Critical review of how business strategy is developed and implemented

Table of Contents

Section 1 – Strategy Theory. 5

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Strategy Defined. 5

Strategic Development. 5

Porter’s Five Forces. 6

The 3C model 8

Ansoff Matrix. 9

GE-McKinsey Matrix. 10

PESTLE model 11

Strategic Implementation. 12

Morgan, Levitt & Malek’s Strategic Execution Framework. 13

Syrett’s Pathway. 14

Kaplan & Norton’s Management System for Strategy Execution. 14

MacLennan’s Inverted Pyramid Framework. 15

Comparison, and analysis of implementation models. 16

Innovation and Change. 16

Section 2 – Company I Review.. 17

Organisational analysis. 17

Strategic Processes. 17

Strategic Engagement. 17

Improvements. 17

References: 18

 

 

 

A critical literature review of key theories of how strategy is developed and implemented, and the relationship between strategy, innovation and change

  1. A critical analysis of selected strategic processes within your organisation, or an organisation of your choice, related to relevant theories
  2. An assessment of the extent to which people within the organisation are engaged with and contribute to a selected strategy
  3. Recommendations about how strategic processes within the organisation could be improved.

 

 

Section 1 – Strategy Theory

 

A critical literature review of key theories of how strategy is developed and implemented, and the relationship between strategy, innovation and change

 

Strategy Defined

 

“As tactics is the employment of military forces in battle, so strategy is the employment of battles…to achieve the object of war”

Clausewitz, 1873 (Howard M,Paret P,2008)

 

There is a wealth of opinion, thought and academic writing on what strategy is and how it is defined.  For some it is about the needs to communicate an organization’s unique position, to determine the use of organisational resources, skills, and competencies to focus in order to create the competitive advantage (Porter, 1980).  As identified by Mintzberg, Ahlstrand and Lampel (2001) many often confuse it with just a plan, the processing of the internal, and often tactical ‘direction’and ‘how’ without any significant thought to the ‘what, where, why, when’ aspects from a higher lens. Mintzburg, Ahlstrand and Lampel (2001) further write that “strategy is a pattern, that is, consistency in behaviour over time”.

 

Mintzburg and Quinn (1996) portray strategy to include the process of formulation and implementation, and that strategic planning helps to coordinate both. Strategic planning is, in itself, mainly analytical; whereas strategy formation involves wider synthesis and thinking, both logical and creative. As such, strategic planning occurs around the strategy formation activity and as part of the overall development.

 

Strategic thinking is focussed toward envisioning and developing a solution idea, with the creation of attitudes to set, and meet, the strategic intent. Strategic planning is to bring to concept and create the actual steps or actions that will result in the project or the goals to get delivered.

 

 

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Strategic Development

 

When developing a strategy there are numerous models and approaches to consider, from the military perspective it dates back to the dawn of Sun Tzu and his ‘Art of War’ some 475 – 400 years BC, through Machiavelli’s ‘The Art of War” in 1521, to the development of Harvard’s early version of strategic planning in the 1920’s, further developed out of necessity during the late years of World War 1 by Basil Liddell-Hart, a British Army officer.  They all offered a new, dynamic and different approach to winning, through thinking and planning ahead with the ability to change.  Von Molke famously coined “No plan of operations extends with certainty beyond the first encounter with the enemy’s main strength” (Bergeson, 2020), or as I was taught it, “No plan survives contact with the enemy”.

 

Strategies can be described as existing at 3 main levels within businesses according to Whittington et al (2020), working from the higher Corporate levels, through Business levels to functional levels. They recognise that strategy is by its very nature a typically complex aspect of business and that the “need to link the…levels underlines the importance of integration”, across the levels (Whittington et al, 2020).

How strategies are developed

 

Design school model

 

The design school approach emerged as a structured model for the formulation of strategy from the general management group in the Harvard Business School text: business policy; text and cases in 1965 according to Sarbah and Otu-Nyarko (2014).  It was further described by  Mintzberg, Ahlstrand and Lampel (1998) as one of the three prescriptive schools of strategic design, with the planning and positioning strategy formation schools, between them providing conception and analysis through formalised structures.

 

It provides an analytical focus on a simplified model to design strategy around internal competences and external threats and opportunities, and as such aims to provide a “match between qualifications and opportunities”(Christensen, 1987) aiming to provide a company with its approach to a market position.

 

The main properties with this approach are that the formation of strategy is a deliberate, but simple and informal process, responsibility rests with the CEO (or equivalent), other officer therefore become subordinate and that the strategies are bespoke and tailored (Sarbah and Out-Nyarko, 2014).

 

It has been recognised by several authors includingSarbah and Out-Nyarko (2014), Mintzberg and Waters,(1985) and Mintzberg, Ahlstrand and Lampel (1998), that this model requires planned and deliberate strategies but that it doesn’t provide for emergent approaches, or the continued formulation of these after implementation.  Also, the strategy has to be formulated and then implemented through robust communications and if required resultant organisational supporting (re-)structure.

