Introduction
When the strategy was first introduced in the 50s and 60s, one of the pioneers- Alfred D. Chandler- said that “strategy follows structure”. He observed that the interactions between functions or departments should be coordinated to give the business structure, direction, and focus. Michael Porter was one of the greatest contributors in the field of strategy and he introduced his concept of generic strategies. His work and that of other scholars are reviewed in this write-up.
Literature Review
Several challenges have been pointed out as the ones hindering the achievement of the competitive strategy in several businesses. The assumption is that the business wishes to achieve its competitive strategy through diversified activities such as switching, exiting, product differentiation, and expansion alongside other available options. Some of the challenges that have been quoted before include:
- Economies of scale– this is the decline in unit costs of a product as the absolute volume per period increases. The new entrant is forced to enter on a large scale and face a strong reaction from firms that are already in business or enter as a small firm and face cost disadvantages. If applicable for specific industries, diversification around common operations or functions can alleviate such problems imposed by economies of scale. That is, if a certain area of operation is overstretched, there can be a transfer of focus to another area or reduction of operation in that other area to make the volumes even (Brache 2002).
- Product differentiation– it creates a barrier to entry in that the new entrant has to spend a lot of money on overcoming customer loyalty to the established competitor. It, therefore, means that there may be start-up losses and these have no salvage value if the strategy fails. Businesses that deal with baby care products, over-the-counter drugs, and banking are known to experience much of this kind of barrier.
- Capital requirements-these are required especially for unrecoverable up-front advertisement and also in research and development. Even when capital is available, its use for most initial investments at entry represents a big risk.
- Switching costs– these come in because they may involve employee retraining, buying of new equipment, cost and time during testing of new methods, product redesign, and other costs. For instance, a car manufacturer who relies on buying wheels from a certain supplier may find it difficult to switch due to incompatibility of the designs and will need costs to redesign his hub to fit that of another manufacturer (Brache 2002).
- Access to distribution channels– this may be a challenge due to logical distribution channels being occupied by established firms.
- Government policy– licensing requirements, limits to the access of raw materials, regulation of industries like transport, liquor retailing, and others are among the government practices that may impose a barrier to entry into an industry for a new firm and so hamper a competitive strategy it may have planned. Other restrictions may come from such things as water pollution standards and other environmental controls.
In the current business arena, some other apparent challenges of businesses are recession and increased global competition. Since recession must affect the tactics or short-term plans of the business, it is expected that the competitive strategies must change to some extent in terms of focus and timing; in worse times the business strategy might include retrenchments to reduce costs as the business is limited in capital finance. Increased global competition has made businesses to amend their strategies due to shrinking markets and competition on product quality (Cicmil & Hodgson 2006). The implementation of the old strategies is therefore shelved and new ones adopted.
Other than entry barriers, there may be exit barriers that impose a hindrance to a firm whose strategy is to exit an area in pursuit of another. Some of these include:
- Specialized assets– they will either be liquidated at a low value or be transformed at a very high cost.
- Fixed cost of exit– they may include labor agreements where much cost will be involved in compensating employees, resettlement costs, and other costs.
- Strategic interrelationships– there may have been some interrelationships between a firm and other businesses that may hold it from exiting operations. These may include shared facilities, access to financial markets, and other attachments that hold the firm from exiting.
- Government restrictions– they involve government discouragement of exit when it is concerned about job losses and economic impacts (Shenhar 2004).
- Emotional barriers– this is where management is unwilling to justify exit because they have identified a lot with the business they were doing before, are very loyal to employees and sometimes customers, or even fear for their career.
Aligning the Project with Competitive Strategies
For a firm to efficiently implement its competitive strategies, the management should ask themselves various questions that will act as a checklist to ensure that the various set procedures and tasks are carried out. These questions include:
According to Srivannaboon (2009), many businesses are “suffering from misaligned projects and lack a systematic approach to align project management with business strategy” (5). Projects are the building blocks of organizational strategy in most firms. However, they still do not recognize project management as a functional strategy. The business must reinforce its competitive strategies for it to sustain a competitive advantage (Porter 1980). He argues that the generic strategies of cost leadership, differentiation, and focus are the threesome from which the firm may choose; and when it chooses one, it enables the organization to achieve a competitive advantage and outdo competitors. If it chooses more than one, it performs below its potential. Project management is one of the key processes that enable companies to implement value delivery systems (Hamel & Prahalad 1990). Realization of organizational goals is achieved if companies have projects that are in line with a cutting edge strategy.
Project management in itself is also a functional strategy just like human resources, IT, research and development, and production. One has got to keep in mind that these strategies are not entirely the determinants of the success of a business and their absence does not guarantee failure. For instance, a window of opportunity is a key determinant of whether a business is well aligned to success. Those that seize opportunities at the right time are more likely to succeed even without having laid down very clear strategic plans or even implementing them. However, that is a risky business and is destined to fail should such opportunities fail to arise or if there is too much competition (Rad & Levin 2002).
Is there a formal of preparing project charters?
This means that the projects must be guided by the original corporate philosophy, intent, and also strategy. This is because the projects are the means through which strategies are implemented. Therefore, the project will enhance overall corporate objectives adequately covering the methodologies, project management philosophy, interfaces, and the project management plan (Markides & Constantinos 1999).
Is the business committed to strategically using project management?
Strategies come with transformations, improvement programs, expansions, and other changes. The firm must be a corresponding commitment to managerial changes and change of corporate policies to reflect the changes brought about by strategy formulation.
