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Answer of SMU assignments for MB0052 Q1. What is strategy? Explain some of the major reasons for lack of strategic management in some companies?

Answer: Meaning of strategy: The word ‘strategy’ comes from Greek strategies, which refers to a military general and combines stratus (the army) and ago (to lead). The concept and practice of strategy and planning started in the military, and, over time, it entered business and management. The key or common objective of both business strategy and military strategy is the same, i.e., to secure competitive advantage over the rivals or opponents.
A well-formulated strategy is vital for growth and development of any organization—whether it is
a small business, a big private enterprise, a public sector company, a multinational corporation or a non-profit organization. But, the nature and focus of corporate strategy in these different types of organizations will be different, primarily because of the nature of their operations and organizational objectives and priorities.
Small businesses, for example, generally operate in a single market or a limited number of markets with a single product or a limited range of products.
The nature and scope of operations are likely to be less of a strategic issue than in larger organizations. Not much of strategic planning may also be required or involved; and, the company may be content with making and selling existing product(s) and generating some profit. In many cases, the founder or the owner himself forms the senior/top management and his (her) wisdom gives direction to the company.
In large businesses or companies—whether in the private sector, public sector or multinationals—the situation is entirely different. Both the internal and the external environment and the organizational objectives and priorities are different. For all large private sector enterprises, there is a clear growth perspective, because the stakeholders want the companies to grow, increase market share and generate more revenue and profit. For all such companies, both strategic planning and strategic management play dominant roles.
Multinationals have a greater focus on growth and development, and also diversification in terms of both products and markets. This is necessary to remain internationally competitive and sustain their global presence. For example, multinational companies like General Motors, Honda and Toyota may have to decide about the most strategic locations or configurations of plants for manufacturing the cars. They are already operating multi location (country) strategies, and, in such companies, roles of strategic planning and management become more critical in optimizing manufacturing facilities, resource allocation and control.
In public sector companies, objectives and priorities can be quite different from those in the private sector. Generation of employment and maximizing output may be more important objectives than maximizing profit. Stability rather than growth may be the priority many times. Accountability system is also very different in public sector from that in private sector. There is also greater focus on corporate social responsibility. The corporate planning system and management have to take into account all these factors and evolve more balancing strategies.
In non-profit organizations, the focus on social responsibilities is even greater than in the public sector. In these organizations, ideology and underlying values are of central strategic significance. Many of these organizations have multiple service objectives, and the beneficiaries of service are not necessarily the contributors to revenue or resource. All these make strategic planning and management in these organizations quite different from all other organizations.
The evaluation criteria also become different.

 Lack of Strategic Management in Some Companies
Some companies do not undertake strategic planning and management. Some other companies do strategic planning, but receive no support from managers and employees. In some other cases, managers and employees do not get enough support from the top management. A number of such and other reasons explain why certain companies do not take to strategic planning and management. David (2003) has mentioned various reasons for poor or no strategic planning and management by companies. These are discussed below:
1. Content with success: If an organization is generally successful, the top management or individual managers may feel that there is no need to plan and strategize because everything is fine. However, they forget that success today does not guarantee success tomorrow.
2. Poor reward structure: When an organization achieves success, it often fails to reward its managers or planners. But when failure occurs, the company may punish the managers concerned. In such a situation, it is better for individual managers to do nothing than to risk trying to achieve something, fail and be punished.
3. Overconfidence: As managers gain experience, they may rely less on formalized planning and more on individual initiative and decisions. But, this is not appropriate. Overconfidence or overestimating experience leads to complacency and ultimately can bring downfall. Forethought and planning are the right virtues and are signs of professionalism.
4. Fire-fighting: An organization may be so deeply engrossed in crisis management and fire fighting that it may not have time to plan and strategize. This happens with many companies and is a clear sign of nonprofessionalization.
5. Waste of time: Some organizations view planning as a waste of time because no tangible marketable products are produced through planning.
But they forget that time spent on planning is an investment, and there would be returns, both tangible and intangible, in due course.
6. Too expensive: Some organizations are culturally opposed to spending resources on matters like planning which do not produce instant or immediate results. They feel that spending on planning is a wasteful expenditure.
7. Previous bad experience: Managers may have had previous bad experience with planning, that is, cases in which plans have been cumbersome, impractical or inflexible. There could be experience of failures also. They would like to avoid recurrence of this.
8. Honest difference of opinion: Some managers may sincerely think that a plan is not correct. They may see the situation from a different viewpoint, or, they may have aspirations for themselves or the organization, which are different from those envisaged in the plan. Different people in different jobs in the same organization may have different perceptions of the same situation, and this may lead to difference of opinions among them and eventually to lack of planning due to lack of consensus.
9. Self-interest: When management has achieved status, privilege or selfesteem through effectively using an old system, it often sees a new plan or a new system as unnecessary or a threat.

10. Fear of the unknown: Managers may not be sure of their abilities to learn new skills or take on new roles or adapt to new system. This is basically inertia against change or fear for change.
11. Fear of failure: Whenever something new or different is attempted, there is a chance of success, but, there is also some risk of failure. Many companies and managers may like to avoid strategic planning and management for fear of failure.
12. Suspicion: Employees may not trust management, or, the management may not have enough confidence in the managers. This gives rise to mutual suspicion.


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