Corporate Level( Grand) Strategies

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Factors Affecting Portfolio Strategy - 3: Common Factors

 These are intervined between external and internal factors in a decision on business portfolio. 

a.      Value System in Decision Making :

 

The role of value system in choosing a strategic alternative is well recognized. While evaluating the strategic alternatives, different executives may take different positions because of differences in their personal values. Guth and Tagiuri (1965)found that personal values were important determinants of the choice of corporate strategy. Similarly, value system to top management affects the types of strategy that an executive chooses.

The constructive role that is played by the value system in decision making by managers cannot be underestimated. Value system is the frame work of personal philosophy that rules and affects the individual reactions and responses to any situation the person in exposed.

Values are essentially a bunch of attitudes, beliefs and feelings of a person as individual and as a group member. Attitudes are the positive or negative, good or bad, desirable or undesirable stands taken or a view point formed. Say, smoking is good or bad, desirable or undesirable. The beliefs are feelings that support one’s stand.

According to Hindutva husband is God and, therefore, the wife shall salute him before going to bed and leaving bed early morning; sneezing in odd number is good and even number is bad; black cat crossing the road from right to left and left to right, the second being a good omen and so on.

Feelings are perceptions prevailing in mind about anything. Value system is constantly changing. This is what we call as generation gap. The value systems are developed by the managers founded on their education, experience and the information they get on their jobs.

According to Mr. William D.Guth and Renato Tagiuri managers have six major value orientation- Theoretical- an orientation toward truth and knowledge; Economic- an orientation toward what is useful and powerful; Political- an orientation toward power; Aesthetic- an orientation toward form and Harmony; Social- an orientation toward love of people; Religious- an orientation toward unity in the universe.

While evaluating the strategic choice, executives have differing sets of values which are respected and accepted by group and personal sets of values which interact in giving weightage. The research findings have proved that Americans are the best business people, Japanese are the best imitators and innovative, Britishers are conventional in their approach and Indians are the best cheats.

To use the words of Mr. George England “Successful—American managers are more pragmatic, dynamic, and interactive and achievement oriented value, while the less successful ones are in favour more static and passive values.”

Coming to another expression, of the six above orientations, American executives lean more toward economic, theoretical and political values than the other values. Thus, the business values and personal bias have deep influence on choosing the strategic option.

An Indian example could be about Vishal Sikka of TCS and his exit

b.       Influence of Past Strategies:

 

It has been noticed that the choice of current strategy may be influenced by what type of strategies have been used or followed in the past. Pearce and Robinson have said, “A review of past strategy is the point at which the process of strategic choice begins. As such past strategy exerts considerable influence on the final strategic choice.”

Hence, it is said that ‘past strategies are often the principal architects of current strategies.’ Pearce and Robinson explain the reason in this way – “Because they have invested substantial time, resources and interest in these strategies, the strategists would logically be more comfortable with a choice that closely parallels past strategy or represents only incremental alternations.”

Henry Mintzberg says, “the past strategy strongly influences current strategic choice.” On the other hand, Barry M. Straw has remarked, “the older and more successful a strategy has been, the harder it is to replace. It is very difficult to change because organisational momentum keeps it going.”

Future has its roots in the past. To this, past strategy is no exception. That is, choice of the current and the future is influenced by the past strategy due to number of reasons. The foundation for formulation of new strategies is the past strategy.

In the light of the past strategy, the strategist either might not have thought of altering it or it is also possible that the strategists might have taken the things lightly and might not have thought of alternatives with the seriousness that they deserve due to inertia.

Personal involvement of the decision maker with the past strategy will continue to do so. Thus, the present and future strategies will be influenced by personal involvement. One cannot afford to lose sight of the research findings of Professor. Mintzberg and his associates.

The research findings say-

1. The older and more successful a strategy, the harder it is to change. The present strategy stems from a past strategy developed by a single, powerful leader. This original and tightly integrated strategy is a major influence on later strategic choices.

2. Once a strategy gets under way it becomes exceedingly difficult to change, and the bureaucratic momentum keeps it going. It becomes a sort of ‘push-pull’ phenomenon; the original decision- maker pushes the strategy, when lower management pulls along.

3. When the past strategy begins to fail because of changing conditions, the enterprise reacts and grafts new sub- strategies on to the old and only later seeks out a new strategy.

