relevance and applicability of contemporary management theories | My Assignment Tutor

TaskIndividual EssayWord limit: 2,000 wordsQuestionFocusing on (chapter 1 to 3 below) of the key topics that have been covered in themodule, write a critical literature review regarding the relevance and applicability ofcontemporary management theories in dealing with the issues arising from thedevelopment and deployment of a successful strategy.The review should conclude with a reflective statement, in light of your wider readingof academic literature, about the opportunities and challenges that managementteams face due to increasing levels of complexity in international markets.GuidelinesThe word limit for this submission is 2,000 words (+/- 10%)Write the report in Word (Times New Roman font,12pt) as this will provide you withthe word count functionality, save as a .doc or .docx file.You may also include photos, tables or diagrams in the main body of the workas you see fit. Text in tables and diagrams will not count towards the wordlimit.1.1: Strategy – ‘In Search ofMeaning’As a student of strategy, you will come across widespread definitions of this term,and frankly, we cannot dwell upon on them all in the context of this module. But tostart you off here are some known definitions of strategy: Strategy: a plan, method or series of actions designed to achieve a specific goalor effect (Wordsmyth Dictionary (Links to an external site.)).Strategy is the pattern of objectives, purposes or goals and the major policies and plans for achieving these goals, stated in such a way as to define whatbusiness the company is in or is to be in … (Kenneth Andrews – The Concept ofStrategy, Irwin, 1971). The determination of the long-run goals and objectives of an enterprise and theadoption of courses of action and the allocation of resources necessary forcarrying out these goals (Alfred Chandler – Strategy and Structure, MIT Press,1962). Strategy is an ongoing process companies use to form a purpose, and analysetheir external environment, and analyse their internal environment, and selectone or more strategies to use to create value for customers and otherstakeholders.(Johnson and Scholes, 2006).The last definition is my personal favourite as it captures a more comprehensive wayof looking at strategic management, and its emphasis on process which is central tohow we approach strategy in this module. I have reviewed several such definitionsand the commonalities that emerge for me are the following: A strategy is the pattern of activities or decisions that a firm undertakes in pursuitof its long-term objectives or advantageIn determining strategy, a firm must understand its internal and externalenvironmentThe external environment is the conditions outside the firm affecting itsperformanceThe internal environment is the conditions inside the firm affecting its choice anduse of strategies – what resources a firm possesses and how it uses them todevelop a competitive advantageStrategy provides direction to organising for success. Keeping these points in mind, let us now look at how Michael Porter, a well-knownstrategy scholar, defines the term ‘strategy’:Strategic vs operationalAlongside having a clear definition of strategy, it is equally important for you todistinguish clearly between what are strategic and operational issues, and therelationship between the two. Many managers get confused about this. An influentialarticle by Michael Porter (1996) makes a strong statement about his view on whatstrategy is, and what it is not. It is definitely not operational.Porter, M.E. (1996) What is strategy? Harvard Business Review, November–December, 61–78.1.4: Levels of StrategyLevels of StrategyAnother way of understanding the role and relevance of strategy is to look at thedifferent levels of strategy. The strategy literature makes a fundamental distinctionon strategic issues at three different organisational levels: corporate, business andfunctional levels of strategy. Since each level of strategy focuses on a different set ofissues, it is important that we understand what strategy means at each of the threedifferent levels.The diagram below shows how the different organisational levels tie together:Accessible Description of DiagramCorporate-level strategies are about where the organisation competes (e.g. whichindustries, which locations). Business-level strategies are about how the organisationcompetes. Functional-level strategies are about operational effectiveness. All threelevels of strategy are important.This module focuses on corporate- and business-level strategies, rather than onspecialist functional or operational-level strategies. However, all three levels ofstrategy are important, since effective implementation of any strategy requirescareful consideration of its operational implications. Therefore, in reality, all threelevels of strategy interrelate and overlap. It is nevertheless important that managersare absolutely clear about what the strategic issues are at each of the differentlevels, since corporate