Difficulties with Implementing Strategy (AQA A-Level Business): Revision Notes

Difficulties with Implementing Strategy

Implementing a business strategy is rarely straightforward. While developing a strategy may seem like the hard part, putting it into action often presents even greater challenges. Problems can emerge at any stage, requiring businesses to adapt and overcome various obstacles to achieve strategic success.

Strategic decision-making involves risk and uncertainty

When choosing a business strategy, managers must consider numerous factors, each of which can create potential problems. The more factors involved, the higher the likelihood of difficulties arising during implementation.

Unknown factors create risk

Most strategies involve an element of risk because they focus on future outcomes. There will always be unpredictable factors that cannot be fully accounted for when planning. Managers making strategic decisions must consider how much risk is involved, but it can be challenging to determine exactly which parts of a strategy carry the most risk.

Judging feasibility is difficult

Assessing the feasibility of a strategy presents another challenge. Managers need detailed information about available resources, employee skills, and timeframes. However, even with comprehensive information, it remains difficult to choose between alternative strategic options, as each will have different requirements and potential outcomes.

The external environment constantly changes

The external environment is continuously changing, which means strategic decisions can become overly dependent on current conditions. This makes implementing the strategy difficult if the business faces unexpected changes from external factors such as new technology, shifts in consumer tastes, or changes in legal, political, or economic conditions. Businesses must respond to these changes, particularly if competitors are benefiting from them.

The internal environment also changes

The internal environment within a business also changes unexpectedly. For example, a business's resources might change without warning, creating issues when trying to implement strategy. This highlights why contingency plans should be included in the strategic decision-making process to account for potential internal changes.

Stakeholder interests often conflict

Stakeholders frequently want different things from a business, making it difficult to satisfy all groups simultaneously. A business may need to consider the views of a particular stakeholder group in its decision-making and be able to justify its decisions to other stakeholders who may disagree. These competing interests can complicate both strategy development and implementation.

Implementing a strategy isn't straightforward

Even after a strategy has been decided, numerous difficulties must be overcome to ensure successful implementation. Understanding these challenges helps businesses prepare for and manage them effectively.

Lack of resources

A shortage of resources (such as money, skills, or time) can make implementing a strategy extremely difficult, especially if significant changes are needed. Heavy investment may be required, which means there is less working capital available for day-to-day activities. This creates a tension between long-term strategic goals and short-term operational needs.

Poor understanding of the strategy

Managers at all levels need to understand the strategy being implemented. If the strategy isn't fully grasped, problems arise such as miscommunication between departments or tasks being assigned incorrectly. Without clear understanding, employees may work at cross-purposes or fail to prioritise strategic activities appropriately.

Weak leadership and communication

If managers don't provide strong, clear leadership and communication to manage the change process, employees might not embrace the changes required. Effective leadership involves explaining why changes are necessary, how they will be implemented, and what benefits they will bring. Without this, resistance to change often increases.

Inaccurate assumptions and forecasting

A strategy may rely on assumptions about the amount of resources needed and the length of time tasks will take. Accurate forecasting can be very difficult, and any inaccuracies cause problems during implementation. For example, a strategy might assume a certain level of customer demand or supplier reliability that doesn't materialise.

Structural changes cause disruption

Changing the structure of a company can create significant difficulties. For example, if a company delayers (removes management layers), this will involve making redundancies, which can affect employee morale and productivity. A structure change could also lead to a shift in the culture of the business, which takes time to establish and may face resistance from long-standing employees.

Lack of flexibility

If a strategy sets out a strict path for the business, it may prove difficult to implement in the future if circumstances change. A lack of flexibility in a strategy means that if the environment changes, the strategy will no longer be relevant. Businesses need to build in some adaptability to respond to unexpected developments.

Issues with planned strategies

Strategies can be classified as planned or emergent (or somewhere in between). A planned strategy is planned out before action is taken to implement it. While this sounds sensible in theory, planned strategy has significant disadvantages in practice.

Planning takes time and costs money

Planning a strategy can cost considerable time and money. It's easy to become caught up in trying to develop the perfect strategy, which is practically impossible to achieve. The resources devoted to planning could sometimes be better spent on implementation or responding to immediate challenges.

Strategies quickly become outdated

A planned strategy will gradually become out of date. For instance, if strategy is planned every five years, then three years into the implementation, the environment may have changed substantially from the time of planning. This makes it difficult to adapt a planned strategy to a changing environment, as the original assumptions may no longer hold true.

Senior managers lose touch

Senior managers who plan the strategy could be out of touch with what's actually happening in the business at operational level. They may not have current information about customer preferences, competitor actions, or employee concerns, leading to strategies that don't reflect business realities.

Planning can be too detailed

Strategic planning could require the input of many people, each with a specific skill set. However, there's a risk that these people will only understand their own contributions and not see the bigger picture of how the strategy fits together. This fragmented understanding can hinder effective implementation.

Focus on planning rather than action

A planned strategy could be too detailed and theoretical, meaning the plan might not focus on how to implement the strategy in practice. Excessive attention to planning documents can distract from the practical steps needed to make the strategy work.

Over-analysis leads to rigidity

Managers can become too concerned with analysing data and ensuring everything follows the plan exactly. The strategy can become too rigid, which prevents people from being creative or innovating when unexpected situations arise. This inflexibility can be particularly problematic in fast-changing markets.