4. If the environment changes even more radically, then the enterprise begins to seriously consider other alternative strategies which might have been previously suggested but ignored.

Similarly, it is the nature of firms that determines to what extent past strategies influence the present or future strategy choice. According to Reymonds E Miles and Charles C. Snow(1978), the firms are four categories as defenders, prospectors, analysers and reactors. “Defenders” are those firms which penetrate in a narrow market product domain and guard it.

They emphasize more on cost effectiveness, centralised control, intensive planning and put less emphasis on environmental scanning. “Prospectors” are the firms that use broad planning approaches, broad environmental scanning, decentralised controls, and reserve some resources utilised for future use.

They go on searching new products markets on regular basis. “Analysers” are those firms that he between the defenders and prospectors. That is, analysers act some times as defenders and sometimes as prospectors. That is they are sitting on the fence.

“Reactors” are the firms that realise that fact that their environment is changing but fail to relate themselves with the changing environment. Hence, they should act is any one of the ways as defenders or prospectors or analyses or face extinction.

If at all, one is to exile from the influence of the past strategy, the only alternative is to dethrone the past management. In fact, Professors Glueck and Jauch (1980) quite bluntly state “Strategic change is less likely if the new executives are promoted from within, and it is least likely if the existing management group remains in power.”

It is because the old strategy of the old or existing people at the top which is flowing in the blood so much so that they are charmed by the old strategy.

 

c.      Coalition phenomenon

Mintzberg has advanced a theory about formulation of objectives that combines the stakeholder forces described earlier with the internal power relationships. He believes that power plays result from interactions of internal and external coalitions.

The external coalition includes owners, suppliers, unions, and the public. These groups influence the firm through social norms, specific constraints, pressure campaigns, direct controls, and membership on the board of directors. Mintzberg specifies three types of external coalitions, noted in the above Exhibit.

 The internal coalition includes top management, middle-line managers, operators, analysts, and support staff. These groups influence the firm through the personnel control system, the bureaucratic control system, the political system, and the system of ideology. Mintzberg specifies 5 types of internal coalitions, shown in the same Exhibit

Mintzberg says that there are six basic power configurations, as shown in Exhibit 4.3 In the instrument power configuration, one external influence with clear objectives, typically the owner, is able to strongly influence objectives through the top manager. In a closedsystem power configuration, power to set objectives rests with the top manager, who sets the objectives. This is also true in the autocracy power configuration. In the missionary power configuration, objectives are strongly influenced by past ideology and a charismatic leader. Ideology tends to dictate the objectives. In the meritocracy power configuration, the objectives are set by a consensus of the members, most of whom are professionals. Thus the formulation of mission and objectives can be a simple process: the top manager sets them subject to the environment. Or, more frequently, they are set by a complex interplay of past and present, internal and external role players.

 

Incrementalists are of the opinion that the achievement of objectives depends on the bargaining process between different interested coalition groups existing in an organisation, and therefore a rational decision-making process should take all these interests into consideration.

 

 

d.      Pressures from Stakeholders:

 

The attractiveness of a strategic alternative is affected by its perceived compatibility with the key stakeholders in a corporation’s task environment. Creditors want to be paid on time. Unions exert pressure for comparable wage and employment security. Governments and interest groups demand social responsibility. Shareholders want dividends. All these pressures must be given some consideration in the selection of the best alternative.

Stakeholders can be categorized in terms of their

(i)                 Interest in the corporation’s activities and

(ii)               Relative power to influence the corporation’s activities.

Each stakeholder group can be shown graphically based on its level of interest (from low to high) in a corporation’s activities and on its relative power (from low to high) to influence a corporation’s activities.

Strategic managers should ask four questions to assess the importance of stakeholder concerns in a particular decision:

i. How will this decision affect each stakeholder, especially those given high and medium priority?

ii. How much of what each stakeholder wants is he likely to get under this alternative?

iii. What are the stakeholders likely to do if they don’t get what they want?

iv. What is the probability that they will do it?

Strategy makers should choose strategic alternatives that minimize external pressures and maximize the probability of gaining stakeholder support. Managers may, however, ignore or take some stakeholders for granted—leading to serious problems later. (Thomas Wheelen and David Hunger)

 

e.      Time Dimension:

This time dimension has four elements which one cannot ignore, these are:

(i) Time pressure,

(ii) Time frame,

(iii) Time horizon and

(iv) Timing of the decision.

