The Role of Culture in Strategic Management

Strategic management is different in nature from the other aspects of management. It is not only the process of strategic decision making, it also concerned with complexity arising out of ambiguous and non-routine situations with organisation-wide rather than operation-specific implications (Johnson 2005, p15).

Manager with strategic management is necessary to make decisions and judgements based on conceptualisation of difficult issues. Due to this the manager have to understand the three main elements within it which includes understanding the strategic position of an organisation, strategic choices for the future and turning strategic into action ( ).

In strategic management, culture from within and outside the organisation will influence the strategic an organisation follows, not least because the environmental and resources on the organisation are likely to be interpreted in term of the assumptions inborn in that culture (Gerry 2005).

According to Pondy (1967), organisational culture is the specific collection of values and norms that are shared by people and groups in an organisation and that control the way they interact with each other and with stakeholders outside the organisation.

Defining organisation culture in an organisation is not an easy task, therefore, some of the significant issues relating to the role of organisation culture will discuss in this assignment. Moreover, in this assignment we will discuss the importance of culture in order to achieve high levels of organisational effectiveness.

Strategic Management

To be success in strategic management, there are three main element need to understand which includes strategic position, strategic choice, and strategic in action, as shown in Figure 1. Understanding the strategic position is concerned with identifying the impact on strategy of the external environment, an organisation’s strategic capability and the expectations, and influence of stakeholders (Johnson 2005, p17). In this element, culture from inside and outside the organisation will influence the positioning because capability and expectation, value, resources are based on the strength of the organisation. There are several analysis involve in this element such as SWOT analysis, PEST analysis, and etc.

Figure 1 3 main element in Strategic Management (Johnson 2005)

According to Johnson (2005), there were all important issues for Dell as it concerned itself with the next phase in the growth of the company. The decision to expand consumer electronics was influenced by a combination of market opportunities, strength in digital technologies and expectations about the company’s continued financial success. By understanding this element, therefore will form a view of the key influences on the present and future well being of an organisation.

Next, strategic choices involve the understanding of bases for future strategy at both the business unit and corporate levels and the options for developing strategy in term for both the directions in which strategy might move and the methods of development (Johnson 2005). In this element, the organisation has to identify the base of competitive advantages arising from an understanding of both market and customers and strategic capability of the organisation. As mentioned on previous point, Dell expected to gain competitive advantages through its strength of digital technologies.

Last element is strategy into action. This element is concerned with ensuring that strategies are working in practice. Managers have to structuring the organisation includes organisation structures, processes and relationships. According to Johnson (2005), Dell was structured around three regional businesses and six manufacturing units in order to successfully implement the new strategy.

However, managing strategy often involves change. This will include the needs of understanding the strength of the organisational culture which will influence the approaches to change before strategy in action. Therefore, identify the role of culture is very important process on strategy position before proceed to others element.

Organisational Culture

Obviously, culture has long been on the agenda of management theorists. Different organisations form a different culture which is hard to define. In order to form a powerful and successful organisation, understanding of culture is very important for the leaders of a company.

There are four type of organisational culture identified by Handy (1993) which is power culture, role culture, task culture, and person culture. According to Handy (1993):

Power culture – usually exists in a small business or part of a larger business which based on the small numbers of individuals within an organisation to make key decisions.

Role culture – usually exists in large hierarchical organisations in which individuals have clear roles to perform and following the rules rather than to operate in a creative way.

Task culture – usually exists when teams are formed to complete a particular tasks in which the team is empowered to make decisions.

Person culture – usually exists when individuals are fully allowed to express themselves and make decisions for themselves.

Identifying the type of culture gives a better understanding of the advantages and disadvantages of that particular culture, thus helps the leaders to determine what cultural changes are necessary.

In addition, Low (1997) had mentioned that an organisation in different nation will have different organisational culture. For example, Singaporean construction companies who operate in China must clearly appreciate that the Singapore culture and the Chinese culture are different although both the cultures appear to be in the same culture region (Shi 2001). From this, we notes that the identification of national culture is important when defining an organisational culture.

Due to this, Hofstede (2001) had established 5 dimensions of a national culture. Hofstede’s frameworks are widely used in defining national culture or multicultural organisations by the leaders.

Individualism – collectivism

Describes the relationships individuals have in each culture. In individualist sides, individuals look after themselves and their immediate family only whereas in collectivistic sides, individuals belong to groups that look after them in exchange for loyalty (Ana 2006).

Uncertainty avoidance

Refers to “The extent to which people feel threatened by uncertainty and ambiguity and try to avoid these situations”(Hofstede 1991, p113). Hence, it deals with the need for well-defined rules for prescribed behaviour.

