Due to a rapidly changing business environment an organisation requires a dynamic strategic planning process and flexible use of resources (Richard A. Swanson, 1995).
Organisations utilize their resources within the constraints imposed by the industry’s competitive environment to design strategies which ultimately affect their financial performance (H. John Hall, Jeffrey P. Katz, Marilyn T. Zarzeski, 2000). John A. Kay (1995) explains that strategy is essentially a match between an organisation’s internal capabilities and its external relationships. An organisation’s strategy reflects how it responds to its suppliers, its customers, its competitors, and the social and economic environment within which it operates. Schon Beechler and Allan Bird (1995) add that each organisation design particular business strategy to fit its unique distinctive competencies, needs, and circumstances.
Emergent and Deliberate Strategies
Discussing the various types of strategies Henry Mintzberg, James A. Waters (1985) elaborate on the emergent and the deliberate strategies. While emergent strategy involves the learning of what works-taking one action at a time in search for that viable pattern, deliberate strategies emphasize central direction and hierarchy. The authors argue that emergent strategy doesn’t mean chaos but in essence unintended order. Openness to an emergent strategy allows manager to take action before everything else is understood. The managers can respond to an evolving reality instead of focusing on a stable fantasy.
The authors conclude that strategy formation walks on two feet, one deliberate and one emergent (Henry Mintzberg and James A. Waters, 1985). A review of few examples will show how companies design successful strategies by understanding their own distinctive capabilities and relating them to the business environment they faced (John A. Kay, 1995)
BMW Case Study-
BMW represents much of German manufacturing industry and boasts a higher quality of engineering than is usual in production cars. The company maintains a skilled German labour force that has helped it gain a world-wide reputation for product quality (John A. Kay, 1995). The author points out that most car assembly is now done by robots or workers from low-wage economies. The well-executed strategy of BMW includes having a different product positioning and pricing policy. The retail margins on BMW cars are relatively high and the company ensures tight control over its distribution network. This in turn supports BMW’s brand image and helps market segmentation (John A. Kay, 1995).
BMW also exercise tight control in its relationships with suppliers and focus its activities almost exclusively on two product ranges (a) high-performance saloon cars and (b) motor bikes, which reflect its competitive strengths. After several false starts BMW recognized its distinctive capabilities and choose the markets which realized its full potential. The company’s policy for its suppliers and distributors, its pricing approach, its branding and advertising strategies, are all built around that recognition and these choices (John A. Kay, 1995). It appears that BMW has used the emergent strategy approach to reach its business goals.
Honda Case Study-
Five years after the company entered into the U.S. market, one in three motor cycles sold were Hondas. Honda redefined the US motor-cycle market and is now a classic case in corporate strategy (John A. Kay, 1995). In the 1950s, motor bikes in the U.S. were associated with leather jackets, the smell of oil, and teenage rebellion. Honda changed the perception by marketing their product under the slogan, ‘You meet the nicest people on a Honda.’ Similar to all successful corporate strategies, Honda’s strategy was built around its distinctive capability–an established capacity to produce an innovative but simple, low-cost product. The immensely successful competitive strategy of the company involved making full use of segmentation and creating a distinctive distribution network which bypassed the traditional retail outlets (John A. Kay, 1995). It seems that the company moved from a planned strategy to an emergent strategy approach to address the strategic issues in U.S. market.
Henry Mintzberg (1994) believes that strategy making is not an isolated process and it is interwoven with all that it takes to manage an organization. Additionally, the strategic change requires both rearranging of the established categories and inventing new ones (Henry Mintzberg, 1994). Lee Graf, Masoud Hemmasi and Kelly C. Strong (1996) draw attention to some strategic issues faced by the health care industry. The hospital administrators are challenged with the problems in business and financial management. The hospitals need to control expenses and conserve resources. Although these problems have been there for the last thirty years in health care administration the “business and financial problems” are quite different from the types of issues confronting health service organizations twenty or thirty years ago. Business skills in the health care industry are now centered on internal efficiency assessment along with strategy formation and planning. These strategies are different from those common in the 1960s and 1970s where more attention was paid to revenue enhancement and domain expansion (Lee Graf, Masoud Hemmasi and Kelly C. Strong 1996). The hospitals appear to move from following planned strategies to using emergent strategies. The authors point out that this study shows that strategy is not static. Customer health care needs and expectations, competitive and regulatory forces of the industry, available resources, all have changed with time. The health care organizations should therefore periodically track the results of their strategies .This will help them monitor and control the level of success achieved from earlier strategic changes. Moreover, periodic checking will them remain responsive to their constituencies and adapt to their changing environments (Lee Graf, Masoud Hemmasi, Kelly C. Strong, 1996)
Process of Change in Organizations
Adopting new strategy require changes in the organization. J. Davidson Frame (2002) believes change is the one thing people can count on in today’s chaotic world. The author regularly conducts an informal survey of his students in executive development classes and asks questions about the change they experience in their work environments. Between half and three-quarters of the respondents said they encountered some kind of reorganization in their department during the past twelve months. About 60 to 80 percent said they experienced substantive change in their own job responsibilities during the past twelve months. Bernard Burnes (1996) points out that organizations have genuine choice in both what to change and the process of change. The author cites Lewin who elaborated three steps for a successful change project. (a) unfreezing the present level (b) moving to the new level (c) refreezing the new level (Bernard Burnes, 1996). These three steps offer a general framework for understanding the process of change and show that the old behaviour has to be discarded in order to successfully adopt new behaviour.