 

(i) Time Pressure:

Decisions are to be taken within the dead line. This dead line is set by higher ups which cannot be questioned. It is these deadlines which generate time pressure within which the managers are forced to make the right choice. For instance, say that there is an offer of acquisition by another company.

The strategists because of the time pressure or a deadline which gives hardly 36 hours, they may accept thinking that such acquisition might reduce the losses because further continuation leads to further deterioration. It is equally true that, acquisition being a very important decision, the strategist may not take decision and post pone it as it warrants ins and outs of proposed acquisition.

(ii) Time Frame:

Time frame refers to time frame of the decision in question. That is, the short-term and long-term implications of a choice. It depends on the reward system that is prevailing in an organisation.

In case the reward system of the firm is associated with achievement of short-term goals, the choice is to gains for short term gains ignoring the long-run gains of the proposed choice. Instead, if the rewards are associated with long-term achievements, there is every possibility of ignoring short-run gains.

(iii) Time Horizon:

This part of time dimension speaks of the period of commitment that goes with it. We have already conversant with stable growth strategy and diversification strategy. It is the strategy in question that decides the time horizon. For example, stability strategy warrants immediate action and the fruits start bearing very early.

Instead, if it is a diversification strategy the decision is not immediate as the fruits of diversification are available in due course of time rather than immediate future. Thus, a long-range strategy that calls for commitment of resources for an uncertain future is less acceptable than that of one having immediate relationship.

That is ‘Law of Delay’ devised by Mr. C. Northcote Parkinson applies. That is, the longer a decision can be delayed, the lower the probability that it will ever be accepted. Much depends on the strategists.

(iv) Timing of Decision:

Timing of a decision determines the strategic choice. It is the timing of the decision that determines the effectiveness of it. It is well known “stitch in time saves nine” which applies. For instance, a prompt and timely decision is a must to exploit the opportunity which is open to the firm.

It should be encashed well before the competitors have hand at it. Again, a decision to enter a new market is going to be in favour of the firm which cannot be delayed. If so the competitors waiting will not wait for you. Thus, delay makes year to lose the golden opportunity on which you can care your future success.

Pearce and Robinson suggest that “strategic choice will be strongly influenced by the match between management’s current time horizon and the lead time associated with different choices.”

 

 

 

f.       Competitors’ Reactions:

 

It is important to consider the competitors’ reactions, responses and capacity to react and its impact while choosing a strategic alternative.

For example, if a company decides to choose an aggressive strategy which directly affects the key competitors to react, then the company may also pursue an aggressive counter-strategy for safety. It would be unrealistic for the company not to consider that possibility.

The strategic choice of a strategy option is bound to reflex in the competitors’ reaction. Therefore, a wise strategist places himself in the shoes of the competitor or competitors to know where exactly the shoe bites. Only after studying the reactions, he may be able to take correct decision than ignoring the impact of competitor reaction.

Much depends on your market position. That is, whether you are leader, challenger, follower or nicher. Say, both your firm and your arch-rival firm are challengers. In this case, it is quite possible that your competitor may take your strategic option as very aggressive and makes the competitor to have counter strategy to overpower you.

Take the case of price war going on between arch rivals namely Hindustan Lever and Proctor and Gamble.

If the first company has reduced the price of Surf Excel , Proctor and Gamble has done so in case of Arial. Later, Surf Excel has been introduced with new proposition.

The followers say Nirma and others being followers, have no choice than to follow the suit without option. Thus, the competitor’s reaction has far reaching impact on the choice of a strategy. The heightened activity to reduce price and increase grammage by HUL, say analysts, was after P&G’s launch of a low-priced variant of Tide, called Tide Naturals, in December 2012.

g.      Availability of Information:

 

Availability of information is a crucial factor in the choice of strategy. Managers choose a strategic option on the basis of relevant data and information. The degree of uncertainty and risk depends upon the amount of information that is available to the strategist. The greater the amount of available information, the lesser the risk is. Hence, managers must ensure the availability of all information bearing on the strategic alternatives.

When it is a question of choice rather rational choice, the quality and quantity of information decide the strategy choice. The choice or strategic decision that is based on facts, the considered opinions other sources of information written as oral are more sound and acceptable that is, the degree of risk and uncertainty depends on the amount and quality of information made available to the decision makers.

