Strategic Management in a Global Context
Topic : Evaluate the proposition that the weaknesses of formal strategic planning confirm that alternative forms of strategic decision-making are more appropriate for organizations that operate in highly uncertain and dynamic environments.
The goal of each organization is to make the most profits possible. To reach this objective they have to follow a strategy which will permit them to have several advantages on their competitors. This process need a long term vision of the market and of the external environment changes, that is why almost all companies use formal strategic planning. Two ways of behaving are possible, either an organization can to create future aspects of the market by working on the external environment or it can adapt and modify its current actions in order to drive it to favorable issues. However, even if literature often tell about external global environment (the macro-environment, the industry competitive environment and competitors) I think that an important aspect is to keep in mind that to impact this external environment's trends an organization have to be aware and develop its internal resource capabilities to be competitive. Nowadays, due to the increasing of competitiveness we often talk about "hypercompetition" as suggest Macnamara et al (2003) and environments are more and more dynamic. We can say that turbulent environment has become the norm and contrary to what certain people think, it is an immense opportunity for organizations to move ahead as it is suggested by Harrington et al (2005). What follows is a framework where I will define how formal strategic planning works and expose its main weaknesses in order to find alternative forms of strategic decision-making which could be more appropriate for organizations that operate in highly uncertain and dynamic environments.
Formal strategic planning is a process which permits to formalize procedures in order to make important strategic decisions which appeared in the mid-1960s. Mintzberg (1994) tell in his paper that it was considered as the best way to implement strategies in each business to be competitive. If I try to write a definition of strategic planning I would say that it is a documented process for deciding of key decisions that an organization must get in order to reach its goals in the future. The process results in the production of a corporate strategic plan. A documented process imply data are required to make a useful existing analysis and to target company's goals. Information on strategic position of the organization, its external and internal environment are very important to make useful decisions. Tools like PESTEL (macro-environment analysis) and SWOT (strengths and weaknesses of the organization, opportunities and threats of the external global environment) are often used by managers to gather the data. This is a group decision making process which permit to ensure that all managers are on the same page. The weaknesses of this process is that there are a lot of procedures that make this process very long. As I said it before, it is a group decision making process so disagreements between top managers can happen and slow down this process already long. Naturally, important delays and long process imply important costs because the organization has to pay its employees for the time they spend on the strategic planning. Moreover, I believe that through tools used like PESTEL analysis are not very dynamic. I mean that in a turbulent environment, trends and requirements often changes and these changes operate very quickly, so a competitive organization has to adapt as quickly as possible. Also, certain events can't be plan, for example, a disaster like the terrorist attack of the 11th September in New York, USA, has completely changed airlines companies and airports concerning their security policies .For me, this strategic decision-making process is not enough...
References: Harrington, D G, Lawton T C, Rajwani T, ‘Embracing and Exploiting Industry Turbulence: The Strategic Transformation of Aer Lingus’ European Management Journal Vol. 23, No. 4, pp. 450–457, 2005
McNamara, G., Vaaler, P. and Devers, C., 2003. Same as ever it was: The search for evidence of increasing hypercompetition. Strategic Management Journal, 24 (3), 261-278.
H Mintzberg (1994) The Fall and Rise of Strategic Planning Harvard Business Review January/February p107-114;
H Minzberg (1994) Rethinking Strategic Planning Part I: Pitfalls and Fallacies 27 3 p12-21;
J Rudd et al (2008) Strategic Planning and Performance: Extending the Debate Journal of Business Research 61 p 99-108;
Selsky et al, ‘Contrasting Perspectives on Strategy Making in Hyper Environments’, Organization Studies, Vol. 28, No. 1. (1 January 2007), pp. 71-94.
Harreld, J. B., O’Reilly, C., Tushman, M.L. (2007) Dynamic Capabilities at IBM: Driving Strategy into Action, California Management Review, 49, (4), 21-43
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