Contents

1 A Tour of Block One: Objectives and Introduction........................ ............................

1.1 Introduction: The Nature ana Value of Strategic Management...................
2 Strategy Definitions............................................................ .....................................
2.1 Activity: Defining Strategy A.........................................................................

Os -fc-
3 Key Perspectives on Strategic Management............................................................
3.1 The Competitive Race: Positioning and Conditioning...................................
3.2 Activity: Positioning............................. ................. .................... ............. .
3.3 Conditioning....................................................................................................
3.4 Activity: Conditioning....................... ...............................................................

w w 1—‘
3.5 Organisational Fit and Stretch.........................................................................
. 3.6 Activity: Organisational Fit and Stretch..................................................................
3.7 Organisational Adaptability and Flexibility.......................................................
3.8 Activity: Adaptability and Flexibility...................................................................
3.9 Evolutionary Processes: Life Cycles. Strategy, and the Passage of Time.

O O ^ O' ^
3.10 Activity: Evolutionary Processes......................................................................
3.11 Strategy Integration: the Woods and the Trees...............................................
3.12 Activity: Woods and Trees...............................................................................
3.13 Strategy Integration and Resource Deployment............................................
3.14 Activity. Resources.........................................................................................
3.15 Organisational Capacity for Change.............................................................
3.16 Activity: Defining Strategy B..........................................................................
4 Strategy Formation - Schools of Thought.................................................... .............
4.1 Strategy Models: Schools of Thought.............................................................
4.2 Prescriptive Views: Overview............................................................... ..........
4 2.1 The Design School............................... ................................................
4.2.2 The Planning School.........................................................................
4.2.3 The Positioning School....................................................................
4.3 Process Views: Overview............................................................. .................
4.3.1 The Entrepreneurial School..............................................................
4 3.2 The Cognitive School........................ .................................................
4.3.3 The Learning School.......................... .................. .............................
4.3.4 The Political School........................>.....................,..........................
4.3.5 The Cultural School.......... ..................................................................
4.3.6 The Environmental School..................................................................
4.3.7 The Configuration School................................................................
4.4 Activity: Organisational Process Analysis......................................................

6 Appendix: Sample Answers.........................

6.1 Sample Answer One...............................
6.2 Sample Answer Two..............................

SC3. Strategic Management. BUx'k I 13

U2S
1 A Tour of Block One: Objectives and
 Introduction
After working through Block One of this course, you should be able to:
1. Define strategy and its key ingredients

2. ' Explain concepts that are important to an understanding of the constituent

 elements of strategy
3. Distinguish between Presriptive and Process views of strategy

4. Compare and contrast alternative ways of perceiving and describing the workings
of the strategy process within organisations, and between organisations and their
environments.

1.1 Introduction: The Nature and Value of Strategic

 Management
Through much of the contemporary world, forces at work are calling into question the
way organisations are managed. This is true across the full range of business sectors and
organisational types. It is constant and ongoing, and reaches into even the most
traditional of industries and conservative of companies. All organisations are being
required, and sometimes forced, to question the basics of their organisation's structure,
culture and processes. Comfortable assumptions they hold about themselves and their
‘world-view' are being challenged, both from within their organisation and outside.

In manufacturing, long established and successful companies are questioning their most
trusted production technologies and processes; see Exhibit l.l. Equally, in services,
computerised information systems have transformed such traditionally inclined
corporations as banks and other finance houses. This has come about through product
development opportunities arising out of the technology itself; see Exhibits 1.2 and 1.3.
These illustrations highlight a number of the variables that are of strategic importance to
the organisation: the external pressures from consumers and suppliers, the distribution
and use of resources, the importance of individual and organisational attitudes toward
new wrays of thinking and behaving, etc.