There is inverse relationship between the available information and the degree of accuracy of strategic choice. That is, the greater the amount of high quality information, lesser the risk and uncertainty. The decision maker is a risk-prone or a risk averter or risk neutral.

Risk prone and risk averters need the information to decide whether to take or not the calculated risks which are unavoidable in the world of business. Hence, the decision makers need a package of relevant information to analyse and interpret and act. The information is not easily available which costs in terms of treasure, time and talent.

 

h.      Critical Success Factors and Distinctive Competencies:

 

Critical success factors are the key factors required for the success of an organisation. Distinctive competency is a specific ability possessed by an organisation. Strategists should look at specific qualities and strengths possessed by the organisation for making a strategic choice. They should also consider the critical success factors for their organisation while making a strategic choice.

1. Factors Affecting Portfolio Strategy

2. Factors Affecting Portfolio Strategy- Internal Factors

3. Factors Affecting Portfolio Strategy- External Factors

4. Key Success Factors

Factors Affecting Portfolio Strategy - 2: Internal Environmental Factors

 

Business Ownership, Attitude to Profit, Ethical Stance, Organisational Culture , Leadership, Strategic position & Resources and Stakeholder influence are stated to have influence on portfolio strategy. Some major aspects among these are discussed in detail below:

a.      Changes in Executive Management

 

One function of portfolio management is to adjust the portfolio, as needed, to maximize its overall contribution to achieving the organization's strategic initiatives and goals. This may require changes in the mix of Products/Businesses in the portfolio, including potential project deferrals or terminations. Every CEO must simultaneously develop strategy and drive execution. Boards assume that CEOs understand that short-term goals and execution are vital priorities, while new CEOs instead focus on vision and strategy. We have seen leaders fall into four traps:

1. Failing to diagnose the execution weaknesses of their businesses. New CEOs might also fail to understand the extent to which their new organization’s culture can absorb needed changes, which often implies letting go of yesterday’s values and beliefs that keep the company stuck in the past. As a result, they build a strategy that is not grounded in the competitive, customer, and cultural realities.
2. Making decisions about their teams too quickly. New CEOs naturally look for people like themselves, and when they don’t see sufficient strategic thinking ability or openness to change, they rush to judgment. They can also underestimate the importance of having a team with strong execution skills, especially early on.
3. Neglecting relationships with the execution side of the business. There is a tendency to delegate responsibility for ongoing operations and focus on “the real work” of developing the future. In doing so, new CEOs can miss out on enlisting key drivers of execution, e.g., sales managers, customers, suppliers, and country managers, who may dismiss the new leader as being out of touch with work at the front lines.
4. Failing to develop a coherent, efficient strategy deployment process while maintaining execution excellence.  Many organizations have some sort of strategy implementation process. But it doesn’t work because it’s complex, time-consuming, and lacks buy-in from lower-level leaders who believe it’s not built to help them do their jobs. As a result, the strategy remains conceptual not operational.

 

Balancing Strategy and Execution Through the Transition

The solution is to have a framework that provides a clear view of key phases of transitionactivity and the associated imperatives for new CEOs to develop strategy and drive execution. We have developed such a framework consisting of three distinct phases of roughly 90 days that unfold during the first year of a leader’s tenure: defending, extending, and transcending the core. 

The well-known fight between Mystry and Ratan Tata in Tata Sons, Narayana Moorthy and Shikka in TCS , RajeevBajaj and Rahul Bajaj in Bajaj Auto Ltd are examples in this respect.

i.        Managerial Attitude towards Risk:

 

Managerial attitude towards risk is yet another significant factor that affects the’ choice of a strategy. Basically, risk is a perception. Risk is an attitude or a mind-set. Risk is the function of likelihood and impact. Risk involves both likelihood and impact. Risk is a possible loss both financial and non-financial which is subject to occurrence of an event which may or may not happen.

Risk is, thus, contingent. Hence, the managerial decision is guided by the attitude of the decision- maker towards risk. Based on this “attitude towards risk”, decision-makers can be of three types namely, Risk lover, Risk Averse and Risk neutral.

