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Overview
The topic of strategy is enormous and there are viewpoints
coming from any number of directions. The business environment
in contemporary times is extremely turbulent and can only
increase the volume of the subject area. Increased market
volatility, rate of organisational change and technological
and global growth have all been cited as reasons for this
change in environment (Buchanan and Huczynski, 2001). These
changes have dramatic effect upon how business strategy is
formulated and implemented. There are also consequences for
the human resource – changing business needs mean a
changing human input requirement and hence the changing environment
represents a changing role for any mentor and trainer.
Strategic Perspectives
Perhaps a good place to start would be to examine the different
schools of though regarding business strategy and how it is
regarded in contemporary theory. Mintzberg and Quinn (1991)
write that strategy can be a plan, a ploy, a pattern, a position
or a perspective – dependent upon the context. Porter
(1980) suggests that strategy is about gaining competitive
advantage however this is very narrow and Johnson and Scholes
(2002) expand upon this defining the components of strategy
as being;
 · Long term direction
· Competitive Advantage
· Scope of activities
· Matching of activities to environment
· Resource building
· Values and expectations of stakeholders
There are numerous schools of thought on suitable approaches
to adopting a strategy. The two major perspectives centre
around the rationalist view that a strategy should be formally
planned, and the modernist view that strategy should be allowed
to develop by learning along the way through environmental
interaction. Both have clear advantages and disadvantages.
The first of these was referred to by Mintzberg (1990) as
the Design School. The main premise of this school defined
by Andrews (1987) is that the formation of strategy should
be a controlled and conscious process of thought led by the
Chief Executive Officer (CEO) who to all intents and purposes
is the strategist. This process is highly rationalised and
formal and perhaps the best example of this direction falls
in Porter (1980) in which his now famous Five Forces model
forms the basis for three strategies he describes as; overall
cost leadership, differentiation and focus. By pursuing one
of these strategies using his model and techniques outlined
in his work he argues that the particular firm will be able
to create a suitable and successful strategy.
On the other hand is Emergent strategy which is described
by Mintzberg (1994) as a strategy that arises in reality although
it was not pre-planned. In simple terms it is a strategy undefined,
unplanned and it develops through a process of learning. The
human resource is key to this learning process and work by
Beer et al (1990) found that learning was the main factor
in enabling strategic change. This has great consequence for
any HRM scheme which may incorporate a mentoring and coaching
process
Strategic change is more important in contemporary times
due to the faster pace at which companies must react to environmental
change. Hence, better change control must be harnessed through
human resource learning. Alongside this is the theory of logical
incrementalism whereby the strategy emerges and develops step
by step. Quinn (1978) argues that his logical strategic procedure
should proceed flexibly and using an experimental method to
arrive as late as possible at commitment to a particular strategy.
Stacey (1997) brings in a further element suggesting that
strategies should emerge through a non-formalised creative
and almost chaotic process. This can be tagged social constructionism
- meaning that the strategy is formed from a variety of social
influences both internally and externally to the organisation.
Closely related to this is that many authors feel that strategy
is subject to social politics – especially where the
strategic goal is the result of the vision of a single person,
or even a small group (Stacey, 1997; Mintzberg et al, 1998).
The basic difference in opinion of strategy design lies in
the separation of formulation from implementation. Taking
the rational and planned strategy first Mintzberg (1990) articulates
the reasons for failure in this strategic context as being
the unpredictable force of the external environment –
be it politics, technology, legalities, whatever. The strategy
will inevitably become forced off its trajectory and not serve
its intended purpose due to any one of these external factors
affecting it - in other words, it fails.
Mintzberg (1994) states that two questions are at the root
of the problem;
· Whether the formulator is sufficiently informed
to formulate a viable strategy
· Whether the external environment is stable or predictable
enough for the strategy to remain viable
Simpson (1998) is in agreement with this stating that the
key element for success is flexibility in strategy where goals
are generated along the way from ideas and not from projections
made by high level management - whom they claim are too distant
from implementation to warrant any right to formulate. A key
phrase used is; "don't try to see the end from the beginning".
Ansoff and Sullivan (1990) do concede that the strategic
model defined by Mintzberg does work - however, only in environments
where change is incremental and environmental speed change
is slower than the organisational response rate. In any other
situation the design school would argue that formulation and
implementation separation should be par for the course. Ansoff
(1991) defines the advantages of prescriptive over emergent
strategy as;
· Time saving where trail-and-error is time-consuming
and especially relevant in rapidly changing environments
· Additional time saving by anticipating the need to
act - traditional strategic planning
· Reduces error and cost by selecting and removing
non-starters before trying them
In the same work Ansoff theorises that because of the rapid
alteration of the business environment in modern times then
emergent theory is turned upon its head as firms adopting
the emergent strategy are putting their survival in danger.
