|Subject :||Strategic Management|
|Topic :||Is Business Strategy A Mixture Of Luck And Judgement, Opportunities And Design, Or More Of An Art Than A Science?|
Firms or companies today face a broad array of risks, problems and issues internal to them and external factors relative to increased international competition due to globalisation. Thus, strategic management is an activity necessary to be undertaken by firms who want to sustain their existence in today’s highly competitive environment. Firms need to develop strategies as they are managements’ game plan for growing the business, staking out a market position, attracting and pleasing customers, competing successfully, conducting operations, and achieving targeted objectives. Strategic management is the set of managerial decisions and actions that determines the long-run performance of a firm. The question however arises as to whether strategic management is an art or a science or that it is simply a mixture of luck and good judgement.
Firms or companies today face a broad array of risks, problems and issues, be they strategic, operational, financial, customer, vendor, competitor, to name a few. Moreover, concerns about increased international competition brought about by the rapid globalisation phenomenon abound not only in the US but also in Europe with the further expansion of the European Union and in Asia and Latin America due to increased economic integration in these regions. Management experts therefore have argued time and again that firms or companies should respond to environmental changes, such as increased competition, by engaging in more systematic planning to anticipate and respond to changing and unforeseen events. The reason for this argument is because formal strategic planning has been seen to enhance a firm’s performance.
Thompson et al (2006) explain that a firm’s strategy is its management game plan for growing the business, staking out a market position, attracting and pleasing customers, competing successfully, conducting operations, and achieving targeted objectives. Thus, a firm’s strategy indicates the choices its managers have made about the specific actions it is taking and plans to take in order to move the company in the intended direction and achieve the targeted outcomes. In one way or another, a firm’s strategy is partly the result of trial-and-error organisational learning about what worked in the past and what did not. It is also partly the product of managerial analysis and strategic thinking about what actions need to be taken in the light of all the circumstances surrounding the firm’s situation.
This paper explores the idea that ‘business strategy is a mixture of luck and judgement, opportunism and design, others argue that strategy is more of an art than a science’. In particular it examines the roles of strategic management in planning an organisation’s future development buy developing knowledge and practice in the application of strategic management concepts and techniques.
IS BUSINESS STRATEGY A MIXTURE OF LUCK AND JUDGEMENT, OPPORTUNITIES AND DESIGN, OR MORE OF AN ART THAN A SCIENCE?
Wheelen and Hunger (2008) define strategic management as that set of managerial decisions and actions that determines the long-run performance of a corporation or firm. Accordingly, it includes environmental scanning (both external and internal), strategy formulation (strategic or long-range planning), strategy implementation, and evaluation and control. In short, strategic management emphasises the monitoring and evaluation of external threats and opportunities in light of a firm’s internal strengths and weaknesses. As Hoffman (Spring 2007) puts it, strategic managements seeks to align the firm’s activities with its external environment.
At the heart of this management approach is the strategic planning system (Hoffman Spring 2007). Included in this system is the strategic management process. The strategic management process, he explains, is the full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above-average returns.
Hanson et al (2008) explain that a firms’ first step in the strategic management process is to analyse its external and internal environments to determine its resources, capabilities and core competencies. These, they say, are the sources of its ‘strategic inputs’. With this information, the firm develops its vision and mission and formulates its strategy. To implement the strategy, the firm takes actions towards achieving strategic competitiveness and high returns. The sequence of the strategic management process can therefore be summarised as follows: effective strategic actions that take place in the context of carefully integrated strategy formulation and implementation actions result in desired strategic outcomes.
Hoffman (Spring 2007) however stresses that the strategic management process should be dynamic considering that there is ever changing markets and competitive structures. Therefore they must be coordinated with a firm’s continuously evolving strategic inputs.As such, as firms face increased environmental changes (e.g. increased globalisation, integrated markets) firms benefit from strategic planning. Moreover, Hanson et al (2008) indicate that the strategic management process should be a rational approach that firms must use to achieve strategic competitiveness in the market. The strategic management process should therefore be the full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn profitable returns (Hitt et al 2003).
Typically, the central thrust of a firm’s strategy involves crafting moves to strengthen its long-term competitive position and financial performance (Thompson et al 2006). However, business strategies built upon single competencies may not provide the competitive position and financial performance a firm is seeking to achieve, as indicated by Olson (2006). He observes that the most successful firms in the current decade are learning to become highly flexible, operationally integrated, and delivering value to customers, partners, and alliances in revolutionary new ways that are not easily leap-frogged or imitated.