Then one may distinguish between the following attitudes reflecting the order of risk preferences-

1. Risk is necessary for success

2. Risk is a fact of life and some risk is desirable and

3. High risk destroys enterprises and needs to be minimised as given by Professor William F.Glueck(1980).

By nature executives who are risk lovers go in for high returns, high growth, less stable markets as there is direct relationship between risk and the reward. These people prefer to be pioneers, innovators, early birds. On the other hand, the risk averse or people who want to take least risks are those who want to be followers than leaders and challengers, they prefer stable conditions, low returns and go in for safer options.

Age factor also plays decisive role. The old managers tend to take no extra risk unlike young people who are yet to make mark. Those who deal with risk and uncertainty easily are able to face successfully the complex problems than those who are risk averse. Risk prone decision makers limit the amount of information and make decisions quickly as if it is an impulsive task.

It is worthwhile to note that attitude toward risk is ever changing. It varies in accordance with the dynamics of business or environmental conditions. Take a situation of fast deteriorating business conditions where executives will have to be bold and go is for risk strategies to make the show to go on.

They may totally forget about risk when they predict and calculate an opportunity with full optimism. Where trade-off between risk and return are in their favour.

These attitudes may vary from risk taking to strong aversion to risk, and they influence the range of available strategy choices. Pearce and Robinson have suggested that, “where attitudes favour risk, the range and diversity of strategic choice expand. High risk strategies are acceptable and desirable. Where management is risk averse, the diversity of choice is limited, and risky alternatives are eliminated before strategic choices are made. Risk-oriented managers prefer offensive, opportunistic strategies. Risk averse managers prefer defensive safe strategies.”

Those who consider some risk is desirable, balance high with low risk choices and prefer a combined strategy. Also, executives may overlook the risks involved if they perceive an opportunity with optimism, i.e., where the tradeoff between risk and return weighs heavily in favour of the gains from the potential opportunity.

Research studies have also thrown some light on the risk preferences of decision maker:

i. Older managers tend to be less prone to risk taking. (Vroom and Pahl 1971)

ii. Individuals who deal easily with risk and uncertainty are better able to cope with complex problems than those who are risk averse. (Sieber and Lanzetto 1964)

iii. Risk-prone decision makers limit the amount of information they consider and tend to make decisions rapidly. (Taylor and Dunnette 1974)

 

        ii     Managerial Power Relations:

 

The in house forces play a significant role. Let us confine to only decision making process. In a highly controlled or centralised company, it is the top management which has the total power to configure the strategic choice.

That is, the decision—strategic decision—made is by centralised management, is quick and non-diluted, as against a company which has participative management that results in diluted strategic decision. The research study proves beyond doubt that lower level managers suggested strategic choices were likely to be accepted than with-held suggestions.

The strategic choice has the tinge of departmental self-interest. Greater the uncertainties of the environment, larger are the number of criteria developed to make strategic choice. Another very important variable is that of managerial power relations. It is normally found that the major decisions are influenced by the power play among interest groups that differ widely.

Even the strategic choice is influenced by this variable. In case an influencing chief executive is in favour of a strategic choice which also benefits other top management members, it may be endorsed easily by other senior member. This happens when unity prevails.

However, this can be opposed in case there is power politics or power game as we find in Indian Parliamentary affairs. The research findings shown clearly that it is power-politics and inter­personal relations are responsible for 30 to 50 per cent of the strategic choices are influenced by this element.

In a nutshell, the decision makers are to remember that-

(i)                             Bargaining is used when power for making decisions is divided within the organisation

(ii)                           Greater is the agreement on organisational objectives, greater is the availability of documented data and staff specialists

(iii)                         Even if the analysis is based on various facts, is filtered because of certain variables of attitude

(iv)                         The impact of lower level managers on strategic choice influences the choice of strategy.

 

Choice of strategy is also influenced by the power play among different interest groups. William Guth(1986) found that strategic choice is significantly affected by interpersonal relations and power relationship among members of the top management team. Power politics is a crucial factor determining the choice of strategy.

