Strategy can be referred to as a process used to achieve some set objectives and goals of an organization. According to Johnson and Whittington (2010, p. 3), strategy is the direction or the scope of an organization over a long term period. Strategy is a crucial factor to consider in any business; it involves what is to be done and how it should be done. According to Jarzabkowski et al. (2009, p. 69), strategy as a practice focuses on how the process is carried out.
It involves who does it, what is done, how it is done, what is used and what implication it has towards shaping an organization. Strategies in an organization helps the manufacturer to understand how to work effectively with the suppliers and in return have effective supply chain for the goods and services to reach the consumers at the right time and in the desired condition.
This paper aims to discuss and debate the following statement: “We see in the world many examples of sets of human activities related to each other so that they can be viewed as a whole.” The changing ideas of strategic thinking and practice will also be explained. This paper illustrates the concepts of strategic thinking in the light of supply chains.
Theories and practices from this field will also be used to illustrate the core themes which were learned in class. The areas learned in class and which are to be covered are complexity thinking and the practice perspective; knowledge management; environment and intellectual capital; systems thinking; communities of practice, and power relationships and emergent leadership. In this essay, I will also explore and examine the links between the themes using supply chain examples.
Jarzabkowski et al. (2009, p. 69), argued that, most strategies lack human actors and their actions and the available studies focuses on top managers and they cannot act strategically alone without other stakeholders necessary for efficient and effective supply chain. For the top managers to be effective in the supply chain they need to involve the suppliers, middlemen and the customers who will finally consume the manufactured goods.
This will help in coming-up with a strategic way of satisfying their target groups. When managers involve other stakeholders they will be using strategy as way of ensuring market leadership through producing quality goods and controlling the price in the market. According to Wilkinson et al. (2007, p. 5), institutions have shifted their focus to improve management of strategies.
They also highlighted that analyzing an institution in a strategic manner is one of the crucial things to be done in an organization since it will balance different forces hence realizing high production. Through this the organization leaders will be in a position to deal with the bull whip effects. According to Leishman et al (2005, p.1), bull whip effect is the fluctuation of demand in the market. When leaders have analyzed their organizations in a strategic manner, they are able to know how to deal with the demand increase and decrease.
They will also know at what time to produce more and when to produce less depending on the demand in the market. Bull whip effect in supply chain depends with the items being produced.
For example, the demand for pampers can be somehow constant compared to the demand of soft drink like coca cola, this is so because of the rate at which each item is consumed and the number of consumers. Through understanding the market and the target group the managers can deal with the challenges of bull whip and ensure they have sufficient supply when the demand increases or decreases. It is worth noting that bullwhip effect is influenced by the decisions or interactions of each stakeholder.
Laari et al. (2009, p. 40.) argued that, there is no one way of defining the term strategy; they gave five suggestions that are commonly used to define strategy:
First of all, strategy can be seen as a plan: a direction, a guide or course of action for the future, a path to get from here to there, therefore representing intended strategy. Second, strategy may also be perceived as a pattern: certain consistency in behavior over time, representing realized strategy.
Third, strategy can be a position, the locating of particular products in particular markets. Fourth, strategy is a perspective, an organization’s fundamental way of doing things, or, its “theory of the business” and fifth, strategy is a ploy, a specific manoeuvre intended to outwit an opponent or a competitor. (Laari et al. 2009, p. 40.)
According to Michael (2001, p. 107), supply chain involves all the activities that are related to the process and transformation of goods from raw material to the final goods that the consumer uses. It is important that suppliers’ manufacturers and consumers to be considered and involved in matters that pertains to effective supply chain, consumers have a great effect of what is produced by manufacturer and supplied by the supplier.
It is therefore important to strategize towards effective practices that will critically look at supply chain. Seong-Am and Dong-Jin (2005, p. 394) added that supply chain is a series of processes that also involves cash, information and material as the main factors. Chopra (2004) argued that, supply chain involves transporters, retailers, warehouses and customers besides manufacturers and suppliers who are the only ones mostly considered in supply chain.