Competing firms who have strategically planned with foresight
can dominate the marketplace because their rational approach
to analysis allowed them to predict for example a new product
market. While the firm adopting the emergent strategy eventually
finds a suitable strategy the planned approach means that
the other firm already owns the new market and hence then
perhaps the emergent method fails. Therefore, Ansoff argues
that formulation must be separate from implementation to allow
the formulator to devise a strategy that can pre-empt and
be predictive by nature in order to gain competitive advantage
over rivals. Basically, a process of plan it and then do it.
If formulation ran parallel to implementation, he argues,
this would be too slow a process and opportunities would undoubtedly
be missed along the way.
The Changing Business Environment
So essentially there is no correct or incorrect process of
strategy formulation – however, with the rapidly changing
environment of today it would seem that a more emergent approach
is seemingly more realistic in delivering the required flexibility.
But what are the factors which affect the strategic challenge
that faces contemporary companies? The major single-most factor
is globalisation. The new technological age has made communication
so much easier and geographical proximity is not a big issue
any more. Cheap labour costs elsewhere have meant that in
the main the larger multi-national companies no longer have
a national identity and loyalty. Particularly in the production
of goods companies now set up dedicated localised assembly
plants across the globe catering for a particular local market.
A good model to use to assess strategic developments and
consequences of globalisation is PESTLE (encompassing Political,
Economic, Social, Technological, Legal and Environmental issues).
It is often conceded that many of these headings are inter-related
to a large degree.
Political issues are of increasing importance. There are
many different areas in which political influence plays a
big part in the strategy determination of a firm. The recent
increased aftermath and indeed future risk of terrorism has
prompted a strategic change in many sectors – not least
the travel industry. Airlines have suffered due to decreased
demand for long haul travel – not helped by the increased
demand for economy short haul travel – and have had
to alter their marketing strategy accordingly by adjusting
prices for example. Similarly, political administration has
a large bearing on trade in relation to more financial matters
such as interest and exchange rates. These dictate to a large
degree the export success and hence the impact upon globalisation
that UK firms have. The apparent onset of the Euro into the
UK would have a dramatic effect upon UK firms who would have
to adjust to accommodate. For instance, say a company based
in the UK exports a majority of its produce to the US, what
would happen if it suddenly became more lucrative to export
primarily to Europe through the more constant rate of the
Euro. Would the firm risk losing their US contacts for more
short term financial gains closer to home? That is just one
example of a potential strategic decision based upon a changing
political climate.
As stated politics is closely related to economics. A lot
of issues in this area are cross-over topics but perhaps the
main economic area of change in modern times is the increase
in market competition. For a variety of reasons such as cheap
foreign labour, expanding markets and increased technology
input it is now far easier for any potential competitor to
enter the market and sell a product. Whereas twenty years
ago markets were more of a “push” scenario they
are now generally speaking “pull” whereby the
customer is king and demand rules the day. If a producer cannot
provide exactly what the customer wants then that customer
will quite simply get it elsewhere. Competition is cut-throat
– see UK supermarkets for a prime example – and
rival firms will cut prices, often at a loss, in the hope
of repeat trade. Emphasising the effect of globalisation,
UK-based supermarkets now may also face direct competition
from US firm WalMart who are allegedly looking to buy into
the UK market possibly into Safeway. The strategic implications
for this are crucial. The strategy of the firm will determine
whether or nor they can compete, survive and prosper or whether
they die. There are all manner of decisions based on markets
such as whether to compete on cost, quality or product differentiation
– whether to change markets or stick to core competencies,
the list is seemingly endless.
By now it should be clear how related these topics are and
we can relate society and changing markets to economics very
easily. The media has made advertising very easy and culture
now is far more wide-ranging than ever before. Consequently,
there are so many sub-cultures and needs to be catered for
in so many markets. A prime example is the escalating love
of football in Asia post-World Cup. David Beckham, Michael
Owen et al are mobbed when they visit and the strategic division
of Manchester United and Liverpool et al have recognised this
and directed large amounts of attention to these markets.
It is no coincidence that many of the major Premiership football
teams are choosing to play pre-season friendly matches in
Asia as they are so lucrative. The nature of cultural change
and diversity means that companies must adapt to change with
shifting market needs – or, again, they will die.
Society within the workplace has also changed with the advent
of the trade union. Bennis et al (1994) argue that modern
organisations have reduced power due to the growth of trade
unions and hence mutual communication and consultation is
vital to ensure a healthy working relationship. In the past
thirty years workers have gained more power firstly directly
through the collective power of the union, and now primarily
through the will of the employer to not have to deal with
unions and indeed to attract employees. Added competition
in the marketplace means added competition for employees and
hence these employees are looking to be incentivised and treated
well. The graduate job market is a fine example of this. Modern
graduates are far more discerning and selective in who they
want to work for and so in order for companies to attract
who they regard as the cream they must offer suitable reward
and training packages to attract these people. This has had
great impact upon managerial styles and procedures. Bureaucracy
and autocracy are becoming decreasingly relevant and employees
are becoming more and more involved and autonomous in their
work. Organisational structures are becoming much flatter.