A few research findings conclude:

i. If the chief executive is in favour of a strategic option, it may be endorsed by senior managers close to him, but one or the other managerial clique may oppose it.

ii. Lower level managers can greatly influence the choice eventually made by the chief executive.

iii. Where a participative decision-making process is in vogue, the strategic choice eventually made by top management is quite often the outcome of a lot of filtering that takes place of die alternatives at lower levels of management. For instance, strategic choices made by lower level managers may limit the strategic options considered by top management.

iv.Eugene Carter (1971) showed that while suggesting a strategic choice, different departments evaluated the strategic alternatives differently and in their own interest.

v. Ross Stanger(1988)  finds that “strategic decisions in business organisations are frequently settled by power rather than by analytical maximisation procedures.”

vi. Fahey and Naravan (1982) suggested that “every organisation is a coalition of many individuals and their groups and each of them puts some kinds of pulls and pushes depending on the internal power relationship. These pulls and pushes operate in different phases of strategic decision-making.”

Power and dependence is a perspective based on the principles advocated by Marx about the diversification of interest and goals and the role of power on determining which interest or goals are to prevail. In the organizational context this principle advocates that it is the (organized) use of power (or influences) what determines the success of some organizations over others. One stream within this perspective focuses on the ―corporate elite‖ or the use of power for the collective benefit of a group of organizations. Another stream focuses on the exercise of power within and between organizations. Although these views refer to organizations, the principles behind broadly regard the capability of individuals to use resources and capabilities to their advantage.

A major source of power in most organizations is the chief executive officer (CEO). In smaller enterprises, the CEO is consistently the dominant force in strategic choice, and this is also often true in large firms, particularly those with a strong or dominant CEO. When CEO begins to favor a particular choice, it is often unanimously selected.

i.                    Styles of Decision Making:

 

Management style and decision-making create an organization’s culture and influence its performance.  Decision making styles also play a vital role in choice of strategy.

 

i. Systematic and Intuitive Styles:

Sometimes managers may use systematic procedure for making decisions. Many times top managers make strategic decisions on the basis of their intuition. A systematic managers relies on a systematic plan and process for making decisions. He defines everything. But an intuitive manager keeps the overall problem in mind, relies on hunches, jumps from one step to another and explores solution quickly.

Systematic thinkers see interrelationships, focus on areas of high leverage (best solutions) and avoid symptomatic solutions. Intuitive thinkers consider a number of alternatives simultaneously and abandon them quickly. They rely heavily on intuition, creativity and judgement. Intuitive style is more used in making ill-structured kinds of decisions.

 

ii. Centralised or Decentralised Styles:

 

Where centralised decisions are made, only top managers use their wisdom and rationality. This style is found in large corporations. Top managers can accept or reject the suggestions of lower level managers in centralised decisions. In a decentralised style lower level managers suggest their strategic choices. Also, the choices of different departments are considered.

 

Oywobi, et.., al,..(2016)  study show that organisations utilize all types of decision-making styles, but the most significantly adopted styles are analytical and directive. The study found that decision-making styles influence organisational performance through competitive strategies.

 

 

a.      Transformation in Organizational structure

 

Organizational structure is a formal system wherein employees, with well defined roles and responsibilities, communicate with other such members/employees for the achievement of common objectives. The structure of an organization is tangible and physical, which means that it is visible to internal as well as external stakeholders of a company. An organization’s structure is based on the overall strategy, which drives the policies and procedures of an organization. Consequently, the policies decide the behavior of managers and other associates within a company. An organization’s structure also helps in understanding the existing hierarchical levels and Span of Control.

Business Strategy is the main driver that decides the structure an organization. Also, in case the structure of a company is not synchronized with its strategy, then the company may not be able to achieve the set targets. For example, a company with a diversified product portfolio and has a functional structure (organized as per various functions such as Marketing, Finance and Operations) will not be able to compete effectively in each of the product categories. As a result, the company may start losing the market share of its products.

Evidently, structure plays a critical role in the accomplishment of an organization’s overall strategy. Another notable aspect is that both business strategy and organizational structure need to be continuously inter-linked in order to achieve desired results.

While structure helps an organization in defining objectives, the culture helps in achieving those objectives in viable manner. Therefore, culture is also critical in the achievement of the defined objectives. More specifically, culture is a function of behavior and relationships patterns.

