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Understanding Strategic Management

Introduction

This essay provides critical discussion and analysis of Richard Rumlet’s work Good and Bad Strategy. The description of the aims and concepts of strategic management is shown below. Much attention is paid to the role of a manager in the designation and realization of an effective and efficient organizational strategy. Rumlet’s ideas are supported by visions of other researchers and by numerous real-life examples. Also, contradicting views are provided and thoroughly analyzed in the current work. The purpose of this essay is gaining relevant understanding of strategic management by synthesizing the concepts described by Rumlet and other researchers as well as the application of these concepts in strategies of different companies all over the world.

Concepts of Bad Strategy

Richard Rumlet (2011) in his work Good and Bad Strategy states his vision of successful and failing organizational strategies. Various characteristics of these strategies and numerous real-life examples are provided in his book. Thus the reader can clearly understand the difference between good and bad approaches to a company’s development.

One of the main concepts of a bad strategy is that the management of the company fails to face the real problem. Instead of finding necessary solutions to existing and possible challenges, employees of the higher level prefer to constitute already developed the company’s goals with general visions on ways of conducting business. The work Good and Bad Strategy states that bad strategy can be characterized by “a restatement of the obvious, combined with a generous sprinkling of buzzwords that masquerade as expertise.” (Rumlet 2011) Thus, the main point of bad strategy is restating the existing visions and missions instead of a realistic assessment of the situation and making efforts to improve it. Due to the fact that managers do not properly recognize the existing critical issues, new objectives do not tackle these issues.

Bad strategy is also characterized by the establishment of a great variety of confused approaches directed towards concealing problems and their solutions (Caulkin 2011). That is why a company’s resources are spent on reaching disjoint and incoherent goals. Instead of analyzing the existing challenges, developing a relevant plan of action and directing the company’s resources on following this plan, management usually prefers the strategy “to spend more and try harder” (Rumlet 2011). This approach leads to the inefficient distribution of the company’s resources thus reaching low results or even worsening the company’s position in the market. The great variety of goals requires sufficient financial and human resources. Lack of coherence and insufficient coordination of actions make the set goals more time-consuming because knowledge, skills, and resources are directed towards solving different tasks. Hence, employees are requested to work harder to provide the necessary results within a set time frame. Undeliberate and ineffective allocation of expenses and capital hinder the company from focusing on organizational capabilities that differentiate the company competitively. Consequently, this can lead to making wrong organizational decisions, like funding of unnecessary projects or commercials. Companies with the lack of focus are unable to “invest in depth where depth is needed, and go light where they should light.” (Kleiner 2010)

One of the failing concepts of bad strategy is the lack of in-depth consideration of ambitious goals (Harney 2011). In this case, top management determines the company’s direction without a clear understanding of the methodology to be applied when following it. Such a mistake is reflected in the lack of funds, resources, cooperation, knowledge, and skills of personnel. For example, inaccurate cost estimation creates a threat of not completing the project when the company runs out of resources. There are numerous examples of such failures in the information technology sector. According to the official investigations provided by Benoit Hardy-Vallee (2012) in the work The Cost of Bad Project Management, “the average overrun is 27 percent, but one in six projects had a cost overrun of 200 percent and a schedule overrun of almost 70 percent.”

The great variety of bad strategies can be explained by the unwillingness of top management to develop real working and successful solutions. Leaders prefer to make broad and ambitious statements and hope that solutions to problems will come by themselves. Managerial decisions are directed towards performing a similar strategy hoping that it will bring the same success as it happened with Interstate Bakers Co. The company was founded in1930 and remained popular until 1980 (Hartung 2012). Its strategy was directed towards operating improvements, control of expenses and fleet optimization. However, managers failed to improve the product line to meet the changeable customers’ perceptions. They tried to defend and extend their old business: “rather than developing new products which would be more marketable, priced for higher margin and provide growth that covered all costs.” (Hartung 2012) Also, it should be mentioned that the company could not keep up with the inflation and in 2004 was “forced to file bankruptcy due to its inability to pay bills.” (Hartung 2012) For the last three years, the company lost more than $ 250 million because of an unchangeable managerial strategy (Hartung 2012). It is a sharp example of managerial inability to recognize the existing problems and develop and realize strategies directed towards adapting to the changeable market conditions.

