Strategic Review: The Process of Strategy Formulation in Complex Organisations


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Generally, strategy is a simple way to analyze the current situation of the organization, expected future situation, the right direction confidently and achieving the objects of the organization. In addition, strategy is a long process over long time periods with individual resources within a competitive environment to meet customer needs. In other words, strategy is a method or process of direction and a scope of an organization to achieve opportunities with its pattern of resources and meet the demand of markets and stakeholder expectations.

A framework to implement strategies in organizations

Mainly Strategies are shaped and designed for the whole organization by senior managers, therefore administering strategy should start from the top to bottom. Effective strategies involve discussion and communication. Organizations should be able to sustain competitive advantage in a discrete and identifiable market. It is the way a company creates value through the configuration and coordination of its multimarket activities.

When all these are carefully managed then the organization is able to achieve its competitive or corporate advantage. Strategy formulation is therefore the process of identifying or deciding what to do with a combination of different factors. Of course the literature on military strategy goes back much further, in the case of Sun Tzu probably to the fourth century BC as indicated by Griffith in Sun Tzu [3]. A good deal of this literature naturally divides itself into distinct schools of thought. There are numerous ways of studying strategic management; some of them are more pedagogic than others.

One method is to classify strategic management into schools of thought and this is in terms of teaching and learning an ingenious method. Mintzberg et al. Secondly, descriptive schools, most of which have been discovered over the last 20 years. Mintzberg emphasizes this broad diversity of perspectives in the current debate and has identified ten main distinct schools in strategic thinking [5]. Three of these schools—Design, Planning and Positioning School—fall under the prescriptive school and the other seven schools—Entrepreneurial, Cognitive, Learning, Political, Cultural and Environmental School—are descriptive in nature.

However, this classification of strategy schools does contribute to a deeper understanding of how strategy, systems are perceived in a limited number of the mainstreams of thinking. Ten deeply embedded, though narrow, concepts typically dominate current thinking on strategy. Among the schools of thought on strategy formation, one in particular underlies almost all prescriptions in the field.

The design school therefore proposes a model of strategy making that seeks to attain a match, or fit, between internal capabilities and external possibilities. Design School has an important and influential contribution in developing other schools of thoughts and providing a foundation to strategic management principles. The design school has been very influential in the development of business strategy and can be seen as the forerunner of the positioning school.

The real impetus for the design school came from the General Management group at the Harvard Business School, beginning especially with the publication of its basic textbook, Business Policy: Text and Cases [6] , which first appeared in Philip Selznick was the first to articulate the basic concept that undergirds this model and wrote in his book [9] that:.


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In defining the mission of the organization, leaders must take into account:. But the real impetus for the design school came from the General Management group at the Harvard Business School, beginning especially with the publication of its basic textbook, Business Policy: Text and Cases, which first appeared in From the mid-sixties the school was highly influential in the Harvard Business School. According to the design school, therefore, strategy, systems are prescribed to be deliberate in nature and strategy formation is regarded as a process of conscious thought.

Responsibility for that control and consciousness must rest with the chief executive officer, who is thereby the main strategist. Moreover, the model of strategy formation should be kept as simple and informal as possible. Strategies should be one of a kind, where the best ones result from a process of individualized design.

The strategy, systems thus should be regarded as a true design process, which is complete when strategies appear fully formulated. Thereby strategies should be made explicit and they have to be kept simple. Finally, only after these unique, full blown, explicit, and simple strategies are fully formulated can they be implemented. The design school therefore represents, without question, the most influential view of the strategy-formation process. At its simplest, the design school proposes a model of strategy making that seeks to attain a match, or fit, between internal capabilities and external possibilities.

The model places primary emphasis on the appraisals of the external and internal situations, the former uncovering threats and opportunities in the environment, the latter revealing strengths and weaknesses of the organizations aka SWOT analysis. The model places primary emphasis on the appraisals of the external and internal situations, the former uncovering threats and opportunities in the environment, the latter revealing strengths and weaknesses of the organization Figure 1.

While on internal appraisal, commitments to ways of acting and responding are built into the organization are crucial. Two other factors are believed to play major role in strategy making.

Strategy Formulation

One is managerial values—the beliefs and preferences of those who formally lead the organization, and the other is social responsibilities—specifically the ethics of the society in which the organization functions, at least as these are perceived by its managers. The figure below shows the model and the other two other factors believed to be important in strategy making.

These as discussed above are the managerial values-the belief and preferences of those who formally lead the organization, and the other is social responsibilities-specifically the ethics of the society in which the organization function, at least as these are perceived by its managers. Once alternative strategies have been determined, the next step in the model is to evaluate them and choose the best one.

