Mr

Rational Vs Irrational School of Thoughts approach towards Strategic Management

Introduction

Managers face no greater challenge than that of strategic management, guiding a complex organisation through a dynamic; rapidly changing environment requires the best judgment.

Strategic management are invariably ambiguous and unstructured, and the way in which management respond to them determines whether the organisation will succeed or fail.

What is a Strategy?

Strategy refers to top management’s plan to obtain outcome consistent with the organisation mission and goals.

Strategic Management is a broader term that encompasses managing not only the stages already identified but also the earlier stages of determining the mission and goals of an organisation within the context of external and internal environment, hence strategic management can be viewed as series of steps in which top management should accomplish.

Analysis

This report will evaluate the practice of strategic management in organisation, in view of different nature of organisational forces that influence strategic decision process.

Case studies will be used to weigh up the strength, limitations and implication of strategic management in organisational setting.

Analysis of the strategic management role will be conducted in views of arguments of rational school of Thought as opposed by irrational school of thought advocated by different authors and practitioners.

Schools of Thought

Rational school of thought advocates the strategic management in organisation is conduct in a formal process, it is linear process and efficient.

Irrational school of thought advocates that organisation are not rational, there are a lot of dynamic factors that affect the strategic management processes like chaos, politics, culture, psychology, etc.

(Cyert and March, 1963) tried to counter more rational models depicting organisations as profit entities operating under perfect knowledge. Instead organisation is constructed as coalition of participants, with differing motives who choose organisational goals through a process of continual bargaining.

Several arguments have highlighted the inherent limitations of rational model and support political view of strategic change, cultural view, psychological view, etc.

The rational school of thought appreciates the need of cultural change in organisation when desired, and prescribe that step by step approach toward cultural change.

The approach is explained by the Dynamic of Paradigm change in Jenson and Scholes literature. The Paradigm comprises of stories, symbols, rituals, control system, organisational strategies, etc.

It starts with a given organisational paradigm, where it has to develop deliberate strategies and implement. Implementation will result in to a certain corporate performance that can be measured by various techniques like Returns on capital employed or Returns on investment. An unsatisfactory performance leads to the next step to squeeze or tight up the controls (budget) and reconstruct a new strategy. A poor performance now will necessitate abandoning the paradigm and adopting a new strategy.

However the formalised steps prescribed by the rational school might not be applicable in real world because organisations are so dynamic as described below

Case study: The greatest challenge when PepsiCo acquired KFC in 1986 was how to mold the two distinct cultures because they knew very little about fast food business.

PepsiCo to pursue strategic change following the acquisition, however the strategy of replacing KFC with PepsiCo managers brought conflicts between managers in both companies, who were accustomed to different operating procedures and working conditions. PepsiCo corporate culture has long been based heavily on a fast-track New York approach to management, which hires business and engineering graduates and if one fails, there is always another waiting in the wing.

The corporate culture of KFC contrasted sharply with that of PepsiCo, it was built largely on Colonel Sander’s laid-back style.

This case study shows that organisational culture differ, and changes sometimes can not be introduced easily in formalised manner as prescribed by the Paradigm of change, because as J. Cranor the new president of KFC addressed the details of new contract to the attending franchisees, they all to their foot to protest the changes. This was because they were not accustomed with the culture of interference by mangers in day to day operations.

Also rational school of thought prescribe useful models that organisation should deploy to analyse its External environment.

Theorists use models like PESTEL in analysing the general environment affecting an organisation, of which it does not have control over them.

Porter’s Five forces model can be used to analyse the industrial environment or competitive environment facing an organisation. The essence of this model is to determine industrial profitability or attractiveness given organisational resources capability.

However the model has been criticise of been to static to cope with today’s turbulence environment, also Richard D’aveni argues that the model should be extended to cope with today’s hyper competition by including networks and Game theory.

In determining who are the most direct competitors of an organisation, theorist developed a model to analyse them called Strategic Group analysis, the model can assess the opportunities and strategic space of a firm, along side threat of different mobility barriers.

Limitations

The strategic manager inability to analyse properly the external invironment might have negative impact to organisational performance as substantiated below:

Case study: Coca Cola has stood adamantly against consumer buying water, in USA the company even ran a campaign called Just say no to H2O.

In time, Changes in market conditions necessitated Coca Cola also to startproducing bottle water called DISANI. The brand became the biggest selling bottled water in USA.

It was publicised