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What is strategy and why is it important in businesses and not-for-profit organisations. What challenges do organisations face in trying to develop and implement a strategy? Do you think strategy is still a relevant concept in the modern competitive environment? Use examples to support your answer.
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Strategies play a significant role in any organisation’s success. There are various aspects in strategies such as business level strategy, corporate strategy and operational strategy. All types of strategies have their own importance in making the organisations achieve competitive advantage. The aim of this essay is to focus on business level and corporate strategy. The business level strategies are intended to create a difference between organisation’s relative positions to those of its rivals. A corporate strategy is generally related to overall growth and direction of a company (John, 2010).It helps in managing and nurturing portfolio or group of business. In this manner corporate strategy is very important for any organisation whether it is not-for-profit business or for-profit business.
The essay will focus on defining the strategies effectively and then discussing the importance of strategy to business and not-for-profit organisations. The discussion will also take place on challenges that the organisations face while developing and implementing strategies. There are a number of challenges that have potential to affect the business. Finally the discussion will be undertaken on relevance of strategy in modern competitive environment. The entire discussion will be done by using various examples from renowned companies of the world. Along with that relevant theories and concepts of strategic management from journals will also be discussed in the essay.
A strategy is something that defines the direction in which an organisation will travel and also defines the time that will be taken by the organisation to travel in that direction (Porter 2010).Corporate strategy is majorly concerned with deploying the resources that are available with the organisation so as to achieve the objectives of the organisation(Aguinis, Edwards & Bradly 2016).A strategy affects the overall direction of an organisation and it tends to establish its future working environment. Corporate strategy defines the markets in which an organisation is willing to operate. As a matter of fact the corporate strategy is decided in the context of mission and vision or an organisation. Every organisation has a vision and mission statement that guides its stakeholders about the objectives and their achievement(Jacob 2014).This further helps an organisation in developing a competitive strategy. Competitive advantage refers to the advantage that a company gets over its competitors and competitive strategy plays a vital role in it. A competitive strategy depends upon the strengths, capabilities and weaknesses of an organisation in relation to that of its competitors’ capabilities, strengths and weaknesses. On the basis of this Michael Porter has provided five forces that are threat of new entrants, bargaining power of buyers, bargaining power of suppliers, rivalry amongst existing firms and threat of substitutes (Cole 2003).
In top Management strategy, John Zimmerman of Kepner-Tregoe Inc. defines strategy as “the framework which guides the choices that determine the direction and nature of an organisation” (Andrews & Kenneth 2012). He also proposes that executives base their decisions on a single driving force of business. In their company they have defined nine driving forces that serve as a basis for strategy and these are production capability, products offered, market needs, natural resources, method of sale, size, technology, return, method of distribution. In this manner strategy is a very wider concept that has different meaning for different types of organisations. Besides having different meaning the purpose of strategy and the relevance of strategy are same to all the organisations. It shall also be noted that with the changing time the meaning and definition of strategy is continuously changing. But the bottom-line is that without a proper strategy no organisation will be able to get succeeded in the longer run. Strategies are an integral part of all the organisations(Porter & Kaplan 2016). This is clear from a formal definition of strategy that suggest that the overarching strategy of an organisation is generally made at top level management by its leaders and it reflects the core values and mission of the organisation. The strategies are attributed to clear define the path that will help in the achievement of defined goals of the business. This is how corporate strategy is also helpful in meeting the expectations of shareholders while providing the value to the employees as well as the customers(Gallus & Frey 2015).
Having a focussed and clear strategy is significantly important for businesses as well as not-for-profit organisations. Without having well-defined clear strategies a business may fail to achieve its objectives and gain competitive advantage(Porter & James 2014). Thus, the major importance of a strategy lies in its tendency to make a business profitable, manageable and productive. Following are the importance of strategy to business and not-for-for profit organisations. It provides direction and action plans: It helps in establishing strategically sound, clear and concise action plans for an organisation. It also helps in detailing a plan as to how the organisation will operate so as to achieve the objectives that have been set by the top level management(Ghemawat 2012). It also enables the stakeholders to be fully aware of the strategy. It aligns and prioritizes the activities of an organisation (Gans et al. 2015). There are a number of activities that an organisation is required to perform thus it is very necessary to prioritize the activities so that the resources can be allocated in an optimum manner. It is important to prioritize the activities so as to get the desired results.
