Problems with Stratergy

Problems with Strategy Implementation

It is critical that managers maintain a strong sense of strategic direction.

Types of strategy implementation

Planned strategies are strategies which are planned by managers and leaders and are purposefully implemented.
Emergent strategies are strategies which develop overtime but were not planned or implemented purposefully.

Strategic drift

Strategic drift occurs when a business fails to respond to changes in the external environment, including customer demands, and therefore no longer offers the products and services demanded by customers.

Overcoming strategic drift

In some cases, managers and leaders may not respond to changes in the market as they believe that changes will eventually reverse, but often this is not the case and many businesses have battled survival because of strategic drift. Businesses will need to make a transformational change or their failure to respond to market changes may otherwise become fatal.

Divorce Between Ownership and Control and Contingency Plans

Strategic problems occur when ownership and management is separated.

When the owner is the manager

When businesses operate with sole trader status, the owner and manager is often the same individual. In limited companies, the owners and managers can be separate groups of individuals as owners, or shareholders, appoint a board of directors to manage the company on their behalf, especially in Public Limited Companies (PLC) like Morrisons and Tesco.

Disadvantages of divorce of ownership and control

Owners, or shareholders, may be focussed on shareholder return and the maximisation of dividends whereas managers and directors may wish to invest profit in the long-term growth of the business; this creates conflict.

Corporate governance

Corporate governance is the process of monitoring the decisions made by managers to ensure shareholder interests are considered.
- For example, Tesco has non-executive directors who advise executive directors on issues related to corporate governance to challenge decisions and audit processes used by business managers.

Contingency planning

Contingency planning refers to the process of managers and leaders planning for events which, if happened, would have a potentially serious impact on the business’ success.
- For example, many businesses with head-quarters in the United Kingdom have created contingency plans because they are unsure of the impact Brexit will have on their business and may need to relocate offices, employees or headquarters in the event of an unfavourable Brexit outcome.

Advantages and disadvantages of contingency planning

Contingency plans can prepare a business for unlikely but potentially serious events.
Contingency plans can waste resources as plans may never be needed but have still been produced.