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Strategy Formulation is Fundamentally potential Activity

VIEWS: 46 PAGES: 11

									      STRATEGY FORMATION PROCESS IS FUNDAMENTALLY
                  A POTENTIAL ACTIVITY
    Babak Mahmood, Muhammad Usman Liaqat, Hafiza Khadija Fatima
 Department of Business Administration, G.C University Faisalabad, 38000, Pakistan.

Abstract: The present study was carried out to check the influence of political process in
organizations, find the importance of end with relation to means, satisfaction level of
strategy makers in developing strategies while following strategy formation process. A
sample of 100 respondents selected randomly from Sargodha Road, Sheikhopora Road,
Khurian Wala and Yarn Market, almost 100% male of marketing department of
Faisalabad Textile Industries. The research revealed some drastic facts that may help in
future decision making. Mainly we concluded that strategy formation is very important &
somewhere extremely important for organization to utilize it. Because the strategy
formation process leads towards the correct decision, so from this point of view it plays a
vital role in decision making. The strategy formation model explains the strategy making
process by focusing on organizational politics and organizational resources which
influence the strategy formation process. Analytical and technical skills are required
mainly for developing effective strategies which would lead to right decision making
while political behavior is critical one in strategy formation. If decision makers have
these skills, they can develop strong strategies. Strategist has to work with a coordinated
manner in formulating strategies. One of the most important point which makes strong
impact in strategy formation is the lack of strategic vision. If strategic vision is not clear
than it is too much difficult to make a strategy. A purposeful questionnaire was designed
to search up to conclusions. Strategy formation is very much related with means-ends
relationship to achieve strategic goals. Strategy formation is fundamentally very much
potential and necessary activity which leads an organization towards achieving its
strategic goals.

Key words: Strategy Formation, Political Behavior, Decisions, Coordination, Strategic
Vision, Means-Ends Relationship.

Introduction:
Strategy formation processes are organizational activities that systematically discusses
mission and goals, explore the competitive environment, analyze strategic alternatives,
and coordinate actions of implementation across entire organization (Anderson, 2004).
Strategy formation is the ability of an organization to cope with problems by following an
approach which leads them to achieve its strategic goals. Our study investigates the
strategy formation process by considering the political processes that include political
behavior, which might helps an organization to achieve its strategic goals. This paper
enlightens some of the recent studies which will help the strategic decision makers in
developing effective strategies for their organizations. The study also investigates role of
organizational politics in the strategy formation process which leads decision makers to
utilize these processes in the better way for their organization. In every organization,
political behavior plays a vital role as for as politics is concerned.
Political behavior in organizations are the activities that are not required as part of one’s
formal role in the organization but to influence, or attempt to influence, the distribution of
advantages and disadvantages within organization (Farrell and Petersen, 1982).
According to Aristotle, politics stems from a diversity of interests. These diversified
interest that exist in the organization by individuals as well as by the group influence the
strategy formation process. Consistence with Aristotle’s conceptualization, it is a given
that, within the organization, all employees bring their own interests, wants, desires, and
needs to the workplace. Organizational politics arises when people think differently and
want to act differently. Modern organizations can utilize the political processes in
positive manner by following democratic approaches. The success of organization
depends on strategy formation processes in which political processes also helps the
strategy makers to cope up with problems and resolve the issues by following rational
process, which is also a political process. This research is conducted to find the following
things in organizations.

   1. To check the influence of political process in organizations.
   2. To find the importance of ends with relation to means.
   3. To evaluate satisfaction level of strategy makers in developing strategies while
      following strategy formation process.

4 D’s Strategy Formation Model
The strategy formation consists of 4 elements which can help the strategist while
formulating strategies. These four elements are Define, Divide, Decide, Develop and two
other elements which make their influence in the process, i.e. Organizational Politics,
Organizational Resources.
The first element “Define” means that strategist has to define the objectives, goals and
vision of the company for whom he is going to develop strategy (Porter, 1996). Strategist
can develop good strategy if he is fully aware of the strategic vision and goals of the
organization. The second element “Divide” means that strategist has to prioritize the
problems, issue for developing effective strategies. When problems and issues are
properly divided then it’s been easy for strategy maker to formulate effective strategies.
The third element “Decide” means that strategist must try to give grade to different
factors according to the finances required for developing and implementing the strategy.
Strategy with less resources and more productive would be given weight-age over the
more resource related strategy with low productivity from organizational point of view.
The factor of time is also been considered in this stage. The fourth element, “Develop”
means that strategist has to formulate the strategy while considering all the three elements
of strategy formation process and develop the strategy which fit according to the
circumstances and culture of the organization.
                                     Organizational
                                        Politics