 

Mintzberg and waters (1985) describe strategies as intended and deliberate, or emergent (dynamically) or unrealised. It follows that within the design school methodology, those that are not realised would be seen as a planned strategic failure, and due to the pre-position of the model it would by nature be unable to adjust to the emergent opportunities presented.

 

This model does provide the most common approach to strategic development, both academically and within management application proper (Mintzberg, Ahlstrand and Lempel, 1998).  This is probably due to the tangibility of the process that can be pre-organised academically outside of application, and replicable within the vast majority of small to medium enterprise businesses.  Paradoxically, this tangible prescribed formulaic approach is one that Mintzberg (1990) argues should be discarded due to its inability to provide for emergent and unpredictable environments and provides a dated approach.  Ansoff (1991) argues that Mintzberg arguments are flawed in methodology and are contradictory, stating that “ his self-denial of knowledge of practice of strategic management in the business sector that leads him to…assertions that are in direct contradiction to observable facts” (Ansoff, 1991)

 

417

 

 

Mintzberg et all deliberate and emergent strategies

6 dimensions – Johnson et al

 

 

 

Strategy Development Processes and Tools

 

 

 

 

Boston consulting group model

 

 

 

The 3C model

The model of Ohmae’s strategic triangle is proposed at providing an overall strategic development tool developed by Kenichi Ohmae (Ohmae, 2005).  This model purports to provide a structure, if balanced, for enduring competitive advantage (Van Vliet, 2015).  The model is based on:

 

  1. The Corporation:

Corporate based strategies with regard to the functions of the business, their capability and how the business can impact cost effective improvements, sequencing of effort and focus and aspects such as insourcing/outsourcing planning.  This is a significant determinant in todays globalised market place, with organisations looking to shorten supply chains and where prudent to control it, also impacting the competition differentiator.  This offers an inside-out view within this model.

  1. The Customer:

Customer based strategies, where Ohmae describes the primacy of the customer over shareholders, and that this focus will create a cause and effect on shareholder value.  This model does review the segmentation of markets, over the 5F model, and prepares the business to adjust the strategic approach based on this dynamic.

  1. The Competition:

An inside-out competitor-based strategy, focussed on a comparative analysis within the markets.  According to Ohmae (2005), one of the most important factors is image/branding, which relates to marketing/advertising and public relations.  I feel that his aspect of the model also throws up the opportunity to review an approach to compete v collaborate tension, franchising, USPs and stretch on margin/price points and wider pricing strategies to gain a foothold.

This seems to align with some other recent schools of thought around the primacy of customers, over shareholders, and the importance of customer relationship management, as described by  Peppers, et al (1999).  This does remove the ROI focus and short-termism I’ve personally experienced with private equity shareholders, that can be all too often stymieing value growth in the mid to longer term.  Ward and Rivani (2005) support this view stating that “shareholders are the most unreliable and the most speculative  when it comes to maintaining company and industry competitive stability”.

Ansoff Matrix

 

One of the first aspects worth noting with respect to this model and the wider approach made by Ansoff et al (2019), they identify that when considering a strategic development approach, the need for a dynamic and evolving model puts it predominantly in the realm of systems rather than the less easily dynamic structures.

 

Figure 2: Structure v Systems (Ansoff et al, 2019)

 

 

This model does support, or re-enforce, the market focus aspects of Potter’s 5F model.  The Ansoff (1987) does align as a marketing tool but provides the analytical focus to drive the over-arching intent, and how, of market improvement or dominance.  The quadrants are:

 

  1. Penetration:

More effective growth in current client, markets or geographies, with current products or services.  I feel this is a known environment that should be analysed, with known competition and entry points, and one that should determine the economy of effort in the other areas.

 

  1. Market Development:

Existing products or services launched into new markets, customers or geographies.  A real focus here is provided specifically for any launch in today’s global economies.

 

  1. Product Development:

New products, or services to existing markets, customers or geographies.  This provides a focus on innovation and evolution of market /client demands.

 

  1. Diversification

Completely new products to new markets, with either related or unrelated diversification. I have always described this as the risky area of the business strategy approach, and something to be contemplated with all stakeholders understanding the risk v reward.

 

Although now a mature model, the Ansoff approach does provide a very good strategic planning and communication tool for businesses.

 

 

GE-McKinsey Matrix

 

The GE-McKinsey matrix evolved from the 1970’s where GE was managing a large and diverse portfolio of businesses.  This model, turned the previous investment decisions within the wide business units from cash flow projections and market growth forecasts to that of measuring the strategic view and performance against a 9-cell matrix (Jurevicius, 2014).  This resulted in a view of harvest/divest it invest. The BUs are evaluated on industry attractiveness and competitive strength.

