The Concept Of Strategy Formulation And Implementation: A Critical Analysis

The concept of strategy

Question:

What is strategy?

Strategy formulation is always a process which has been debated for its effectiveness and success ratio. Researchers believe that it is always a difficult task to predict the future in form of strategy formulation (Karami, 2012). Especially when it comes to strategy related to economic decisions. All organisations, irrespective of their size of industry have to face challenges related to strategic decisions. At times some organisation might succeed in getting a right strategic decision, whereas at times, a specific strategic decision can create a major mess. That is why, it becomes important to analyze, that in real world how strategy formulation and implementation can result into situations which can result into both favorable as well non-favorable situation. Purpose of this essay is to critically analyze the concept of strategy formulation and implementation, so that a conclusion can be derived about the process of strategy formulation and its effectiveness.

Before analyzing the impact of strategy decisions and its other aspects, it is first important to understand the concept of strategy itself. Words such as ‘strategy’ and ‘strategic decisions’ are associated with issues such as:

Defining long term direction for an organisation, this is an important aspect of strategy, which means taking such decisions which defines the long term approach of an organisation towards transforming itself (Ramaseshan et al, 2013, pp.1224-1250). For example, Yahoo! Inc. after years of domination in internet industry faced sudden collapse in its revenue due to poor decisions made by its management. As part of strategic decisions, CEO was changed, who laid down an entire new approach towards rebuilding the company and introducing new products in search engine market. Her strategic decisions helped Yahoo! in recapturing a large share of market which it lost.

Providing advantage for the organisation over competition is an important characteristic of the strategy. Often it has been seen that as a result of strategy decisions, organisations are able to gain significant competitive advantage over the competition. However, in order to achieve the advantage, it is essential that strategic decision should be successful. At times, a strategy formulated might result into the opposite as well, and the organisation might lose its competitive advantage to the competitors.

Above are two of the basic and common characteristics of the strategy. Based on the above characteristics, and various researches and reports, strategy can be defined as the direction and scope of an organisation over a long term, which enables the organisation to achieve advantage in the changing environment through effective utilization of the available resources and competencies (Fredriksson & Larsson, 2012). Core aim of the strategy is mainly focused on fulfilling the expectations of the stakeholders associated with the organisation. Hence, a stakeholder can be an employee, shareholder or anyone associated with the organisation that might be impacted by the performance of the organisation.

It can be said that strategic decisions are about providing long term direction to an organisation. These decisions to a large extent impact the scope of the organisation’s activities and to a large extent address the change in the business environment. In such circumstances, strategy might be complex in nature, and often made in situation of uncertainties (Hart & Logan, 2011, pp.81-106). It has been observed that strategic decisions often require an integrated approach – both inside as well as outside an organisation to be implemented successfully. Strategies are often implemented at either corporate level or at business level. However it has been observed that strategy at times also leads to failure and mess in terms of economic implications.

Characteristics of strategy

For example, Kodak which is famous for its film based business model used for photographs and movies failed miserably due to one strategic blunder it did in 1975. According to one of the work on Kodak’s failure it was revealed that it was Steve Sasson, the Kodak engineer who invented the first digital camera in 1975. When Steve presented his invention in front of Kodak’s management team, they brushed it aside and asked him to focus on Kodak’s film based photograph business model. Kodak’s management clearly failed to see that digital camera was a potential disruptive technology which later on changed the complete concept of photography to an extent that use of films was no more required, and Kodak from being a leader in film based photography eventually filed for bankruptcy (Kruger & Mama, 2012, pp.152-169).

This example of Kodak reveals the risky part of the strategy. Kodak’s strategic decision was based on the fact that Kodak didn’t want to lose its leadership position in the market of film based photography, by brining a new product which might result into creation of new industry all together, however what Kodak failed to see in its strategy that if not Kodak then someone else would invent the digital camera, and take advantage of the device to gain edge over Kodak. In fact, Kodak could have further consolidated its position in the market of photography if it would have been able to initiate the technology of digital camera before any other company like Canon or Nikon.

The core aspect of above example is to reveal the risk and uncertain part which is involved with the strategy formulation and implementation. Often strategy formulation and implementation is associated with success and positive result. Majority of the companies perceive strategic changes with a positive outcome even before strategy is implemented in real life, due to which there are financial loses, brand failures and various other issues which comes up (Andrews, 1997, p.52).

According to the work on strategic decisions titled Strategy Safari by Henry Mintzberg, Bruce Ahlstrand and Jospeh Lampel there are ten perspective towards strategy formulation mentioned below:

• The Design school, which perceives strategy formation as a process of conception.
• The Planning school, which sees strategy formation as a formal process.
• The Positioning school, seen strategy formation as an analytical process.
• The entrepreneurial school, where strategy formation is a visionary process.
• The cognitive school, views strategy formation as a mental process.
• The learning school sees strategy formation as an emergent process.
• The power school sees strategy formation as a process of negotiation.
• The cultural school sees strategy formation as a collective process
• The environmental school sees strategy formation as a reactive process
• The Configuration school sees strategy formation as a process of transformation.

Hence, it can be seen that in several ways strategy formulation can be seen. However more important aspect to debate upon is the effectiveness of the process of strategy formulation.

Over a period of time, it has been observed that there are several organisation which failed miserably due to its strategic decisions, which eventually raises the question that how effective is the process of strategy formulation (Baird & Thomas, 2006, pp.230-243).

Researchers who advocate the process of strategy implementation always focus on understanding the future trend, and based on that perception forming a strategy which can help the organisation to gain competitive advantage in the market. However this aspect might not be true always. At times, companies have failed miserably, even after ensuring that they were prepared with their strategy to tackle competition and change in market environment.