Concepts of Good Strategy

The main concept of a good strategy is a constant adjustment of the connection between the company’s goals and objectives. This approach will ensure viably and at the same time successful pathway between general vision and operational performance. The following aim of strategic management is described in the work Good and Bad Strategy: “discovery of critical factors in a situation, and designing a way of coordinating and focusing actions to deal with those factors.” (Rumlet 2011) Managers should build chains between the existing and desirable company’s position. A clear explanation to employees that stated goals are reachable will stipulate their performance. Therefore, strategic management should be based on the realistic acknowledgment of the situation, existing challenges and a company’s position on the market; otherwise, the company’s resources will be directed to solving unreal and non-existing problems instead of overcoming real barriers for its future development and success.

One of the major roles of strategic managers is finding ways of overcoming the existing challenges. They should honestly acknowledge the company’s challenges and existing barriers by considering the possibilities of any positive and negative events. Clear identification of critical issues enables the use of available resources to improve the working process as well as the company’s position in the market and stimulate future growth and development. At the same time, strategic management implies the establishment and realization of a coherent response. The coordination of actions and processes is one of the major concepts of strategic management. For example, a retailer company should be able to connect its products and services with its unusual and differentiating capabilities for reaching success (Leinwand & Maonardi 2011).

Instead of load and ambitious statements, strategic management is to be directed towards the determination of the challenges, development of the guiding policy aimed at overcoming the identified obstacles; and realization of coherent actions to coordinate employees, working processes, and funds and facilities. Brian Harney (2011) describes the successful strategic processes as the mixture of argument and action that can be based on “leverage, proximate objectives, chain-link systems, design, focus, growth, advantage, dynamics, inertia, and entropy.” (Harney 2011) Consequently, managers should clearly determine the company’s strengths and its sources of value. The strategic direction can be based on the activity that is performed in the most effective manner. The main emphasis can be made on the company’s capabilities instead of fixed assets because the last is “more difficult to leverage across diverse businesses and tend to expire, become obsolete, or give way to related services.” (Hartung 2012) Much attention should be paid to the determination of the characteristics of the products and services that are highly valued by customers and at the same time not provided by competitors. These characteristics can form the background of the company’s future success.

Coherence is also based on the determination of specific pathways, accumulation of resources necessary for reaching the set goals and creating strong chains between the involved parties. The example of successful coherent strategic management is the performance of Frito – Lay. It is “the snack division of Pepsi” (Leinwand & Maonardi 2010). The company’s category share in the American market increased at about 17 percent for the last decade due to the successful streamlining of the product’s portfolio and effective use of a high-quality distribution system (Leinwand & Maonardi 2010). It should be mentioned that Frito – Lay owns and effectively operates numerous supermarkets, vending machines, a fleet of trucks, and gas stations.

Also, managers should perform a realistic analysis not only of the existing challenges and difficulties but also of the company’s resources. They should clearly understand their strong sides that can be used for solving current and possible problems. The aim of a good strategy is “application of your strength against weaknesses.” (Zeb 2011) This approach will enable the development and realization of a workable and viable strategic plan that can be realized by the application of the hidden power.

One more characteristic of successful strategic management is unexpectedness. Competitors should not even guess that the company can plan and realize something insomuch unique and innovative. Richard Rumlet provides the following description of this characteristic in his work: “the first natural advantage of good strategy arises because other organizations often don’t have one. And because they don’t expect you to have one either.” (Harney 2011) Hence, the unusual strategy plans will catch the competitors flatfooted and discombobulate them (Otley 2012).

The good strategy is unusual and rare. It is based on “a coherence, coordinating actions, policies, and resources so as to meet the organizational objectives.” (Zeb 2011) This advantage can be obtained by looking at the existing problems from a different perspective. The originality of the offered products and services gets attention and holds customers’ interest. An example of the success based on the application of an unusual approach is the solution realized by Southwest Airlines: “its customers line up by boarding letter and number.” (Stowers 2013) Moreover, some employees of the company are allowed to perform their work in casual clothes and to joke while making in-flight announcements. This strategy was successful, and the company was recognized as “one of the top 100 military-friendly employers.” (Stowers 2013)

Contradicting Viewpoints

There are several viewpoints that contradict the ideas stated by Richard Rumlet in Good and Bad Strategy. According to the first viewpoint, a clear understanding of the business objectives and developing appropriate plans can be difficult because every company has unique problems. Hence, management should search for unusual solutions in each particular case for each particular organization. Strategic management should be based on “situation logic that looks at the circumstance of each problem and tailors the strategy accordingly.” (Continuity 2012) However, it should be mentioned that Richard Rumlet in his work provided a general understanding of the characteristics, aims, and concepts of good and bad strategies that can be applied to various companies in different situations. He avoids delving into details of the management of particular business spheres in order to focus the readers’ attention on the principles of conducting successful strategic management.