On the other hand, Michael (2001, p. 107) argued that these definitions bears two vital supply chain characteristics. One of the characteristic is that it is holistic and systematic view that is more than value chain. The second characteristic is that the information flows mean that relations within the chain are two-way but not only downstream oriented.
The information that comes from the members who are down in the chain of supply and communicated to the top people is important in a supply chain (Michael 2001, p. 107). According to Chee (2010), when a supply chain is coordinated well all the decisions for achieving global system objectives are supported.
Stanley et al. (2007, p.358), argued that, information sharing within companies is a core effective factor of better supply chain. If two or more companies working in the same field, for example in manufacturing vehicles, they can share important different information that they both have.
Such information can be used by the manufacturer to know what to modify to suit the demand of the customers. Through sharing of information organizations and companies can have different areas where they may outsource some of the materials or services that they may in need of.
Through this strategy they can ensure that their companies achieve market leadership. Sharing information requires for both parties to be observe trust, there cannot be relationship if on party cannot be trusted. The parties’ too need to be sharing similar objectives and goals. This can result in improving services and reducing the cost of production in the involved companies.
According to Seong-Am and Dong-Jin (2005, p. 395), system thinking is the ability to comprehend relations between input, process, and output, it is considered a means for the overall best of the total system but not for the sub-standard. Strategic leadership can lead to a practice that will ensure that the process between input and output is of the desired standards and in return it will yield much in regards to the set goals of the company.
McNamara (n.d., p. 1) highlighted that, systematic thinking is a way of assisting individuals to look at systems from a wider perspective rather than looking at some specific areas in a system which make the whole system. System thinking ability, therefore, assumes that systems thinking interventions are likely to produce profitable changes in behavior, thinking or organizational performance, and that they have exceeded the research testing of these claims (Michael & Trevor 1995, p. 15; ‘Organization towards a chaordic enterprise’ n.d.).
There is no concluded stand concerning people’s native system thinking ability, however, Seong-Am and Dong-Jin (2005, p. 395) suggested that system thinking ability involves the understanding of how the behavior of a system occurs from the relations of its agents over a longer period. It also involves discovering and representing feedback process put forward to cause observed patterns of a system behavior (Seong-Am & Dong-Jin 2005, p. 395).
This can best illustrate why companies which are sharing information must trust each other for the relationship to be strong, through system thinking leaders are in a position to way other companies and get to know which company to partner with and which never to associate with.
System thinking ability is likely to be a tool for measuring an individual’s ability that is expected to give results in the supply chain management. Seong-Am and Dong-Jin (2005, p. 395) argued that consistency is directly proportional to the uncertainty; in chain supply a decision made by one of the party has an influence on another who usually make a decision referring to the previous one. Through understanding companies set to partner with leaders can assess their ability and expected outcome hence making a clear decision.
Seong-Am and Dong-Jin (2005, p. 395), went further to argue that people can be categorized into two different groups: systematic thinking ability and the consistency of a person in decision-making. However, they argued that if system-thinking ability is proportional then, it is only two categories, which are possible.
According to Lyneis (n.d., p.2), systematic thinking has been gaining acceptance though it is not well understood by majority of the people. He argued that systematic thinking gives a person a chance to look at things as whole rather than as parts, which may not be connected in any way (Lyneis n.d., p.2).
In relation to strategy as a practice and leadership, leaders should be in the forefront to use system thinking in ensuring that all the practices involved in supply chain will lead to market leadership. Through system thinking companies can understand where to outsource their requirements and who to deal with.
If system thinking is used appropriately it will help company leaders to deal with bullwhip effect since they can understand what other stakeholders would like and therefore having an insight as they plan for the way forward of the company.
Thwink (2012, p. 1) argued that there are five levels of system thinking maturity. These levels of system thinking maturity are shallow awareness, deep awareness, novice, expert, and guru. According to Thwink (2012, p. 1), an individual who is at the level of shallow awareness is only aware of the concept but does not really grasp what the system entails.
Some of the customers might be in this level of system thinking, they understand very little of the products that they use. Deep awareness level involves people who are fully aware of the concept of system thinking and understand the significance and potentials of the system thinking.