Technology is at the root of the vast majority of innovation
and fresh products that come onto the market. It speeds up
development processes and is an aid in helping the company
gain competitive advantage. However, the costs are also high
and so strategic decisions facing firms now are whether the
benefit outweighs the cost. The life-cycle of technology too
is shortening which means that any investment must be weighed
up in great detail. This also means that the rate at which
technology becomes obsolete increased. Old industry in general
uses old and outdated equipment which does the job for its
old requirements perfectly well. However, to maintain a competitive
edge new technology is required to produce new goods. Technology
also has bearing upon labour issues – to robotise or
to humanise? Companies, especially manufacturing companies
et al, have decisions to make over whether to automate processes
and reduce labour. However, this has obvious knock-on effects
for the unemployment and the economy.
Legal problems can ruin businesses in the blink of an eye
– be it through direct financial penalty or indirectly
through damage to corporate image. Customers have more power
now than ever before and any malpractice or negligence by
a firm can be extremely damaging. Even issues that had not
perhaps before been acknowledged can affect the image of a
company. For example the recent McDonalds incident in the
US where a number of customers began legal action against
McDonalds for making their food too high in fat and sugar
and therefore, it was argued, addictive.
In modern times legislation is particularly tight in the
eco-environment. As awareness of suffering eco-system becomes
more apparent the powers that be have acted to preserve it.
Changing legislation means that companies must be more aware
and careful in their dealings. This is particularly relevant
to heavy industry where fifty years ago the skies were filled
with smoke in industrial areas. Nowadays, this is simply not
allowed and any firm caught is punished severely. Any business
strategy today must accommodate for legislation.
Implications for mentoring, training and HRM issues
Any change in strategic direction by a company must be compensated
by a subsequent change in human resource direction. Take a
coach or mentor for example who has a responsibility to train
up an understudy to the skill-base and level that they have
become accustomed to. What happens if the strategic direction
of the company changes and completely new skills are required?
The mentor becomes – in terms of skill training –
almost redundant. In modern times it is important to align
the corporate strategy to the human resource function.
In more recent times Human Resource Management (HRM) has
been used alongside and in conjunction with the overall business
strategy. The aim of this is to ensure that the human resources
at the disposal of the company are fully utilised and in a
way which complements the necessary skills required strategically
(Armstrong and Long, 1994; Mabey et al, 1998; Tyson, 1995).
This has been termed Strategic Human Resource Management (SHRM).
Armstrong and Long (1994) define SHRM as being;
“…concerned with development and implementation
of people strategies which are integrated with corporate strategies
to ensure that the culture, values, organisational structure
as well as the quality, motivation and commitment of its members
contribute fully to the achievement of its goals”. (
p1)
Many studies have found that companies involving HR staff
in the business strategy formulation process were quite notably
more successful in implementing the planned business change
strategies (Tyson, 1995; Kippenberger, 1996).
Summary
It should be clear by now that the vast majority of contemporary
organisations do face big strategic challenges in the 21st
century. These decisions are extremely important and the majority
of them would not have been an issue even as little as ten
years ago. Globalisation is at the root of many of them and
increased competition means that topic of strategy is now
perhaps as important as it has ever been before.
These all present a number of management issues. How do we
formulate our strategy? Indeed, do we formulate a strategy
at all? How do we monitor and measure the success of our strategy?
Companies must now be as flexible as is possible in order
to deal most effectively with environmental change. This change,
as has been described, can come in many forms and this emphasises
the need to monitor the environment. Failure to do so could
be extremely damaging to the firm.
Also mentioned was the management style adopted. Obviously,
this is industry-dependent but in the main employees hold
sway over management in collective terms and hence new management
styles have been adopted to incorporate the needs of employees.
One example is appraisal which are commonplace now in most
firms. Armstrong and Baron (1998) write that traditional appraisals
are backwards-looking and top-down affairs that focus upon
work that has been done. The performance of an employee was
assessed for the previous year and their pay altered accordingly.
More contemporary appraisals are far more developmental in
approach and are a two-way process of feedback.
This appraisal is a big part of SHRM which is now vital to
organisations as it shapes their training and development
processes which should be strategically aligned to equip staff
with skills that will enable the firm to achieve its strategic
objectives. Any trainer or coach within the business world
has a more difficult job now as they must adapt to monitor
what training should be delivered to suit the match between
corporate strategy and environmental situation.
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