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Strategic Management - Decisions, inertia, applications II

Updated on October 3, 2015
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2. Strategic issues – critical in execution

2.1. Coordination and integration role of a general manager

The general manager is not just working on the strategy. He also has to execute it. He has to be the role-model. His employees will follow him. He has to take care about all parts of the value chain. Primary activities like production or after sales service and also supporting activities like HR and so on. Especially under start up conditions he has to care about so many areas. Later when the company has matured he will have his experts for each department which can sum it up for him.

For example if the marketing department wants to spend 3% more for advertisement the manager has to consider this first with the financial department. Do we have the budget? Is it really necessary? He has to make the final decision. While he is doing this he has to use the strategy as orientation.

2.2. Strategic Planning as a loop

Heisenberg uncertainty principle says that an object changes just by watching it. Nothing is static. Everything is changing. We also can use this principle in Strategic Planning. While we are planning from the scratch (from the scenario until its implementation…) we are always rethinking. There are always feedback loops. These loops influence our thoughts about the situation. For example we could find more key variables or we see more problems ahead. In text books it looks good to show strategic planning as a sequence. But in reality it is more a loop or furthermore a spiral or helix, its complexity is growing with every consideration.

Strategic Planning as a loop
Strategic Planning as a loop | Source

Strategic Planning - pros and cons

Source

Western vs. Chinese Negotiation Styles

2.3. Constructive Ambiguity

Negotiations are used to solve conflicts, which are based on heterogeneous expectations. The term “Constructive Ambiguity” is usually used in politics, especially in a diplomatic context. It is an instrument to encourage progress in negotiations. The terms are deliberately not clear to avoid resistance towards a certain position and provide some flexibility in interpreting those terms (De Bruijn & Ten Heuvelhof 2010). The participants “adopt language that is vague and can, simultaneously, mean different things to different people”(Bell & Cavanaugh 1998, p. 1356). Results might be perceived very positive by each party (Fischhendler 2004).

While western countries often prefer transparency, ambiguity is a frequently used negotiation technique in China and other Asian countries (Gan 2014).

2.4. Intentional over-extension and political realities

Intentional over-extension of goals is an instrument of general managers. Raise the bar higher to get an acceptable result. People focus on this bar. In their minds 80% is also ok. But u want at least 100%. So u set the level to 120%. But within an organization goals are sometimes limited, because they just contain an internal point view. They might not consider the outside reality.

Overextended strategies are important for the survival of a company. As an example the European Central Bank (ECB) is checking banks regularly with a so called “stress test”. Here they want to ensure that banks are keeping the Basel III conditions in order to have a stable banking system. There a bank has to take care that every loan on the active side of the balance sheet has at least 8 % equity underlying on the passive side. This is an enormous amount of money (overextended) if we talk about company loans. But this way the next financial crisis could be coped with eventually.

Results of a stress test in 2014. Some banks in Italy and Greece failed completely.
Results of a stress test in 2014. Some banks in Italy and Greece failed completely. | Source

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