strategy, business unit (competitive) strategy and functionalstrategy all address very different kinds of problems.One final (and perhaps confusing) point that must be explained in relation to thethree levels of strategy is that although they address very different issues and remainconceptually distinct, in some organisations such as small businesses, all threelevels of strategy are likely to be carried out by the same person or persons (e.g., theowner/manager in a small firm). As a result, they can, in practice, merge together.Similarly, for a business that has only one line of business activity, business andcorporate levels of strategy are likely to be carried out by the same layer ofmanagement. It is much easier to see and understand the three levels of strategy ifyou look at a large organisation, where each level is the responsibility of a differentmanager at a different level of seniority.In large multidivisional, multi-business organisations, corporate and business levelsof strategy are very different. One of the major tasks of corporate-level managers isthe continuous review of the performance of the organisation’s individual businessesand the occasional decision to buy or sell one or more of them to meet changedcorporate strategy priorities.For example, a corporate manager at the fashion house Chanel would need toreview whether to continue to diversify into so many other things such as perfumesand make-up, since there is a view that such extensive diversification may damagethe status of its core luxury clothing business. This can occur in exactly the sameway in a not-for-profit organisation. For example, a hospital manager might decide toget rid of the accident and emergency department (a strategic business unit, or SBU)and invest the resources saved into expanding other business units, such asincreasing the number of wards for children, or upgrading the specialist cancertreatment department. A similar example may be used in modern armies. Allgovernments are reviewing their balance of investment across army, navy and airforce to decide on what weapons, human resorces and logistics will be mosteffective in the light of ‘new’ forms of warfare and security threats.As these examples show, strategy plays a significant role at all levels in all kinds oforgan2.1: The Business EnvironmentThe Business EnvironmentThere are lots of questions to ask when thinking about the business environment!For example, what is the business environment? Why is it changing fast? Why doesit matter to strategy?Strategists have always understood that an awareness of the external environmentis important for decision-making in organisations. Indeed, industrial organisationeconomists have suggested that strategy should be largely based on opportunitiesthat can be identified in the external environment.However, differences of opinion exist about how great the influence of the externalenvironment should be. In this unit we will review these different opinions andencourage you to develop your own view on which perspective you find mostconvincing.Whatever view you hold, it is clear that: Organisations must understand their external environmentWhen making strategy it is essential to listen to the messages being sent by theexternal environment (even if making strategy based on these messages alonemay be unwise). We suggest, therefore, that understanding what constitutes an organisation’sexternal environment and, in particular, the nature and impact of change in itsexternal environment is critical for strategists. Understanding how the externalenvironment can constrain or enable the organisation’s strategic choices is also veryimportant.When we say the business environment is fast changing, what do we mean by ‘fast’?Being ‘fast’ is relative; it can mean different things in different business contexts. Forsome, it might just be the norm. Let us explore what a fast-changing businessenvironment might look like by comparing two scenarios in different businesscontexts.Take a look at the following resources relating to these two business sectors andthink about the question that follows:2.2.1: Strategic Implications ofMacro-environmental FactorsStrategic Implications of Macro-environmentalFactorsMacro-environmental factors, like all the other factors discussed in this unit, can beseen in terms of the opportunities or threats they signal. The point about the types ofsignals received during this form of analysis is that they are very high level andgeneral, and some effort may be required to interpret the true nature of themessages being sent.How, therefore, might an understanding of macro-environmental factors affect anorganisation’s decision-making?Let us consider a historic decision, namely the development by the Japaneseelectronics company Sony of its Walkman mobile audio cassette player in 1978. Thisproduct launch resulted from Sony’s mastering of the technological process ofminiaturising music-playing devices; it actively created a previously non-existentdemand for ‘music on the go’. This in turn contributed to