Is the business group and implementers of the project working in synergy?
Those involved in the strategy implementation must be involved from the inception to prevent collisions in the middle of implementation. It however presents the challenge of resistance during the strategy formulation. The management must keep on stressing the importance of business planning, people, and project management group.
How can it be ensured that projects don’t wobble from the objectives?
There should be maintenance events, designed to keep the project focused on corporate interest and strategy. An example of such events is the project management audit, where the on-site practice is compared to the project charter. It can be used to point out where there is a need for strategic alignment.
According to Susan Hapeck of UPS, 70 percent of business failures do not come from the formulation of strategy but alignment with business charter and implementation. She adds that some challenges that face businesses are; organizational focus, where some managers are process-oriented and do not see how their functional role is of relevance to the competitive strategy; businesses having a strong collaboration with external parties or trading partners that makes radical business decisions limited; and failure of businesses within the larger firm to speak the same language and pursuing different paths (Chlesinger & Heskett 1991).
Many business managers approach projects as an isolated, individually-tailored undertaking and do not align the individual projects with the long term strategy. They also enter into agreements, choose wrong contracting models, and misjudge the risk or skills required in the business. Managers ought to find the business best practice that produces the best of results in the competitive strategy. Some of these practices could be in the area of contracting, negotiation, and other collaborative relationships. Better project designs, fewer delays, and lower costs must also be part of the business strategy since whichever way it is going to lead the achievement of the competitive strategy (Anderson & Merna 2005).
Milosevic (2009) argues that a competitive advantage can be achieved through the use of project management. He says that when processes are aligned to strategic elements, the strategy is likely to be a success. In many cases, the business may fail to tie the project to the strategy which may cause them to terminate the projects or continue pursuing projects that are not contributing to the organization’s goals and hence wasting the resources of the organization.
Claude and Hanley (2007) assert that translating a strategy also faces communication problems. Effective communication methods such as reports, two-way communication, and the continuous meeting would increase the chances of concentration of employees on the strategy. It is important to involve the project manager in the formulation of strategy so that there is a good linkage between project management and strategy. The project manager must also be competent.
Morris and Jamieson (2005) stated that the skills required to manage day-to-day activities are not necessarily the same skills required to effectively manage strategic implementation. Clear definition of roles and responsibilities will assist greatly though all have to keep the long term strategy in mind (Morris and Jamieson 2005).
Training and motivation, personal commitment, and personal culture are also variables that contribute to either failure or success of strategy implementation. They all need to be emphasized to have a competitive and well-implemented strategy (Alsudiri 2011). He reiterates too that 30 percent of business failures occur due to misalignment between project management and business strategy.
Conclusion
Misalignment of business to the competitive strategy being a major cause of business failures ought to be addressed from the top management. It should be addressed in the areas of information to the implementers through training, meetings, and reports. The involvement of implementers in the formulation stage is important for the sake of agreeableness within the entire organization.
Even though the misalignment of business to competitive strategy is a major cause of business failures, there are many other challenges that businesses encounter that hinders them from implementing such strategies. The percentage of business failure arising from misalignment of activities to the long-term strategy is only about 30 percent while the other causes contribute to the remaining 70 percent. If the other causes of business failure were to be analyzed individually, it may probably be found that misalignment is the major cause. However, those others cannot be overlooked because most managers are now enlightened on the area of strategic management.
Suggestion for Further Research
Most corporate firms, it has been observed, face relatively different challenges from smaller individual firms. It is suggested here that such a study be done about businesses of different sizes.
List of References
Alsudiri, T., 2011. A framework on aligning project management with business strategy. Brunel Business School – Doctoral Symposium 2011, p 3-7.
Anderson, D., & Merna, A., 2005. Project management is a capital investment process. Journal of Management in Engineering, 21, 173-178.
Brache, A., 2002. How organizations work: Taking a holistic approach to enterprise health. New York, NY: John Wiley & Sons, Inc.
Schlesinger, L., and Heskett, J., 1991. Customer satisfaction is rooted in employee satisfaction. Harvard Business Review, 7, 23.
Cicmil, S., & Hodgson, D., 2006. New possibilities for project management theory: A critical engagement. Project Management Journal, 37, 111-122.
Claude, A., & Hanley, C. A., 2007. The execution challenge: Translating Strategy into action. Bank Accounting & Finance, 20(6), 17-20.
Hamel, G., & Prahalad, C., 1990. The core competence of the corporation. Harvard Business Review, 68, 79-91.
Hamel, G., & Prahalad, C.K., 1989. Strategic intent. Harvard Business Review, 1989.
Markides, C., 1999. A dynamic view of strategy. Sloan Management Review, 40, Spring, 55–63.
Milosevic, D. Z., 2006. A theoretical framework for aligning project with business strategy. Project Management Journal, 37(3), 98-110.
Porter, M. E., 1980. Competitive strategy. New York, NY: Free Press.
Porter, M., 1996. What is strategy? Harvard Business Review, 61-78.
Rad, P., Levin, G., 2002. The advanced project management office: A comprehensive look at function and implementation. 9, 39-46.
Shenhar, A., 2004. Strategic project leadership: Toward a strategic approach to project management. R&D Management, 34, 569-578.
Srivannaboon, S., 2009. Achieving competitive advantage through the use of project management under the plan-do-check-act concept. Journal of General Management, 34, (3), 1-20.