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Change and Strategy Discussion

I have commented previously about change and types of change and reactions/responses to change. We know that things are not static, that basically the only thing that is constant is change. Therefore, one very important aspect of strategic management and strategy is management’s attention to and focus upon managing change.

The management of change is not just about formulating strategies in an attempt for an organization to be in control of its own destiny by being proactive (one decision making strategy) or by having a quick but carefully thought out reaction to change (being responsive or reactive), rather than doing nothing (no reaction or response) and being victimized by change (the American Auto Industry), but it also is about implementing change within the organization, including the adjustments of resources (physical, financial, human) and the necessary commitment of those resources (a principle of management referred to as the Commitment Ptinciple) in order for the organization to achieve its goals.

There is a management saying that you either change or you will be changed (again the U. S. Auto industry is an excellent example–it didn’t change when it had the window of opportunity to do so, but was forced to change, with heavy casualties for not managing change).

The competitive landscape is dynamic, and in order to not only survive over time, but to grow and expand, strategic decision makers must ensure that their decisions are leading the organization in the right direction to sustain a competitive advantage.

Before moving onto the next step in the development of a strategic plan, which as you may recall is a fundamental role of strategic management, I want to offer some additional perspectives on change, in this case with particular emphasis on retailing, and on fashion.

Think back on some experiences you may have had in making retail purchases over the past several months. Even before the pandemic retail sales in stores had been declining as increasing numbers of individuals across all age groups were making purchases online–for vityually all products across the board. This new type of consumer behavior has been putting physical retail stores, and in fact, shopping malls in jeopardy of surviving. It even seems that some stores have deliberately contributed to this problem by making decisions to not stock many items they have traditionally stocked in their stores, forcing us to purchase these items online. Companies have been worried about having to close physical outlets, and in fact many have closes several stores, but their actions of stocking fewer items has seemingly resulted in a self-fulfilling prophecy. That is, being concerned about declining sales in physical stores, so making decisions to force us to purchase more items online, thus further contributing to declining sales in stores, contributing to store closures. Their strategic decisions to deal with this changing landscape have contributed to a major problem for them. In turn, as they close stores shopping malls suffer financially due to loss of lease revenue, probably leading to no plans to build new malls. Ironically, the first shopping mall was in Kansas City, Missouri, and it was an outdoor area. Then corporations began building enclosed, climate controlled malls which became the norm across the country. However, things have come full-circle, and the trend has been to build outdoor malls, no Mor enclosed spaces, and these may be the salvation of physical location retail.

Now add to the already existing problem of increasing online purchases, the pandemic where we all stayed in, stores closed because we couldn’t go out, and we were forced to make even more online purchases. Online purchases soared, and we began to look forward to the delivery of our purchases as this was essentially our contact with the outside world. Revenue of such companies as FedEx, UPS and Amazon skyrocketed and all were forced to hire additional warehouse and delivery people as well as put additional equipment to work.  This trend continues today as many people found it easier just to shop online, and with liberal return policies, they have not been hesitant to purchase just about anything as they can return if it doesn’t fit, doesn’t work, or they just plain don’t like it when they physically see it.

It is not likely that things will go bad to the way they were even before the pandemic, and this dramatic change requires retailers to make major strategic decisions to cope with this change and the new competitive landscape in order to survive and grow.

Now what about the fashion industry? Even before the pandemic, the Mormon  in business was for many, if not most, people in offices and other public places to dress in professional business attire. However, again before the pandemic, a movement began toward more casual attire. We have been evolving from professional business attire to business casual, or less. What in some cases was normally casual Friday where it became acceptable and the norm to wear even less than standard business casual began to be accepted as the standard attire throughout the week. Even in many cases now, even if men, for example, are wearin suits, they are not wearing dress shoes, but are wearing casual shoes such as sneakers. Most major men’s shoe manufacturers are now offering sneaker type shoes with wingtips–something which from a personal perspective disgusts me and to me looks pretty dumb–but I guess I am a traditionalist. However, as one who never went to the office or taught a class without wearing a suits or sport coat and tie, having to move to online in spring 2019  as well as summer 2019, I began to wonder why I had all these clothes anyway, and have taken the position that I certainly don’t need to purchase more. However, I can assure you that you will never see me in a suit but wearing casual wingtips.