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A Review of Strategic Process Research - Anne S. Huff, Rhonda Kay Reger,

Finally, virtually all of the writings of this school make a clear that once a strategy has been agreed upon, it is then implemented. The design school is one of the ten strategic management schools of thought that was coined by Mintzberg et al. The design school endorses a prescriptive view of strategy formulation, being potentially more concerned with how strategy should be formulated rather than how it actually is.

This school therefore seeks to find a match or fit for internal capabilities and external possibilities. It says to think before you leap. It lays a lot of importance in the analysis of external and internal situations. In this model, the strengths and weaknesses of a company are mapped, together with the opportunities and threats in the marketplace. The data can be used to analyze various strategic options, which both exploit the internal opportunities and anticipate the market situation.

Reaching a good fit between the internal opportunities strengths and weaknesses and the external circumstances opportunities and threats can be considered to be the central guideline of this school of thought. A key role in the strategy formation is played by the board of directors, and in particular by the chairperson. External covers the threats and opportunities and the internal covers the strengths and weaknesses.

Basically, it is a SWOT analysis. Social responsibility and Managerial values also play a role in the formulation of the strategy. Once the alternatives are figured out, the best of them are chosen. Once a strategy is chosen, it is then implemented. This approach can be further formalized into a more systematic approach. In this perspective, strategy formation consists of developing, formalizing and implementing an explicit plan.

The well-known SWOT analysis is therefore one of the main central tools of the design school. The evaluation of external opportunities and threats help to define the key success factors. These are combined to allow for the creation of strategy, or at least the definition of a number of strategic alternatives.

Richard Rumelt [12] suggests that the strategy must be evaluated once it has been selected from multiple options. This evaluation should be based upon following tests which are considered to be the best evaluation framework:. Once the best possible strategy has been selected, implementation follows. Running through most of the literature that was identified with this school are a number of fundamental premises about the process of strategy formulation. A number of basic premises underlie the design school, some fully evident, others only implicitly recognized. These premises include external environmental variables and factors of strength and weaknesses as their variables.

These premises are as follows:.

2. Strategy Map

Action must flow from reason: effective strategies derive from a tightly controlled process of human thinking. Strategy making in this sense is an acquired, not a natural, skill or an intuitive one—it must be learned formally. It might be noted that this premise not only relegates other members of the organization to subordinate roles in strategy formation, but also precludes external actors from the process altogether except for members of the board of directors, who Andrews believed must review strategy.

Fundamental to this view is the belief that elaboration and formalization will sap the model of its essence. This premise, in fact, goes with the last: one way to ensure that strategy is controlled in one mind is to keep the process simple. This distinguishes the design school from the entrepreneurial school on one side and the planning and especially positioning schools on the other.

As suggested above, it is the specific situation that matters, not any system of general variables. It follows therefore, that strategies have to be tailored to the individual case. The big picture must appear—the grand strategy, an overall concept of the business. Andrews, in common with virtually all the writers of this school, believed that strategies should be explicit for those who make them, and, if at all possible, articulated so that others in the organization. Central to this distinction is the associated premise that structure must follow strategy.

It appears to be assumed that each time a new strategy is formulated, the state of structure and everything else in the organization must be considered a new. The writings of the design school can be critiqued on a number of levels. In perhaps the most general sense, the school has denied itself the chance to adapt.


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  7. Research results that have put parts of it under suspicion were not considered; indeed, there was no reason to, if the model could not be elaborated upon. A strategy that locates an organization in a niche can narrow its own perspective. This seems to have happened to the design school itself not to mention all the other schools with regard to strategy formation. The premises of the model deny certain important aspects of strategy formation, including incremental development and emergent strategy, the influence of existing structures on strategy, and the full participation of actors other than the chief executive.

    On this, the design school has been quite clear—by consideration, assessment, judgment supported by analysis; in other words, by conscious thought expressed verbally and on paper. One gets the image of executives sitting around a table, discussing the strengths, weaknesses, and distinctive competencies of an organization, much as do students in a case study class. Having decided what these are, they are then ready to design strategies.

    Might they not also be distinct to context, to time, even with the application?

    Strategic Review: The Process of Strategy Formulation in Complex Organisations
    Strategic Review: The Process of Strategy Formulation in Complex Organisations
    Strategic Review: The Process of Strategy Formulation in Complex Organisations
    Strategic Review: The Process of Strategy Formulation in Complex Organisations
    Strategic Review: The Process of Strategy Formulation in Complex Organisations
    Strategic Review: The Process of Strategy Formulation in Complex Organisations

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