Managing strategy in construction industry in recession

Submitted By, Jayantkumar Sadashiv Sapre Registration Number: 101644176

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TABLE OF CONTENTS Introduction Significance of schools of thought Main elements of strategic approach Strategic schools of thought Strategic management process Agreement on process Goal-setting Analysis Strategy formation Strategy implementation Strategy monitoring and feedback Strategy process in built environment in current climate Conclusion References 3 3 3-4 4-6 6 6 7 7 7 7 7 8-9 9 10

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Introduction Lions share of built environment is facing severe recession of recent times. Business activity is reduced and is less successful. Projects are being stalled, delayed, suspended and terminated at an exceptional pace. Grim scenarios, resultant of chain reactions are raising the apprehension of declining confidence. This necessitates for built environment organizations to devise effective strategic management practice to secure their interests in current uncertain times. Thus, strategic management practice is more sought-after than ever. This essay endeavors to attain coherent understanding about strategy, on the basis of various approaches and by unfolding prominent facets of strategic management process, examine its applicability in present construction industry organizations in the current context.

Significance of schools of thought In the absence of mention and comprehension of most suitable school of thought on strategy, the way a strategy should percept to strive for superiority and a could be winner in a trade, is complex to visualize.

Main elements of strategic approach Strategic schools of thought consist of four distinct constituents. First, it is inclined to the future. It identifies that the setting will transform. It is an exhaustive positioning; it aims to look forward to occurrence irrespective of responsive action. This leads to the position where organization would like to be following a definite time, what it entails to attain objective, how to build up the measures to reach destination. In conclusion, to realize purposeful milestones, what are the salient ways to cope with the subjected strategies? Identification of anticipation of events is not predictable, yet by the virtue of reasoning, imminent can be foreseen, businesses can aid to form and amend the influence of transformation in surrounding.

Second, it has a peripheral prominence, considers various factors of the outer surroundings, consists of technical know how, affairs of state, finances and the pubic interest. Strategic beliefs make out that, these predominant factors either restrict or assist an enterprise as it try to put into practice the course of action. Affair of state will influence the guidelines to be put in practice, finances will establish the organizations quantity of reserves, and public aspect may possibly conclude who the recipients are. Specifically, strategic thought comprehend and categorically considers bringing into play the government clout. Managers must be responsive of the requirements, in implementation there may not be any say for decisions from them and react to requirements of elements over which they have negligible restrain. Political players are conceivably the vital.

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Third, it focuses on ensuring a valid reasoning between the surrounding influences and the establishment (including its task and aims, policies, constitution, and reserves) and endeavor to foresee the requirements to guarantee prolonged match. In the scenario of quick political, monetary and collective transformation, strategies can rapidly worn-out or unfit to function; or the backup supply usually needed by the establishment to churn out its provisions, may abruptly become out of stock. It distinguishes, with the happenings in surroundings, review and alteration of diverse constituents in a steady and uninterrupted manner is essential, in order to sustain compatibility.

Ultimately, as an uninterrupted course of action, this distinguishes approachability of requirement to fluctuating objectives as consequence of changing events within the surroundings. Continuous monitoring is required in this procedure and uninterrupted feedback to managers needs to be provided by competent assessment methods. Collectively, these viewpoints are a method of assessment about how to administer procedural amendments.

Strategic schools of thought Preferred listings and categorizations of schools of thought have nurtured by numerous academics, perhaps the most complete and thorough by Mintzberg et al. (1998)

Mintzberg et al. (1998) put forward ten schools of thought on strategy formation. They are three classical and seven emergent schools. These ten schools of thought are described in subsequent paragraphs.

The source of Design school (Sculpting the strategy by method of perception) can be traced back to 1957 by book authored by Selznick. Use of SWOT analysis is employed to trace out internal capabilities and external possibilities of an organization in this approach. Strategy formation should be a calculated process of pensive thinking is strength of this approach, whereas learning process is altogether avoided, due to assessment of strengths and weaknesses is a main drawback.

The source of Planning school (Shaping of strategy through Formal Procedure) can be traced back to 1965 by book authored by Ansoff. Mintzberg et al. (1998) describes Predict and prepare as the motto of this school. Strategy arrives from a restricted process of official planning is strength and weakness is control of process by staff.

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Top promoter of Positioning school (Unfolding the strategy through investigative route) is Michael Porter (1980), who devised systematical means to comprehend vastly dissimilar scenarios and presented a sophisticated and effective understanding to manage strategy. Porter through his Five Forces Model explained the prerequisites of an organizations profit. Mintzberg (1990) mentions, extensive data is essential for the effective use of Porters model limits it applicability to conventional industries. It endures, from departure of judgment, thus rare chances of acquiring knowledge.

