Organizational Strategies
Deliberate and Emergent Strategies
Companies have a number of different options as they chart their course, seeking to maximize their advantages and limit their liabilities. Two of the major strategies that companies can follow are deliberate strategies, which consist of a systematic course of action that is pursued to allow a company to reach a desired object of goal. Another basic strategy approach is that of the emergent strategy, which involves a company’s responding to the particular conditions and dynamics of a particular situation. This paper describes three companies (in three different sectors) that are pursuing a deliberate strategy and three that are pursuing an emergent strategy.
Deliberate Strategy deliberate strategy may be seen as one that is initiated from within a company and that accords with the company’s intrinsic goals. Of course, it is unlikely to be the case that any company can ever pursue what might be considered to be a perfectly deliberate strategy given that any new entrant into a market will always be affected by the marketplace as it is currently structured. However, it is certainly true that some companies pursue strategies that are close to being fully deliberate.
An example of an apparel company that is pursuing a deliberate strategy is the women’s clothing company CP Shades. While the clothing that this company produces and sells in its stores is relatively expensive it is also relatively casual in look: The company aims its wares at professional women in occupations that allow them to present themselves creatively in the workplace. The company, by selling its clothing only in its own stores and by creating a distinctive and almost unvarying look (with only the palette of the clothing changing) from year to year has created a clothing universe that is entirely separate from all other clothing stores. It does not define itself vis-a-vis other brands or seek to compete with them. Rather, it defines itself vis-a-vis the philosophy and needs of its clients.
A food that has pursued a deliberate strategy is Nutella, which is a hazelnut and chocolate spread used in sandwiches and desserts. The company has only recently begun to market its product in the United States and has gone about this process as if Americans had been waiting all of their lives for a hazelnut and chocolate spread and was simply – until that first taste of Nutella – unaware of this fact. Rather than compare itself to peanut butter and seek to compete within the established market of sandwich spreads (which would have been an emergent strategy) Nutella has presented itself as something entirely (not merely partially) new.
This strategy has proven to be relatively successful:
Although Nutella sales have shown double-digit increases for many years, it’s apparent that there still is a lack of awareness for the product and its uses. Generally, Americans consider Nutella a snack or dessert spread on fruits, pretzels, toast and crackers or used in recipes. Marketing studies consistently have found that consumers’ purchases of Nutella dramatically increase after trying the product. And, brand adoption takes place after three to four purchases. Therefore, sampling and product demonstrations (in-store and elsewhere) as well as couponing have been critical to marketing efforts (http://www.prssa.org/resources/bateman2003-info.asp).
A health and beauty aid that is being sold through a deliberate strategy is Celestial Seasonings tea. The company has combined a number of different marketing concepts – primarily aromatherapy, hot-drink bonanza started by Starbucks, and the politics of agriculture – to create a product that stands by itself. Celestial Seasonings does not market itself as the “Starbucks” or the “Peet’s” of the tea world, however. Rather, it markets itself as the only product that combines sensual pleasures, responsible environmental politics and an ethic of self-care in as effective a way as it does.
The company’s own description of its teas refers only to its own virtues, declining to compare them to other beverages:
At Celestial Seasonings, we are committed to providing the highest quality, most environmentally responsible product possible. We know that you are concerned about what you and your family eat and drink, so we want you to know what makes Celestial Seasonings teas so special.
Our teas are all-natural, and we use natural flavors when needed. Our decaffeination process is safe and environmentally friendly, and we never use irradiated botanicals in our teas (http://www.celestialseasonings.com/whoweare/csdifference.php).
Each of these companies presents its products as unique, not merely one choice in a crowded field.
Emergent Strategies
An apparel company that is currently using an emergent strategy is Vans, which is continually shifting its strategy. In the arena of youth fashion in which Vans operates, producing shoes as well a clothes for the segment of the youth market that associates itself with skateboarding, being the “in” label is the most important thing. It is the most important thing for the company but it is also the most important thing for those who wear Vans products. There is actually relatively little that a company can do to guarantee this “in” status: Such a designation as being in is made by the young men (and some very few young women) who identify with this brand. It is consumers who make a company’s products “cool” – even as (of course) they are engaging as advertisement for that company, thus necessitating the constant shifts.
A food company that is using an emergent strategy is Coca Cola, which is constantly setting its course not only to match what its consumers want but what its archrival, Pepsi, is coming out with.