At this point it may be emphasised that a firm’s strategy is reflected in its actions in the marketplace and the statements of senior managers about the firm’s current business approaches, future plans, and efforts to strengthen its competitiveness and performance (Raps June 2004).
Blumentritt and Danis (Summer 2006) observe that one key to successful strategic management is the ability to achieve fit or coherence among a set of competitive factors, both internal and extent, to the firm, in a manner that facilitates high performance. In such a case, firms must not simply react to their environments but should dynamically interact with them via the strategic actions of top managers. Achieving strategic fit therefore requires alignment of the firm’s resources, capabilities and competencies with environmental opportunities and threats.
However, once a firm is clear what to look for, the task of identifying a firm’s strategy is mainly one of researching information about the firm’s actions in the marketplace and its business approaches (Thompson et al 2006). In this case the formulation of a strategy should be scientific as it looks into data and information that are relevant to the firm. Strategy, according to Guttman and Hawkes (2004), is about the future and thus requires certain assumptions about upcoming product, market, technological, governmental, and competitive trends. Such assumptions are worthless, and maybe even deadly, unless they are tested and validated. While formulating assumptions is a legitimate task for the top team, its members rarely posses the first-hand knowledge needed to confirm or deny the validity of those assumptions. Using this approach makes strategy formulation scientific.
Nevertheless, effective industry analysis is a product of careful study and interpretation of data and information from multiple sources (Hanson 2008). In this regard, a wealth of industry-specific data is available to be analysed. Because of globalisation, international markets and rivalries must be included in the firm’s analysis. In fact, research shows that in some industries, international variables are more important than domestic ones as determinants of strategic competitiveness. Furthermore, because of the development of global markets, a country’s borders no longer restrict industry structures. In fact, movement into international markets enhances the chances of success for new ventures as well as more established firms.
On the other hand, Thompson et al (2006) emphasise that a firm’s strategy is typically a blend of proactive actions on the part of managers to improve the firm’s position and financial performance and as needed reactions to unanticipated developments and fresh market conditions. Accordingly, the biggest portion of a firm’s current strategy flows from previously initiated actions and business approaches that are working well enough to merit continuation and new launched managerial initiatives to strengthen the firm’s overall position and performance. This part of management’s game plan is deliberate and proactive, standing as the product of management’s analysis and strategic thinking about firm’s situation and its conclusions about how to position the company in the marketplace and compete for buyer patronage.
Research therefore has revealed that firms that engage in strategic management generally outperform those that do not but when a firm fails to execute effectively, the culprit is often how and why of countless individual decisions and actions (Chehade et al June 2006). The attainment of an appropriate match, or ‘fit’ between a firm’s environment and its strategy, structure, and processes has positive effects on the firm’s performance. Wheelen and Hunger (2008) observe that in a survey of nearly 50 corporations from various countries and industries, there are three highly rated benefits of strategic management, namely: (1) clearer sense of strategic vision for the form; (2) sharper focus on what is strategically important; and (3) improved understanding of a rapidly changing environment.
It should be remembered however that a firm’s strategy, according to Thompson et al (2006) should always be viewed as a work in progress. In general, a firm’s strategy evolves incrementally from management’s ongoing efforts to fine-tune this or that piece of strategy and to adjust certain strategy elements in response to unfolding events. On occasion, fine-tuning the existing strategy is not enough and major strategy shifts are called, for, such as when a strategy is clearly failing and the company faces a financial crisis, when market conditions or buyer preferences change significantly and new opportunities arise, when competition do something unexpected, or when important technological breakthroughs occur. Some industries are more volatile than others.
In such a case, regardless of whether a firm’s strategy changes gradually or swiftly, the important point is that a firm’s present strategy is always temporary and on trial pending new ideas for improvement from management, changes in industry conditions, and any other new developments that management believes warrant strategic adjustments. Therefore, a firm’s strategy at any given point is fluid, representing the temporary outcome of an ongoing process that, on the one hand, involves reasons and intuitive management efforts to craft an effective strategy, and on the other hand, involves ongoing responses to market change and constant experimentation and tinkering. Adapting to new conditions and constantly learning what is well enough to continue and what needs to be improved is consequently a normal part of the strategy-making process and results in an evolving strategy.