             Define                                              Divide


                                    Strategy
                                   Formation
                                     Model

             Decide                                               Develop




                                      Organizational
                                       Resources



                      4 D’s Strategy Formation Model
The above model of strategy formation depicts the two aspects of organization i.e.
organizational politics and organizational resource with relation to strategy making.
Organizational politics also plays vital role in strategy formation process. In the above
model it shows that, Define and divide elements are being influenced by political
behavior. The arrow signs show that there is direct relationship between these two stages.
Strategist try to indulge in political behavior while developing strategies in these two
stages, because there are positive as well as negative activities takes place in these two
stages (Denison, 1984). The second important point which makes strong influence on
other two elements of strategy formation process is organizational resources.
Organizational resources have direct relationship with decide and develop stage.
Strategist makes their efforts to acquire resources for implementing strategies which will
bring them more incentives and power in the organization as for as organizational
strategies are concerned (Gupta and Jenkins, 1996). On the other hand, triangle of
organizational politics (Decide & Develop) and organizational resources (Define, Divide)
depicts the influence on these elements are indirect.
Review of Literature:
Cyert and March said that when managers within the organization influence the strategic
direction, differences in experience, motivation, and self-interest expose decision
outcomes to the diverse preferences of the decision makers and satisfying can become
more prevalent than rational analyses and optimization.
According to Narayanan and Fahay strategy may emerge through political process where
strategic issues are formed around coalitions among managers in the organization that
develop shared cognitions. Dutton says that strategic issues can gain formal recognition
as managers continue to promote their ideas to top management until they become part of
the organization’s formal strategy. Denison said that managers can influence strategy as
they push their opinions, views, perspectives, and ideas through the organization’s
strategic decision processes.
Anthony, Hofer and Schendel said that strategic planning constitutes a systematic
approach to management where strategy is formulated on the basis of comprehensive
analyses of the organization’s competitive environment. According to Schendel and
Hofer, strategic management paradigm incorporates a series of logical steps in the
planning process; for example, mission statement, long-term goals environmental
analyses, strategy formulation, implementation, and control.
Porter says that strategic planning represents the organization’s analytical thinking
activities intended to consider various competitive and organizational insights and
rationality determine how the overall organization should be positioned strategically.
According to Amason and Denison, decision processes cause more market views and
organizational perspectives to be considered in strategic decisions, which should lead to
better decision outcomes. Floyd, Wooldridge and Mintzberg say that managers in market
oriented functions are found to be more engaged in the strategy formation process.
Burgoyne and Jackson say that politics within the management and organizational
literature remains a relatively neglected and somewhat marginal field.
Scott and Mayer said that, a particular form of rationality is thus introduced into
organizations, defining means-ends relationship and standardizing systems of
control……that create ways of organizing and organizational change. Institutionalization
operates at various levels, from the interpersonal to the supranational, such that the wider
social and cultural and ideological, political and organizational’.
Janis and Mann said, as part of their approach to vigilant decision-making, that such
resistance may be enhanced by promoting multiple advocacy. They refer to studies
showing that conflicts and disagreements among members of a decision making group,
can have a constructive effect on the quality of the group’s search for and analysis of
alternatives.
Ashforth and R.T. Lee said that when people perceive politics as a threat rather than as an
opportunity, they often respond with defensive behaviors- reactive and protective
behaviors to avoid action blame or change. And defensive behaviors are often associated
with negative feelings toward the job and work environment. In the short run, employees
may find that defensiveness protects their self interest. But in long run, it wears them
down.
According to J.Pfeffer, one of the reasons many of us like to work for and with people
who are powerful is that they are generally more pleasant, not because it is their native
disposition, but because the reputation and reality of being powerful permits them more
discretion and more ability to delegate to others. The effective manager accepts the
political nature of organizations. By assessing behavior in a political framework, you can
make better predict the actions of others and use this information to formulate political
strategies that will gain advantages for you and your work unit.
According to N.Gupta and G.D. Jenkins Jr, people who are good at playing politics can
be expected to get higher performance evaluations and hence, larger salary increases and
more promotions than the politically naïve or inept. The political astute are also likely to
exhibit higher job satisfaction. For employees with modest political skills or who are
willing to play the politics game, the perception of organizational politics is generally
related to lower job satisfaction and self reported performance, increased anxiety and
higher turnover.