Exhibit 1-1 The arrival of haute carture

The production line is dying. What began 75 years ago. when a model T
chassis was winched by rope across the floor of Ford's Highland Park
plant in Detroit while employees fitted various bits and pieces into it, is
fast coming to an end even in the car industry which has clung more
stubbornly than any other to the mass-production techniques pioneered by
Henry Ford. But now, borrowing modular manufacturing methods from
the aerospace and electronics industries, car firms are learning to make

SC3. Strategic Management. Block I 14

 their cars in a radically diflorent way. This will revolutionise the industry
as much as did Henry l ord's innovations at Highland Park two
generations ago.
The pressure for change is coming from the market. Increasingly,
manufacturers need to produce a variety of products from a single product
line; constantly to update and change these products; and to tailor them as
close as possible to customers' demands.

As a result, car companies are fast evolving towards the bolting together
of prefabricated modules. Now designers and assemblers, not
manufacturers, they are devoting their energies to marketing a larger
number of products to increasingly fashion conscious customers.

Source: Business: The Economist. July 29. 1989 (abridged).

Exhibit 1-2 Speaking on the Ford Motor Company:

Productivity, competitive advantage and responsiveness all three visions
of automation have created both successes and failures. But they are
increasingly united by a common theme. To reap the benefits of new
technology, companies must create ORGANISATIONS, doing new things
in new ways. That means questioning the day-to-day traditions of
centuries of business.
Mr. Michael Treacy. an information-technology consultant, tells an
instructive tale about lord's efforts to reduce the number of paper
shufflers. What seemed at first to be a mundane efficiency campaign
became a challenge to l ord's long established ways of doing business,
ford employed about 500 people to order components, receive the parts
and pay suppliers. Mu/da. a Japanese car maker with which l ord had
formed an alliance cemented by a 25% shareholding, did the same job
with less than 100. An elaborate automated system cut ford's order-
shufflers only to about 400. So f ord's folk took a harder look at Ma/da.
Ma/da, f ord discovered, had fewer computers than ford. Its secret was
that it did not wait for invoices from its suppliers. When goods arrived at
the loading dock, a warehouseman waved a bar-code reader over each
box. That single action entered the parts into inventory, updated
production schedules (if necessary) and sent electronic payment to the
supplier.
This seemed like a bit of magic to some of ford's managers. They had
viewed invoices as a capitalist essential, like double-entry bookkeeping.
Once shown the trick, the possibilities for boosting efficiency bv
eliminating the complications of matching parts and invoices seemed
obvious. But tapping these efficiencies required changes in the w ay people
worked: close relations with suppliers: a warehouse that can talk directly
to the finance department and workers w ho adapt happily to new ways of
doing things....

Source: Information Technology Survey: The Economist. June.16. 1990..

SC.y Strategic Management. Mock / 15

Exhibit 1-3 Speaking on banks and finance houses:
During the 1980s the computer transformed the nature of finance. In an
effort to differentiate their wares from other banks on Wall Street and in
London's Euromarkets finance houses devised new investing instruments
or sliced and repackaged old ones, using computing power to calculate the
new instruments’ characteristics. Investors were soon faced with a shining
array of products to suit their portfolios. Many products disappointed,
failing to perform in the way that their creators promised: perpetual
floating-rate notes are one example, portfolio insurance is another.
Interest-rate and currency swaps, for instance, have served to bind once-
discrete financial markets into a global whole.
An investor coming to the capital markets in the 1970s would have had
just half-a-dozen financial instruments from which to choose: equities,
treasury and municipal bonds, some blue-chip corporate bonds and a
convertible or two. During the 1980s investment banks look these
securities and, with the aid of raw processing power, reshaped them in a
thousand different ways here separating a security's principal payment
from its interest payment, there adding an embedded option. Institutional
investors liked the ‘differentiation' that they were being offered, for it
allowed them better to tailor their portfolio of assets to their liabilities, as
well as to the risks they were prepared to lake.

Source: Information Technology Survey: The Economist. June 16. 1990.