building and sustaining alifestyle expectation (that electronic devices will be ever more portable and evermore powerful), which led to further technological developments (such as laptopcomputers, electronic books and MP3 music players) to respond to this change andto meet this emerging demand.Before the Walkman, it is arguable if anyone realised that they ‘needed’ a portablemusic player. Sony, therefore, in anticipating an emerging lifestyle change,developed a product to satisfy this ‘need’ and in so doing encouraged demand andcreated a new market segment. A more recent example illustrating the samephenomenon may be that of the BlackBerry, a smart phone and email device, whichhas revolutionised personal communication and is actively changing the way manypeople work. The impact of devices like the BlackBerry and other smart phones hascreated a new concept, sociomateriality, which attempts to describe the relationshipbetween the design of new technology and how people use that technology.The Macro-environment is a ‘System’What do we mean by a ‘system’?The idea of ‘system’ has been used to imply that its parts (organizations orinstitutions) are interdependent with each other: that the performances of the partshave consequences or functions, consequences for the ‘performing’ part,consequences for other ‘parts’, consequences for the whole system.This suggests that a system is a group of interacting, interrelated, or interdependentelements forming a complex whole. Fahey and Narayanan (1986), when suggestingthat we should view the macro-environment as a system, acknowledged that eachfactor is (potentially) related to and (potentially) affects every other factor. Haveanother look at Figure below and notice that the arrows linking the various factors donot all point in the same direction; this implies an interrelationship rather than simplyan effect.Any big change in society can result in an equally big business opportunity, as JensUlltveit-Moe illustrates. Select Play on the video for a video clip featuring an interviewwith Jens Ulltveit-Moe of the Umoe Group, a Norwegian investment group2.3.1: GlobalisationGlobalisationInternational business matters to any business anywhere, irrespective of itssize and shape. It matters not only to the planning departments of largemultinational corporations, or to governments trying to attract the investment of suchcompanies to create jobs for their people, but also to the managers of small andmedium-size enterprises and to neighbourhood stores trying to retain the business oftheir local customers. Whether they know it or not, they are competing in aninternational market for goods and services. Every initiative taken by an internationalfirm has an impact in a local market and on the market share of local organisationsand their ability to satisfy their customers.Consider, for example, that some of the most significant competitors of small localretailers are the major multinational oil corporations such as Exxon/Mobil, ElfAquitaine, Shell and BP. From about the beginning of the twenty-first century theyhave grown their downstream retail business of 24-hour shops in their gas and petrolstations, and this has been one of the fastest-growing retail sectors in the developedeconomies. It also directly undermines the one competitive advantage of small localconvenience stores – that of staying open late (although we should note that in somecountries, for example Germany, convenience stores are not allowed to stay openlater than larger competitors and so are denied even this one potential competitiveadvantage). Petrol stations are often open 24 hours a day and provide a wide rangeof services. Some now also act as collection points for parcel deliveries to localpeople. This is a classic example of a global company developing a strong offeringfor a local market.International strategy is about the pursuit of international advantage. There arenumerous difficulties but also benefits associated with operating across internationalborders. With our focus on understanding the external environment, we aim to brieflyintroduce the main themes associated with globalisation and to encourage you tothink about how the increasing internationalisation of business is impacting on yourorganisation, whatever sector you operate in.Globalisation increases risks. Globalisation is now a widely discussed andarguably almost an everyday concept for organisations, but, as the precedingdiscussion has indicated, it is an area of activity that is extremely complex andextremely risky. Extending your organisation’s activity or configuring yourorganisation’s value chain over international boundaries extends the complexity andrisks of your organisation’s activities. Even something as straightforward asoutsourcing production to a ‘low-wage’ economy is fraught with difficulty and risk, asthe reading in the next activity demonstrates.Globalisation increases complexity. Overall, even something as simple asmanufacturing cheap shampoo in China for the US market is revealed to be complexbecause of