

In contrast, proponents of the emergent approach claim that a deliberate strategy contains biases that are detrimental to a company’s success. According to Chakravarthy (1997), a deliberate strategy does not meet the demand for strategic flexibility needed in today’s environment, and would therefore be inappropriate to base strategic decisions on. Mintzberg (1994a), who depicts a number of strategic fallacies in his book “The rise and fall of strategic planning”, claims that this rigid and bureaucratic approach causes strategic inertia, as it stifles intuition, creativity and innovation. Further, the deliberate strategy is repeatedly critiqued of being unrealistic and too focused on quantitative data. Researchers, who had earlier emphasised the importance of quantitative analysis, later acknowledged that logical rationality is not sufficient to determine an organisation’s strategy (Ansoff and McDonnell, 1990). Hence, demand rose for a more intuitive and agile approach, which should include the line managers in strategy making. An emergent strategy is developed applying a bottom-up approach and is formed by a multitude of small decisions. The development process proposes to include shorter planning horizons, less formality and less emphasis on details, in order to achieve higher agility and faster decision making (Bourgeois and Eisenhardt, 1988; Grant, 2003). Quinn (1978) introduced logical incrementalism, which has the nature of an emergent strategy, to explain how strategy emerges from a multitude of subsystems within one company. According to Quinn (1978, 1980), logical incrementalism allows managers to learn by experimentation and to react to external as well as internal events on a daily basis, but nevertheless act in conscious and proactive way.

4. Discussion on strategic decision making in high-velocity environments

Rapid change in competition, regulation, technology and demand due to a globalised market has resulted in ever-shorter product life cycles and increased uncertainty, which can be described as a high-velocity environment (Meyer, 1982). These circumstances require the management to handle continuous innovation as well as continuous strategic decision making. Strategic decisions are those that shape the goals and overall direction of an organisation, hence, strategic decision making is the act of making a decision that has a major impact on the entire business and is mostly executed by the management level (Mintzberg and Quinn, 1991). In the following section, this essay will contrast the different benefits and drawbacks of a deliberate as well as an emergent strategy and discuss the impact on the effectiveness of decision making in a turbulent environment.

a. Quantitative versus qualitative data

One element in the discussion about the most useful approach is the applicability of quantitative analyses in high-velocity environments. According to Mintzberg (1994b), effective managers should not solely rely on formal analyses, such as market research reports, but also focus on qualitative and intangible data in order to successfully manage strategic decision making. However, a rationalised analysis is still essential in the modern world (Porter, 2001), as it helps managers to gain a profound understanding of the market, which will increase the managers’ confidence to act (Courtney et al, 1997; Hambrick et al, 1996). Taking the example of Google, the company bases as many decisions as possible on data, analytics and scientific experimentation (Steiber, 2014). An advantage of a deliberate approach is that decisions based on objective reasoning inhibit nepotism and enhance the feeling of fairness. However, the incremental approach claims that managers should consider a combination of the input from their analysis and their personal experience, instead of solely relying on binary data (Grant, 2003).

[...]

Details

Pages
10
Year
2015
ISBN (eBook)
9783668435742
ISBN (Book)
9783668435759
File size
497 KB
Language
English
Catalog Number
v358844
Institution / College
Edinburgh Napier University
Grade
1,6
Tags
Mintzberg Porter Strategy Decision making

Share

Previous

Title: Strategy development processes and Strategic decision making in high-velocity environments