Strengths include focus on capturing competitive advantage. Inadequate to unchanging representation, attention being limited picture of industry than vigorous investigation which opens up original inclinations, changes and patterns. Main emphasis is on business magnetism than painstaking assessment of requirements of users. (Pietersen, 2005)

The source of Entrepreneurial school can be traced back to 1950 by book authored by Joseph Schumpeter. The ultimate and dominant milestone is growth; tactics for business growth live in the intellect of the far-seeing strategist, visionary future of business. Mintzberg (1973) suggested the predominant distinctiveness to strategy creation in this approach, strategy making is governed by the active search for new opportunities and power is centralized. Strategy making is typified by the spectacular jumps forward towards uncertainty. The process of strategy formation is leaders experience and intuition.

The leader promotes the vision under personal control in order to reformulate specific aspect. The strategic vision is thus compliant, the strategy to be inclined on purpose and developing. The establishment is equally obedient, an arrangement approachable to the leaders commands. Strategy tends to take position, which can be defined as Monopoly. One man show is the main weakness.

Cognitive approach can be traced back to 1985 by books authored by Bogner & Thomas and Duhaime & Schwenk. Strategy shapes up in the thoughts of the strategist.

Learning school can be traced back to 1959 by publication of article by Charles Lindblom. In this approach, strategies emerge as individuals come to learn.

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In Power school, strategy formulate from disputing parties within an organization or by themselves as they tackle their external settings. Power relations envelope organizations; they can also fill them.

In contrast to the power school is the Cultural school, where united social method is adopted for shaping of strategy, which considers strategy formation as a social interactive process. Information concerning beliefs and values of members of an organization plays most significant role and in fact the conceptual vagueness and deep rooted beliefs acts as barriers for changes in strategy.

Environmental school, there is example of managers who performs environment/PESTEL analysis and hence influences of strategists in the formation opens the doors for new options. Impact of globalization is a best example of how organizations reshaped to the significant changes of the environment. (Su, 2009)

People in Configuration school, look for incorporative, and gather the different constituents of the strategy creation method, the contents, organizational compositions and their backgrounds, into diverse chapters.

There are three mainstay aspects to one and all strategically motivated conclusions. These essentially are situation, substance and realization. These nuclear ingredients overlap and are functional concurrently in any strategy. Reasoning and ethics are two prominent characteristics of these aspects. The approaches put into use to create the relationship of these three basic elements is in nutshell is schools of thought. It is all depend on the requirement of leaders of industry, which schools of thought, singular or plural shall cater the requirements of vision and mission of their business.

Strategic management process Agreement on process To arrive at consensus on procedure is the initial requirement. To commence involvement of minimum of three dissimilar sorts of entities are to be taken into account. Key decision makers, major stakeholders (from within or outside, supporter or critic, customers or suppliers and experts) who dispense crucial inputs. The various decisions about participation of persons and items deemed to be used should be taken up only after securing an undertaking from key decision makers as a first step. To address issues of complicated aspect wider spectrum of actors should be involved but not at the sake of failure to arrive at lively conclusions. (Crosby, 1991)

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Goal-setting Step two is recognition and explanation of the organizations task, aims and existing strategies. Establishment of objectives facilitates expression of organizations foresight. By recognizing parameters to be realized, immediate and far reaching intentions to be described and those linked up to organization requirements. A mission statement sums up intention and targets in conditions effortlessly figured out by one and all or internal and external stakeholders. (Scribner, 2000)

Analysis Step three is analysis .There are numerous techniques e.g. a) straightforward SWOT (strength, weakness, opportunity, threat) analysis, b) scenario planning (setting aside time to consider the organizations response to potential events) or, c) environmental analysis (aimed at social, technological, environmental, ethical, political and legal issues STEEPLE analysis) of either the entire organization or more manageably, divisions or departments. Analysis directs organization to gather and take into account information so that it entirely comprehends their state of affairs.

Strategy formation Step four is strategy formation which essentially includes zeroing on key constituents and stakeholders, their potential and possessions, Identification of significant concerns and design, scrutiny and choice of strategy options and choice to manage salient strategic issues. To determine a strategy, organizations replicate, prioritize and expand options and effect decisions. (Scribner, 2000)

Strategy implementation Step five is implementation. In order to implement organizations strategy, necessary resources to be assembled and applied. For moving ahead marshalling should be carried out, by applying the desired ideas, essential means and indispensible pledges. Use of existing facility or facility upgradation will be a favorable option for achieving results.

Strategy monitoring and feedback Step six is monitoring and review of performance. Monitoring allows organizations to check their progress towards achievement of their targets, helps to initiate a review to ascertain variations in situation which call for amendments. By allowing amendments in action plan, regulate the influence of variation in working situation. Valuable data is generated in terms of feedback as a result of good monitoring.

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Strategy process in built environment in current climate The current ongoing scenario of global downturn, which gradually encompassed the built environment sector from third quarter of year 2008 and reached to full bloom in year and half afterwards, is still not showing any clue to recovery. It is appropriate time for key decision makers of organizations in built environment sector to undertake thoroughly dedicated introspect in order to sustain their business in this hostile situation.