differences in expectations and culture, and in the increased complexityof building business relationships over large distances and different culturalexpectations.2.4.1: The Concept ofHypercompetitionThe Concept of HypercompetitionThe idea of hypercompetition was introduced by Richard D’Aveni in 1994. In asubsequent paper (D’Aveni, 1995) he defined hypercompetition as follows:[Hypercompetition results] from the dynamics of strategic maneuvering among globaland innovative combatants. It is a condition of rapidly escalating competition basedon price–quality positioning, competition to create new know-how and establish firstmover advantage, competition to protect or invade established product or geographicmarkets, and competition based on deep pockets and the creation of even deeperpocketed alliances. In hypercompetition the frequency, boldness, andaggressiveness of dynamic movement by the players accelerates to create acondition of constant disequilibrium and change. Market stability is threatened byshort product life cycles, short product design cycles, new technologies, frequententry by unexpected outsiders, repositioning by incumbents, and radical redefinitionsof market boundaries as diverse industries merge. In other words, environmentsescalate toward higher and higher levels of uncertainty, dynamism, heterogeneity ofthe players, and hostility.It is not just fast-moving, high-tech industries, such as computers, or industriesshaken by deregulation, such as the airlines, that are facing this aggressivecompetition. There is evidence that competition is heating up across the board, evenin what once seemed the most sedate industries. From software to soft drinks, frommicrochips to corn chips, from packaged goods to package delivery services, thereare few industries that have escaped hypercompetition. (D’Aveni, 1995, p. 46)Competition Will Only Become More IntenseIn essence, D’Aveni is suggesting that there is an inevitability about the intensity ofcompetition in all sectors – it will continue to grow and it will become harder andharder for organisations to build sustainable, long-term superior performance. Theintensity of hypercompetition is captured by an alternative definition:‘Hypercompetition occurs where the frequency, boldness and aggressiveness ofdynamic movements by competitors accelerate to create a condition of constantdisequilibrium and change’ (Johnson et al., 2006, p. 89). In hypercompetitiveenvironments, any advantage an organisation holds is likely to be temporary andthere is a risk it will be competed away by the actions of its competitors. Thephenomenon has been described by D’Aveni as a ‘cycle of competition’ (D’Aveni andGunther, 1995).The relationship it describes emphasises the active nature of the competitiverelationship and the need for constant vigilance on the part of incumbents.Advocates of the notion of hypercompetition suggest that this phenomenon isfrequently witnessed in high-tech industries such as mobile telephony or computing,where the pressure is always on to deliver ‘the next big idea’. These organisationsneed to be constantly making innovations in their products and services in order tomeet their industry key success factors.2.5: Embracing Change FastEmbracing Change FastFrom technology to globalisation, it is a truism that today’s successful companiesmust adapt to – and embrace – rapid change. The key to our success in dealing withchange, at an individual and at an organisational level, lies in our willingness toaccept change and to respond at lightning speed to the demands made by ourenvironment with empathy for all those who are involved. It is normal to want toresist change, to try bargaining and negotiating things back to the way they were,and to feel frustrated when the change inevitably continues. It is equally important tounderstand that these feelings are within the leader as well as all team members andmust be dealt with if the organisation is to grow as a cohesive group. In order tosurvive in a globalised society and in a universe that is constantly changing, we needto see change for what it is: the natural order of things! We need to recognise thisand to master the techniques to become part of that natural order so that theorganisation survives and thrives in the storm of change.1: How Does Strategy Happen inthe ‘Black Box’?How Does Strategy Happen in the ‘Black Box’?In this lesson, we will look at the core elements of strategy implementation. Makingstrategy happen involves two processes: strategy formulation and strategyimplementation.While logically we might anticipate that implementation follows formulation, in mostpractical circumstances this is not the case. Formulation and implementationfrequently occur simultaneously, with acts of implementation feeding into further actsof formulation as strategies are refined as a result of feedback from theimplementation process. Although we treat formulation and implementationseparately for purposes of clarity, I view them as interrelated processes.You may recall reading about Mintzberg and