Materials and Methods:
A questionnaire was developed to collect accurate information from the 50 respondents.
The information collected on this questionnaire was used to observe the satisfaction level
of respondents about strategy making decisions, political behavior effect on strategy
formation process and to check the means-end relationship. The questionnaire was
prepared by using a nominal, interval scale. We collected data 20 from Sargodha Road,
60 from Sheikhupura Road and Khurianwala and 20 from yarn market of Faisalabad. The
data was tabulated and statistically analyzed through percentages, mode and graphs

Results and Discussions:
Table # 1: Frequency distribution and percentage of the respondents answer
regarding political behavior help for good strategy making.

Scale of Agreeness:                      Frequency              Percentage
1. Strongly Agree                        08                     08
2. Agree                                 18                     18
3. Not Agree                             24                     24
4. Disagree                              34                     34
5. Strongly Disagree                     16                     16

Total                                    100                    100%

Mode= 17 (Disagree), Where Mode = the most frequent value in the data.

Table 1 shows that 34% strategist disagree political behavior help in strategy making.
There are 8% who strongly agree that political behavior helps in strategy making. 18%
respondents agree that with the role of political behavior in strategy making decisions.
16% respondents strongly disagree that political behavior does not help in strategy
making. These results showed that political processes emerge and help where strategic
issue exist are closely matched with (Narayanan and Fahay, 1982).
Table # 2 Frequency distribution of the respondents answer with regards to opinion
taken for strategy related decision.

Strategy decisions:             Frequency                      %age
By yourself                     64                             64
Top management                  28                             28
Employees                       08                             08
Others                          -                              00
Total                           100                            100%

Mode= 32 (By yourself), Where Mode = the most frequent value in the data.

Table 2 shows the opinion taken by strategist in strategy related decisions. The
respondents who gave answer that they make strategies by own self without getting help
of anybody are 64%. Respondents who take opinion from top management and from
employees are 28% and 8% respectively. While there are no other people to whom
strategist take opinion regarding strategy related decisions. The results are related that has
been observed and studied by (Denison, 1984).

Table 3: Frequency distribution and percentage of the respondents in order to check
the satisfaction level regarding strategy making decisions.

    Scale of Satisfaction        Frequency                    %age

    Extremely Satisfied          28                           28
    Mostly Satisfied             52                           52
    Not Satisfied                20                           20
    Mostly Dissatisfied          -                            00
    Badly Dissatisfied           -                            00
    Total                        100                          100%

Mode= 26 (Mostly Satisfied), Where Mode = the most frequent value in the data.

Table 3 shows that 28% respondents extremely satisfied with their strategy making
decisions. There are 52% respondents who are mostly satisfied with there strategic
decisions. 20% respondents were not satisfied with the decision taken by them. These
results are closely matched with (Burgelman, 1983).
Hº= There is positive relationship between means and ends with respect
to strategy making decisions.

HA = There is no positive relationship between means and ends with
respect to strategy making decisions.

    Category            Much               To some         No at all         Total
                                            Extent
 Ends                     56                  32              12             100

 Means                    36                 40               24             100


 Total                    92                 72               36             200



To check the hypotheses we use the following formula of chi square
                        2
                 (o–e)
Xcal =      ∑ -------------
                    e
O = Observed values
e = Expected values

                               (o-e)²                    (o-e)²/e
                         (10)² =     100              100/46 = 2.17
                         (-10) ² =   100              100/46 = 2.17
                           (-4)² =   16               16/36 = 0.44
                           (4)² =    16               16/36 = 0.44
                          (-6)² =    36               36/18 = 2.0
                          (6)² =     36               36/18 = 2.0
                                                           9.22
Xcal =  9.22 d.f = ( r – 1 ) ( c – 1 )= ( 2 – 1 ) ( 3 – 1 ) = 2
Level of significance = .05      Xtab = 5.99
Xcal      >     Xtab