2 Strategy Definitions
The term strategy may be used in two senses. As an adjective assigning particular
importance to some action, activity or process, it is possible to speak of strategic
management, strategic planning or strategic decision making, all deemed to be activities
which are essential to the organisation's survival. It is also used as a noun, to describe a
pathway along which the organisation moves towards its goals. Below is a historical list
of strategy definitions that shows the underlying similarity among a range of viewpoints.

The language of strategy stems from the natural, physical, behavioural and military
sciences, but much of the terminology betrays its origins: terms such as life cycle,
evolutionary niche, competitive behaviour, boundary and entropy, as well as mission,
goals and tactics. For example, there are strong parallels between behaviour in corporate
society, and that of the military world. As well, many of the survival solutions and
behaviours, exhibited by life forms in the natural world, arc mirrored in business and
other human organisations.

There are as many definitions of strategy as there are experts and commentators in the
field. A sample of these is given below'. They illustrate the fact that despite the choice of

SC '3, Strategic Management, Bhck / 16

words and phrases there is considerable agreement on what constitutes the essential \
characteristics of strategic management.

1947
Strategy is a series of actions by a firm that are decided according to the
particular situation.
Von Neumann & Morgenstcrn, Theory of Games and Economic Behaviour. 1947,
pp.79-84:

1954
Strategy is analysing the present situation and changing it as necessary.
Incorporated in this is finding out what one's resources are or what they
should be.
Druckcr, The Practice of Management* 1954, p. 17.

1962
Strategy is the determination of the basic long-run goals and objectives of
an enterprise, and the adoption of courses of action and the allocation of
resources necessary for carrying out those goals.
Chandler, Strategy and Structure: Chapters in the Histoiy of American Industrial
Enterprise* 1962, p. 13.

1965
Strategy is a rule for making decisions determined by product/market
scope, growth vector, competitive advantage, and synergy.
Ansoff, Corporate Strategy: An Analytic Approach to Growth and Expansion* 1965,
pp. 118-121.

1969
Strategy is the pattern of objectives, purposes, or goals, major policies and
plans for achieving these goals, stated in such a way as to define what
business the company is in, or to be in, and the kind of company it is. or is
to be.
Learned, Christenson, Andrews and Guth, Business Policy: Text and Cases* 1969, p. 151.

1972
Strategy is defined as the basic goals and objectives of the organisation,
the major programmes of action chosen to reach these goals and
objectives, and the major pattern of resource allocation used to relate the
organisation to its environment.
Schcndel and flatten. Business Policy or Strategic Management* Academy of
, Management Proceedings, 1972, p. 4.

1974
Strategy is concerned with long-range objectives and ways of pursuing
them that affect the system as a whole.
Ackoff, Redesigning the Future* 1974, p. 29.

SC3. Strategic Management. Block i 17

1975
Strategy is an analysis of the environment and selection of economic
alternatives that will match the corporate resources and objectives at a risk
commensurate with the profit and viability, which the alternatives offer.
McCathy, Minichiello, and Curran, Business Policy and Strategy': Concepts and
Readings. 1975, p. 19.

1976
Strategy is a unified, comprehensive, and integrated plan designed to
assure that the basic objectives of the enterprise are achieved.
Glucck, Business Policy: Strategy Formation and Management Action. 2"'1 ed.. 1976,
p. 3.

1977
Strategy is the forging of company missions, setting objectives for the
organisation in light of external and Internal forces, formulating specific
policies and strategies to achieve objectives, and ensuring their proper
Implementation so that the basic purposes and objectives of the or
Organisation will be achieved.
Steiner and Milner, Management Policy and Strategy: Test. Readings, and Cases. 1977,
p. 19.

1979
Strategy is a mediating force between the organisation and its environment
consistent patterns in streams of organisational decisions to deal with the
environment.
Mintzbcrg, The Structuring of Organisations, 1979, p. 25.