Waters’ (1985) arguments from Unit 1.The arguments distinguished between a variety of different approaches to strategyformulation on the basis of whether or not they were deliberate or emergent. Weexplore the realities of organisations pursuing what Mintzberg and Waters (1985)would have identified as emergent strategies comprising umbrella, process andconsensus approaches.That is to say, our premise is that, in an ever more dynamic and complexenvironment, who makes strategy is less and less clear-cut, and that the types ofdeliberate strategies identified by Mintzberg and Waters (i.e., planned strategies) areless and less common.Recall that in Unit 1 we stressed that we are not encouraging you to take a particularapproach to strategy. We explained why a purely top-down approach has manylimitations, particularly when entering the implementation phase. We take the viewthat strategy-making corresponds more closely to a process of designing andcrafting, where strategy is a continuous and adaptive process. In this way of thinking,contrary to a linear pattern where analysis is followed by choice and implementation,there is continual interaction between formulating and implementing.We shall now discuss a number of major themes that affect the potential for strategyto be implemented within an organisation. These themes explore the configuration ofan organisation and discuss how the nature of the organisation’s configuration – howit is structured, how control is maintained, and the culture of the organisation and itspeople – can facilitate or constrain the implementation of strategy. This discussion ofthe strategy implementation process marks the culmination of the linear-rationalapproach to strategy. However, we argue that the strategy process is iterative andthat any attempt to implement a strategy reveals key messages that must be heededin any future strategic analysis and choice activity.The Levers of StrategyThe above diagram provides a template for the next three lessons, and before webegin to explore each of the themes it is perhaps a good idea to explain theinterrelationship of the various elements. The diagram suggests that successfulimplementation of an organisation’s strategy is more likely if there is consistencybetween the content of strategy and the configuration of the organisation itself.Perhaps it is best to illustrate what we mean by using the following hypotheticalscenario.Strategic analysis has identified a potentially valuable set of opportunities in a newand rapidly changing sector of a market, and the organisation believes that itsresources will enable it to build a product or service to meet this demand.It crafts a strategy which it believes will enable it to effectively meet the demand. Thisstrategy requires considerable flexibility on the part of the organisation because theenvironment is dynamic and customer expectations are evolving rapidly, but: The organisational structure is rigid and hierarchical rather than flexible andadaptableThe organisational control systems are focused on maintaining order andconsistency rather than permitting experimentation and risk-takingThe people in the organisation are used to working with a bureaucracy and arenot by nature particularly entrepreneurial. The result?The strategy, which required flexibility in structure, control and people, will beseverely undermined by this lack of consistency with the actual configuration of theorganisation. Strategies that do not take account of the organisation’s ability toeffectively implement them will contain the seeds of their own failure.While this is a very simplistic example, we hope it helps indicate the importance thatneeds to be given to questions of configuration – of structure, control and culture – ina strategy process.3.4: Unwrapping OrganisationalCultureUnwrapping Organisational CultureStructures and strategic control systems are macro-mechanisms designed to shapemicro-activity. In making strategy happen, they act as overarching moderatingforces. Their aim is to influence the behaviour of people, but people bring with themtheir cultural beliefs and assumptions, and this complicates matters considerably. Inthis lesson we are interested in how culture can constrain or enable the way in whichstrategy is implemented or made to happen within an organisation. We now begin togive due attention to the people who ultimately make strategy happen inorganisations and enter the fuzzy boundaries of macro- and micro-activity as we lookat culture at national, organisational and individual levels.If you have studied the international business (IB) module, which is one of the coremodules in this programme, the notion of culture will not be new. You will haveconsidered organisational culture in the unit ‘Managing People and Organisations’.We shall not duplicate the work there, but will look at culture in a slightly differentway and explore its interplay with strategy. Indeed, you will encounter somechallenges to the view of culture that was presented in the IB module. This is not tosay that that view