November 23, 2019 63
November 23, 2019 63
The influence of strategy can be seen in every age and every area of industry. It has its influence on the success recorded in the oil industry, in the banking industry, and the manufacturing industry.
No seasoned politician would undertake a campaign for a major office without an equally clear concept of his strategy. Also, no good military officer would undertake even a small-scale attack on a limited objective without a clear concept of his strategy.
In the field of business management, however, we frequently find men deploying resources on a large-scale without any notion of what their strategy should be. Yet, a company’s strategy is a vital ingredient in determining its future. A valid strategy will yield profit and inappropriate strategy not only would fail to yield benefits but may result in disaster.
The strategy is of course not the only factor determining a company’s success or failure. The competence of its managerial leadership is significant as well. Luck can be a factor too although what people call good luck is often the product of good strategy.
A valid strategy can gain extraordinary results for the company general level of competence, which is only average. Conversely, most leaders who had been locked into an inappropriate strategy will have to exert their full competence and energy merely to keep from losing ground.
The strategy is important because it gives focus to management in confronting big business problems. It is also for the large organization that is faced with a wide range of choices in domestic and international operations.
A strategy is a set of goals and major policies. But while the notion of a strategy is extremely easy to grasp working out an agreed-upon statement for a given comparison can be a fundamental contribution to the organization’s future success.
To develop such a statement, managers must be able to identify precisely what is meant by and what is meant by a major policy. Otherwise, the process of strategy determination may degenerate into what so often becomes the solemn recording of platitudes, useless for the clarification of direction or the achievement of consensus.
Undoubtedly, a statement of what a company hopes to achieve may be much more varied and complex than can be contained in a single sentence. This will be especially true for those managers who are sophisticated enough to perceive that a company operates in more external systems than the market. The firm is part of not only a market but also an industry, the community, the economy, and other systems. In each case, there are unique relationships to observe, for instance, with competitors, municipal leaders, etc.
You ask young men what they want to accomplish by the time they are 40 years of age the answers you get fall into two distinct categories. There are those great majorities who will respond in terms of what they want to have. This is especially true of graduate students of business administration.
There are some men, however, who will answer in terms of the kind of men they hope to be. These are the only ones who have a clear idea of where they are going. The same is true of companies. What little thinking goes on about the future is done primarily in monetary terms. There is nothing wrong with financial planning; another is by the use of products.
The lesson of these experiences is that a key element of setting goals is the ability to set them in terms of more than a single dimension. Both money and product policy are part of a statement of objectives. But these must be viewed as the concrete expressions of a more abstract set of goals, the satisfaction of the needs of significant groups which cooperate to ensure the company’s continued existence.
Who are these groups? They are the many customers, manager’s employees and stockholders of the company, to mention just the major ones. The key to corporate success is the company’s ability to identify the important needs of each of these groups, to establish some balance among them and to work out a set of operating policies that permit their satisfaction. This set of policies, as a pattern, identifies what the company is trying to be.
Many managers have a view of their company’s future which is strikingly analogous to the child’s view of himself. When asked what they want their companies to become over the next few years, they reply: “We want the company to grow”.
There are a great many rationalizations for this preoccupation with growth. Perhaps, the one most frequently voiced is that we must grow. What must be appreciated however is that ‘growing bigger’ for a company has enormous implications for management? It involves a different life and one which many – managers may not be suited for either in terms of temperament or of skills.
Moreover, whether for a large company or a small one growing bigger may make economic sense. Companies that are highly profitable at their present size may grow into bankruptcy very easily. A company, which is not now profitable, may successfully seek its survival in cost reduction than growth.
There is a business philosophy that reflects the frontier heritage. It is one that places a high value on growth, in physical terms. The manager, whose corporate sales are not increasing; the number of whose subordinates are not growing; whose plants are not expanding feels that he is not successful. But there is a dangerous trap in this kind of thinking. More of the same is not necessarily progress.
Also, few managers are capable of running units several times larger than the ones they now head. The great danger of wholehearted consumer acceptance or astute program of corporate acquisition is that it frequently propels managers into situations that are beyond their present competence. It should be noted in stating corporate objectives a company must not go beyond its organizational competence.
A policy says something about how goals and objectives will be attained. It is what statisticians would call a “decision rule” and what systems engineers would call a “standing plan”. It tells people what they should and should not do to contribute to the achievement of corporate goals.
A policy should be more than just a platitude. It should be a helpful guide to making strategy explicit and providing direction to subordinates. Consequently, the more definite it is, the more helpful it can be. “We will provide our stockholders with a fair return on investments” is a policy no one could disagree with; but what is a fair return? This is the type of question that must be answered before the company’s intentions can become the job of management and this is not merely the preparation of valid policies for a standard set of activities, but the much more challenging one of first deciding what activities are strategically significant.
No standard set of policies can be considered major for all and each company is a unique situation. It must decide for itself which of corporate life are most relevant to its aspirations and work out policy statements for them. For instance, advertising may be insignificant to a company that provides research services to the Ministry of Defense, but critical to a firm trying to sell luxury goods in commercial quantity.
Corporate strategy, having one is a step forward. Any strategy, once made explicit, can quickly be evaluated and improved. But if no attempt is ever made to commit it to paper there is always the danger that the strategy is either incomplete or misunderstood.
Many successful companies are not aware of the strategy that underlies their success. A company can achieve initial success without the real awareness of its causes.
However, it is very difficult to successfully branch out into new ventures without a precise appreciation of their strategic significance.
Another reason for making strategy explicit is the assistance it provides for delegation and coordination. To an ever-increasing extent, management is a team activity whereby groups of executives contribute to corporate success.
Making strategy explicit makes it far easier for each executive to appreciate what the overall goals are and what his contribution to them must be.
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