Some of the drivers that can be included under the two GE/McKinsey Matrix dimensions include:

Market Attractiveness Factors

  • Market size / growth rate / profitability
  • Pricing trends
  • Competitive intensity / rivalry
  • Overall risk of returns in the industry
  • Opportunity to differentiate products and services
  • Demand variability
  • Segmentation
  • Distribution structure

Competitive Strength

  • Strength of assets and competencies – Relative brand strength
  • Market share and share growth
  • Customer loyalty
  • Cost position compared with competitors
  • Relative profit margins
  • Distribution strength and production capacity
  • Record of technological or other innovation
  • Access to financial and other investment resources

(Ward & Rivani, 2005)

This model considers both inside-out and outside-in viewpoints when analysing the business characteristics to shape a development strategy, or prioritising group investment.

 

Comparative analysis here – to do

 

PESTLE model

 

A derivative of the PEST model, the PESTLE includes the Legal and environmental aspects which have risen in their importance in the global economy.  This is one of the most used PEST derivatives when appraising the external business market (Perera, 2019).   This is the often-uncontrollable aspect of the business impacts and is highly dynamic in today’s business world.  It provides a comprehensive outlook on the external environments, and if utilised well can provide a strategic opportunity to forecast future intent.  It also provides for a geo-political narrative that helps to shape a global or wider domestic strategy.  I my view it should provide a high-level view but can often be used incorrectly at a low-level tactical level, becoming a planning tool.

 

For the larger corporate organisations, it can be used to assist in lobbying governments to help shape market governance and/or legislation.

 

Strategy Applied

 

 

 

 

 

Strategic Implementation

 

The above models offer a wide range of approaches against which to shape a strategy.  Implementing a defined strategy often fails if the strategic team is imbalanced.  Belbin (1981) grouped the behaviours into 8 team roles, each with a determined behaviour and preferences, promoting these as vital to the performance of teams.  The eight different team roles that Belbin identified were:

 

  • Plant
  • Resource investigator
  • Co-ordinator (originally Chairman)
  • Shaper
  • Monitor evaluator
  • Team worker
  • Implementer (originally Company worker)
  • Completer-finisher
  • Specialist

 

 

Belbin predicted how various roles combinations could provide an impact on team performance, however Pritchard and Stanton (2016) propose in their study that whilst team working is an essential dynamic, “there has been limited research to assess the usefulness of such methodologies”.

 

All too often, as a completer-finisher and implementer, I’ve seen the wandering plant and RI roles providing the conceptualisation and analytical framework, with no idea on how to communicate it, or implement it effectively.  A constructed implementation pathway can be a key, but often forgotten model on which to provide an efficient and repeatable roll out of the strategic plan.  “The challenge of implementing strategy successfully is one that faces managers across the globe and in organizations of every kind” so “the failure rate of planned strategies remains remarkably high” MacLennan, 2011).

 

Modern implementation models provide structures around which to plan the strategic implementation, these include:

 

  • Morgan, Levitt & Malek’s Strategic Execution Framework
  • Syrett’s Pathway
  • Kaplan & Norton’s Management System for Strategy Execution
  • MacLennan’s Inverted Pyramid Framework

 

 

Morgan, Levitt & Malek’s Strategic Execution Framework

 

Morgan, Levitt and Malek (2007) identified an implementation framework with 6 imperatives, namely:

 

Ideation

The emphasis to  clarify and communicate the identity, purpose and long-range intention.

 

Nature

The link here is to pull together the organisational structure, strategy and cultural approach.

 

Vision

Morgan et al. (2007, p. 62) argue that many organisations fail to execute their strategy when the connection between what the strategy says and the specified or implied goals it is directed toward.  Also, to ensure understanding of the output performance metrics to understand progress.

 

Engagement

The first of the project leadership domains, with a focus on engaging the strategy with the appropriate projects and programmes, where the rubber meets the road.

 

Synthesis

Focuses on monitoring and continuously aligning the project and program with strategy and could also be described as part of the feedback loop to assist in strategy development.

 

Transition

Highlights importance of transferring projects crisply to operations to reap the benefits

 

Analysis

 

 

Syrett’sPathway

 

Write up and analysis  – To do

 

Figure 3: Syrett’s Pathway to Strategy Execution

 

 

Kaplan & Norton’s Management System for Strategy Execution

 

Write up and analysis  – To do

 

 

 

 

 

 

 

 

 

 

Figure 4: Kaplan & Norton’s Strategy Execution Model

 

 

 

 

 

 

MacLennan’s Inverted Pyramid Framework

 

Write up and analysis  – To do

 

 

 

 

Comparison, and analysis of implementation models

 

Write up and analysis  – To do

 

 

Innovation and Change

 

 

In this age of digital transformation, the ability to respond quickly and strategically to unpredictable change can determine the success or failure of the firm. As an organization becomes more successful at implementing change, the ability to respond to changes in the environment will be entrenched in its culture (Ansoff et al, 2019).

 

 

 

 

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