is wrong, just that an alternative understanding of culture and howit affects strategy in organisations enriches your knowledge, and allows you to drawconclusions and develop your own perspectives relevant to your own specificcontexts.Organisational culture is a complex phenomenon, and it is best to make sense it ofby drawing on one or more of several frameworks and typologies (e.g., Handy, 1999;Schein, 2010). In the IB module, a discussion of Hofstede’s (2001) cross-culturalstudy is presented. Famously, he identified four dimensions that he claimedrepresent the basic differences between national cultures:1. power distance2. uncertainty avoidance3. individualism/collectivism4. long-term orientation/short-term orientation.This work is interesting and potentially useful. However, in this lesson we shall focusmore on the work that has been done on national cultures and how this may affectmanagers who work across cultures. One argument we will examine is that, whetherwe work in international or purely national organisations, we all work within andacross cultures. This means that we shall also focus on culture at the individual leveland give some consideration to how it affects interactions between organisations.Making strategy happen ultimately involves individuals and groups, representingorganisations, working with each other in the practice of strategy.The IB module discussions of culture suggest that an organisation pursues a ‘fit’between the strategy it has developed and the culture of its people who will becharged with implementing that strategy. We suggest that simply looking for ‘fit’ isnot as easy as it sounds, and that cultural understanding is a complex andmultifaceted issue. Indeed, it is questionable whether it is even possible fororganisations to identify a culture and then try to build it. Calls for a ‘change inculture’ abound, but often result in little but cosmetic change. However, developing abetter understanding of who your people are and how they behave in differentcontexts is important. Making strategy happen requires a nuanced understanding ofculture and cultures: you need to know the dangers of ‘cultural stereotyping’, and theimportance of recognising your own cultural assumptions and preferences and ofexploring the relationship between culture and trust. Therefore, in this lesson weshall discuss: the cultural web – as an approach to understanding our own cultural preferencesand assumptions and how these influence our activities with othershow, if strategy is going to happen trust is needed internally in the organisationand externally with partners and stakeholders. 3.4.1: The Cultural WebThe Cultural WebThe cultural web shows the behavioural, physical and symbolic manifestations of aculture that inform and are informed by the taken-for-granted assumptions, orparadigm, of an organisation.3.5: The Need for Change inStrategyThe Need for Change in StrategyMaking strategy happen implies change as organisations move from an existingstate to a new one. This occurs irrespective of whether that transformation resultsfrom the ordered implementation of a formal strategy, or emerges from the messyactivities of people as they create their strategies informally. The sustainability of anorganisation’s competitive advantage is based on its ability to review, redirect andrenew strategy as contexts change. Managing strategic change, therefore, consistsof ‘managing changes which specific strategies give rise to and imply’ (Whipp, 2003,p. 241).In this lesson, we shall discuss how the need for strategic change is realised, how itis conceptualised, what the different views say about change and how that affectsour thinking around strategic change. Through this, you will become better informedabout how strategic change occurs and better able to discern different forms ofchange.The content of change (what is actually changed) and the process (the way changeis implemented) are both influenced by internal as well as external contexts ofchange. Managing change therefore requires sensitivity towards the specifics of thesituation faced, an appreciation of the contexts, and an understanding of how thesemay interact. As Balogun and Hope Hailey (2008, p. 2) note, ‘successful changerequires the development of a context-sensitive approach. There are no formulae orready-made prescriptions that can be rolled out.’ Rather than hoping to apply asimple step-by-step framework, managers embarking on strategic change would dobetter to recognise that every circumstance will be different, carefully evaluateinternal and external environments, consider what they mean by change, and ensurethat the types of changes they pursue are appropriate to their contexts.The Strategic DriftHistorical studies of organisations that have failed to respond to the need forstrategic change have highlighted how organisations become ‘blind’ to the need forchange. One framework that has been offered as an explanation of this is the idea ofstrategic drift (Johnson et al., 2008, pp. 179–184), which is shown in the diagrambelow: