Power and politics
A- Detail the importance of stakeholder mapping in the strategic management process?
B- Is it managers task to limit the role of stakeholders, and if so how can they do it?
Stakeholders in the business (such as customers, vendors, investors and employees) can be very influential in whether a business achieves strategic success and maintains a top quality market reputation. Stakeholder expectations influence strategic choice (Johnson, et al. 2014). Strategic managers of a firm develop stakeholder matrices that determine the level of power specific stakeholders groups have on business success, whether certain stakeholders have legitimacy to the business, and urgency of servicing certain stakeholder group needs. Such a framework, known as stakeholder mapping, determine which require immediate and in-depth attention and which are less influential (Mitchell, Agle and Wood 1997).
Why stakeholder mapping is important can be illustrated with a hypothetical business scenario. One can consider an airline company that determines it requires construction of a new hub to better service a variety of foreign markets. Stakeholders involved include residents of the community that will be impacted by construction and noise of the new airport hub, advocates concerned about environmental sustainability, investors that hold shares in the securities market, and even employees who might have to become expatriates to support a new foreign hub business model (to name only a few groups). Stakeholder mapping provides a snapshot of the potential level of influence a group might have in interrupting the new construction, such as environmental advocates that attempt to use legal measures to stop land destruction which could potentially hold up hub completion for years. A less-influential stakeholder, the employee, might be serviced well with proper internal training in foreign business practices that is facilitated with minimal resistance, labour and economic expenditures. Stakeholder mapping assists managers in having a relevant picture of the potential threats and opportunities stakeholders have on the entire value chain or special project which provides a framework for how to best influence or service these important or lesser-important stakeholder groups.
Whether it is the role of management to limit stakeholder roles is a subjective issue. Johnson, et al. (2014) suggest that it might be critical to remove certain stakeholder influences when it is determined that a certain stakeholder group would be resistant to corporate changes. If the stakeholders resisting change are internal, such as managers that resist change at senior levels, then strategic leaders can recruit new executives with similar values and attitudes. Johnson, et al. (2014) again asserts that managers can build alliances with smaller stakeholder groups so as to over-power the influence of more powerful stakeholder groups. These coalitions can be built by using relevant stories and symbols to communicate the need for coalition development and persuade stakeholders to join the mission of overcoming the power of those who resist change in the business model (Johnson, et al.).
In some instances, managers do not have the authority or power to remove resistant stakeholder group influences (Johnson, et al.). In some businesses, the status quo related to stakeholder expectations and influence is so pervasiveness that undertaking efforts to remove stakeholder influence becomes impossible. In some instances when certain stakeholder groups have long-established values and beliefs, the ability of managers to undo these normative values is impossible (Johnson et al.).
Managers, in some instances, can remove some dimension of stakeholder resistance by timing strategic changes according to stakeholder expectations. For example, slow change for the aforementioned airport hub construction strategy might mean less immediate stock price returns for shareholders, hence influencing them to adopt a more rapid change model. In the same example, a manager might agree to participate in a collaborative environmental assessment of the new construction site to appease environmental advocates. If statistics of such an assessment indicate there would be no long-term harm to the local ecology, the manager was instrumental in giving the environmental advocate stakeholder group what it wanted and also expedited continuing hub construction. Sometimes, a win-win scenario is most viable for removing stakeholder influence, hence suggesting managers should, in some instances, work to remove those with the most authority to resist change.
As shown, in some instances, it is impossible or highly difficult to remove resistant stakeholder influence in strategic decision-making. However, with strategies such as cooperation, win-win scenario-seeking, or more effective communications using persuasive symbols and stories can be effective in ensuring strategic goals are met and stakeholders do not interrupt strategy implementation. When the status quo is so well-developed and engrained into stakeholder mindsets, managers might have an impossible task of removing stakeholder influences.
Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2014). Exploring strategy: text & cases. Harlow: Pearson Education.
Mitchell, R., Agle, B. and Wood, D. (1997). Toward a theory of stakeholder identification and salience: defining the principle of who and what really counts, Academy of Management Review, 22(4), pp.853-887.
6. Explain and evaluate the role that power and politics may have in an organisations strategic development.
In order to realise success in realising strategic goals, legitimate power is necessary to coordinate, implement and direct strategy (Hardy 1996). Even though rational planning models tend to paint the portrait that quality and well-developed strategic plans will ultimately deliver their own results, the reality of the organisational circumstances and external environment assert a type of complexity in implementing new strategic goals.
There are different levels of power that influence strategic implementation, including macro-level power whereby the organisation seeks to protect its own needs and interests by using control tactics or cooperative strategies with other organisations (Mintzberg, Ahlstrand and Lampel 2009). One could view power, in this sense, with a relevant hypothetical example. A Chinese firm wishes to enter the UK market to sell pizza and pasta to consumers and has the cost leadership capabilities to undercut competition in the firms pricing structure. Established players in the market hold the majority of market share and seek immediate barriers to stop market entry, such as using intellectual property protections or building differentiated brands to gain consumer loyalty. This new entrant, however, can seek joint ventures or alliances with other established retailers with profit-sharing opportunities or the ability to share resources to create an expensive and wide-ranging marketing campaign that emphasises price and quality superiority. This power is exploited by giving the alliance or joint venture firm more market power that dominates existing competitors market relevancy. Power, in this sense, affected the ability of other firms to seek market entry barriers and now the firm, because of its powerful market position resultant of strategic alliance and joint venture, begins dramatically under-cutting domestic competition with a more attractive product price structure.
Politics can be viewed from the perspective of senior executives that guide an organisation. A hypothetical firm might have determined that growth should be achieved through joint ventures to build a learning organisation and share important talent and economic resources to enter a new foreign market. However, the Board of Directors holds a disparate belief, believing that a joint venture would remove considerable controls over the strategic position of the business and therefore exert their authority to stop joint venture as a market strategy. The governance team might see joint ventures and sharing decision-making with the new venture partner as a threat to their authority in the long-term and begin communications to ensure that shareholders vote against joint venture development. Executives, however, see this new opportunity as a viable growth strategy and consider their own needs, such as bonus compensation for revenue growth, as the self-serving ideology underpinning why joint venture market entry is viable from their own perspective. Hence, politics and legitimate power (governance versus executives) influenced the ultimate hypothetical decision for forego joint venture development and gained coalitions from voting shareholders to assert that the business should seek growth differently. In this hypothetical case, executives had their power superseded by governance and shareholders and strategic intentions had to be redeveloped even though executives are resentful and de-motivated because the business chose a less strategy less conducive to bonus and other remuneration opportunities. Hence, practically, power and politics go hand-in-hand and will dramatically influence the strategic design and direction of a corporation.
Power can also be seen with buyer segments. Some buyers have low switching costs for defecting to competing products especially when there is ample competition in an established market (Porter 1987). In this case, businesses might allocate more resources to the marketing function to differentiate the business and its products or even develop a cost leadership strategy to provide lower prices to give the business competitive edge and attract more profitable target segments. Power should be only viewed as an internal factor, but as a legitimate phenomenon of servicing external customer segments. If customers can negotiate pricing or refuse to buy products as a result of price sensitivity, they exert legitimate authority and the business may have to adopt such strategies as lean production and procurement to ensure that cost controls facilitate a lower product pricing structure when distributed. To service markets with considerable power, a firm must adjust its value chain and its strategic objectives.
As seen, politics and power have significant impact on strategic direction for a firm. Internal political struggles can alter strategic direction and choice, especially when coupled with legitimate power that can be asserted over decision-makers; such as in the governance versus executive example. Genuine authority gained through strategic alliances or joint ventures can reduce power of competition and even coerce executives to alter a long-term plan when politically-motivated organisational actors are resistant in an effort to secure their own needs and self-interests.
Hardy, C. (1996). Understanding power: bringing about strategic change, British Journal Of Management, 7, pp. S3-S16.
Mintzberg, H., Ahlstrand, B. W., and Lampel, J. (2009). Strategy safari : the complete guide through the wilds of strategic management. Harlow: Financial Times Prentice Hall.
Porter, M.E. (1987), From competitive advantage to corporate strategy, Harvard Business Review, 65(3), pp.43-59
Leadership and strategic change
Specify and critically evaluate the key factors which affect how managers should approach the management of strategic change
There are four distinct types of strategic change: adaptation, reconstruction, evolution and revolution (Johnson, et al. 2014). Strategic change involves modifying a firms vision and mission to achieve new strategic objectives. Strategic change is therefore a change in firms overall strategy which is underpinned by the firms scope, resource capabilities, competitive advantage and existing synergies and competencies.
The first key factor in how managers should approach strategic change is consideration of the external environment, in this case economic factors and competition. A firm enacts strategic change to ensure adaptability to better respond to changes in the external market. Adaptation is incremental and can be facilitated with the established culture already present within the organisation. In some instances, change is a prescriptive activity, requiring a rapid change. Lewins model of change suggests first unfreezing old behaviours, guiding the organisation to a new level of thinking and mindset, and then refreezing attitudes after achieving a new level (Burnes 2014). The goal in unfreezing is to change an existing mindset to accept a new change practice. Managers must be considerate of the socio-psychological and cultural factors that might impede change and work diligently to prepare organisational members for a new change practice.
Transitioning involves consideration of effective communications systems, promoting active staff involvement in the change, address perceived barriers, make regular use of milestones, and have an openness to negotiation throughout the change process. Freezing new behaviours involves being considerate of reward systems, celebrating victories, and training of personnel when required (Burnes).
Managers considering strategic change must also be considerate of what specific goals the organisation wants to achieve, how to measure change effectiveness (metrics), the specific sequence of activities required to achieve a change goal, and implementation. Winning the support of employees in an environment where change resistance behaviours are often irrational and illogical (Ford, Ford and DAmelio 2008), is critical to managing successful strategic change.
To illustrate the many complexities of managing strategic change, one can consider an organisation that has a culture where compliance and productivity are main normative beliefs and values. However, the firms external market now mandates that the firm develop a team-based ideology under a decentralised model in order to facilitate innovation because of new market entrants with considerable product development capabilities. The business will have to change culture, by unfreezing mindsets related to hierarchy-driven models with power distance to familiarise employees with working collaboratively under a new mission of being a pioneer in a market. This will require considerable upheaval both in terms of adjusting organisational structure and building a new set of values and beliefs that drive a new normative set of values related to cooperation and teamwork.
Therefore, key factors are recognition of employee motivations and needs, considering how to enact a cultural change, opening effective lines of communication, and ensuring managers have considerable leadership skills to gain acceptance of the change, minimise resistance and ensure followership of a new vision and mission. Having an openness to embrace new ideas and values from employees is part of this leadership model necessary to facilitate change effectively (Johnson, et al.).
Coupled with the more humanistic aspects of change leadership, managing strategic change means having an understanding of internal resources and how best to allocate them to achieve a new change goal. For instance, if a firm had been operating under a model where the primary goal is diversification and suddenly requires a cost leadership strategy, the business will have to consider new structural components such as focusing now on cost management, implementing a lean ideology, and determining how to exploit economies of scale or rare resources to achieve competitive advantage. This means introducing new methods of conducting business and responding to customers, which entails understanding how to remove resistance barriers with a blend of legitimate authority that focuses on compliance whilst also satisfying the cognitive and psychological needs of employees concerned about change relevancy.
Managing strategic change is a multi-faceted and complex situation. Being able to align resources with leadership is not simplistic and not all employees will get on-board immediately, especially if the change is prescriptive and not emergent. Having knowledge of all internal competencies, cultural factors and values will assist in unfreezing old behaviours and solidifying new ones related to a new chan
ge objective.
Burnes, B. (2014). Managing change, 6th edn. Harlow: Pearson Education.
Ford, J.D., Ford, L.W. and DAmelio, A. (2008). Resistance to change: The rest of the story, Academy of Management Review, 33(2), pp.362-377.
Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2014). Exploring strategy: text & cases. Harlow: Pearson Education.
Discuss how changes in technology contributed towards the globalisation of industries. Would the globalisation of these industries have been possible without these technological changes?
Technology has contributed significantly to globalisation. Leading businesses have chosen to become globalised in response to market conditions and growth in competitiveness facilitated by technological change and evolution. Production facilities now have a global agenda and are strategically determined by global screening processes whilst research and development is now sourced from best and most efficient places throughout the world (Johnson, et al. 2014).
Of the most significant technological contributor to globalisation is emergence of communications technologies. The ability to contact off-site representatives in real-time using mobile devices, Internet conferencing and other telecommunications systems allows managers to coordinate multiple business units throughout the world with efficiency and considerable cost reductions that were once attributed to high travel costs to achieve the same goal. Management of a firms headquarters can enter new markets and have expatriate managers coordinate all foreign business activities, regularly using telecommunications systems to report on activity, transmit important market data, and collaborate with governance systems remotely. Information technologies are substantial improvement in the business environment that provide opportunities for business growth and new market entry throughout the world without significant challenges in coordinating strategy development and implementation.
Technology has also reduced barriers to knowledge production, leading to a phenomenon known as borderless knowledge (Gornitzka and Langfeldt 2008). New information technologies and communications technologies allow a firm, even if dispersed into different global business units, to turn their organisations into learning organisations; a form of knowledge management that can facilitate cross-functional training to employees to transform various tacit knowledge into experiential knowledge. Managers now have the ability to use such technologies as the intranet or extranet to provide customers and internal staff members with valuable information that translates into better human capital development. With the ability to translate and distribute knowledge globally, it becomes an incentive to seek a globalised strategy that can bring a business greater revenues and market power.
Furthermore, developing nations and developed nations, alike, now have access to new production technologies and ERP systems due to a amalgamated global supply chain that can facilitate the transfer and distribution of various technologies throughout the world. This incentivises foreign direct investment for a firm, hence seeking a globalisation strategy, as now new technologies in key areas along the value chain make it feasible to launch a new business model in a foreign market territory. New educational technologies, additionally, provide greater human capital expertise along the global labour pool, ensuring that firms have top talent to facilitate business operations and management when entering new markets.
Technology standardisation is also contributing to globalisation. Compatibility of various technological standards make it more simplistic for companies to enter new markets using the same product or service. This strategy forbids having to adapt to local standards, but maintain the same production systems that were built on competencies in the host market (Johnson, Whittington and Scholes 2011). These standards facilitate less costs when offering existing products to a new market.
Improvements, also, in transportation technologies improve speed and affordability for companies with an export or import strategy for its products and raw materials. For instance, improvements in super tanker capacity and efficiency, facilitated by technology evolution, increases the volume of goods that can be transported and GPS technologies facilitate the ability to track transport movements to ensure timely delivery and managerial coordination of goods transfer. With lower cost international transport prices and greater managerial control, using technology, of needed raw products, it becomes an incentive to seek a global strategy for a corporation. Using information technologies, management of an organisation can contact transport representatives and managers in real-time, facilitating coordination of new scheduling and being able to offer realistic promises to customers about delivery in a fashion not feasible prior to the advent of new communications technologies.
As shown, technology significantly contributes to globalisation, both as an incentive for pursuing a global strategy and also facilitating more efficient global business operations. Coupled with standards in R&D and production technologies, firms do not necessarily have to adjust existing low cost production operations when entering a new market, but can launch a similar strategy to their host country markets. This has implications for cost savings, efficiency in production, and ensuring compliance to regulatory frameworks that are also becoming standardised.
Gornitzka, A. and Langfeldt, L. (2008). Borderless knowledge, Higher Education Dynamics, 22.
Johnson, G., Whittington, R and Scholes, K. (2011). Exploring strategy: text and cases. Harlow: Financial Times Prentice Hall.
Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2014). Exploring strategy: text & cases. Harlow: Pearson Education.
Evaluate how important the management of change is in the strategy process? Discuss the approaches available to the manager
Managing change is critical to the strategy process. Businesses that must be flexible and adapt to their evolving market conditions require implementation of new processes and procedures to ensure the business is aligned with market factors. Change is critical to avoid corporate stagnation and requires various approaches to achieve successful change implementation.
Change is highly critical to organisational success. It is illogical to assume that an external market will maintain the same characteristics over the long-term, hence, the old way of doing things will not be sustainable over the long-term. Additionally, new market entrants and those with innovation capabilities can disrupt an established market, forcing a firm to adjust its operations and other value chain activities to achieve sustainable market success. Some firms must reposition their brands to gain market attention, create new and creative products, enter new markets to avoid high taxation and tariff rates in another market, and a variety of other issues influenced by the external environment. Therefore, organisational structure, job role expectations, implementing new technologies, adjusting marketing strategy, or new procurement ideologies (to name only a few) represent the types of recurring change that must occur to remain adaptable to the firms respective markets. A firm incapable of change is likely a firm that will meet with ultimate market failure.
The first approach is gaining commitment for a change, a persuasive approach that asserts why change is imperative and critical to meet organisational goals. Change must be perceived as relevant to important internal stakeholders and often rewards are used for complying with change performance expectations. Resistance to change is a legitimate phenomenon and managers can address the different reasons for resistance to ensure change is embraced.
Change resistance can occur because fear of consolidation throughout the business model creates fear of job losses. Expectancy theory justifies this resistance type, asserting that staff members choose a particular behaviour based on the benefits perceived to be an outcome of a behaviour (Montana and Charnov 2008). If employees fear job security, they will likely resist a change practice. This type of resistance can be combated with proper persuasive tactics and communication that clearly identify the potential rewards that will be received for embracing and complying with change (Galpin 1996).
Resistance also occurs because organisational members do not believe a change is relevant or will meet with expected results. In this situation, Gable and Stewart (1999) suggest that managers must show a deep commitment to the change and communicate the vision of the change consistently to gain followership and dedication toward the new practices. This is supported under social learning theory where individuals begin to mould their behaviours to fit the model of another when they maintain charismatic or otherwise desirable traits. A competent leader that role models commitment behaviours will have more likelihood that others will accept the change and begin developing the same outward manifestation of commitment. This, again, asserts that a change manager must be a positive transformational leader who teaches, engages and communicates with employees if they are to be committed to change.
Stratman and Roth (1999) also state that change resistance occurs because employees are confused about a change and unsure of its expectations on their job roles. Therefore, they should be provided with hands-on training, when possible, to involve them in the change and ensure that they understand all dynamics of the change and feel confident to facilitate change role activities. Such training could be testing software that will be implemented in the change. Being able to boost esteem, from a socio-psychological perspective, represents tactics to ensure a change, whether prescriptive or emergent, meets with its intended compliance goals.
As illustrated, change is an important predictor of organisational success and ensures that a firm remains adaptable and flexible to changing market conditions. Resistance to change could make a new change strategy fail miserably and these barriers need to be removed. They can be undone through effective leadership, training, communications, and persuasive tactics that are paramount to ensuring compliance and embrace of new change activities critical to meet evolving market demands and conditions.
Gable, G. and Stewart, G. (1999). SAP R/3 implementation issues for small to medium enterprises, 30th DSI Proceedings, 23 November, pp.779-781.
Galpin, T.J. (1996). The human side of change: a practical guide to organizational redesign. Jossey-Bass.
Montana, P.J. and Charnov, B.H. (2008). Management, 4th ed. Barrons Educational Series, Inc.
Stratman, J. and Roth, A. (1999). Enterprise resource planning competence: a model, propositions and pre-test, design-stage scale development, 30th DSI Proceedings, November 20, pp.1199-1201.
Merger
Evaluate the concepts of Merger, Acquisition and Alliance, as effective strategic management processes.
Mergers, acquisitions and alliances are effective methods of strategic management to reach a desired goal and objective. Mergers involve blending two firms to become a single entity. Acquisition is the procurement of other businesses to grow and expand an existing firm that made the acquisition. Alliances involve short or long-term partnerships with other organisations to exploit potential synergies and share resources.
Mergers can be effective as a strategic intention to achieve financial or strategic-level goals (Johnson, et al. 2014). If a business determines that another business entity maintains a positive strategic fit, merging the two companies can have significant advantages. This can be illustrated with the merger between Air France and KLM, two airline companies serving wholly-different markets, but both with high volume of resources including managerial competency, financial resources and tangible resources (fleet). Air France and KLM were having difficulty achieving growth in their markets and, through merging of the companies, the business now had ample resources to service many new markets that would not have been available to either firm (individually). Merging these companies allowed a new, merged business entity to leverage its management-based and economic-based resources in a way that made the firm larger than competition and have much more market power throughout the entire value chain.
Acquisitions have the substantial advantage of removing competition in a key market. If a firm makes a realistic offer for acquisition to a competitor that holds market share in a desirable market, acquiring this firm gives the buying firm an opportunity to seize market share. It also gives tangible asset growth through the acquisition, such as now having control over this old competitors production facilities, warehousing and logistics systems, and even human talent that is transferred to the purchaser with knowledge and experience operating in the new market. Especially in a situation where an acquiring firm has not cultural knowledge of a new foreign market, acquisition and transfer of staff from the acquired firm gives the business new competencies in how to service the socio-cultural aspects of customers and vendors that consume or provide products in this new market environment. From a learning perspective, acquisitions can greatly improve human capital competencies that translate into an effective learning organisation.
Strategic alliance, additionally, allow a firm several advantages. First, it allows the firm to spread its investment over a period of time, where acquisitions require an immediate upfront investment (Johnson et al. 2011). This has significant implications economically in the event that the alliance concept does not meet with intended strategic objectives, making it easier to exit the alliance agreement without considerable loss of capital. It also spreads risk among the different alliance partners. However, strategic alliances must be handled carefully and when terminated, it should be under good terms between both partners. This is because in some alliance situations, the two partners might be forced to work together again, which emphasises a need for improved courtship and sensitivity if an agreement is terminated (Johnson, et al. 2014).
Mergers and acquisitions also have the added advantage of giving a firm more control. Unlike alliances where control is often shared between partners, through acquisition a firm continues to make strategic decisions whilst being able to utilise the resources and assets it has gained through purchase or merger. M&A also provides better capabilities for the purchasing firm to leverage its competitive advantages by having access to new markets, new resources and knowledge sources.
One can consider a firm unable to achieve organic growth in a very saturated domestic market. Through analysis, it has determined that a foreign market represents a lucrative opportunity because there is high demand and predictable consumption behaviours that favour market entry. The firm identifies another with a quality strategic fit and makes a purchase offer. Now, the firm has market presence with facilities absorption occurring in the acquisition without the high costs of new facility construction and, in some instances, can even rely on the established brand power that the acquired firm maintained in this new market.
As illustrated, mergers, acquisitions and alliances assist in achieving strategic goals. They control costs of expansion, spread risk, and provide opportunities for managers to leverage new human capital. All of these factors are critical for achieving strategic objectives.
Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2014). Exploring strategy: text & cases. Harlow: Pearson Education.
Johnson, G., Whittington, R and Scholes, K. (2011). Exploring strategy: text and cases. Harlow: Financial Times Prentice Hall.
Innovation
Justify the importance of innovation and an entrepreneurial approac