Rational Strategic Planning in IBM Corporation

Introduction

Rational strategic planning is paramount to the development and implementation of sound decisions towards the realisation of organisational goals. A strategy is a series of predetermined activities that are based on the prevailing market and future operations of an organisation. The formulation of success plans demands a critical analysis of the factors in both the internal and external business environments that influence the achievement of goals. The context of this essay is limited to the rational strategic planning approach that is taken as the best way of organising and executing business goals.

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Definition

According to DeWit and Meyer (2010), rational strategic planning is a deliberate process that is implemented to establish a problem and create an evaluation criterion with a view of formulating feasible solutions. It involves the implementation and monitoring of the stipulated alternative methods to ensure that the process of problem-solving is successful. Furthermore, it embraces a thoughtful and scientific-based technique that guides the process of implementing sound solutions in an attempt to realise organisational goals (DeWit & Meyer, 2010). The top-level management managers who must embrace a detailed tradition of the organisation execute rational strategic plans. They are charged with the mandate of choosing appropriate plans that are implemented by the lower level management (DeWit & Meyer, 2010).

The emergent approach is another way of strategic planning that is based on decentralisation. In this approach, the CEO is not the top strategist. It primarily occurs in the process of a company’s operations where consistencies and/or ideas are realised in either the presence or absence of senior management. Business activities shift in tandem with the changes that are experienced in the market and technological environment (Khatri & Ng, 2000). The management must respond to such changes promptly to capture significant market shares (DeWit & Meyer, 2010). Many managers use this approach due to its nature of flexibility. Contemporary organisations ensure that innovative techniques are applied based on scientific experiments to establish a relationship between businesses activities and rational strategies (DeWit & Meyer, 2010; McGrath, 2010).

Rational Strategic Planning

Rational strategic planning is the deliberate and logical formulation of prospective methods of realising organisational goals. According to Hill, Jones, and Schilling (2014), the CEO of the organisations, as the senior planner, leads the managers and employees towards the planned strategy. However, the approach does not consider future changes, but only modifies the adoption techniques depending on the emerging circumstances in the market environment (Hill, Jones, & Schilling, 2014). Anderson (2004) also reveals that the model focuses on the evaluation of efficient and possible actions based on alternative solutions. Various methods that are implemented using this approach include scanning the environmental factors, analysis of portfolios, and identification opportunities, threats, and effective formulation of processes. This approach ensures that managers gain access to detailed information about the plan to ensure adequate preparation of financial resources that are paramount to the implementation of the decisions (Andersen, 2004). Rational strategic planning involves SWOT analysis in the development of alternative solutions to business activities (Godet, 2000). The employees are only allowed to implement what the top management has planned. Examples of companies that have successfully implemented this approach include the IBM Corp. and the Texas Instrument Company (Godet, 2000; Bennett, 1996).

Characteristics of the Rational Approach

Bryson (2011) reveals that rational strategies require a robust analysis of market structures and consumer behaviour. Numerous other researchers have also attested that the method works best in predictable and stable markets. Although such analyses are crucial, Garvin and Levesque (2010) among other researchers posit that the top management is usually overworked. The approach is also demanding, especially in environments where frequent changes in technology and customer desires among others are evident (Garvin & Levesque, 2010).

As demonstrated by companies such as the IBM Corp., implementation of the approach results in minimal errors, assumptions, and subjectivity among organisational flaws due to logic and scientific techniques that are used to obtain data. This set of circumstances reduces uncertainty in the company (Porter, 2008). As a result, most companies that operate on a global scale should adopt the approach. However, the organisations should have a well-established market share and an ability to retain such markets. The plans should lead them to the invention of new products to thrive in a competitive market landscape (Innes & Booher, 2010).

The approach ensures that organisations solve various complications only within their operational environments. However, it is not an appropriate approach to make prospect decisions for organisations since it lacks dynamism and predictability of future performance. As a result, it is a threat to organisational changes that are required to suit consumer demands, competition, and technological advancement. Brinckmann, Grichnik, and Kapsa (2010) posit that the approach is complex and cumbersome owing to time and resource wastages that are incurred during the process of its implementation.

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Rational Strategic Planning: A Case of the IBM Corporation

IBM Corp. is an international company that deals with computer production and consultation. The corporation manufactures computer software and hardware systems. It also offers consultation services for technology among others. The company was started in 1911 (Balgobin & Pandit, 2001). Its managers and leaders were ranked the best worldwide in 2011 (Marx, 2013).

IBM Corp. uses a rational approach to design strategies that involve both the top management and marketers (Luthans & Doh, 2008). The strategic planning of the company is done twice in a month. However, the management can also make independent decisions regarding the formulation and implementation of strategies in cases where the process is done continuously. This state of affairs in the organisation was designed to ensure the exploitation of opportunities and proper allocation of resources. The company’s competitive position is also taken into account when long-term rational strategies are involved (Dittrich, Duysters, & de Man, 2007).

The Emergence Approach

According to Johnson, Whittington, and Scholes (2013), the emergence approach is an unintended pattern, action, or consistency in entity over time in the absence of an objective. A strategy is embraced due to changes in the business environment in terms of shifting consumer demands and technological changes among other factors (Johnson, Whittington, & Scholes, 2013). This approach is also perceived as consistent market behaviour over time. However, it does not occur in the initial planning process. The approach ensures that managers implement strategies through practice. It enhances flexibility in the dynamic business environment that organisations exist. The management of the emergence approach involves less control than the rational strategy. However, it exhibits practical learning that occurs together with day-to-day operations of the organisation (Santangelo & Meyer, 2011).