All this is to say that the fashion world , both for men’s and women’s fashions is in a State of turmoil and designers are not sure what to do. Tastes and prderences for styles, and even desire to purchase them have changed dramatically and are in a state of flux, still be impacted by COVID and its variants.

I subscribe to an online report called Sourcing Journal which focuses on many of these problems. A summit is being held later this month for designers and retailers for discussions about the future and in which direction they need to go. And on top of all this there are problems with manufacturing in other countries where most of our clothes are made, problems with tariffs and currency exchange rates, and even getting cargo ships unloaded in ports.

So, how dramatic of an impact does change have on strategy? As I said earlier in the semester, change is the very reason why organizations must have well-crafted strategic plans to help them determine what to do, and help them determine what needs to be done when things don’t go according to plan.

Today I want to address the next step in the development of a strategic plan, which is Planning Assumptions.

Peter Drucker, among the many things he is noted for, is his emphasis on helping strategic planners understand that strategic decisions must be made in light of what is expected to take place in future periods over the time frame of the strategic plan (the plan horizon). Unfortunately, it seems that in too many instances, strategic planners do not take into consideration the future, but make decisions taking into consideration only the present, which, in fact is not strategic at all.

According to Drucker, it is this “futurity” of present decisions that makes them strategic, and is the most important consideration because our decisions “unfold” or take place in the future. Thus, strategic decisions have implications or impact for periods into the future.

Strategic decisions involve a commitment of an organization’s resources in order to achieve the objectives or goals which the strategic decisions are focused on. A couple of examples may help illustrate this:

1. Amazon has as part of its growth strategy to rely less on third-party couriers ( FedEx, UPS and DHL, for example) for shipping its items, and ship more of them itself. To do this, Amazon has committed to invest millions in acquiring additional aircraft and opening more warehouses around the country. Thus, Amazon has made a strategic decision that doing more of the shipping internally allows it to exercise greater control over deliveries while also reducing costs and not being at the mercy of third-party providers. If you think back on assignment 1, this is an example of forward vertical integration.
2. A major social issue today is for organizations to reduce their carbon footprint– thus such factors as Electric Vehicles EVs) are getting traction ( increasing number of EV automobiles and trucks for example so that virtually every manufacturer has at least one or more models in its product mix). A major decision has recently been made by DHL to reduce its carbon footprint while also reducing expenses, become more competitive and increase profitability. To this end DHL has placed an order for 13 electric airplanes to service areas domestically, Here, again, an example of an organization developing a strategy that has major future implications and committing resources to make it happen over future periods.

The list of such example is endless.

so, how do organizations determine what the future holds or in which direction things are likely to go.Obviously, strategic managers do not have a crystal ball and cannot predict the future. The best thing they have going for them is PLANNING ASSUMPTIONS.

PLANNING ASSUMPTIONS DEFINED–Planning assumptions are ready educated guesses about factors in future periods (plan horizon again) with these educated guesses based on the most accurate and complete information available. How do we get this information? Extensive and thorough research.

An organization must have individuals who engage in in-depth research/information gathering to obtain the most and best information possible in each of the 6 external environmental factors that we identified in the SWOT (Economic Environment, Social Environment, Political Environment, Legal/Regulatory Environment, Technological Environment, and Competitive Environment)

This process of researching these external environmental factors and gathering information is referred to as Environmental Scanning.

Once Management has this information, it is the job of strategic management to analyze it in terms of its impact on or implications for the organization and to use this information to make strategic decisions in the best interests of the organization.

An Example:

According to U. S. Census Bureau, the population of the U. S. Is projected to reach 392 million by 2026 (5-year plan horizon) so what are the implications of this. One consideration is that increasing population means increasing demand for goods and services so what does an organization need to do from a strategic perspective to capitalize on this increasing demand? Increase production capacity, develop a better distribution system, expand into new areas, ramp up additional sales staff, develop new marketing strategies (or other things) in an effort to compete for market share and perhaps gain a competitive advantage.