Finally a health and beauty company that is pursuing an emergent strategy is INAMED, a firm that manufactures silicone breast implants and that in reintroducing them is responding to the recent legal challenges to their having been banned for use in the United States.
Situational Factors
In a number of important ways those companies that offer services are very similar to those that offer tangible products: Both types of companies (and of course a number of companies offer both goods and services) have to compete with other, similar firms to attract customers, both are bound by certain federal, state and local regulations (both paying a minimum wage, for example, and having proper business licenses), both must seek to balance innovation with continuity.
However, there are also important differences in terms of the effects of situational factors on service-related as opposed to product-related businesses. This paper explores three of those, emphasizing the fact that overall service-sector companies are more subject to the influence of situational factors.
1. Service-sector industries are more subject to the influence of geography, one of the key situational factors simply because service providers have to be located where the service itself is needed. Companies that provide a tangible product, on the other hand can relatively easily locate, and often do. We can see this distinction if we look at medicine (which is a service industry as well as a science and a profession) and compare it to clothing manufacture.
One of the reasons that health-care costs have risen so dramatically in the last generation is that the business aspects of medicine are highly constrained by situational factors. In order to provide health care for people living in Manhattan, for example, one has to pay rent or mortgage and taxes at New York levels and one has to pay one’s staff at a sufficiently high level to allow them to live in New York. Other costs – such as insurance and utilities must be paid at local rates. All of these geography-related factors tends to drive up the cost of health care because a hospital or a clinic cannot simply decamp to a place where it is cheaper to provide medical services. (There are other reasons why medical costs have gone up, of course, but this is an important element of them.)
The rising costs of education and especially of post-secondary education is another example of how geography tends to affect service-sector industries. (Again, although colleges do like to think of themselves as being the same as for-profit companies in many key ways they are.)
In contrast to an organization like a clinic or a college, we might look at a company like the Levi jeans company, which just closed its last U.S. manufacturing plant and now makes all of its products outside of the U.S. – even as it continues to sell to customers both inside of and outside of the United States. A company that makes tangible goods has the option to make those goods wherever it is cheapest to do so: This accounts for the fact that nearly all clothing worn in the United States is made in other countries where the labor costs are lower. Of course, American consumers have the option of retaliating against companies that move out of the country and take American jobs with them, but this has not in fact generally been proven to be what consumers (eager for spiffy goods at cheap prices) are inclined to do.
2. Local physical conditions affect service sector companies far more than they affect providers of tangible goods. This is, of course, related to the point argued above: Because service providers cannot leave an area they are often subject to pressures caused by local physical or environmental conditions. For example, restaurants in Southern California cannot simply close up and open in Arizona when there are (as there were last month) devastating wildfires. Not only were a number of businesses physically burned to the ground, but even those that were physically unharmed were harmed in terms of their ability to do business by the fact that their customers have been evacuated or have lost all of their possessions and so cannot afford to eat out.
Restaurants in the area (which do offer a tangible good in the form of prepared food but are more a part of the service sector since the primary reason that people go to restaurants is not for food per se but for the service of having someone else prepare the food and then clean up afterwards) were further affected by the fact that roads and highways were closed for days.
If we look at a company like the manufacturers of the plates that those restaurants use, however, we see that they are relatively unaffected by such fires. They might lose a small amount of business from restaurants that suffer a loss in their own business but they also gain from those restaurants that need to replace what they have lost. And if their own factory is destroyed in a fire, the company can rebuild elsewhere, outside of a fire zone.
3. Service sector companies are expected to be able to shift to meet the needs of their customers more quickly than are companies that produce tangible goods. For example, car manufacturers are just now beginning to produce alternatives to the internal-combustion engine driven automobile. Despite the fact that people have been asking for such vehicles since the 1970s OPEC-induced oil crisis, auto companies have (apparently) felt little pressure to innovate and have been able to sustain profits even without such innovation.
However, now that such cars are beginning to appear in the marketplace, mechanics are expected by their public to be able to fix such cars right away. One mechanic at a local Firestone garage put it this way:
Toyota and Honda take, what? twenty years to produce these hybrids. And I’m not saying that I’m not impressed with the engineering, because they are very slick cars. But now all of a sudden we have people coming to us with a kind of car that we’ve never worked on and when we tell them that it may take us just a little longer to do the work we get an outraged response. We get, “What’s wrong with you guys? I have this new kind of car and so you should already know everything about it.”
