External Environment Effect on Strategy

Topics: Strategic planning, Complex system, Strategy Pages: 32 (9717 words) Published: September 9, 2013
The external environment’s
effect on management and
strategy
A complexity theory approach
Roger B. Mason
Durban University of Technology, Kwa Zulu-Natal, South Africa, and Honorary Research Fellow, University of Wolverhampton, Wolverhampton, UK Abstract
Purpose – This paper seeks to investigate the influence of the external environment on the choice of strategic management activities, from a chaos and complexity perspective, since a business environment is a complex adaptive system.

Design/methodology/approach – The study in this paper was of an exploratory nature, using the qualitative techniques of case study, depth interviews and document analysis to collect data from two companies each in the IT and packaging industries, namely, more successful/less successful companies. Findings – The paper finds that first, it was proposed that more successful companies in turbulent environments would use radical, fast and disruptive strategies. Furthermore, strategy making should be a democratic, bottom-up process and should be organic, self-organising, adaptive and emergent. The results confirmed these propositions. Second, it was proposed that more successful companies in stable environments would use more traditional management and strategies and more formal strategy planning activities. The findings did not confirm this proposition, probably due to the fact that in reality a truly stable environment does not exist in South Africa. Originality/value – This paper is of benefit to managers and strategists by emphasising a new way to consider the future management and strategies of their companies. Since businesses and markets are complex adaptive systems, using complexity theory to increase understanding of how to cope in complex and turbulent environments is necessary, but has not been widely researched. Keywords Strategic management, Complexity theory, Chaos theory, South Africa Paper type Research paper

Introduction
The business environment is comprised of a set of relationships between agents or stakeholders in the environment – relationships that are changed by individual decisions taken (Lewontine, cited in Wheatley, 1996). These interactions continuously “co-create” the environment. The business environment is changing faster than ever before (Achrol, 1991; Hamel and Prahalad, 1994; Kotter, 1996; Glass, 1996; Loewen, 1997; Conner, 1998), with such change occurring in two major dimensions, complexity and turbulence (Dess et al., cited in Robbins, 1990; Huber, cited in Achrol, 1991). Complexity is defined as the measure of heterogeneity or diversity in environmental, sub-factors such as customers, suppliers, socio-politics and technology (Teopaco, 1993; Lane and Maxfield, 1996; Chae and Hill, 1997; Chakravarthy, 1997). As complexity increases, the ability to understand and use information to plan and predict becomes more difficult (Black and Farias, 1997). As all systems increase in complexity over time (Farrell, 1998), the increasing complexity leads to more change (Conner, 1998). As the system becomes more complex, making sense of it becomes more difficult (Black and Farias, 1997) and adaptation to the The current issue and full text archive of this journal is available at www.emeraldinsight.com/0025-1747.htm

MD
45,1
10
Management Decision
Vol. 45 No. 1, 2007
pp. 10-28
q Emerald Group Publishing Limited
0025-1747
DOI 10.1108/00251740710718935
changing environment becomes more problematic (Lane and Maxfield, 1996; Merry, 1995).
Turbulence is defined as dynamism in the environment, involving rapid, unexpected change in the environmental sub-dimensions (Conner, 1998; Vorhies, 1998). A stable environment changes little, but when it does, the change is predictable. In turbulent environments, there are many unexpected changes. Turbulence is the natural state of the world (Benton and Lloyd, 1992; Mintzberg, 1994). It is caused by changes in, and interaction between, the various environmental factors especially...
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