1979
Strategy provides directional cues to the Organisation that permits it to
achieve its objectives, while responding to the opportunities and threats In
Its environment.
Schcndel and Hofcr, Strategic Management: A New View of Business Policy ami
Planning, 1979, p. 51S.

1980
Strategy is the pattern or plan that Integrates an organisation's major
goals, policies, and action sequences, into a cohesive whole. A well-
formulated strategy helps to marshal and allocate an organisation's
resources into a unique and viable posture based on its relative internal
competencies and shortcomings, anticipated changes in the environment,
and continent moves by intelligent opponents.
Quinn, JR, Strategies for Change: Logical Incrementalism. 1980.

1980
Corporate strategy is the pattern of decisions in a company that determines
and reveals its objectives, purposes, or goals, produces the principle
policies and plans for achieving those goals, and defines the range of

SC3. Strategic Management. Black I 18

c
 A

business the company is to pursue, the kind of economic and human

organisation it is or intends to be, and the nature of the eoewomic and non
economic contribution it intends to make to its shareholders, employees,
customers, and communities.
Andrews. The Concept of Corporate Strategy, rcv.cd., 19X0.

1983
Strategy is really no more than a plan of action for maximising one's
strength against the forces at work in the business environment.
Ohmae. k.. The Mind of the Strategist. Penguin Books. 1983. p.248.

1988
Strategy is the fundamental pattern of present and planned resource
deployments and environmental interactions that indicates how the
organisation will achieve its objectives.
Motor. C.W. and Sehcndcl, D.. Strategy Formulation: Analytical Concepts. 1 lih reprint.
1988.

1988
Strategy is a unified, comprehensive, and integrated plan that relates the
strategic advantages of the firm to the challenges of the environment. It is
designed to ensure that the basic objectives of the enterprise are achieved *
through proper execution by the organisation.
.launch and Cilueek. Business Policy am! Strategic Management. 5th ed.. 1988. p. 11.

1988
Strategy is large-scale, future-oriented plans for Interacting with the
competitive environment to optimise achievement of an organisation's
objectives.
Pearce and Robinson. Strategic Management- Strategy Formulation and Implementation
1988.

1989
Strategy is a deliberate search for a plan of action that will develop a
business's competitive advantage and compound it.
Henderson, B.D.. Harvard Business Review. Nov Dec, 1989. p. 141.

1990
Strategy is the pattern of organisational moves and managerial approaches
used to achieve organisational objectives, and to pursue the organisation's
mission.
Thompson and Strickland 111, Strategic Management - Concepts and ('uses. 1990.

1990
Strategy is the organisation's pre-selected means or approach to achieving
its goals or objectives, while coin with current and future external
conditions.
Digman, Strategic- Management. Concepts, Decisions, Cases, 1990.

SC3. Strategic Management, Block / 19

1991
... strategies, large-scale action plans for Interacting with the environment
in order to achieve long-term goals.
Bartol and Martin. Management. 1991. p. 190.
t
1993
Strategy is the direction and scope of an organisation over the long-term;
ideally, which makes its resources match its changing environment, and in
particular its markets, customers or clients, so as to meet stakeholder
expectations.
Johnson and Seholes, Exploring Corporate Strategy - Text anil Cases. 3rd ed.. 1993.
p. 10.

1994
Strategy is the search for directions, which energise the life of an
organisation.
Stace and Dunphy, Beyond the Boundaries: Leading and Recreating the Successful
Enterprise, 1994, p.54.

To be effective strategists, managers of organisations must be able to ‘see' or ‘picture'

themselves, their organisation, and its environment in certain ways. In particular, they
need to be:
· able to see and work with the parts as well as the whole of an organisation
V-

· aware of. and responsive to. situational or contingency factors and flexible in the
use and interpretation of rule-governed behaviour

· sensitive to the flow and evolution of events and phenomena, as well as the
influence of time and change on the behaviour and culture of organisations

· comfortable in multi-tasking environments and be able to handle multiple and

parallel demands on their time, attention and energies

· able to strike a workable balance between the use of intuition and logic in
managing and planning.