Because consumers interact directly with service providers they make demands upon them that they do not – and cannot – make of manufacturers of tangible goods.
Departmentalization
If there is a single element of human thought that defines us as a species it is the ability to categorize – to put like with like and unlike with unlike. And yet, if there is any defining characteristic of social organizations it is the fact that what one person thinks is a logical category another person will disagree with – a useful reminder that there are always different ways to categorize or departmentalize both work and knowledge, as Griffin (2001) argues.
Anyone who has ever spent time playing with a young child will know this. A great deal of what we do when we interact with children is to teach them conventional ways of categorization. We give a child a collection of wooden blocks and then teach them how to sort them. “See,” we say, “we can put all of the red blocks together here and all of the blue blocks together over there.” And then we watch as the child ignores our neat divisions and puts all of the cubes together regardless of color.
This lesson – that you can put red blocks together or cubes together – is one of those kindergarten-level lessons that we have been reminded are in fact quite useful in the world of business, as this paper explores with an examination of how departmentalization works in three different situations.
1. In my current job, I manage a small mortgage brokerage company. We organize our loans in terms of how we originate them: Through customer solicitation telephone calls, through customer solicitation telephone mailing, through referrals, through real-estate offices, etc. We then process the loan application, underwrite the files to the lender’s specifications and then submit the file for approval with the lender, who then prepares the documents and then closes the loan, at which point the mortgage broker is paid a fee.
This process works well, but it is certainly not the only way in which we might work. Mortgages that we initiate directly with the consumer are more profitable to us, but we tend to squander our efforts in this area by classifying different direct mortgage offers in different categories. We might be better served by beginning the process by concentrating on non-Realtor derived mortgages and those that are based on direct solicitation. This would emphasize to each of the firm’s workers that it is not the physical means by which we attract business (i.e. telephone or mail) that matters but rather whether or not we work through a mediator.
2. We might also come up with a new way to departmentalize the fast food restaurants that we go to. Currently I go to Del Taco more often than I go anywhere else, although I feel no great loyalty to it. It is simply convenient. However, my loyalty to this brand name would certainly be increased if the company packaged its goods more thoughtfully. This should not be hard to do given the amount of information that the company has on consumer buying habits (since all transactions are computerized).
For example (and this is of course supposition since I do not have access to the data, but the company could do this on a more scientific basis) it seems likely that customers tend to order the same combinations of goods on a regular basis. But the clerks are told to ask customers if they want the same side order regardless: If I order a burrito I am asked if I want French fries, if I order a quesadilla I am asked if I want French fries, if I order a salad am I asked if I want French fries. I think I might even have been asked if I want French fries when all I’ve ordered was French fries.
The company has made the choice to treat all food items and all customers as potential French fry matches on the grounds that many people who like French fries and on the ground that they believe it is quicker to offer such simple choices. In doing so, they have created a certain kind of ethos for the chain. This is a type of departmentalization that revolves around a certain way of conceptualizing the ways in which fast-food restaurants work.
However, the company could make different choices with little if any costs being incurred (asking me if I want fries with my shake but a quesadilla with my burrito) and so reconceptualize the process of service in a fast food restaurant. Customers are not looking for cordon bleu service at Del Taco, but a shift to treating them as somewhat more discerning customers would certainly not be amiss.
3. My least favorite class has always been political science. When I tell people this they are often surprised because I am myself actively engaged in politics. I believe that politics matters: I stay informed, always vote, have deeply felt opinions (but am always ready to become better educated) and believe that these are all duties of each citizen.
And yet, I disliked the political science courses I took. Looking back on them with the perspective of departmentalization in mind I can see that these courses could have been organized in a way that would have made them far more appealing to me – as well a having made them in many ways a more incisive avenue of understanding American politics (which is why I would have liked them better).
Political science classes tend to be taught as if the only thing that mattered in terms of politics was the fact that there are political leaders and political parties. Well, of course both of these elements of the American political system are important, but they are only one element of it. One thing that is strikingly absent form the political science classes that I have taken is the American public. There are, from time to time in political science analyses, “voters,” but these are not quite the same as people, their appearance tends to be fleeting, and they seem to have little if any free will.
However, politics is very much about people and individuals – and in large measure about those who do not vote and thereby have an important impact on the process. Political science with ordinary people in it would be more accurate as a science – and more fascinating as a discipline.