Since the calculated value of X² = 9.22 falls in the critical region, so we reject our null
hypothesis and conclude that; there is no positive relationship of means-end relationship
with respect to strategy making decisions.
So, an alternative hypothesis is accepted.
The means-ends relationship and standardizing systems of control that creates ways of
organizing and organizational change. Organizational culture, political, ideological,
cultural factors having strong impact on means-ends relationship. Institutionalization
operates at various levels, from the interpersonal to the supranational (Scott and
Meyer,1994). The organizational culture differs from one organization to another one.
This shows different approaches to be utilized while developing strategies for
organizations. The mean-ends relationship can be possible in small organization where
resources are scarce to meet them with ends (Floyd and Woooldridge, 1992). These
relationship always depends upon the situation and organizational culture which
influence the decision making process.

Main Findings:
This research shows that strategists are very much satisfied with their abilities to solve
the problems facing by the organization. Decision makers follow the strategy formation
process while developing strategies but some of them make their strategies by informal
way in medium and small sized organizations by considering the problem and issues
faced by organization (Floyd, Wooldridge and Mintzberg, 1992). Different types of skills
like analytical skills, political behavior and technical skills are very necessary for the top
level management for strategy making. The strategy formation model explains the
importance of organizational politics and organizational resources in formulating
strategies. Our research shows, strategist mostly disagree that political behavior help in
strategy formation. Most of strategist believe that political behavior don’t take part in
strategy formation process. There are other factors like mental abilities, technical skill,
analytical skills which help in developing strategies. But it was observed that political
behavior works unconsciously because every one in the organization works to achieve its
own objective that lies in the organization (Narayanan and Fahay, 1982). When the
question regarding do you gathered opinion for strategy making decision, it was observed
that strategist make their strategies by concentrating on their own abilities. There are
some who also get help from top management as well as from employees where some
critical decision has to be taken. The strategists are satisfied with the strategy making
decision taken by them (Dutton, 1995). This shows their strong confidence and their
abilities to make strategies.
The departmental interest also put influence in strategy making decisions. This shows
that strategy makers are mostly concerned with their own department and responsibilities,
thus depict their specific political behavior. Our study showed that there is no positive
relationship of means and ends with respect to strategy making decisions. Strategic has
been very much concern with the ends to be achieved. But means plays very important
role, because if there are proper resources then it’s very easy and helpful for strategist in
strategic making decisions.
Conclusion:
Our findings show that organizational politics, political behaviors and organizational
resources play a very important role in strategy formation process. Organizational politics
is going to happened in every organizational, employees seek to get knowledge and work
for achieving their own interests which lies in their organization. The political behavior
are thought to be having some negative approach in our environment, that is the reason
strategist don’t take it into positive manner (Ashforth and Lee, 1990). The strategy
formation model gives us an approach that how they can formulate strategies by
following four elements and taking into account the other two elements of organizational
politics and organizational resources while developing strategies. The study shows that
analytical skill, technical knowledge helps the strategy makers in formulating strategies.
But it was observed that political behavior works unconsciously because every one in the
organization works to achieve its own objective that lies in the organization. The role of
politics in the organization is very much common phenomenon. Political behavior can
work well if it is to be considered by the employees as a positive thing. On the other
hand, organization can utilized it by focusing on the employees benefits with respect to
getting higher benefits. It is necessary for decision makers to hire those people in the
organization who are capable of having these skills and who can forecast the future need
of the organization in the globally changed business world. If strategy makers have
different types of management skills, it will be easy for them to integrate different
strategies into same strategically decision process. Strategist should have to work closely
with other departments while formulating strategies because, there is dire need of
coordination among different departments in the competitive environment where only
that company can perform well who is having coordinated approach starting from the
strategy making towards its implementation. One of the important factors in the strategy
formation process is to having a clear strategic vision of the organization. If anyone has
not clear vision, he might never able to formulate in developing right strategies. There are
possibilities of some clashes between employees while working on different projects in
the workplaces. When there is proper coordination between decision makers and
strategists and they will closely work with employees then it will be very much beneficial
for the organization. The resources of organization would be fully utilized in the proper
manner with effectively and efficiently. Strategy formation process greatly helps the
management to work by making coordination among different areas such as from strategy
making to towards its implementation. The management can develop and implement the
strategies at proper and right time by utilizing their resources in right way in order to get
success in field of marketing in the textile industry of Faisalabad.

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