Failure of Nokia-which was mobile handset manufacturer leader in 1990s and early 2000s, highlights the surprising facts that how even after focusing on its strategy, it failed to understand the market trend and collapsed miserably from position of leadership to getting acquired by Microsoft. Nokia, which dominated the mobile handset market with its products based on Symbian operating system became too complacent with its line of product, and never felt on innovating something major to revamp its offering to the products (Hedberg & jöhsson, 1999, pp.88-109). It failed to read the market requirement for an operating system which was more graphical and easy to use. Moreover Nokia also failed to understand the requirement for touch-based mobile devices and continued to push its key based devices in the market. Eventually, other manufacturers like Samsung, Apple, and LG etc. quickly gained market share with their innovative touch screen based mobile devices and Android operating system.

Types of strategic decisions

Above example, highlights the fact that even after have a proper strategy a company can fail miserably. It is not that Nokia didn’t innovate but problem is that is strategy for future was based on wrong assumptions that people will continue to use its devices which were less innovative. However, its assumption proved to be wrong and resulted into its collapse of the company (Noy & Ellis, 2003, pp.691-707).

Important aspect regarding strategy is about its future perspective. Strategies are always formed on certain assumptions and current data. For example, if a company decides to open it manufacturing plant in a different country, then it will be a strategic decision which will be based on several external and internal factors. Organisations even focus on the perceived failure or success of the strategy, but issue is that strategy implementation and its result is something which cannot be judged immediately. At times, effect of strategy takes years to realize, especially when it is related to large organisation’s transformation. The core issue with strategic decisions remains its futuristic nature, element of uncertainty in strategy is something which makes us think that how relevant it is to formulate and implement a strategy when its success or failure is not known? This debate on relevance of strategy should be based on the cases of successful as well as failed strategies.

There have been several cases of organisational successes due to strategic decisions taken by the organisation. For example Apple’s decision to launch its tablet based PC known as iPad in 2007 was a major success. It is important to note is that, Apple didn’t’ innovate tablet based PC; it was Microsoft which initially launched the tablet which failed miserably in the market (Salmela & Spil, 2002, pp.441-460). However Apple’s decision to reignite the tablet category surprised several industry observers as they believed that market will not prefer tablet PCs such as iPad. However, Apple completely surprised the market with tremendous success of iPad. Today, the scenario is that tablets are already being seen as an alternative to laptops and other computing devices. In this scenario, Apple’s strategy highlights the fact that strategy is a calculated risk which an organisation has to take, but even more important to understand is that Apple’s strategy was not just a fluke, its strategy related to launch iPad was integrated with the fact that iPad is an extremely superior product with an already popular operating system iOS, which means, that in order to ensure that a strategy is successful, companies need to have focused on their ground work such as building right product, creating right market environment, and overall launching appropriate market campaign to launch the product. Similarly, at times strategy success is also related to organisational transformation where organisations which are going through rough phase, transform itself towards a successful future (Bourgeois, 1999, pp.25-39).

There are several examples like iPad, which highlights the fact that strategy if formulated on right data, and correct understanding of market can help an organisation to reap tremendous benefits. However there are organisations like Nokia, Polaroid and Kodak etc. who failed miserably in the market due to their incorrect assumption about future market and trends.

Conclusion

Important question is that, is there any specific formula to ensure strategic success in various scenarios? Based on the above analysis it can be said that irrespective of any theory revolving around strategy formulation and implementation, there will be always an element of uncertainty which will be part of strategic decisions. There can be no sure shot successful or failure strategy. However, organisations can definitely focus on creating the best possible strategy based on its currents strategy, macro and micro environmental factors and available resources with it. Based on these aspects an organisation or an individual can make the best strategy as per their criteria. Its success or failure however will not just depend on the factors supported by the organisation, but also various external or internal factors which might not be in control of the organisation. In such circumstances, it can be said that there is always an element of risk of with strategy implementation which can never be removed, however this risk element can definitely minimized to the lowest possible level.

References

Karami, A. 2012. Strategy formulation in entrepreneurial firms. Ashgate Publishing, Ltd..

Ramaseshan, B., Ishak, A., & Kingshott, R. P. 2013. Interactive effects of marketing strategy formulation and implementation upon firm performance. Journal of Marketing Management, 29(11-12), 1224-1250.

Fredriksson, G., & Larsson, H. 2012. An analysis of maintenance strategies and development of a model for strategy formulation.

Hart, S. D., & Logan, C. 2011. Formulation of violence risk using evidence-based assessments: The structured professional judgment approach. Forensic case formulation, 81-106.

Kruger, C. J., & Mama, M. N. 2012. Incorporating business strategy formulation with identity management strategy formulation. Information Management & Computer Security, 20(3), 152-169.

Andrews, K. R. 1997. 5 The Concept of Corporate Strategy. Resources, Firms, and Strategies: a reader in the resource-based perspective, 52.

Baird, I. S., & Thomas, H. 2006. Toward a contingency model of strategic risk taking. Academy of Management Review, 10(2), 230-243.

Hedberg, B., & jöhsson, S. 1999. Strategy formulation as a discontinuous process. International Studies of Management & Organization, 88-109.

Noy, E., & Ellis, S. 2003. Risk: a neglected component of strategy formulation. Journal of Managerial Psychology, 18(7), 691-707.

Salmela, H., & Spil, T. A. 2002. Dynamic and emergent information systems strategy formulation and implementation. International Journal of Information Management, 22(6), 441-460.

Bourgeois, L. J. 1999. Strategy and environment: A conceptual integration. Academy of management review, 5(1), 25-39.