A novice thinker has a profound knowledge and goes a step further to question operations of a system; these can be termed as the customers who usually give the company feedback concerning their products, whether negative or positive.
At expert level individuals understand systems more than novice and this gives them a chance to solve difficult and complex social system problems in an organization, consumers in this level goes ahead to suggest what the company should do to improve their services and products.
According to Thwink (2012, p. 1), an individual at guru level is in a position to give knowledge to others in regarding system thinking and also solve complex social system problems (Thwink 2012, p. 1). For example, consumers who are believed to be last people in the supply chain may give reference for the company to emulate.
This means that they have quality knowledge of the product despite that they are not consulted in most cases while manufacturing those products. Such consumer’s knowledge can help the companies to come-up with relevant practices that can lead to market leadership.
According to Wegner et al. (2002, p. 4), communities of practice are groups of persons in organizations who decide to gather and discuss issues that they are aware of, learn from each other concerning issues that are related to their work and offer a social context for the same work.
Wegner et al. (2002, p. 4) argued that these people do not necessarily work in the same organization every day. However, they share relevant information, help each other in solving problems, and give insights and advice on various issues. Companies willing to deal with bull whip effect will use communities of practice to share relevant information that may lead to effective supply chain management.
Communities of Practice (n.d., p. 3) argued that communities of practice provide an advanced understanding of networks. It originated as a means of developing a new theory of learning. It seeks to explore how relationships within organizations are established around shared activities.
According to Eckert (2006), communities of practice provide accountability links between groups, individuals, and the workplace in a wider social order. Through communities of practice companies can draft their strategy through understanding different individual in different departments of the company. This will help in allocate the right human resource at the right position for quality productivity.
Ash et al. (2006, p. 3) claimed that communities of practice have some characteristics which are evident in most of the groups. These characteristics include:
- Sustainable mutual relationship among the members, which may be harmonious or conflicting. They are described with a very quick setup for problems, which need to be further discussed according to Ash et al. (2006, p. 3).
- They display shared and engaged ways of doing things in different individual in different settings.
- They are aware of what others grasp through sharing and how effective the information they share is.
- They know what they can do and how they can contribute to an enterprise.
- There is also the substantial overlap in participants’ descriptions of who belongs.
Mutual definition of identities, the ability to assess the appropriateness of products and actions characterize communities of practice. Shared discourse reflecting a certain perspective on the world is also another characteristic of communities of practice (Ash et al. 2006, p. 3).
According to Communities of Practice (n.d., p. 4), there are some challenges, which are related to communities of practice. They include trust and power which are inherently important in communities of practice, as with any relationship and that there is size and scale to effective communities of practice.
Wegner et al. (2002, p. 6), stated that cultivating communities of practice in strategic areas is a crucial and a realistic way to manage knowledge as an asset since without focus on critical areas it is hard to keep up with the fast pace of change especially in the 21st century. According to Wegner et al. (2002, p. 4), these changes happen simultaneously with a firms’ reconstruction in numerous relationships both internally and externally in order to respond to the demand of the shifting market (Presley et al. 2002, p. 1).
Supply chain management can be enhanced if the leaders in companies realize the need of involving stakeholders as they prepare their production strategy. According to Cox (2005, p. 3), the term community is used to mean participation in a system where people through participation share common understanding of what they are doing. It has an implication to their lives and their communities.
According to Dasgupta et al. (2009, p. 208), knowledge management is a system that is responsible for promoting collaborative environment for capturing and sharing knowledge, it creates opportunities to produce new knowledge. It also offers the tools and approaches that are required to apply what the organization knows in its struggle to meet its strategic set goals.
In this context of organizations, knowledge is referred to what people know about the products, customers, processes, successes, and the mistakes they are likely to make.
This information can be used to improve the management of supply chain. Dasgupta et al. (2009, p. 208) argued that the existing knowledge in an organization is not what brings about competitive advantage but rather it is the ability to apply the knowledge effectively that creates new knowledge necessary in an organization. Through sharing knowledge and making use of it helps the organization to have quality practices as they seek to be among the best companies in the market.
