Strategy Formulation and Implementation
The environment in which organizations operate is in constant change and unpredictable. Therefore, it is impeccable for corporate managements to adapt to rapidly changing business environments within which they operate to be competitive. This adaptation requires organizational management to formulate and implement strategic changes that will assist their organizations to improve in environmental performance. Strategy formulation and implementation is part of the strategic management process which has three stages; diagnosis, formulation and implementation (Gratton, 1999 p. 6). During strategy formulation, corporate managers are required to determine the rate of envisaged change, and the direction of this change after an effective diagnostic procedure has been done (Daniel, 1999 p.54). Strategy implementation requires corporate managers to determine the management programs that are mandatory for the achievement of corporate objectives and goals (David, 1991 p. 1352). This paper discusses how strategy formulation and strategy implementation can be influenced by corporate culture and the identity of the organization. The first part of the discussion will deal with formulation strategy which includes a look at the dimensions of environmental strategy, and the choices in the environmental programs. The second part looks at the implementation of strategic change in the organization (Roy, 1988 p. 239).
In strategy formulation, corporate managements determine the size of strategic problems, and compare corporate operations and capabilities with current and future environmental needs (Analoui, 2007 p.35). Second, management evaluates costs and benefits when reacting to these demands, and determines the time available for implementing strategies. Strategic forecasting of environmental needs can be challenging and problematic because environmental issues are surrounded by technical and social issues that are complex (Roome, 2005 p.11). Organizations can pay dearly in case they fail to appropriately assess the environmental requirements. Strategy formulation requires corporate managers to consider three main dimensions of strategy as demanded by their positions. These dimensions include: one, the business dimension which requires managers to use environmental demands to adopt a competitive advantage for the company through measures of saving costs and increasing profits; second, political dimension which makes it necessary for corporations to interact effectively with other stakeholders such as; suppliers, environment groups, investors, employees, local communities, and others. Political strategies require organizations to build legitimacy especially for environmental activities in the social context in which they practice (Willauer, 2005 p. 232); and three, the technical dimension which must be consistent with both the business and political dimensions. The technical dimension guides the company in effecting the actual modifications in product and process environmental performance (Christopher, 1990 p.16).
Strategy formulation gives an organization strategic direction and guides it on how to move in that direction. Once an organization has developed a strategy, it needs to design some programs to bring to bear the necessary competencies required to implement the strategy (Daft, 1989 p.519). There are some programmatic choices available for organizations in environmental management, these include: one, environmental policy structures which require the organization to internalize and fulfill both its regulatory and proactive environmental goals. Additionally, structure for environmental policy needs organizations to assign environmental responsibility, that puts in place specific flow of internal and external information, and provide directions on how to perform its environmental goals; two, environmental performance and review mechanism, which is a vital programmatic choice available for organizations since poor environmental performance leads to potentially severe consequences to company performance. Companies should rely mainly on mechanisms such as, reporting directly the activities of the environment and doing environmental auditing to monitor and review the environment; three, incentives and controls which is a mechanism that assists an organization to encourage environmental achievement. This mechanism puts more emphasis on the organization’s commitment to environmental performance. Additionally, it encourages company employees to perform in ways consistent with this commitment. Under this mechanism, companies ensure that environmental achievements and innovation are rewarded effectively, and also put in place effective programs that motivate employees; four, guidelines and tools that assist organizations in making environmental investments. Environmental investments do not result in short-term financial recoups when based on traditional accounting procedures. Financial guidelines, for instance, will assist organizational managers to consider such benefits as long-term financial savings and avoiding costs that are unnecessary when making environmental investments. In this case, companies can create tools that can aid in evaluating environmental performance in financial terms; five, methodologies and tools that organizations should adopt to help in environmental decision making. The task of assisting company employees in making decisions about environmental issues that are complex is a challenging activity in environmental management. Therefore, companies need to use tools that assist in reducing uncertainty in environmental decision-making; lastly, companies should put in place guidelines for communication with stakeholders. The company management needs to communicate with stakeholders to ensure support of the environmental strategy. These programs could include; companies offering financial support for environmental activities. These categories provide organizations diverse options from which to choose.
There are a number of corporations that have long history of environmental activity. This paper will examine Volvo’s environmental strategy as an example. According to Longenius (1991) Volvo is one of the first companies among industrial manufacturing corporations to put in place a formal environmental policy. Volvo emphasized compliance with applicable regulations as its primary environmental strategy. This emphasis lasted until the mid-1980s. A notable achievement of this environmental strategy, was the development of a three-way converter with Lambda sound. In the 1980s, the world experienced a general growth in environmental awareness and this drew the attention of Volvo management to the significance of environmental influence in business decisions. The chairman of Volvo, Pehr Gyllenhammar invited the formation of environmental task force that included all senior managers from other Volvo companies. This came at a time when the scope and magnitude caused by environmental pressures peaked in 1988. The chairman requested this committee because he was mindful of changing public interests. This committee assisted Volvo Corporation to formulate its environmental policy. The company decided to place environment as a key element and made an environmental profile that was unique. This was built upon its earlier strategy which emphasized safety. The company management was well aware that making a company profile that is unique and legitimate would place the company ahead of legislation. The company profile was also aimed at communicating effectively Volvo’s environmental activities will stakeholders. Volvo’s unique environmental strategy emphasized two important aspects; one, it pledged to develop and produce technologies that are more efficient, sanctioning the production of goods with the superior environmental performance taking into account product constraints. Two, the company pledged for its production processes, to employ manufacturing processes that have less effect on the environment. The two-process improvements by the company took into account its financial constraints.