2.1 Activity: Defining Strategy A

Based on what you have read to this point, make a list of the factors that you believe
define what is meant by strategy. Think in terms of some key perspectives such as the
time horizon, organisational features and environmental and situational factors. Hold on
to this list and re-visit it after you have completed the next section of this Block. See
Defining Strategy (b). Note: this is a required activity.

SC3, Strategic Management. Block I

20
List of factors that define ‘strategy':

3 Key Perspectives on Strategic Management

There are a number of features that separate strategic management and decision making
from other types of managerial activity. All of them are concerned with survival and
growth, and the longer rather than the shorter-term aspects of decision making. They
include positioning, conditioning, fit, adaptability, flexibility, evolutionary effects, the
harmonisation of parts with the whole, resource deployment and coping with change.

There are many dimensions that are important to understanding the development and use
of a strategic perspective in an organisation. A selection of some of these dimensions is
set out below; each has a set of Questions for Consideration and an (optional/required)
Activity designed to enhance and grow your critical understanding of the concepts
employed, and their practical expression in the workplace. Most organisations, for-profit
or not-for-profit, public or private all express, or are influenced by one of the themes
below, to some degree:

· The competitive race: positioning and conditioning

· Organisational fitness and stretch

· Organisational adaptability and flexibility

· Evolutionary processes: life cycles, strategy and the passage of time

· Strategy integration the woods and the trees

· Strategy integration and resource deployment

· Organisational capacity for change

3.1 The Competitive Race: Positioning and Conditioning

In most industry settings there is rivalry among member organisations for position. It is
similar to the positioning activity of a runner in a race. Running at the front of the field is
different to running in mid-field, or in a follower position at the end. The industry leader

SC3. Strategic Management. Block / 21

determines the direction and pace of industry growth and development. They also attract
both the benefits as well as the costs of breaking new ground, as innovation opens up new
options and choices for all. Industry leadership may be developed or acquired at a
number of points in the life cycle: at the start-up position of an industry life cycle, or at a
later stage where the new entrant, through some form of merger or acquisition, assumes
the positioning advantage. Ironically, occupying the lead position in a mature or declining
market may simply leave the organisation at the ‘top of the heap' in a landscape that is
trapped by the very dominance that they fought so hard to acquire.

Like a competitive bicycle race, industries may contain a small group of front runners
whereby the leading position shifts from one to the other in turn. In these circumstances,
relative market shares are often stable over long periods of time and leadership depends
of‘stealing' small advantages that last for short bursts of time and then are lost again to
another competitive player in the next round of play. This tendency is commonly seen in
financial markets the banking industry in particular. An organisation acquires its
position in the marketplace through such factors as market share, technology dominance,
control and ownership of distribution networks, etc. Positioning can also be influenced by
the changing nature of relationships that link the organisation to its key suppliers and
customers. In some cases this relationship is central to the acquisition or loss of
positioning: the value that these relationships inject into the business is assessed by
whether they lift or reduce the depth and strength of its play. Changes in both business
operation as well as societal environments also have the ability to affect and rearrange the
patterns of forces at work on industry players, causing them to gain or lose relative
advantage. Note: See Appendix: Sample Answer for one possible answer to Question 1
below.

Questions for Consideration: Positioning

1. I low is industry positioning seen and defined by your organisation?

2. What is your organisation's basic ‘positioning' style? Docs your organisation

have the habit and practise of always looking to be first in initiating new
products and processes or does it prefer to wait and adopt these changes as
they are proved to work in practice? Note: Hither position is legitimate and
each offers its advantages and disadvantages.