It defines accountabilities and the timelines for the better achievement of expected results in an organisation. It is important to have a proper time oriented framework so that all the individuals who are working on that particular task are able to know that they are required to finish it in that particular time frame and everyone is made accountable for their work (ref###).It enhances communication and commitment by clarifying the accountabilities and vision with the organisation. A strategic plan has a tendency to increase the alignment of all the activities of an organization and foster the level of commitment from all the parties involved in it (Hill, Jones & Melissa 2015).It provides a framework for decision making. The strategies and strategic initiatives act as reference point for the decision making and this is the reason why strategy plays a vital role in decision making in an organisation.
In this manner there are numerous other advantages of a strategy to an organisation. It aligns the objectives, vision, mission and goals of an organisation and makes it easier for all the stakeholders to ascertain their priorities(Juul 2013).
For example, When ALDI was willing to expand in other regions after overwhelming response in Australia it undertook SWOT analysis which is a very strong tool of strategic management. On the basis of SWOT analysis the company could decide whether to expand in a particular region or not(Armstrong 2014). Thus, SWOT analysis acted as a great tool to take this decision. There are various other examples from many renowned companies that helped in coordinating and integrating the activities and various functions and this helps them in achieving long-term objectives.
It is not an easy task for an organization to develop and implement a strategy. Development of a strategy and implementation of a strategy are two different phases and both of them are affected by different challenges. The rapidly changing external environment and changes in the internal organisation are major challenges in front of an organization when it comes to strategy development and implementation(Gallus & Frey 2015). It takes huge efforts and calibre to develop a strategy and many a times the strategy is being developed by someone who is not an expert of the field and which results into the failure of strategy. A very good example of this can be seen in Nokia. The strategy that Nokia adopted for selling its mobile phone focusing on low price rather than focusing on demand of modern technology required by customers. Due to that the company had failed miserably. There is another example of bad strategy development from Pampers in China. When Pampers entered into China initially it faced lower sales but after a while it again worked on the strategy and became successful(Best 2014).
There are many reasons why strategy fails. The foremost reason of failure is insufficient leadership attention (Jacob 2014). There are events when leaders of the firm see a strategy as a linear initiative and due to that the strategy fails. A study reveals that less than 10% of all the business strategies being implemented by an organisation are successful(Bettis et al. 2016). The reasons are also attributed to the understanding of the workforce. It shall be noted that majority of the workforce is not able to understand the strategy properly and the impact this strategy is going to have on their work lives and due to this the strategy fails. There are many organisations that don’t link incentives to strategy and due to that strategies are not developed properly(O'Clock 2013). People who are involved in the implementation of strategy are often not included in its development and implementation plan and due to that the strategy fails. In this manner strategy development and strategy failure are interrelated to each other. In the year 2001, Swiss year had to suffer huge loss because of implementation of its “Hunter Strategy” (Jacob 2014). Similarly Apple Inc. also faced stiff non-acceptance in Indian market few years back and this was only because of its wrong strategy to penetrate Indian market. The top management has assumed so many things in wrong manner while they were developing strategy to launch iPhone in Indian market. This is why Indian customers did not accept the phones and the company faced huge loss(Galliers & Leidner 2014).In this manner every organisation is required to focus on development and implementation in an effective manner to overcome the challenges.
There are many opinions on this matter when it comes to the discussion on relevance of strategy in modern competitive environment. Due to globalisation the demands of customers and other stakeholders have changed drastically(Porter 2001).These changes in the demand are also affecting the strategies that organisations are framing. It can’t be said that the strategy is not relevant in current context because without strategy an organisation is not able to achieve its objectives. However the changes in internal and external environment may affect but strategy will always be an important part of an organization. It shall be noted that various aspects of strategy are not much relevant in the current competitive environment. For example in a research undertaken on MAC cosmetics it has been found out that the concept of 7C’s is not relevant in the organisation rather it is affecting the productivity of the company in a negative manner (Keupp, Palmié & Gassmann 2012). A research study has also found out that many companies are suffering because of the modern competitive environment as the strategic tools are not helping them in analysing the actual environment and due to the organisations are not able to formulate policies in an effective manner (John 2010). In this manner it is important to formulate strategies keeping in mind the dynamicity of internal environment as well as external environment. With this the organisations will be able to achieve competitive advantage as well as their goals and objectives with the help of strategies.
The analysis of strategies suggests that it is important for every organisation to have set of strategies to be successful in the competitive environment. The essay has also talked about various examples on the strategies and these examples suggest that many companies do not formulate strategies effectively and due to that the implementation of the strategies get failed. The relevance of strategy can’t be questioned because strategy is something that is able to provide direction to all the stakeholders of the organization. Except for some concepts of strategy such as 7C’s, in some events all the other concepts are relevant for organisations to gain competitive advantage. It is just that the organisations shall use strategies in a significant manner as per the nature of their organisations. Top level management shall take full interest in strategy and only then a strategy becomes effective.
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