Thesis on "Evolution of Organizational Strategies"

Thesis 13 pages (4029 words) Sources: 6 Style: APA

[EXCERPT] . . . .

Evolution of Organizational Strategies

It is a fact that the world has become increasingly complex over the last century, with technology and electronics changing rapidly almost overnight. Complex social issues have joined the wave of change as globalization brought to light issues of human and worker's rights concomitantly with economics and profits issues. Functioning within a social and political customer base, business paradigms have also changed and evolved towards increasing complexity. In the industrial age, for example, cost leadership and product differentiation served to create a competitive edge on the local market scale. These fairly simple strategies served a customer base that was built upon the simple technologies of the time.

However, with the industrial age, technologies began to advance rapidly, with businesses experiencing a concomitant paradigm of growth. Large corporations began to engage in activities such as vertical integration, product diversification rather than differentiation, mergers and acquisitions, soon to be followed by globalization. The economic scale of these businesses rapidly expanded, and rules and regulations were created to regulate a company's entry into foreign countries. This further contributed to the complexity of the business and economic world and concomitantly necessitated further complex business strategies in order to remain competitive within this environment.

With the advance of communications technology, social changes also began to occur more rapidly. The social consciousness began to extend to violations of human rights on a global rather than only a local scale. As such, businesses began to be obliged towards global citizenship and responsibility, rather than only towards the profit margin in order to remain competitive. As such, a "friendlier" business paradigm began to emerge, with strategic alliances, cooperative or open source strategies, flexibility-adaptability-agility, and high-reliability strategies becoming the norm of the competitive global business.

At the basis of these more complex business paradigms then lie the fact that the world within which business functions has changed and become more complex. Communication technology, financial and social values have changed. In order to remain competitive, the business is therefore obliged to change accordingly. This has made possible the newest of the business paradigm: the network strategy, by which business work together to create customer-focused value, rather than against each other. Although now able to compete on a friendlier and more customer-focused level, businesses however face complex challenges in terms of maintaining an acceptable profit margin in the face of extreme social and financial change.

Technological Change

C.M. Christensen (2006, p. xii) ascribes the failure even of good businesses to rapid technological change and the unforeseen market changes that these would bring about. He mentions many notable companies in this regard, including Xerox, Sears, and Digital Equipment Corporation. Paradoxically, the author notes that it is precisely because these companies followed sound business leadership strategies, that they failed. The main reason for this is that such strategies and investments rely on stability within the market. Stability is no longer a trait of the business market today. The successful company will not remain so by maintaining the strategies that had brought it to its fortuitous status, according to the author.

In order to remedy this, Christensen (2006, p. xiii) proposes his principles of disruptive innovation. According to these, stability is never assumed. Rather, the market is continually scrutinized for change, for new trends, or for disruption. When these are identified, the business should rapidly respond with innovative and appropriate approaches. This, according to the author, is the only viable way for the modern business to function in the current market climate - by itself being a force that accommodates disruption.

Specifically, Christensen notes three reasons why traditionally "good" management techniques tend to fail in the current business environment. The fist is the importance of the distinction between sustaining and disruptive technologies. The second is the pace of technological change, and the third is the often artificially inflated importance of certain attractive investments, so indicated by successful companies.

One important element of the current business world is disruptive technological change. In his introduction, Christensen defines this as technologies that, in contrast to sustaining technological change, creates a product that performs worse than its predecessor. What attracts the market to it is elements such as size, convenience of use, and lower price. Hence this could be a significant threat, as shown in the rest of the book as well.

Christensen basically suggests that companies should be aware of the market forces around them, and potential disruptive innovations. The company should also be fully aware of itself in terms of its own capabilities, strengths and weaknesses in dealing with these disruptions. Knowledge and innovation will then provide a company with the tools to mitigate not only disruptive market forces, but also the unstable climate that is the reality of business today.

Business Strategies for the Global World

Indeed, it appears that many business people are following Mr. Christensen's advice, as the very structure of businesses and their decisions are changing almost as rapidly as computer technology today. No business strategy can be simple in the face of the challenges mentioned above. The business world is becoming increasingly complex, and businesses must respond in kind, or fail.

Mark L. Frigo (2002) mentions the Return Driven Strategy model as a financial model that is applicable to global businesses today. The tenets of this model indicate both the complexity with which the business world is now obliged to engage, as well as the necessity of targeted strategies for profit creation and measurement. Within the model, there are eleven tenets forming a hierarchy of activities as a guide for companies on their way to the top of the visualized pyramid: financial stardom. The model not only provides a suggested pathway of strategies, but can also be applied to identify financial weaknesses in the company, and ways in which to remedy them. In this way, a company can identify its specific weaknesses and identify ways in which to remedy them.

Specifically, the model operates on the basis of three goal tenets, the first and highest being to maximize financial value creation. In order to establish this, management must align its financial goals with shareholders through customers. By focusing on customer needs, according to Frigo, a company can increase its cash flow by an awareness of unmet customer needs, and how the company can best remedy this situation. In this way, a company can work towards dominating high-growth markets.

In the middle of the hierarchy lie the three competency tenets, which refer to the competitive bases from which a company operates. Here product branding and perceived quality are important aspects. Customers must believe that they are receiving value for money to maintain interest in both current and future products.

At the bottom of the hierarchy lie the five suggested ways in which to improve competencies towards the specific market a company may choose. Here also, one notes the echo of Christensen's work: business strategy requires continual and heightened attention on the forces of change within a market; whether these be disruptive or not. In addition to technological breakthrough, Frigo mentions demographic shifts and regulatory change as aspects that might challenge a company towards targeted change tactics. Schwab is mentioned as exemplary in this regard, responding to every change in information technology or consumer preference as an opportunity rather as a threat. As such, the model provides the business entity with a strategic decision-making tool towards a future that is financial stable in an unstable world. In a practical sense, Frigo notes that the model is useful in strategic decision making in terms of activities such as brainstorming, business plan development, and evaluation activities.

Of course no financial strategy or model can work without a suitable workforce behind it. In this regard, Alden Cuddihey (2003) considers the challenge of employees in the current business climate. Elements that all too often plague business, particularly in the current economic crisis, include tight budges, slow growth, and layoffs. In addition, ineffective retention programs correlate with mass retirements, resulting in companies losing years of collective and valuable experience. Finding quality employees to mitigate these forces is often a challenge.

Nevertheless, Cuddihey notes that the workforce, particularly in the current business climate, is becoming the most important element not only in financial performance, but also in corporate competitiveness. Cuddihey suggests that businesses should address this problem and its mitigation particularly in order to create an effective strategy for future success. As such, the Human Resources department plays a vital role. If human resources are aligned with business goals, a high-performance workforce is maintained. It is therefore necessary to take specific steps to hire only the most suitable employees for specific jobs on the workforce. This will ensure not only a high level of skill in each performance, but also job satisfaction, which is highly important in terms of employee retention.

In order to further ensure employee retention and satisfaction, Cuddihey notes that companies are also increasingly providing employees with a supportive HR department. Such an HR capability then focuses on an improvement of firstly… READ MORE

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