Strategy is an important management theory that helps corporations to gain competitive advantages in their businesses and to forge a high performance organization. It is obvious that the current business environment has been becoming more complex than ever before because of the rapid technology development and more varied customer needs. Managers have to find the most effective methods of maintaining competitive advantages and sustainable business success in such a turbulent context. Therefore, formulating a proper strategy is the most effective method of helping the company clarify its position and guide it to achieve the organization goals. However, formulating strategy is always the most difficult. In order to form a successful strategy, we should know what factors play important roles in the competition and how to analyze them to contribute to the final strategy, which are the components of a strategy. However, there are many different situations existing in both external and internal environment of the companies, such as competitor??™s behavior or its own organizational structure, so that it is hard to tell which is more critical to a useful strategy. Executives often feel frustrated when trying to understand their companies??™ current performance in an effort to formulate a strategy. Michel Porter explains the three components of a company??™s internal environment involved in strategy in his article What Is Strategy which includes organizational structure, leadership styles and so on. However, he only addresses the strategy-making problem from the internal perspective which is not sufficient to formulate a comprehensive strategy because a company can??™t succeed based solely on internal excellence without knowing external environment such as its competitors??™ performance. So he analyzes the five competitive forces of firms??™ external environment in another article, The Five Competitive Forces That Shape Strategy. Comparing these two articles would help us gain a more comprehensive vision for analyzing a firm??™s current performance and pay more attention to the company??™s position and competitive capabilities because it combines both external and internal analysis. But understanding only the current position cannot guarantee the future success because the business environment is changing every single day. We should also improve organizational performance, such as leadership effectiveness and employee involvement, to support the implementation of the strategy. Roffey Park describes these theories about organizational performance in his article High Performance Organization to help managers to recognize the importance of building a high performance organization and the roles of managers play in the process.
Defining and communicating the firm??™s unique position is usually the first thing in a strategy-making process because managers have to make sure that the whole company understand what they are supposed to do and why they should do it. Porter believes that the position of a company serves as a guideline to lead the company towards achieving its goals. But he explains the factors influencing positioning from different aspects. For example, in ???What Is Strategy???, Porter points out that the inner structure, culture and systems of an organization can determine the organization??™s position because people are the key of the structure and systems so that their behaviors could determine the organization??™s entire capability. However, since the valuable resources for a company are limited, managers have to make trade-offs to decide which resources need more emphasis in strategy-making. In the first article, Porter emphasizes that fit has to be forged among all different corporation activities so that the resources can be integrated together properly and support each other to achieve the best results. But the internal analysis is not comprehensive for making a successful strategy unless it is combined with the external analysis. Therefore, we can combine the internal analysis with Porter??™s Five Forces Model which is a model used to analyze the external competition environment. By understanding the five participants of an industry competition companies can recognize the threads and opportunities, such as whether the competitor has better or similar advantages and whether there is a new population who have potential buying power, and provide assessment of likely levels of industry profitability. Therefore, managers can differentiate their position based on these assessments of others??™ positions. Porter??™s two theories exist side by side and play a part together in understanding a company??™s current performance.
Expect for understanding the company??™s position, companies are trying to change their structures and practices more effectively to meet with the needs of the new trends in business world and their current position. Internal and external environment analysis is the first step in strategy-making process. Then managers have to find proper ways to align the organization??™s activities with its goal in order to form a high performance organization that will facilitate the implementation of its strategy. Therefore, Porter and Park introduce the common characteristics of high performance organizations in different perspectives. That is, Porter puts particular emphasis on the role of leadership while Park stresses on the empowerment of employees. In Porter??™s opinion, one of the most important functions of an explicit strategy is to have strong leaders who can guide employees in making choices that align their day-to-day jobs with the company??™s goals. This opinion provides a vision for managers to explore the solutions for controlling employees??™ behavior. Effective leadership which means managing from top level to down level leads to the correct direction of the organization. At the same time, Park argues that empowerment which means managing from down level to top level is another critical factor that gives organization more flexibility when facing rapid changes. He believes that empowered employees would feel more committed to the organization, which gives managers an insight of how to improve employees??™ involvement. Therefore they are more willing to give their best skills and passions to finish their jobs. Porter??™s top-down theory and Park??™s bottom-up theory have been both adopted in the current organization management and played a complementary role in the development of a high performance organization because they provide guidelines for both leadership and empowerment.
With the development of the fierce competition and business management, an increasing number of theories concerning corporation strategy-making have been developed. Those theories analyze the management issues from different perspectives and give suggestions to managers at different levels in an effort to improve their management practices. In a word, an effective strategy leads to sustainable competitive advantages while high performance organization is the premise of an effective strategy. Porter??™s strategy theory and Five Forces Model leave us a clear impression on how to formulate the practical strategy. Park provides us an insight of how to improve the organizational performance to support the implementation of the strategy, which is of great practical values. With the development of corporation management, managers will pay more attention to the practices of helping the entire organization achieve its high performance and sustainable success.