Power distance

This dimension reflects the consequences of power inequality and authority relations in society. It influences hierarchy and dependence relationships in the family and organisational contexts (Ana 2006).

Masculinity-femininity

Dominant values in masculine countries are achievement and success whereas in feminine countries are caring for others and quality of life (Ana 2006).

Long-term orientation

This stands for the fostering of virtues oriented towards future rewards, in particular perseverance and thrift (Hofstede 2001, p359). This dimension represents a range of Confucian-like values and was termed Confucian Dynamism (Bond 1987).

Hofstede’s framework is widely use around the world, however it have several drawbacks need to concerned by the users. The users should aware that not all individuals or even regions with subcultures fit into the model although this model has proven to be quite accurate when applied to the general population. Moreover, the empirical work that led to uncovering the first four dimensions took place in 1967-1973, thus the finding might outdated. However, Sivakumar (2001) believe that culture change in very slow rate and relative cultural differences should be extremely persistent.

In the other hand, Johnson (2005, p119) stated that organisational culture consist of four layers includes values, beliefs, behaviours and taken-for-granted.

According to Mintzberg (1988) while developing strategy elements mentioned above, it is important to follow the process which takes place within a context of taken-for-granted and tacit beliefs and assumption about the organisation and its environment – the organisational paradigm which also known as culture web, as shown in Figure 2.

Figure 2 Culture Web (Johnson 2005, p202)

Understanding the culture web helps the organisation leaders to understand the norms and based of the culture in the organisation before making any changes and new strategy implementations.

However, culture change mean changing the corporate ethos, the images and values that inform action and this new way of understanding organisational life which must be brought into the management process. Deal and Kennedy (1982) argue that culture is the single most important factor accounting for success or failure in organisations.

This theory was supported by Hampden-Turner (1992) definition of culture which culture comes from within people and is put together by them to reward the capabilities that they have in common, gives continuity and identify to the group. Refer to the Fairborn Fire Department case study (Harlow 1994), Chief Duggan found that fire service leaders must recognise the importance of organisational culture when desiring to make changes successfully and refrain from making rapid and radical changes which may cause culture chock.

The theories discussed above, majority are from the perspective of managers, rather than workers, and usually emphasis the leader’s role in creating, maintaining or transforming culture.

However, according to Bate (1994), for those who take an anthropological stance, culture is not readily manipulated or changed, and is not created or maintained primarily by leaders. This is because the early leaders’ beliefs and behaviours had been translated into assumption operate at sub-conscious level which shared by all organisation members that subsequently guide the organisation, they are not easily displaced by new organisational values and beliefs articulated by later leaders.

Moreover, Schein (1992) also argue that leadership today is essentially the creation, the management and at the times the destruction and reconstruction of culture. In fact, he stated the unique talent of leaders is their ability to understand and work within the culture. Therefore, leaderships and management competency is very important.

Strong VS Weak Culture

Apparently, some organisational appear to have stronger cultures than others. Many researchers tended to assume that a strong, pervasive culture was beneficial to all organisations because it fostered motivation, commitment, identity solidarity, and sameness, which in turn, facilitated internal integration and coordination. Seeing culture as important for implementing new organisational strategy, the acceptance of new ideas and perspective, and needed organisational change may require a different view of organisational culture (Kathryn 2002).

Organisation with strong culture will increase their competitive advantages over their rivals. Beside this, they also enjoy many others benefits such as worker morale improved, better working environment, better team work, openness to new ideas and sharing of information.

One of the Wal-Mart case studies shows the benefit from strong culture. Founder Sam Walton’s concern and respect for staff from the foundation of the company creates an environment of trust that persists to this day. Walton met staff, calling them by their first name and encouraged change to maintain the competitive edge (Sadri G 2001).

However, some noted potential dysfunctions of a strong culture, to the point suggesting that a strong culture may not always be desirable. For example, a strong culture and the internalized controls related with it could result in individuals placing unconstrained demands on themselves, as well as acting as a barrier to adaption and change (Kathryn 2002).

Morgan (SHU 2010) case study supported Kathryn theory which there facing problem with their customers orders backlogs and long waiting lists over ten years. In 1989, Morgan only produces 18 cars per week and due to order backlog, the manager wish to increase the production per week. But because of the strong culture build in the past, the workers are resisting to make any strategy changes. It took 10 years for Morgan to change the production line and increase their production to reduce waiting lists problem but there are still some bad practice found within the work space. They should make more suitable changes to cope with the environment in order to maintain a long term success.

Schein (1992) supported above theory and argues that just because a strong organisational culture is fairly stable does not mean that the organisational will be resistant to change.