Dasgupta et al. (2009, p. 208) argued that a firm’s knowledge is dependent on both its internal learning activities and the learning activities of other different actors who are outside the firm. According to Wadhwa (2005, p. 13), knowledge management is used by the world class organizations since it is an effective approach.
Wadhwa (2005, p. 13) argued that knowledge management offers new chances to create and retain values from supply chains through business competencies. Knowledge management helps people in top offices in an organization to get updated information which they use to programme models rooted on integrative knowledge of past experiences.
Knowledge management also gives the top executives a chance to review alternative solutions and also bring up innovative proposals leading to high productivity. Through this, managers are in a position to anticipate problems well, experiment in time and plan for quality practices that are necessary. On the other hand, stakeholders’ ability to solve problems lies in their education knowledge, professional training, background, creativity, and their motivation towards what they are doing.
Quality focused trainings assist in creation of new knowledge that in return leads to innovative solutions and management of change in a firm. Dasgupta et al. (2009, p. 208) further claimed that the employees’ knowledge regarding the customers, products and the processes depends on the employers’ willingness to share the available relevant knowledge.
According to Rastogi (2002, P. 230) an enterprise is basically a creation of human knowledge regardless what it produces. This is the reason as to why firms should ensure that they have communities of practice which will serve as a platform to share the relevant information towards quality practices and leadership. He added that knowledge is necessary in order for an organization to develop and vary out exploitation of all resources.
Frans et al. (2004, p. 419) stated that complexity is the name given to the emerging field of research, which discovers systems through which various independent agents are interacting in various ways, in this case stakeholders interact in supply chain and each person’s decision influences the other. According to Blecker et al. (2006, p. 8), complexity of a supply chain is associated with numerousness, connectivity of its elements and variety of business processes that are involved in the supply chain.
Supply chain complexity is dictated by both internal and external drivers. Check lands soft systems methodology of complexity thinking seem to be the most effective methodology in structuring problems and solving complexity issues. This methodology presents strategy as a practice in an organization. According to Check lands (1990, p.13) soft system methodology has been employed greatly both in government and industries.
Internal forces as managerial decisions and the organizations trend to produce complexity. These internal drivers occur at each step of supply chain and also in the co-operation level. On the other hand, external drivers for supply chain complexity are unidentified demands and lead to a huge percentage of different customer’s orders in terms of variety quality, quantity and time (Blecker et al. 2006, p. 8).
Attempt to satisfy everyone’s need is a complex idea, however through soft system methodology suggested by Check lands such issues can be slowly dealt with. It is not possible for the supply chain partners to accommodate different requirements and, therefore, firms try to extend the number involved in supply chain and additional of partners (Oaces Conference Warwick 2009, p. 1).
Complexity management as an integral part of supply chain management is a compulsory requirement for the successful implementation of supply chain management in a complex competitive environment. Complexity strategy matrix describes the dimensions to determine the optimal strategy for complexity management involved in supply chain.
According to Blecker et al (2006, p. 12), this matrix introduces four resulting basic strategies for supply chain management which are used to manage complexity, they include controlling, accepting, reducing and avoiding complexity. Through this the issue of complexity in the supply chain will be managed well, this will give a company a chance to exploit it resources and ensure smooth supply with assistance from other stakeholders.
Complexity can be considered as co-evolving process in which each firm is considered a fully participant agent. Mitleton (n.d., p. 5), argued that connectivity not only involves the elements that are within a system but also considers all other related systems in an ecosystems.
Strategy as Practice (n.d., 14) argued that when a physical system is pushed away from equilibrium, it survives and thrives while if it remains at equilibrium it dies. The reason behind this is that when far-from-equilibrium, systems are forced to experiment and explore their space possibilities and exploration helps them to discover and create new patterns of relations and different structures.
This is what happens to the stakeholders involved in the supply chain since each stakeholder contributes to the success or failure in the process hence strategy being crucial in fighting for better practices which will lead to better market.
Martin (2010, p.5) argued that there are five reasons that make a supply chain complex and they include; numerousness, variety, interconnections, opacity, and dynamic effects. According to Martin (2010, p.5), numerousness is an acknowledged indicator of supply chain complexity.
