Term Paper: De Wit B. And Meyer R. And Their Paradoxes

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DE WIT, B and MEYER, R and their paradoxes

If we compare business in the last decade of the 20th century and the beginning of the 21st century with business 40 years ago, perhaps the main difference that is likely to strike us is the increased number of threats and risks a company is facing in an ever changing, complex environment and the numerous variables and factors it needs to take into consideration before working out and applying a strategic decision. In this sense, it seems only natural that, while in some cases, the company needs to take one type of decision, in another condition, it will be forced to apply exactly the opposite strategic decision. B. De Wit and R. Meyer have worked out a set of ten strategic paradoxes, which will be analyzed further below.

Strategic thinking

This paradox refers to the fact that creativity and rational analysis need to coexist in a company in order for it to survive. This paradox is applicable to any individual's life as well: we often find ourselves in a situation where the decision we take relies on instinct and imagination rather than on the planning and analysis performed previously.

This is the same in the case of organizations and General Electrics is perhaps the best example in this sense. In his book, "Jack-Straight from the Gut," Jack Welch, former CEO at General Electrics, gives us numerous example where many of the decisions he took in his exercise where instinctual, with no previous analysis, and forms of creative thinking.

On the other hand, we should agree on the fact that most of the companies still use, at a certain time or other in their existence, the classical strategic approach, involving charts, plans, organizational materials, etc. The classical strategic management still works fine in many situations of the global economy, despite the challenge it faces due to the incredibly fast rhythm of change, which may mean that, at a point or other, the plan is not viable and actual anymore.

As a last note on this paradox, we should consider some of the departments in the company. In some of them, the rational approach works best and, even more so, it is most necessary. On the other hand, there are several departments, like human resource or the marketing department, where creativity plays a huge role in creating the final product (a commercial, for example).

Strategy formation

This paradox comes in close connection with the previous. Indeed, it shows the duality of needing to adapt to the changing factors in the business environment, while at the same time, wanting to keep one's own influence on the changes produced and particularly on how these affect the company.

Strategic decisions are being taken at a certain moment t0 keeping in mind the relevant internal and external factors, important in that specific case. At moment t1, the external factors (at least them) have already changed and the strategic decision taken is no longer fully adapted to the requirements of the external environment.

In this sense, when the organization reaches this phase, it finds itself facing and implementing to separate things. First of all, it needs to change and adapt to the new external coordinates and modify its strategic thinking accordingly. Second of all, it needs to learn from the change produced, so that it will be able to perform the same at a similar change in the future.

Strategic change

This paradox refers to companies that need to change and adapt to new realities in order to remain profitable, while at the same time, keep relevant elements from the past, as a sign of continuity in the company.

There are numerous examples and explanations we may give in this case. If we think of the human resources department, this needs to decide between keeping a low age average in the company, benefiting from the enthusiasm and creativity of young employees and having older people in the company, with their experience. Of course, the decision is always somewhere in the middle and involves continuity and new young experience.

If we take this example to the organizational level, the paradox remains. As I have previously mentioned, the external business environment is constantly changing. A company like General Electrics or Ford, for example, operating for 100 years, needs to adapt to these changes, but, at the same time, keep in mind the company cultural traditions that have brought these companies in their positions. One cannot ignore the past and concentrate only on the future, because the past is always something you can learn from.

Business level strategy

At best, internal resources and the external needs and requirements form the market should be in perfect equilibrium, but it is most obvious this never happens. The reasons for this are quite simple: as you cannot predict the future, it is impossible to predict any change in the environment that may be favorable at a certain point. In this sense, you are not able to speculate the opportunity because you do not have the resources at that specific moment. On the other hand, you cannot keep your resources and wait for the conditions to happen, because this will be inefficient.

Corporate level strategy

As in military strategy, one needs to decide between integration or decentralization, between giving the troops a certain autonomy or integrating them. In the case of companies, integration brings about two separate advantages: the creation of favorable synergies and economies of scale.

Let's start with the latter. Integration brings about economies of scale because the different business units cooperate better between them and are able to save on several processes. On the other hand, the synergic principle according to which 1 + 1 = 3 works perfectly here.

On the other hand, responsiveness to market challenges is strictly reduced in the case of integration. Integration implies a certain degree of centralization as well and this means that the decision needs to go through the entire chain of coordinating links, with all the implications deriving here from.

Network level strategy

The network level strategy paradox is the best exemplification of game theory and the Prisoner's Dilemma. Every company has the goal of maximizing profits, increasing the market share, etc. We may agree on the fact that, at a certain point in the company's existence, it comes in direct competition with several other entities that want to achieve the same goals. This is the case when each company in turn uses different methods in order to reach its goals.

On the other hand, there are several situations when cooperation leads to lower costs for the companies deciding to use this method. We are not referring here to illegal cartels, but to joint Research and Development activities, for example. This type of cooperation helps make each companies more competitive in the external business environment, with mutual benefits.

The industry context

This is a paradox that most often occurs in anybody's life as well and it refers to being creative and approaching something new or simply going with the flow. In the case of industries and companies, trying something new may be equivalent to launching a new product, but also to promoting and using a new business management strategy. In the case of companies, any such experiment may have a positive turnout or it may cost a lot of money.

This is why many companies choose to a reactive attitude and simply respond to the changes that occur on the market, without trying to be one step ahead of them.

On the other hand, simply complying to existing patterns and ideas on them market will most certainly include the company in a large category of organizations which have a reactive strategy to the market forces and which can be at most deemed as average. Such an organization will never be able to claim a leadership position and will probably remain a crowd player until it decides to change its approach. As economics points out, a low level of risk returns a similar level profit.

The organizational context

This goes hand in hand to what I have referred to when discussing the corporate level strategy. The management always needs to decide upon the level of control it wants to implement in the company, ranging from complete decentralization to integration and centralization.

Decentralization has its many advantages, the most notable of them being the ability and capacity to quickly respond to market challenges and to react to the external factors. The fact that each business unit can take and implement its own decisions is equivalent to a short response time. An excellent example of how decentralization worked is the Swedish-Swiss company, ASEA-Brown Boveri.

On the other hand, many of these almost independent business units may deviate from the company's overall strategy, which may be dangerous because it may simply corrupt the original ideas.

As such, in my opinion, this is less a paradox, but one of those situations where you need to be able to discern [END OF PREVIEW]

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