Virtual Organization
The following is a fairly typical definition of a virtual organization:
Any pattern of organization based around distributed physical, human and knowledge resources, and (most usually) tied together via information technology systems that enable such resources to perform valued-added activities. Today, most virtual organizations will involve people linked by computer and telecommunications networks such as the Internet or an intranet, and which permit them to run groupware and other applications for effective CSCW (http://www.nottingham.ac.uk/cyber/fullglos.html).
By such a definition an organization like a football team would be hard pressed to qualify. But let us consider a definition like the following:
An organization that is not limited by the constraints of legal definition. Virtual organizations may be formed in an informal manner through alliances of independent organizations, or by assembling members of various legally independent organizations into a single virtual organization with specified business goals and powers delegated by their respective legal organizations (http://www.eleccott.com/glossary3.htm).
If we consider a virtual organization along these lines we can see beyond the high-tech and gadgetry elements that are usually used to define the virtual organization to see its underlying structure. And when we look at such a structure we see that it is entirely possible to consider a football team to be a sort of virtual organization.
The key element of a virtual organization is the fact that it is made up of elements that are not present. Of course, in some sense this means that most modern businesses are “virtual” to some degree – with companies depending on parts that are manufactured elsewhere and on a distributor that is separate from the headquarters. It is not surprising that nearly every company should contain such a quasi-virtual structure; today’s fully virtual organizations came about in part because of computer technologies that allow ease of communication but they also developed in part a logical successors to models of business that were already being used.
If we consider the defining characteristics of a virtual organization to be those elements of it that are unseen as well as seen, a sports team has a number of visual elements. The fans, for example, may well be seen and heard, but they are not a formal part of the organization. They are not on the payroll, are not required to show up, cannot list “fan” as their occupation on their tax returns.
And yet fans – whether absent or present – are a part of a football team, even as they are not a part of the football team. This indeterminateness of borders between the elements that are a part of an organization and those that are not is one of the defining characteristics of the virtual organization.
There are also a number of other organizations that interact with football teams in a sort of web: The betting industry is one of these, as are manufacturers of sport shoes and clothes, as is the educational establishment in large measure. Colleges are not (or at least not formally) in the business of helping the NFL, but effectively they do so. The bookmakers in Vegas are in business for themselves, but they too help college and pro-football teams. This dependence for its own organizational health on institutions entirely outside of its control is a marker of a virtual organization and is certainly true of football teams.
Virtual organizations occupy a particular temporal space: They are more fleeting than other forms of businesses, and this is certainly true of a football team. Although the franchise name may continue to exist for decades, the team itself is different whenever there are different players on the field, which is almost every day. This element of time-boundedness is more important than a dependence upon email.
Current literature on virtual organizations describes a richness of different aspects that contribute to the emergence of this new organizational form, like customer orientation, the use of information and communication technology (ICT), time-based competition or decentralization. However, there seems to be one common theme in this literature. “Virtual” organizations are frequently (re-) created, sustained to capture the value of a market opportunity and dissolved again to give way for the creation of a next virtual organization (http://portal.cetim.org/file/1/67/Katzy-1998-Design-and-Implementation-of-Virtual-Organizations.pdf.).
In large measure because they are constantly changing (and often changing dramatically and rapidly) virtual organizations are more team-oriented than individualistic:
Successful virtual organizations assume effective managerial competence for design and implementation. Even though all three design processes have distinct characteristics they can all three be simultaneously active. Preparing the proposal for a customer, for example, is at the same time active competitive behavior regarding its contents and it is the restructuring of a virtual operation that is build to deliver it. And the preparation of the proposal is a joint experience of its members, which contributes to the network design (http://portal.cetim.org/file/1/67/Katzy-1998-Design-and-Implementation-of-Virtual-Organizations.pdf.).
Virtual organizations are often based on the latest technology. But they are – like football teams – more importantly defined by their fluidity over time and by their porous organizational borders.
Works Cited
Griffin, Ricky. Management (7th ed.). New York: Houghton Mifflin, 2001. http://portal.cetim.org/file/1/67/Katzy-1998-Design-and-Implementation-of-Virtual-Organizations.pdf. http://www.celestialseasonings.com/whoweare/csdifference.php
http://www.eleccott.com/glossary3.htm
http://www.prssa.org/resources/bateman2003-info.asp http://www.nottingham.ac.uk/cyber/fullglos.html
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