The Task Force Report outlined a set of Volvo’s management programs to implement the environmental strategy. The set of programs was as follows: first, on the environmental policy, a new decentralized organizational structure was outlined by the Task Force. This program makes it possible for companies to set long-term and yearly internal goals. These goals covered company; products, production, communication, management, training, public relations, and others depending on the divisions concerned. All the company goals were set at the product company level which has substantial flexibility concerning the goals that they establish; second, in terms of mechanisms to monitor and review environmental performance, the Task Force recommended internal reporting on goal achievement and environmental auditing programs. The work of the audit team was to compare the environmental performance to potential trends of regulation as well as the company’s own internal environmental goals. The program also scrutinized environmental management, responsibilities, and routines; third, in terms of the incentives and controls to encourage environmental achievements, the company had to rely on environmental training. Environmental trends and company policies were the core training programs that were covered; fourth, the Task Force set the guidelines and tools program to assist the company in environmental investments. Volvo’s environmental decisions of investment were based on the utilization of the best technology that complies with environmental needs. This policy allowed only top management to make those decisions deviating from the policy; fifth, the Task Force put in place methodologies and tools program to help Volvo’s decision making; last but not least, the Task Force outlined guidelines and communications program that was broad for internal and external communication.
The second part of this paper discusses the strategy implementation after company management has established ground rules during strategy formulation phase. Strategy implementation is concerned with the way companies make fundamental choices on developing and utilizing the company’s scarce resources (Tushman,1989 p. 95). Strategic change implementation within an organization demands flexibility or adaptability. The extent of organizational adaptability to strategic change depends on how far and fast the organization decides to move. In case an organization affects drastic changes that are radical, it will encounter resistance to change, and the company will be forced to deploy more resources to overcome the resistances, and will damage the company’s operations due the uncertainties that will result (Schuler,1999 p. 112). Every organization has a unique corporate culture that is composed of beliefs and values that members of that organization share and practice in common (Kozami, 2005 p. 334). Corporate culture has a significant influence on organizational life because no effort concerning strategy implementation can succeed if corporate culture is not supportive of the strategy (Kozami, 2005 p. 334).
Companies can tailor their particular strategic and programmatic choices to comply effectively with their corporate culture. The organization’s corporate culture comes from the organization’s beliefs and philosophies that dictate the way it does its activities. A strong corporate culture is vital in promoting a successful implementation strategy (Kubr, 2002 p. 265). Strong corporate culture refers to beliefs in practices, norms, and other practices embedded in the company that assists in motivating everyone to work towards strategy implementation (Armstrong, 2002 p. 51). Volvo Company’s experience as seen in this text, illustrates clearly how it tailored its specific strategic and programmatic choices to fit into its corporate culture and identity. The corporate culture and identity involve the social, political, and competitive contexts in which an organization operates. Corporate culture and identity provide greater influence for strategic change by presenting the company’s constraints and opportunities. It is essentially important and necessary for instance, in the implementation of environmental strategies that are proactive (Smith, 1990 p. 7). For better performance, organizations must ensure that they match their strategies and programs with their prevailing corporate cultures and identities. This is a vital component in the strategic management of the organization as it enables it to reduce the costs and possible resistance to strategic change (Schein, 984 p. 14).
Changing corporate culture and identity is an extremely difficult process for companies because they are inherently conservative. Therefore, it is better for company management to match corporate strategies and programs with the company’s prevailing corporate culture and identity as opposed to effecting massive changes in corporate culture aimed at transforming environmental values. A great deal of corporate culture and identity must be put into consideration when designing an organization’s environmental strategy, a strategy that should consider; the core values of the company’s environmental performance record, the consistency of the organization’s history of environmental performance, and its cultural values. Corporate culture can exert a strong influence on the behavior of all employees (Tushman, 1989 p.108). Hence, this can in a powerful way impact the ability of an organization to divert its strategic direction. An optimal corporate culture is one that best provides support to the mission and strategy of the company. It is important to note that all organizations have multiple corporate cultures due to geographic groupings (Kotter, 1990 p. 5). Morgan (1986 p. 127) explains that “there are often many different and competing value systems that create a mosaic of organizational realities rather than a uniform corporate culture in an organization”. Given Morgan’s explanation, corporate managers should determine the extent to which organizational culture differs between subcultures. In most multinational organizations, different organizational substructures reflect the culture of the host country (Smith, 1990 p. 33).
Volvo Corporation as discussed ensured that it matched its programs with its traditional corporate culture. The company had a unique tradition of making a “safe” car for the market, and its employees understood the company’s 40-50 years old “caring concept”. Therefore, this explains the company’s positive reaction to environmental strategy implementation. The adaptability of the decentralized environmental programs of Volvo company can only be utilized if there is enough control to ensure that, within the company’s own operating limitations, the stakeholders live realizes Volvo Groups company’s expectations. To realize these, Volvo Group is heavily dependent on the active participation of its subsidiary companies and divisions, and also depends more on informal mechanisms such as ; environmental training and “tools” for environmental decision making, to motivate this participation. According to Mintzberg (1979), training and formalization in organizations are more substitutes for one another. He further explains that “depending on the task in question, the company can either control it directly through its own procedures and rule, or else it can get an indirect control by professional duly trained. Hence, Volvo’s avoidance of the formal structure was largely due to its corporate culture which is more open to incorporating new environmental initiatives through training than central dictates.
In conclusion, formulation and implementation of organizational strategy can only be designed in an open environment and not in a vacuum. The process of strategy formulation and implementation needs a comprehensive analysis of the organization’s characteristics such as; corporate structures, culture, processes, history, corporate resources, products, processes, individuals, and others. It also emphasizes the company’s demands, constraints, and opportunities that corporate contexts present.
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