Implementation of strategy based on positioning school of thought (here large organization/corporation is considered for the purpose of applicability of strategy process in built environment in current climate) proposed by Mintzberg et al. (1998) shall be an ideal tool, although this school of thoughts major weakness of requirement of large amount of data can be certainly the strongest feature in these times as to sustain and spearhead the business in markets when the emerging trends will start. The information collected in past or to say in good times will suddenly will be of good use to develop strategy process afresh.

Information or data accumulated in due course of time in all facets of an organizations business shall be of paramount help to strategists in step one of strategy management process of agreement, as stakeholders input e.g. disinvestment of idle assets like fleets of construction equipments and downsizing of business shall certainly save expenses in longer run and in turn will increase the cash reserves to have finance people to formulate their individual strategies within the organization to be in line with strategy of the organization as a whole.

Revision of vision and mission statement may not be anticipated but by downsizing the business the smooth transition towards already recognized parameters is achievable. Conservation of utilities and environment friendly policy guidelines to be incorporated as in these difficult times these can be easily developed into a culture for the enterprise and in turn help the business positioning.

SWOT analysis plays a significant part in current context. Keeping abreast genuine sources of information about the general situation of markets, the sector in which organization is pursuing its business, the competitors, clients, suppliers, internal capabilities etc. all help strong decision making during the uncertain times.

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External issues are expected to be more aggressive to organizations riches and difficult to forecast and hence monitoring strategic position during recession is vital. But until the business, in its fullness producing strategic choices, for universal development as well as transforming environment, key decision makers may formulate important alternatives at snails pace to counter. A strategic option can be unsuccessful, if it lacks drawbacks in implementation, even if is based on sturdy and sheer knowledge. Choices should essentially contain targets, milestones, timeframes and long run success ingredients. The basis of strategic implementation is excellent project management. Firstly, required result should be known to all. Secondly, the means should be clear. Means organization to have expressive group of goals. Nearer milestones are elementary to recognize than a most important strategic foresight, and a sequence of goals assembling to a last result make certain that organization will be fine tuned. Thirdly, all these goals should also described by schedule. Fourthly, all the goals and the complete project, required to satisfy pre-described yardsticks for excellence and match financial plan set out. Once more, these ought to be specific.

Finally, and may be most essential, effective management and responsibility, both for the entire task and for each goal to be required. Accountability of key manager is required.

This facilitates the high ranking executives to carry out an uninterrupted assessment of their accomplishment. By following a regimented & ordered style to realization, they can at all times make out where they exist with respect to organizations enduring strategy, the standing of the company and integrate examples for imminent strategic choices.

Conclusion When an organization is having the clear picture of their current situation, effective development of overall strategy from conception to implementation by putting into use the best suitable schools of thought, single or multiple, will ensure survival and thriving of business during this recession. (Hammel, 2008) Diminishing economy, undefined supply chains are important hazards to business survival. Following a well thought-out tactic to manage these aspects and remain observant on the long run strategy of organization is the only exit a business can attain through the recession. Construction sector have been relentlessly interrupted by global financial crisis. Successful strategists will make use of this scenario to concentrate in the business, scrutinize strategic prospect and customize their procedures.

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References Atkinson, H (2006) 'Strategy implementation: a role for the balanced scorecard?' Management Decision 44, (10) pp. 1441-1460 Crosby, Benjamin L (1991) 'Strategic Planning & Strategic Management: What Are They and How Are They Different.' Introduction to Strategic Management Technical Note No. 1, 5-6 to 5-7 Feurer, R & Chaharbaghi, K (1997) 'Strategy development: past, present and future.' Training for Quality 5, (2) pp.58-70 French, S (2009) 'Exploring the House built on sand!.' Journal of Management Development 28, (1) pp. 38-50 French, S (2009) 'Re-thinking the foundations of the strategic business process.' Journal of Management Development 28, (1) pp. 51-76 Hammel, Laury (Oct. 2008) concordiba.org [online] available <http://www.concordiba.org/hammel12strategies.pdf> [22 March 2010] from

Mintzberg, H, Ahlstrand, B & Lampl, J. (1998) Strategy Safari: A guided tour through the wilds of Strategic Management. New York: The Free Press Mintzberg, H. (1973) 'Strategy-Making in Three Modes.' California Management Review 16, (2, Winter) 44-53 Pietersen, William G. (2005) 'Strategy in Search of a Method.' Columbia Business School Executive Education March, 5 Porter, M. (1980) Competitive Strategy. New York: Free Press Price, A.D.F. (2003) 'The Strategy Process within large construction organisations.' Engineering, Construction and Architectural Management 10, (4) pp. 283-206 Scribner, S (2000) 'Introduction to Strategic Management.' Policy Toolkit for Strengthening Health Sector Reform Section 5, 5-3 Su. D, (2009) 'Review of ecology - based strategy change theories.' International Journal of Business and Management Vol. No. 4, (no.11) pp. 69-71 Whittington, R (2001) 2nd edn. What is Strategy - and does it matter?. London: Thomson Learning

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