Additional information relative to population factors is obtaining Tapestry Lifestyle Reports that can help an organization narrow down population demographics as to the number of people in specific groups and their typical buyer behavior (such as Millinials for example) and their preference for such things as pet ownership, food preferences, vehicle preferences, coffee’s purchases and so on, as well as how much they spend in these categories)

such information can help providers of these goods and services formulate the best strategies going forward.

some comments on Strategic Issues. Strategic Issues are, along with the SWOT and the development of Plaaning Assumptions, an important step in crafting a comprehensive strategic plan and the step in following Planning Assumptions in the process of doing so. What are Strategic Issues?

Strategic Issues Defined–I like to think of Strategic Issues as critical success factors for the organization, or another way of stating it, “do or die” issues facing the organization. In this context “do or die” may pertain to something or some things an organization absolutely must do or address in order to position itself for success–accomplish its goals, achieve desires outcomes, or in some cases simply to survive and/or grow.

How does an organization determine or identify what the strategic issues are that it must address?Typically, strategic issues are determined by looking at the organization’s weaknesses–the major internal factors that may be holding it back or preventing it from achieving its desired level of performance or desired outcomes. These can be things that the organization can do by playing off its strengths and by looking at opportunities and threats outside the organization. Thus, the SWOT Analysis figures prominently in the determination of strategic issues to address.

From what I have experienced in serving as an independent consultant to numerous organizations, many of the strategic decision makers in those organizations failed to place appropriate emphasis on strategic issues, if they addressed them at all. So one of the major things I would help them with was I helping identify the strategic issues which absolutely needed to address going forward. In addition, in my graduate level Strategic Management class, which I have taught every semester since I have been here, as well as every semester when I was at the University of Louisiana–Lafayette, I engaged my students in the development of strategic plans for organizations in the communities served by the 2 universities, doing strategic plans for 100 for-profit as well as nonprofit organizations in the Lafayette area and approximately 350 strategic plans to date for a variety of for-profit and nonprofit organizations here. Similar to my experiences as an independent consultant to many organizations (approximately 300 over the years) which typically paid little or no attention to key strategic issues, not one of the strategic plan clients for which my students have developed strategic plans had any clue about formalizing strategic issues. Consequently, in all these situations, the organizations were failing to deal with the major things they needed to deal with to achieve the outcomes or levels of performance they desires to achieve.

In today’s dynamic business environment, and the accelerated rate of change, there are

some, what I would refer to as “generic strategic issues”, or strategic issues that are common to most every organization, similar to Porter’s Generic Strategies (you will recall these from your first assignment dealing with definitions/explanations). These “generic strategic issues” are listed below:

• Marketing and Promotion
• Website and Social Media
• Products/Services
• Revenue (or in the case of nonprofits, funding)
• Staffing (and volunteer programs for nonprofits)
• Location
• Facilities
• Organizational Structure (very important to have strategy for structure)

Not every organization has everyone of these strategic issues, but virtually all have some combination of several of these strategic issues typically 5-6 strategic issues in total.

So how does this work? Let’s say we determine that the organization doesn’t have an effective website and has only limited use of the most popular social media platforms. The website may be poorly designed, not easily navigable, is lacking in information, has links that don’t function, contains too much verbiage and not enough pictures, may contain information that is inaccurate and/or outdated, and so on. Relative to social media, the organization may not be active on the most popular social media platforms, may not be posting to social media accounts as frequently as it should be, may not be posting at prime times for the various social media to ensure viewers are active at those times, may have old and outdated information, lacks a blog, fails to manage multiple social media accounts effectively, and so on.

obviously, in today’s dynamic business environment, which relies heavily on the Internet and being connected both for Business-to-Business (B to B) and Business-Consumer (B to C) transactions, not developing and maintaining an effective web presence through websites and social media is a major strategic issue which organizations must address in order to compete for customers, sales, market share, or in the case of nonprofits, be successful in attracting volunteers, donors, and funding.

Once an organization has addressed its strategic issues, it must develop objectives to deal with them and formulate strategies by which it can accomplish the objectives (we will take this up next)

Have a great weekend.