Nadin (2007) reveals that the emergence strategy assumes a dynamic bottom-up approach. It is less structured in nature with more emphasis on process management. As a result, it allows the management to predict the operations of an entity shortly. Therefore, business managers can seize emerging opportunities promptly (Nadin, 2007). Also, the approach allows for flexibility since it encourages open-mindedness and brainstorming of ideas since it occurs in tandem with the goings-on of the organisation (Nilsson & Dalkmann, 2001). The management benefits from the practical learning process that the approach entails. In this regard, the management and staff learn new techniques that are paramount to the implementation of both short-term and long-term organisational goals. Moreover, the emergence approach also embraces innovation, especially in top-notch organisations that are primarily driven by modernism (Grant, 2010).

Emergence Approach: A Case of the Xerox Company Strategic Planning

The Xerox Company is a multinational corporation based in America. The document management corporation deals with printers, multifunctional systems, and photocopiers among other products (Grant, 2010). Founded in 1906, it is well known for its strategic planning based on the emergence approach. For instance, the company has developed many innovation partnerships with other companies for several years. This situation has resulted in the invention of digital copiers, photocopying machines, and printers among other office products (Huczynski & Buchanan, 2010). The company uses the unstructured and decentralised approach in which the top management does not necessarily make decisions. The organisation has established subsidiary branches in India and Japan. Fuji Xerox is one of those subsidiaries that manufacture and sell products to the Asian markets (Doz & Kosonen, 2010). The Xerox Company promotes an innovation culture to improve the satisfaction of consumers and the needs of other stakeholders (Teece, 2010). Also, the company utilises apt communication models to promote the timely flow of information.

Critical Thinking: Strategy Formation (Rational vs. Emergence) in a Company

As aforementioned, both rational and emergence approaches to strategic planning can work for the organisation (Donaldson & O’Toole, 2002). The rational approach has been depicted as deliberate and logical because it is based on scientific facts. In the context of this approach, the CEO and top management are perceived as the primary decision-makers in the organisation (Markides, 2012). Therefore, the rational approach is centrally based on the organisation’s operations rather than the staff’s performance. Recent research that was conducted by Markides (2012), factors such as diversity, innovation, and strategy were used to prove that the rational approach was a scientific approach to company analysis. However, although the approach is logical, it is devoid of some vital elements such as the managers’ critical thinking. These elements are termed as irrational (Santangelo & Meyer, 2011). Some researchers have revealed that the implementation of the rational approach together with the availability of adequate information results in higher returns and improved results.

This approach is deliberate and ensures the scientific analysis of issues with clearly defined objectives. Therefore, the timely availability of information can generate a positive outcome. Clegg, Carter, Kornberger, and Schweitzer (2011) posit that successful implementation of the rational approach involves the provision of relevant information and selection of the best available alternatives. This situation results in the achievement of goals. Moreover, the approach sustains the resources of a company by strengthening its strategic position in the market and ensuring accessibility of vital information concerning the costs of trade that can be used to place the business operations at the global level. The approach can also be used to evaluate the influence of psychic distance at the company level (Peng, Sun, Pinkham, & Chen, 2009; Barney, 2001). Other models that have been implemented in organisations include radical approaches such as the Uppsala and OLI models (Clegg et al., 2011).

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One of the lacking techniques that many researchers such as Hambrick (2004) have noted is the incomprehensive feature. This approach fails to consider various human factors that are not stable in decision-making processes. The process of formulating decisions in a company also involves systems that are based on cognitive systems to arrive at a feasible conclusion. Therefore, there is a need to come up with decisions on matters affecting the company’s operations. This approach is seen as irrational and the CEO is not the primary strategist (Hill, Jones & Schilling, 2014; Mintzberg, Alstrand, & Lampel, 2009). The complexity of the rational approach is also seen where the strategies are formed due to its nature of linearity. Formation of the strategy requires processes that are intertwined. Furthermore, the process does not exploit the available information in the market environment extensively (Mintzberg, Alstrand, & Lampel, 2009; Boddy, 2009).

To counteract such limitations, the emergence approach to strategic planning is implemented in various organisations. The approach is more flexible than the rational strategy, which is characterised by rigidity. It also allows the management to respond to the dynamic and constant change in technology and environment efficiently. Finally, yet importantly, it enables a practical learning approach (Mintzberg, Alstrand, & Lampel, 2009).

The earlier mentioned Uppsala model is an example where the emergence approach is implemented (Johanson & Vahlne 2009; Clegg et al., 2011). Other researchers attest that it ensures quick learning through experience and increased availability of information on a global scale (Jarzabkowski & Spee, 2009). This set of circumstances is accomplished through the implementation of the emergence approach to strategic planning. Intuition is part of human beings and the top management must give their thoughts on the rational planning strategy (Steiner, 2010). Creativity is paramount to contemporary business situations where dynamic environmental factors play a vital role in the realisation of organisational goals. As a result, strategists must apply knowledge, experience, and intuition in making decisions for successful business operations (Boddy & Patton, 2011).

Conclusion

The essay has elaborated the rational strategic planning as the best way to formulate feasible decisions. It has been realised that the rational approach is a top-down process that is used for planning strategies by the management of organisations. This approach is structured in nature owing to its logical aspects that minimise errors through scientific interventions. Logicalness is critical in ensuring the reduction of business uncertainties among others. The essay has also elaborated the emergence approach to strategic planning in an organisation that has been described as unstructured and dynamic. The increasingly competitive nature of modern industries requires organisations to implement business approaches that are more robust to capture factors that govern consumer behaviour. Most managers who implement the technique respond promptly to changes in technology and consumer behaviour among others. Although many researchers recommend using the emergence approach, a critical examination of the rational approach reveals that it has more advantages; hence, it forms a ‘one best way’ of making business strategies.

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