Since strategic decision-making covers a wide range of issues confronting management, then it is necessary to organise these in some way, to see where they arise and how they are concerned (Warren 2008). He suggests that a logical approach is to follow a more or less chronological sequence, as follows: (1) whether to take part; (2) choosing a strategy for taking part; (3) designing a likely path to success; (4) steering strategy through time; and (5) whether to extent or revise the strategy.
Given the concepts discussed regarding strategic management, the question now is: Is strategic management is an art or a science or is it a mixture of luck and judgement or a combination of everything? Based on the discussion of the literatures and studies reviewed, firstly, it can be said that strategic managements is a combination of both an art and a science. It is an art because during the implementation phase of the plans made, managers are given the flexibility of implementation considering the fact that there are conditions during this phase that may intervene and thus require modification of the plans in the course of their execution. Moreover, the implementation of plans usually depends upon the character traits and style of the manager. This is because each manager has his own style and character of executing plans. The objective here is to carry out the plans and it does not matter how a manager will properly execute them. Because of this different managers perform differently from each other since they are unique individuals with different traits.
Managers obviously need to improve strategy implementation activities, but the pace of these activities and the implementation itself has many problems along the way. In some instances, primary objectives are somewhat forgotten as the strategy moves into implementation, and the initial momentum is lost before the firm realises the expected benefits. Traditional strategy implementation concepts overemphasise structural aspects, reducing the whole effort to an organisation exercise. Ideally, according to Raps (June 2004), an implementation effort is a ‘no boundaries’ set of activities that does not concentrate on implications of only one component, such as the organisation structure.
Strategic management, on the other hand, can also be considered a science since during the formulation phase, all aspects (external and internal) are examined which require both quantitative and qualitative data and extensive analysis. During the formulation process various assumptions are formulated and tested and alternatives are formulated to see the various outcomes based on the factors considered. What is more crucial here is that it requires scientific method of studying the data and information before management decides on what is the best strategy to undertake given the assumptions formulated. Accordingly, successful strategies are based on a good understanding of the markets in which firms compete. This understanding requires that they have accurate, timely information and means to analyse and communicate this information to relevant decision makers.
Although the research process is a complex, time-consuming, and expensive activity, this does not mean that firms must remain ignorant and isolated about the world around it. It should be remembered that there are simplified approaches to obtain data and information. (Katsioloudes 2006) In such a case, therefore, relevant strategic inputs derived from analyses of the internal and external environments are necessary for effective strategy formulation and implementation. In turn, effective strategic actions are a pre-requisite to achieving the desired outcomes of strategic competitiveness and above-average returns. (Hitt et al 2003)
Just like an excellent tasting food however strategic management can be said to be actually a fusion of several ingredient, which when appropriately mixed together by management, will achieve the objectives of the firm. In other words, strategic managements is a blending of right plans as a result of scientific research, positive attitude of managers to execute the plans including their excellent knowledge and skills of management; excellent judgement on the part of managers which is always carried out on the right-time and at the right place; flexibility of the plans for adjustment when crucial because of changing economic environment along the way during their execution; and luck or fate. As Hitt et al (2003) indicate, effective strategic actions that take place in the context of carefully integrated strategy formulation and implementation actions result in desired strategic outcomes. When implanting a new strategy, it is dangerous to ignore the other components because strategy implementation requires an integrative point of view. Altogether, this integrative incorporation allows a manager to develop implementation activities that are realistic (Raps June 2004).
Decision-flow process, however, are the vehicles firms use to integrate results into coherent patters for developing, implementing, and controlling decision making (Raps June 2004). Moreover, without understanding the greater course of strategy, employees cannot contribute to an effective implementation. What is necessary to help reach this goal is a higher degree of transparency in the decision-making process.
To sum up the discussion, it is nice to remember what Thompson et al (2006) say about business strategy as follows:
Strategic management process sets the long-run performance by undertaking environmental scanning, strategy implementation, and evaluation and control. The process of strategic management is a mixture of several ingredients. It is a science because it requires scientific research when formulating plans for the firm. On the other hand, it can be stated that it is an art considering that when plans are implemented it varies relative to the characteristics and style of managers. However, to be more effective in achieving the goals of the firm, other ingredients are necessary like excellent judgement of the manager, flexibility of the plans, and even luck. Business strategy therefore is not merely a result of one factor but a mixture of interrelated factors and that when mixed well by management can bring the firm to greater growth.
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