3. Where in the industry does your organisation see itself as best placed? Are
you the front-runner, part of the leading group, in the mid-field or at the tail-
end? Is your organisation a leader or follower? Why? Is there a difference
between where it is currently positioned and where it would like to be? How
much of your organisation's choice about positioning is self-determined and
how much is driven by the behaviour of its competitors?
SC Strategic Management. Mock I

22
3.2 Activity: Positioning
Identify and compare the actual positioning of your organisation with that of its principle
industry competitors. Select the criteria you would use to make such a comparison and
assess how well it permits such a comparison. Present reasons and arguments for this
selection. Having completed these tasks, determine how well the actual positioning
matches the desired positioning.

3.3 Conditioning
1 low well a race is run will reflect the level of conditioning the athlete possesses. The
conditioning of an athlete is measured in terms of muscle strength, breathing rate, blood
oxygen levels, etc. For an organisation, its level of conditioning is reflected in the degree
of efficiency with which it carries out its tasks and achieves its goals. The conditioning of
an organisation is measured in terms of its ability or ‘capacity' to respond to change, its
ability to operate at satisfactory levels of performance in difficult circumstances (with
regard to returns on capital, equity, investment, etc.).

It is important to note that different mixes of goals and their associated strategy pathways
place differential demands on the levels of fitness for an organisation. A stroll along the
beach calls for a different pattern of energy use and release than a run up the side of a
mountain a considerable stretch, especially if there is a lack of basic fitness. For the
same reason, the goals that an organisation sets for itself will place ‘energy' demands on
its resource base and push the organisation to configure (or reshape) itself so as to be able
to perform as required. II'it is unable to do so it may collapse, especially if it has little or
no control over the pace of change that is driving the industry's evolutionary cycle. Thus,
the ‘shape' an organisation is in will be revealed by whether it is able to sustain levels of
activity and courses of action over the long-term.

Short burst demands on an organisation are very different to demands that continue to
escalate into the foreseeable future. Likewise, the configuration of resource mix and use
is very different over the short as opposed to the long haul. Conditioning involves
management setting the tone for the organisation through its staff development and use of
key competencies. The competencies of an organisation are the underlying mix of skills
and abilities that play a large part in shaping the organisation to fit the demands that it
places on itself. If it does not have the basic attributes necessary to run a particular type
of business race, if the lack of these attributes makes it next to impossible to acquire the
necessary conditioning, then it should consider an exit strategy. In summary an
organisation is faced with two basic options: pick the race to suit vour given conditioning
(i.e.. Fit) or reconfigure your conditioning to accommodate the circumstances of the race
(i.e.. Stretch).
SC ’S, Strategic Management. Mock /

23
Questions for Consideration: Conditioning

1. I low does your organisation define, establish and maintain performance

levels? Note: This would be the equivalent of the exercise and fitness
measures that individuals use to measure their own health and performance
such as heart rate (levels of profitability), oxygen intake rate (ROI). glucose
absorption rate (ROI:). red and white blood cell count (Asset utilisation), etc.
These and others are all measures of both financial and strategic conditioning,
as well as that for strategic health as a whole.

2. What are the main characteristics of the environment that stimulate or dampen
down its drive to achieve such performance levels? Note: The level of
competitive pressure may be such that much of an organisation's available
resources for growth are spent in just surviving, maintaining position rather
than building strengths to assist it to keep up with or ahead in the game.

What are the main characteristics of the onzanisation itsell that also stimulate
or limit its drive and ability to achieve sustainable levels of performance?
Note: Organisational culture is olten important in this regard for example
much ofan organisation's energies and attention mav be expended fire
fighting internal political conflicts between different lines of functional or
small business unit management.

3.4 Activity: Conditioning

Identify the criteria (financial and non-financial) you would use to assess the strategic
health and fitness (the conditioning) of your organisation. Rank them according to their
importance to making effective decisions about your organisation's long-term future.
Present reasons and arguments for your choice of ranking. Use the table below to set out
vour choices.