Emergent and Planned Model of Change
A large number of writers believe that organisational change is more a continuous and open-ended process. The planned approach to change has come under increasing criticism since 1980s and it is considered to be suitable for relatively stable and predictable situations (Bernard Burnes, 1996). In recent years, a new approach to organizational change is now becoming popular. The new approach can be referred to as continuous improvement or organizational learning and is more often called as the emergent model of change. Typically, the emergent models see change being driven from the bottom up rather than from the top down. According to the emergent models change is an open-ended and continuous process of adaptation to the dynamic conditions and circumstances (Bernard Burnes, 1996).
The author argues that since it is a relatively new concept, the emergent model often lacks methods and techniques accumulated by planned model. However there are many experts who challenge the appropriateness of planned model in the dynamic and uncertain business environment. Bernard Burnes (1996) also speaks about the popular contingency theory that rejects the “one best way for all approach”. According to the author two organizations don’t face exactly the same contingencies. Therefore the operations and structure of the organizations should be according to their situation.
Bernard Burnes (1996) further explains that the managers and other people involved in the change have to ensure that the approach adopted matches their circumstances. Following this theory would mean that organisations will have to move away from their preferred mode of managing change. The author emphasis that managing change doesn’t involve the managers adopting the “best practice” laid down by latest expert. In fact, it is also not about mechanically adopting an approach which matches their circumstances under which the change takes place. Management of change involves wisely choosing what to change, careful evaluation of the circumstances under which the change takes place and deploying the best approach (Bernard Burnes, 1996)
A dynamic strategic planning process and flexible use of resources is needed by a firm to address the dynamic business environment (Richard A. Swanson, 1995) These resources have to be used within the given constraints in order to design effective strategies (H. John Hall, Jeffrey P. Katz, Marilyn T. Zarzeski, 2000). The research shows that business strategies are designed so that they fit their unique distinctive competencies, needs, and circumstances (Schon Beechler Allan Bird, 1995)
The examples of BMW and Honda show that companies indeed craft strategies by understanding their distinctive capabilities and relating them to their business environment (John A. Kay, 1995).Although most car assembly is now done by robots or workers from low-wage economies BMW maintains a skilled German labour force. This has earned the company a global reputation for product quality. BMW’s brand image is supported by high retail margins, its control over the distribution network as well as exclusive focus on two product ranges. The company finally recognized its distinctive capabilities after many false starts and became successful by choose the markets which realized its full potential (John A. Kay, 1995). It is clear from the analysis that BMW has deployed emergent strategies approach to be successful in this highly competitive industry.
Honda too built its strategy around the company’s distinctive capability. The company produced an innovative and low-cost product, made full use of segmentation and created a distribution network which bypassed the traditional retail outlets. Ultimately Honda was successful in redefining the US motor-cycle market (John A. Kay, 1995). It is evident that Honda changed its existing strategy for the new market and successfully used emergent strategies to beat the competition and increase market share.
An effective design of strategy involves rearranging of the established categories as well as inventing new ones (Henry Mintzberg, 1994). This theory is supported by the example of health care industry. The problems that plague this industry has changed over the last thirty years and thus the management has changed its strategies accordingly (Lee Graf, Masoud Hemmasi ,Kelly C. Strong ,1996) The focus now is more on internal efficiency assessment, strategy formation and planning instead of revenue enhancement and domain expansion. Strategy is therefore not static (Lee Graf, Masoud Hemmasi, Kelly C. Strong, 1996) and firms should use a combination of deliberate and emergent strategies (Henry Mintzberg and James A. Waters, 1985). While a deliberate strategy will enable an organization to exercise central direction and hierarchy, emergent strategy will allow them to act before the situation is completely clear (Henry Mintzberg and James A. Waters, 1985). From the three case studies it is evident that emergent strategies are crucial and more appropriate for an organization’s growth and success in a dynamic business environment.
The shift from a planned strategy to emergent strategy requires change in the organizations. This research shows that executives are experiencing changes in their work environment on a continual basis (J. Davidson Frame, 2002). The author’s survey reveals that a large number of employees see substantive change in their own job responsibilities in a span of one year. On the same note the organizations can choose to implement the changes intelligently by using Lewin’s three step method (Bernard Burnes, 1996). More organisations now believe that organisational change is a continuous and open-ended process and have replaced the old planned approach of change. The new emergent model of change is more suitable for the dynamic and uncertain business environment. Since there is no one best way for all organisations the firms should choose their operations according to their specific situation. Additionally, the organization has to make sure that their adopted approach matches their circumstances. The organizations should not mechanically choose an approach but decide after careful evaluation of the circumstances under which the change takes place (Bernard Burnes, 1996).The organisations should therefore design their strategies according to their business context. By designing strategies according to their capabilities and business situations they are more likely to enjoy success similar to BMW and Honda.