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The strategic management cycle
Based on available research, it is possible to develop a schematic representation highlighting the manner in which managers and managerial action interact with several of the more macro aspects of organizations, including their mission and values, strategy and goals, organization structure, and management practices. This can be referred to as the strategic management cycle. Historically, the relationships involved in this cycle have been seen largely in terms of a one-way causal relationship. That is, mission determines strategy, which in turn determines structure, which governs management practice, which ultimately determines the extent to which the organization succeeds in achieving its mission. The cyclical nature of this model acknowledges feedback loops throughout the process, but particularly in the same single direction as is suggested for the other factors.
However, more recent evidence, as discussed below, suggests a far more complex and interactive relationship (see Exhibit 5.1). Specifically, while mission and values may help determine an organization’s initial strategy and goals (at least in the early years of the venture), organization design and even management practices can also influence strategy in significant ways, especially as the organization matures and is confronted by new challenges and economic realities. Likewise, strategy can influence structure, but so too can management practices. Finally, these interactive relationships are played out in a business environment that is itself multifaceted and interactive. This includes such external factors as geographic location; the cultural milieu(s) in which organizations work; legal conventions and local customs; variations in political and institutional support; a country or region’s factor endowments; the specific sector of the economy where the organization does business (e.g., industry versus services); available investments, technologies, and markets; and environmental challenges and goals. In other words (as will be discussed below) the simple strategy-structure management paradigm is found to be sorely lacking in explanatory power as organization theory crosses borders.