Senior managers become overstretched

Senior managers who implement strategy could be too busy to fully oversee everything. If tasks are delegated to people without sufficient authority, implementation becomes more difficult, as decisions may be delayed or made inappropriately.

Emergent strategies solve some problems of planned strategies

Emergent strategy develops over time, as a business's actions lead to patterns of behaviour. Rather than being planned in advance, emergent strategy can be adapted as the business learns what works in the current environment. Following an emergent strategy can solve many of the problems that occur with a planned strategy.

Saves time and money

Emergent strategies save considerable time and money that would otherwise be spent on strategic planning processes. Instead of investing resources in detailed planning exercises, businesses can allocate these resources directly to operational activities and implementation.

Maintains relevance to changing conditions

Emergent strategies stay relevant because they can adapt to the changing environment as it evolves. Rather than being locked into a plan created months or years ago, the business continuously adjusts its approach based on current conditions.

Uses better quality information

A planned strategy relies on senior managers making most decisions, but an emergent strategy is based more on the decisions of junior- and middle-managers. These managers often have access to more up-to-date information about the business and its environment because they work more closely with day-to-day operations.

Increases employee involvement

Junior- and middle-managers will be more knowledgeable about employees and what would be most suitable for different tasks or projects. Emergent strategies also give lower-ranking employees a chance to have a say in some aspects of strategy, rather than all decisions being made by senior management. This can improve motivation and commitment to strategic goals.

Emergent strategies also have disadvantages

While emergent strategies address many issues with planned approaches, they aren't perfect and have their own downsides that businesses must consider.

Unclear strategic direction

With an emergent strategy, it might not be clear what the end goal is, whereas a planned strategy clearly works towards stated objectives. This lack of clarity can make it difficult to measure progress or communicate strategic intent to stakeholders.

Loss of senior management oversight

If the strategy is constantly changing in the lower ranks of a company, those at the top might have little idea about what's actually happening in their business. This could lead to senior managers believing the company is following a particular direction, when in reality it's going in a completely different direction. This misalignment can create serious problems.

Coordination difficulties in large companies

It can be very difficult for large companies to implement an emergent strategy because different parts of the business need to coordinate with each other. Emergent strategies work best in companies with a flat organisational structure where communication is easier and decisions can be made more quickly. Large, hierarchical organisations may struggle with the flexibility required.

External constraints limit flexibility

Some organisations might be affected by certain requirements that don't allow for an emergent strategy. For example, the NHS will have many strategic decisions made for it by the Government, limiting its ability to develop strategy organically based on local circumstances.

Strategic drift happens when strategy and reality grow apart

Strategic drift occurs when a business's strategy becomes less and less suited to the business's environment. It happens when a business's strategy doesn't adapt to keep up with changes in the environment.

Multiple factors cause drift

Many different factors can cause strategic drift to happen. For example, new technology, changes in consumer tastes, changes in expectations, or legal, political, and economic factors can all contribute. A business should respond to these changes, especially if competitors are benefiting from them. Failure to adapt means the gap between strategy and reality widens.

Initial response focuses on implementation

Managers might initially react to poor results by improving the way the strategy is being implemented rather than changing the strategy itself. If that doesn't work, managers may make small alterations to strategy, sticking mainly to what the business knows and does already. However, they may think it's too risky to introduce major changes, or there might be resistance to change from employees or managers worried about their own positions.

Drift increases over time

Small changes might work in the short-term, but as external change increases, strategic drift will increase. At this point, managers are required to step out of their comfort zones to implement big strategic change. There will be considerable uncertainty as they try to decide what direction the business should take. This uncertainty can paralyse decision-making.

Transformational change becomes necessary

Eventually, transformational change will be needed for the business to survive. This represents a fundamental shift in strategic direction and often involves significant disruption, restructuring, and cultural change. The longer drift is allowed to continue, the more dramatic and difficult this transformation becomes.

Divorce between ownership and control causes conflicting interests

In small firms, the owner often manages the firm on a day-to-day basis, maintaining direct control over strategic decisions. However, as firms grow, this close relationship between ownership and control often breaks down.

How the divorce occurs

As a firm grows, the owner can raise finance by selling shares. The new shareholders become part owners, and the firm will be run by directors, who are appointed to control the business in the shareholders' interests. This is known as the divorce between ownership and control – the owner(s) of the firm are no longer in day-to-day control. In large firms, much of the control passes down to managers rather than the owners themselves.

Different groups create conflicts

Different groups with ideas and influences exist within businesses – such as the original owners, new shareholders, directors, and managers. These groups might all have different views on objectives and strategy, creating potential conflicts that complicate strategic decision-making.

Corporate governance structures

Corporate governance describes the power structure of a business. It sets out how decisions should be made, the influence that different groups of stakeholders have on strategy, and the information that should be available to each group. Good corporate governance helps manage conflicts between different stakeholder groups.

Stakeholder influence on strategy

When ownership and control are separate, a company could have internal and external stakeholders with many different interests competing for influence on strategy. For example:

• The board of directors might decide strategy, but shareholders appoint the board, so shareholders can also influence strategy by choosing board members who represent their own interests
• External stakeholders can influence strategy by affecting internal stakeholders. For instance, if a company has many union members as employees, the union can call for strike action to pressure management
• If a bank funds a company, the bank can cut off funding and force the company to adopt a strategy that the bank prefers
• Different groups of stakeholders competing for their own interests to be represented in a strategy can make it difficult to make strategic decisions and reach consensus

Remember!