Ranked Criteria Reasons for cri*0"* choice and ranking

1
2
3
4
5
6
7
8
9
.
10
_______________________

Strategic Management, Block I

24
3.5 Organisational Fit and Stretch
Long distance runners take part in marathons; short distance runners stick to the one and
two hundred meter events. The physical makeup of each type of runner is different, and
suited to the specific conditions for which they have trained. The short distance runner is
ill-equipped for the long slow release of energy that characterises the marathon runner.
The converse is equally true of the 100-metre dash when large amounts of energy are
released in very short periods of time.

Business corporations also need to identify their particular ‘strategic match/ pick their
competitive distances, and ‘train' themselves to perform under those conditions. In this
way they choose the race that best fits their capabilities. If the environment significantly
shifts around them, they may need to stretch themselves to meet the changed demands of
its customers and the market. Fit is concerned with the degree of integration and
compatibility between an organisation and its external political and resource networks
(i.e., societal environment). Stretch is concerned with the extent and willingness of the
organisation to rearrange itself in order to extend itself beyond its current levels of output
and performance. It is concerned with culture and behavioural dimension of the
corporation as well as with developing the capacity to make such adjustments.

Questions for Consideration: Organisational Fit and Stretch

1. Mow well fitted (as with a key to its lock) is your organisation to the industry
environment in which it operates? Note: By way of example, methods of
distribution often vary considerably with local conditions and an operator's
bulk distribution of a product in one area, as in the case of cooking oils, (say
by small tanker to supermarkets) may have to be scaled down to match the
scale of demand and distribution in another area (say to small retail outlets
that sell the product in small containers supplied by their customers. In this
instance the vegetable oil distribution firm would have to adjust (stretch) itself
to meet market conditions if it wishes to survive across a range of different
operating environments. It may have to ‘stretch* itself to meet different and
varying customer needs and expectations. If it .is unable or unwilling to do so
it needs to find a different set of business conditions that better matches what
it seeks to achieve.

2. I las your organisation established appropriate and functional linkages to its

external environment? Does its culture match the culture required to succeed
in its competitive niche? Does it think, act and behave in the way it needs in
order to have a chance at long-term survival?
SC3. Strategic Management. Biotic /

25
3.6 Activity: Organisational Fit and Stretch
Identify the main organisational and environmental components that need to match so
that the organisation is best configured to meet the demands of its industry environment.
Show in detail how these matches contribute to the strategic positioning of the
organisation in its landscape. Note: It is suggested that you use the following headings:
Structure, Culture, Processes, and Resources in this way.

For example, what is its structure and does it match (and exceed?) current industry
requirements and practices - such as too many or too few manufacturing sites to suit
industry distribution chains, wasted and non-productive capital assets that do not align
with supplier and customer requirements and customers wanting JIT relationships that
cannot be met with current technology and logistics)?

Organisational Environmental Degree of

Component Requirement Match or
Mismatch
Structure: Structure: Structure:

Heavily Decentralised Poor match

centralised and and localised which is causing
controlled by required to meet low morale and
corporate HQ very varied local excessive
conditions turnover

Culture Culture Culture

Processes Process ' Process

Resources Resources Resources

3.7 Organisational Adaptability and Flexibility
The natural world has developed two different strategies for individual and species
survival. One involves extreme specialisation of structure and behaviour. The other
follows a more generalised pattern of adaptation in which the organism is able to
accommodate a range of environmental states. Where the environment is stable and little

SC3, Strategic Management, Block 1 26

change occurs across extended time periods, the specialist adaptation is perfectly
functional. Hummingbirds, for example, have adapted to the precise structure and form of
their target food sources - the flowers of tropical South America. However, with the
destruction of the rainforests they are uncreasingly becoming an endangered species.
Alternatively, the rat, cockroach, sparrow and seagull have been able to exploit human
intrusion. They occupy a wide range of environments with equal facility and ease. In
these two broadly different ways, all living organisms seek to survive.

