Strategic Management, Rational Planning

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"Although the view of strategy as the product of a rational planning process driven by top management has some basis in reality, it is not the whole story" (Hill, Jones and Galvin, 2004, 6). The purpose of this essay is to verify the truth of the above statement with reference to the theories that argue for or against it by academics as well as the truth behind it in current real world corporate strategic management practices. The argument indicates that, although rational planning does indeed bear realistic importance, it is by far and away detrimental to companies who would solely focus on long-term planning by top management that would leave them inflexible to capitalize or survive on unknown factors. This will be done by first quickly looking at the rational planning process and the failures of poor planning in order to point out the irrationality of applying rational thought to certain aspects. This will then be followed by a look at the concept of emergent strategies and the scenarios under which it would benefit the planning process.

The Rational Planning Process

In Hill, Jones and Galvin (2004) it says that traditional definitions of strategy stress that an organisation's strategy is the outcome of a rational planning process. It is essential that, before we begin, we should provide a short description of the existing basic rational model. It consists of the overall traditional conception that major decisions in regards to strategy are undertaken by top management with goals being formulated, analyses being undertaken, strategies being chosen for the different functional levels within the organization, and finally the methods by which these strategies would be implemented within the organization. In other words, this is generally done with the implicit belief that the top management of the company is able to appraise and analyse the internal and external environment around them, the company's performance, and come up with a strategy with the greatest possible success in uncertain future circumstances that are then communicated downwards in the hierarchy. (Mintzberg, 1990) As Mintzberg aptly puts it this is a case of a rational approach to coming up with ‘intended strategies' that will further down the line become ‘realized strategies'.

Formal strategic planning often have some highly noted problems that we will go into very briefly. These are worth mentioning as it is important to show that the rational planning process can be, at many times, irrational despite the best wishes of the strategists or from the fact that they may be unaware of the presence of such things. To this end Mintzberg (1994) has summarized these fallacies into three distinct groupings.

The Fallacy Of Prediction

"According to the premises of strategic planning, the world is supposed to hold still while a plan is being developed and then stay on the predicted course while that plan is being implemented." (Mintzberg 1994, p.229)

Rational planning does not allow for effective planning of the future (aside from limited external analysis) aside from certain patterns (such as seasons).

The Fallacy Of Detachment

"Real strategists get their hands dirty digging for ideas and real strategies are built from the occasional nuggets that they uncover." (Mintzberg, 1994, p.229)

This basically concerns the ‘ivory tower' problem whereby managers who are removed from the perspectives of the workplace make decisions based on information passed up to them. What happens if the information is wrong or late in verifying? In addition to this, how are they formally program if the process is not fully understood by the managers? (Mintzberg, 1994)

The Fallacy Of Formalization

"Formal systems could certainly process more information, at least hard information. But they could never internalize it, comprehend it, synthesize it. In a literal sense, planning could not learn." (Mintzberg, 1994, p.230)

He also argues that formalization...
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