 

b.      Corporate Culture:

 

Schein (2010) defines the culture of a group as “a pattern of shared basic assumptions learned by a group as it solved its problems of external adaptation and internal integration, which worked well enough to be considered valid and therefore to be taught to new members as the correct way to perceive, think, and feel in relation to those problems”. Organizational culture implies the existence of values and patterns of beliefs and behavior shared by members of a particular organization. Ideally, the strategic decisions adopted by the organization's top management should be in line with the culture of the organization. Strategies that run counter to cultural norms are hard to implement (Parnell, 2014). Organizational culture can be a basis for building a sustainable competitive advantage. In order for this to happen effectively, the organizational culture (viewed according to the resource-based approach) must be valuable, rare, difficult to imitate, and the firm must be organized to have the ability to absorb the value created (Rothaermel, F., 2015). Jay Barney has identified the conditions under which a particular culture can be the source of a sustainable competitive advantage. Thus, it is important to have a link between the values and other elements of the organization's culture and the value that the company creates for the client. A creative value culture can be analyzed as any other resource or capability of the firm. When a company that comes from a national culture that supports performance adopts a diversification strategy on international markets, it will compete with foreign firms whose crops may not be so supportive. It is the known case of the Japanese automobile manufacturers that have penetrated the US market, the success of such firms as Honda being often attributed to the cultural attributes of Japanese firms (Besanko et al., 2013). If a company culture is a source of competitive advantage, a large number of competitors will try to imitate such a culture. However, there are two reasons why it is difficult to imitate successful business cultures: causal ambiguity and social complexity. For companies with dominant cultural uniqueness it is difficult to establish a causal relationship between values, norms, artifacts and performance. Organizational culture encompasses an ensemble of complex social relationships that include not only interactions between members of different hierarchical levels, but also contacts established with actors of the external environment.

 

In choosing a strategic alternative, strategy makers must consider pressures from the corporate culture. They must assess a strategy’s compatibility with that culture. Every organisation has its own corporate culture. It is made of a set of shared values, beliefs, attitudes, customs, norms, etc. The successful functioning of an organisation depends on ‘strategy-culture fit’.

The strategy choice has to be compatible with firm’s culture. The strategic choice should not be out of tune with the cultural framework of the firm. The culture has substantial influence on the strategic choice. In case of mismatch between strategic choice and the cultural framework of a company, either one is to be redefined.

The culture of an organization is based on shared values, norms and individual group & behavior. More specifically, the culture of an organization is more informal in nature and is based on collective ideas & values shared by the employees. The ways in which various tasks are performed at different levels also defines the culture of an organization.

Structure and culture in organizations exist in close alignment. Structure is one of the determinants of culture; conversely, culture has been shown to have an influence on the organizational structure and operational systems in an organization. Both are mechanisms for the coordination of organizations: structure as an integrating mechanism for organizational activities, and culture as an integrating mechanism concerned with behavior and values within organizations.

 

The management should decide to:

i. Take a chance on ignoring the culture

ii. Manage around the culture

iii. Try to change the culture to fit the strategy

iv. Change the strategic alternative to fit the culture.

 

A key feature of organizational culture is the founder of the company, which can hold solid beliefs about business practices (Parnell, 2014). Concepts of success of the founders and top leaders of the company form the foundation of the company culture (remarkable are the strong influences on McDonald's and Apple's founders, Ray Kroc and Steve Jobs, respectively). Sam Walton, Walmart's founder, also embodies the retailer's cost leadership strategy. The culture originally imprinted by founders is strengthened by their strong preference to recruit, retain and promote employees who adhere to the same set of values (Schneider, Goldstein and Smith, 1995). As employee values and norms become more and more similar, organizational culture is more powerful and full of elements of distinctiveness. A side effect of this situation is “groupthink”, when individuals coalesce around a leader without evaluating or criticizing his views and assumptions. Cohesive and low-diversification groups will probably be inclined towards this pattern of thinking, which may lead to deformed decision-making processes (Rothaermel, 2015).

 

c.       Personal Characteristics:

 

Personal factors like own perception, views, interests, preferences, needs, aspirations, personal disposition, ambitions, etc., are important and play a vital role in affecting strategic choice. Even the most attractive alternative might not be selected if it is contrary to the attitude, mindset, needs, desires and personality of the selector/strategist himself.

Thus, personal characteristics and experience affect a person’s assessment and choice of strategic alternatives.