For the business organisation, the basic proposition also holds that as the levels of
uncertainty and complexity rise and environments become more turbulent, the more
flexible (and less rigid) the organisation and its planning process should become. It is not,
however, always easy to establish sufficient levels of responsiveness and flexibility. The
reasons for this can stem from a number of factors. Take, for example, the following:
· Like super tankers, large organisations may take a long time to actually slow
down and shift direction. The momentum generated by a commitment lo a set of
goals, objectives and strategies gives a certain inertia to the organisation

· Like aircraft, the company may have passed the point of no return, and financial
obligations force them to continue whilst trying to cope with threats from the
environment

· Like stubborn army generals, the culture of the company may be one of ‘never
retreat,’ and this factor pushes it to extend the life of a strategy that might
otherwise be better left to collapse.

In a similar fashion, human organisations become attached to particular patterns of

existence. These patterns are in part determined by the approach the organisation takes to
the management of entity-environment relationships. It is also partially shaped by the
form of delegation, accountability and managerial autonomy at the periphery of the
organisation. On the one hand, managers may be so constrained by formal rules of
thought and behaviour so as to have no independence of action (autonomy) or choice of
direction - such as the hummingbird. On the other hand, when environments are simple
and stable, such prescriptive decision making can be an effective means of managing
change. However, when they become more complex and dynamic, the organisation needs
to be able to make adjustments in pace with the given rate of change - like the rat and
sparrow. Rigid and complicated rules, together with too formal hierarchies for decision
making, tend to hinder this ability. Habits of thought and action also constrain the ability
of individual managers to act freely, when time and the situation demand. Trying to
create such flexibility involves that the organisation in develop a management culture that
is able to handle changing circumstances and events on a case-by-case or contingency
basis.

Strategic management is therefore concerned with establishing an appropriate point of

balance between rule-centred and situationally-based decision making, and between the
strategic- and operationally-based management processes and cultures - which can often
exist side by side within the same organisation. Establishing this balance is a problem
that affects business organisations as well as nation states. Dow Chemicals has searched

SC3, Strategic Management, Block 1 27

for a solution to the centre-periphery problem for twenty or more years and their mission
continues.

In a very practical way, evolution teaches that species survival rests in part on an ability
to look around corners, into valleys and beyond the next range of hills in search of food
or enemies. The adaptable survive. The role of seer, shaman, and priest and more recently
the scientist has been to predict the pattern of future events and reveal the consequences
of current decisions and actions; in turn, they strive to incorporate adaptive behaviour
into custom and law. Although events and circumstances have changed, the same need to
know that the future confronts the chief executives of the modem corporation as much as
it did the leaders of past tribes and times.

There are two different approaches to defining futures. At one end is the objective,
rational, quantitative and numeric approach. At the other is the intuitive, subliminal,
subjective and qualitative approach. One may be considered to be logic- or ‘brain’ based,
the other feeling, or ‘gut’ based. Good strategy requires the manager to use the right mix
in tune with their personality and the circumstance.

Informal Formal
instinct-based numbers-based
subliminal objective
intuitive rational
qualitative quantitative
‘gut’ based ‘brain’ based

In recent decades much emphasis has been placed on the establishment and operation of
formal planning systems. Behind this has been the assumption that it is possible to drive
back the shadows and clarify future events by gathering, processing, analysing and
interpreting information to support the strategic decision making process.

The strategic environment is, however, more multivariate than univariate. Managers need
to be comfortable in situations requiring multi-tasking ability, where they need to be able
to carry out tasks in parallel and to handle a number of different and possibly conflicting
claims on their time. The usual method is to prioritise tasks for attention and action, and
under conditions of stability, this is acceptable. When environments become more
complex and demanding, the ability to act in parallel becomes vital to organisational
survival. The use of models to simplify complex decision environments testifies to this.
The BCG Matrix, the GE Screen and others (see Block 7) try to condense and focus
information into a format that makes it more accessible to the chief executive and the
planning team. They all represent attempts at extracting the key factors that describe the
strategic aspects of any given situation.