He argued that the more the variables that require to be monitored and controlled the more complex the operation become in a supply chain. This is true since the bigger the company the longer the process of manufacturing and the human resource required. Martin (2010, p.6) referred to variety as the distribution pattern of each of the variables that are involved. He insists that different interactions must be involved in any process of the supply chain and this is how interconnections come in.
Klara (2009, p. 484) argued that individual empowerment and transparency in organizations, interconnectedness, speed of transactions and decreased cost of information are also responsible for the challenge of complexity. This complex problem can be well dealt with if all the stakeholders are involved and firms share the challenges they are undergoing through together.
Mitleton (n.d., p. 3) highlighted that organizational complexity is related with the complicated inter-relations of individuals, individuals with ideas and the effects of interactions in an organization. She considers theories of complexity as providing a conceptual framework meaning that it offers a way of thinking and also the way people look at things surrounding them.
She argued that complexity emerges from the inter-relationship, inter-connectivity of elements between systems and its environment (Chin-Chun et al. 2008, p. 296). If firms use complexity as a practice to encourage relationship between firms it can be looked as an advantage that can help people learn together and come-up with lasting solutions rather than as a challenge.
Mitleton (n.d, p. 4) considered connectivity in human system to mean that ideas from an individual, organizations, or a group of people have an effect on all other people who are in the same system, I concur with this author as earlier mentioned each stakeholders decision have an effect on all those who are involved in the process of supply.
According to Macal (n.d., p.1), complex adaptive systems are components interrelate and change. They react to one another and at the same time they react with the environment, complex adaptive systems may include social groups, ecological groups, or biological systems. Macal (n.d., p.1) further argued that traditional modeling methodologies are in-sufficient to deal with the many multi-disciplinary and inter-disciplinary problems that are involved in such systems.
According to Lucas (n.d., p.1), complex adaptive system have several autonomous parts and they are able to send feedback to external changes and also form systems that maintain them with internal response path. Lucas (n.d., p.1) gave the following example of complex adaptive system.
According to Darshan et al. (2010, p. 391), complex adaptive systems are unique from other systems and they are complicated. Organizations are considered complex systems since they cannot be understood through analyzing some few of its parts. Supply chain in a company cannot be assessed by examining one stakeholder only.
According to Introducing Concepts of Power (n.d., p. 10), power is the ability to do anything without being coerced by another other person or being influenced by some factors. To this connection there should be discussions between stakeholders in supply chain otherwise there is a possibility that the less powerful will be exploited.
Blois et al. (n.d., p.3) stated that power is a complex and a difficult concept to define and the definition depends with the concerned party’s perception. According to Blois et al. (n.d., p.3), there are five areas that social power are based on.
He stated that expert power is the power that is possessed by the customer, which is rooted on expertise, knowledge or even skills that are necessary and desired by the supplier. The second social power is based on the power that exists the time a supplier values identifies with the customer (Concepts of Power n.d., p. 2).
According to Blois et al. (n.d., p.3), the third kind of power is legitimate power, which is natural; according to this power, the customers have power to influence the supplier. Reward power is a type of power that exists when the customers provide rewards, which are nice-looking to the suppliers. If customers are excited with the suppliers, the quantity they purchase and at which frequency increase.
The other power is coercive power; this is a type of power that exists when the customers have the ability to offer punishment that is harmful to the suppliers (Blois et al., n.d., p.3). all these types of power develops through the relationship that customers have with the suppliers and the manufacturers and they further affect the supply chain negative or positively.
Power is used when a powerful party has been confronted by possible situations which are not desirable and are believed to be dealt with through exercising power (Blois et al. (n.d., p.6). for this case relationship management involves long term value exchanges between customers and suppliers. Both the buyer and the seller move towards forming relation as they interact for their own benefit. Van Dijk (n.d., p. 20) argued that the properties of power may be discussed in different ways as discussed below:
Social power is considered a property of connections between classes, groups or any other social formation between and among people and social members. Social power relationships in elementary perspective involve evident interactions.
