WAYS OF RESPONDING STRATEGIC MANAGEMENT

The below figure provides four quadrants for thinking about the environment. One axis deals with the organisation’s willingness and ability to influence the direction of the trend. The other is its willingness or ability to change its strategies. The top left-hand quadrant has the organisation in the position of being able to exert some influence on the trend, but not altering its strategy. How successful this will be will depend on how far the trend can be influenced. A minor change may still affect the organisation adversely: a major change may be very favourable.

The common methods of influencing the trend consist of lobbying, and the effective use of information to provide a reason why something should be done or not done. Frequently the best approach is through pressure groups, such as industry associations, and through representation, usually through such groups, on advisory bodies, such as those setting standards. Pressure groups are not restricted to business and one approach to changing the trends might be to provide a counter to the activities of other pressure groups. Of course there are many pressure groups that are not important to the organisation, but those that are should not be ignored.

Nestle experienced massive loss of sales because of the activities of INFACT, an organisation set up in the USA in 1977 to force Nestle to change its marketing and promotional activities for baby milk in the Third World, where there were many deaths because the product was used in appropriately by many mothers. Among the weapons was an attempt to boycott all Nestle products until it conformed to INFACT’s demands. Hartley who provides a case study of this event, maintains that the impact on Nestle was wider than loss of sales and profits, as it also caused action by governments and world bodies.

The top right-hand side of the diagram states the situation where action is taken both to affect the trend and to change strategy. In the Nestle example the company did much through its own public relations activity to combat the power of the pressure group. An alternative, suggested by Hartley, might have been to be seen to cooperate with them, and to ensure that there were no grounds on which accusations could be levelled. What the strategic change might be is very dependent on the circumstances, but might include measures to reduce risk, or to deal with the partial modification of a trend which still left the organisation needing to adjust its actions.

In the bottom half of the matrix we have a situation where either on grounds of practicability or cost, the organisation intends to take no actions to influence trends. This may be a general view that applies to every aspect of the environment, or may be applied only to specific trends: for example no companies are in a position to change the world’s demographic trends! Where the underlying strategy is also not to be changed, the bottom left side of the figure, it may be sensible to take actions that enable the organisation to reduce risk. This may include careful monitoring of trends, and actions inside to reduce lead times for reacting. Lead times before changes can be made to different conditions may involve setting up different decision processes, taking steps to reduce the time needed for new product development, or installing flexible manufacturing methods which make it easier to change what is produced.

The bottom right-hand corner can cover an enormous variety of possible changes to strategy. There are also types of strategic decisions which may reduce risk. Among these are shifting risks to others in the chain from first supplier to ultimate buyer, perhaps by changing contract terms so that inflation risks were taken by someone else, or by franchising so that certain risks were avoided. It may be preferable to work through alliances and joint ventures rather than taking on the whole risk oneself. There is still another aspect to relating the organisation to the business environment that we have not yet covered. This is the issue of business ethics and social responsibility, and the concept of the social audit which achieved some popularity in the late 1970s and early 1980s. A dimension of the social audit which remains topical is concerned with the physical environment, and the requirement to be ‘green’.