For example, one study found that narcissistic (self-absorbed and arrogant) type of managers favour bold actions that attract attention.

a.      Execution Capacity and few others:

 

Strategy choice must take into account the firm’s ability to execute the strategy. Without execution, strategy has no meaning. The strategists must consider the elements like people, skills, processes, resources, and culture of the firm. The ‘suit must fit.’ Firm’s limitations must be considered for proper execution. Most important steps in strategy implementation are :

1.      Commit to a Strategic Plan. Before diving into execution, it's important to ensure all decision-makers and stakeholders agree on the strategic plan.

2.      Align Jobs to Strategy.

3.      Communicate Clearly to Empower Employees.

4.      Measure and Monitor Performance.

5.    Balance Innovation and Control.

 

Alignment, Ability, Architecture and Agility are the popular four ‘A’s of Execution capability The 4A model of strategic execution is a system of interrelated and interdependent factors. The executional capability also requires infrastructure, processes, structure, and systems to make things scalable and repeatable. And the ability to shift rapidly in response to change. So the Alignment and Ability needs to be matched with Architecture and Agility.

Alignment

If one is not fully aligned around the core strategy, the organization is in danger of getting sidetracked, distracted and diverted. The priorities run the risk of becoming dispersed and your resources scattered. This can lead to a continual shift in focus and diffused impact.

Ability

Strategic execution means not only delivering on today’s priorities, but also building the capacity to invent the future. So how do organizations nurture that kind of ability — building effective leadership teams, ensuring a pipeline of key talent and improving collaborative capability across the enterprise?

The research shows that one can improve execution ability when you do three things:

1.      Focus on leadership-

Top management team members are the ones who initiate the game plan and have responsibilities for and to others who will ultimately make strategy happen. In order to find out whether you have  the right people in the right roles to take your company forward? Ask yourself the following questions:

·         In what ways do your leaders exhibit the breadth and depth of skills, competencies and experience needed for breakthrough performance?

·         Do you have the right mix of leaders who bring out the best in one another on behalf of the organization?

·         Do your leaders inspire and empower others to achieve organizational goals?.

 

 

2.      Establish a pipeline for Leadership and talentpool

The people that really drive strategy execution  are deeper in your organization. The real traction happens with middle-level managers and rank-and-file employees. It is critical, therefore, to build a highly powered talent engine throughout your company.

To assess whether you are building capacity in terms of both the stock and flow of skilled individuals in key roles, ask yourself these questions:

·         Have you identified “mission critical” positions and staffed them with your top performers?

·         Do you have a robust system for talent assessment to identify, develop and retain high-quality employees?

·         Are you investing in a talent pipeline to ensure a continual flow of “next generation” talent, people who are capable of leading your organization into the future?

·         Do your managers spend time coaching and developing employees and teams?

 

3.      Build Collaborative capability

Joint decision-making, pooling resources and sequencing actions to drive performance are all contingent on effective collaboration. And that’s not all. Collaborative capability is also a multiplier of talent. In academia, we call this human capital leverage. When senior professionals with experience partner with more junior associates to spread their knowledge, everyone wins. To find out whether  your organization is prioritizing its collaborative capability? Ask yourself these questions:

·         How well do managers and employees work together to make everyone better?

·         Do teams have discretion to make decisions and act using their best judgement?

·         Is there a spirit of collaboration that cuts across business units and functions?

Architecture 

Things like infrastructure design, processes, systems and controls directly shape behavior and performance. In the best of cases, that impact is extremely positive and the organization architecture aids efficiency, clarity and ease of operations. Poor form and function, however, can be negative, where bureaucracy, inefficient processes and cumbersome systems impede performance.

According to engineer W. Edwards Deming, 94 percent of performance problems are systems — not people — problems. “A bad system,” he said, “will beat a good person every time.”

Agility

The military use the term “situational awareness” to convey the importance of staying alert to your surroundings for potential changes in the environment.

In complex and dynamic environments, we need to be aware of how elements and events are in play, interacting, reshaping context. And how our actions may be impacted as a result.

Ask yourself this: is your organization proactive, versatile, and responsive? Or is it reactive, scrambling, flailing — and failing — in crisis?

Source: Scott Snell and Ken Carrig’s forthcoming book, Strategic Execution: Driving Breakthrough Performance in Business, published by Stanford Business Books (2019)

1. Factors Affecting Portfolio Strategy

2. Factors affecting Portfolio Strategy- External Factors

3. Factors Affecting Portfolio Strategy- Common Factors