Van Dijk (n.d., p. 20) gives an example of a group “A” having power of group “B” and, therefore, “A” controlling “B” in whatever engagement. For this reason the powerless stakeholders in supply chain will do as the powerful person wishes and dictates. This kind of power also gives some freedom to the ones who are subjected to that power.
Van Dijk (n.d., p. 20) state that the framework that consists socially shared and related to interest is mainly acquired and transformed through communication and dialogue. To ensure that power in supply chain is controlled, there should be contuse communication and sharing. This will ensure that the laid strategies of practice and leadership of the organization will be realized.
Kong (2008, p. 118) mentioned that intellectual capital can be classified into three main primary interrelated components which are structural capital, human capital, and relational capital.
However, on contrary Basile (2009, p. 1) presented a different view and argued that intellectual capital bears three components: internal capital that involves organizational structure, management, and process; external capital which involves the stock market, the suppliers, and the customers; and the human capital that involves the learning, knowledge, and growth of employment. Intellectual Property Department (2009, p. 1) demonstrates the three categories of intellectual capital as follows:
Kong (2008, 118) argued that since organizations do not exist in a vacuum, external environment situations are vital in organizations’ ability to operate and also transferring of knowledge from one organization to the other. This author further supports that companies working in the same area should network and build each other through sharing relevant information.
According to Choong (n.d., p. 622), human capital is associated with the set skills, ability and attitude of the employees or the stakeholders in the supply chain. Structural capital also referred as organizational capital is considered as the most complex. Structural capital has undergone several changes, and finally it has been considered to include innovation, culture, and process. Customer capital is related to organizational relationships that involves all other stakeholders.
Dale (2005) stated that intellectual capital is a strategic resource in an organization and it is rare. Intellectual capital management can be considered as a set of simple management tools that allow enterprises to gain knowledge and expertise that they already have though not fully exploited (Intellectual Property Department 2012, p. 1). Intellectual Property Department (2009, p. 1) highlighted that there are six steps involved in achieving an intellectual capital report.
The department highlighted that creating an intellectual capital report is the best way to develop an enterprise-wide system which can be used to assess and evaluate enterprise knowledge at all levels. The six steps include the stakeholders, where to look for the enterprise knowledge, what to look for, how valuable is it, reading back from the report and protecting what you have. This can be considered the information that should be discussed by different companies as a strategy to achieve market leadership.
The step which involves the stakeholders and seeks to identify accurately who the stakeholder are, what they attach value to, and how much they value each item is important in the supply chain. The second step involves looking where to get the enterprise knowledge needed, for example, in manufacturing, marketing, purchasing, distribution, and research. This is the information that is relevant to all the stakeholders who are involved in supply chain.
The third step involves what to look for, for instance, identifying useful knowledge that can be used to create wealth in an enterprise, for this case it may entail the customer’s tastes and preferences that will help the manufacturer to know what kind of product to manufacture. The other step involves to quantify how valuable and viable whatever you have planned is.
The fifth step considers reading back from the report; it involves revisiting the ideas that have been made and learning from them. The sixth step is protecting what you have. Intellectual Property Department (2009, p. 1) argued that when one understands knowledge acquired and the value attached, it is necessary to come-up with ways of protecting it. Manufacturers value and protect the knowledge gained since this is what dictates how they are going to perform in the market.
Strategy as a practice and a leadership in an organization or a firm is very vital. This is because well-designed planning process motivates the stakeholders towards realizing the set goals. Successful leaders have also been known to have vision that guides them to achieve these goals and it is only through laid down strategy that they are able to achieve this.
Pasmore (2009, p. 3) highlights that, organizations depend on competent leadership to direct them through unique changes. Therefore, every leader should be aware of the value of a well-organized business strategy that can work for all the stakeholders involved.
Pasmore (2009, p. 6) argued that leadership strategy clarifies how many leaders we need, their kind, where they are required, bearing what kind of skills and behaving in which way both individually and collectively to achieve the total success that an organization is looking for. This will automatically strengthen the work force in such an organization and through combined efforts the organization will realize high production and satisfaction to all the stakeholders.
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