In his turn, Nicolas Megow (2015) makes emphasis that, according to Richard Rumlet, the company’s growth is one of the major outcomes of a good strategy. The company’s growth is viewed as a positive event, and organizational strategy should be directed towards removing any growth barriers. It is never considered to be a challenge or a threat to a further company’s development or existence. However, growth can be connected with losing control over the working process, inability to correspond to changeable market conditions in due time, and losing customers and competitive position. Sometimes, a considerable increase in the company’s growth is based on its ability to provide unique services or offer unusual products. However, fast growth creates a threat of paying little attention to the strengthening of the digital infrastructure that enables communication between departments and contracting parties. Also, in large companies, new employees can face problems with assimilating into the working environment and becoming a part of the team.

The weak performance of growing organizations is connected with the inability of top management to deal with the increased amount of tasks, correspond to new challenges and adapt to the changeable market conditions. Numerous issues of fast-growing companies are mainly connected with employees: finding and hiring talented workers who will help the organization to reach the next level of development. At the same time, managers should focus on creating a friendly environment for workers and enabling highly skilled, motivated and ambitious personnel with numerous ideas to perform at their best. Hence, the above-mentioned contradiction is groundless.

Additional attention should be paid to Rumlet’s understanding of the customer-centric approach (Otley 2012). He states, “the phrase customer-centric intermediation” is pure fluff. Pull off the fluffy covering and you have the superficial statement “our bank’s fundamental strategy is being a bank.” (Rumlet 2011) The author points out that the main strategy of each company is the performance of its core functions. However, he should not leave out of an account that orientation on customers’ perceptions is one of the backgrounds of conducting a successful business nowadays. Lack of customer orientation can lead to a situation when the company will not be able to cover people’s needs and will not offer necessary and attractive products and services. Consequently, it will become unclaimed and lose its position in the market. This contradiction is very strong and argumentative. The example of the company’s failure due to its inability to provide customer-oriented production is the downfall of Nokia.

Nokia was a successful company until 2009 (Suroweicki 2013). Its production was highly demanded in Europe, North America, and Africa. The company’s success was based on the proposition of various models of cell-phones, which covered the needs of customers within a certain period. However, success turned to failure because the company’s managers did not understand that the market and people’s perceptions are changeable. Launching of iPhone in 2007 with its innovative operating system and touch screen provided people with unique opportunities unavailable to them before (Nosa-Ero 2015). The managers of Nokia did not establish a new approach to the company’s development. Therefore, they directed manufacturing facilities towards improving the existing solutions (hardware) instead of developing the new ones (software). They continued to believe that users would abide by the superior hardware design of their cell-phones. However, it was a tremendous mistake that caused the downfall of the company. Customers turned their views on other companies that proposed more innovative solutions. In 2013, the company had only 3 % of the global market share and was obliged to sell its handset business to Microsoft for $ 7.2 billion (Suroweicki 2013). James Suroweicki (2013) in his work Where Nokia Went Wrong provides the following description of the company’s failure: “the high-tech era has taught people to expect constant innovation; when companies fall behind, consumers are quick to punish them.”

Conclusion

The current paper provides an understanding of the successful and failing ways of conducting strategic management. It is based on the book by Richard Rumlet Good and Bad Strategy, numerous articles and examples of various companies from all over the world. Leaders who perform bad strategic management fail to face a real problem and develop solutions to these problems. Usually, they just restate already existing goals and missions instead of establishing real working solutions. Some of them focus on stating the great variety of different approaches without a clear determination of the necessary resources. The lack of coherence and in-depth consideration of ambitious goals, as well as insufficient coordination of actions,  are the major backgrounds of a company’s downfall. This essay shows that a good strategy is based on the constant adjustment of connections between goals and objectives.

It means that the aim of managers to provide the interrelation between the current company’s position and resources with desirable goals. The main role of strategic management is overcoming the existing challenges by using available resources. A successful company’s performance is based on such concepts as the unexpectedness and originality of a new strategy. These ideas form a general vision of good and strategic management without deepening in principles of successful organizational performance in some particular industry. Much attention should be paid to the fact that Richard Rumlet in Good and Bad Strategy does not emphasize on the customer-oriented managerial approaches. However, a real-life example of the tremendous failure of Nokia shows that the orientation on perceptions of the target audience is one of the core principles of the company’s success.