AN ORGANIZATION’S STRATEGY UNDER CONSTRAINTS, THE UNCERTAINTY AND UNPREDICTABILITY

Author
, professor, Kharkiv, Pushinska, 77

In heading

 Economic theory;

Signed print

 30.06.2020

Issues number

 2020 - № 3 (42)

Page

 8-27

Type of articles

 Scientific article

Code UDK

 005.21:338.244.42.025.4

ISSN print

 2411-5584

Abstract

 Problem setting. the practice of strategic management indicates that up to 70 % of planned strategies, sometimes even more, remain unimplemented. In the process of estimating a strategy, managers may ascertain that: a) they actually undertake a spontaneous strategy rather than planned one under permanent changes in an external environment; b) they have not undertaken a strategy because of numerous unestablished constraints or
events being undetermined and unpredicted in strategizing. In any case, this process is concerned with a scope of strategizing.
Recent research and publication analysis. the research in the sphere of strategic management has occurred since the 1960s. Scientific papers of Alfred D. Chandler Jr. [1], K. Andrews [2], and I. Ansoff [3] have become the first significant contributions to examinations regarding issues of strategizing. These researchers have substantiated the necessity for transition from operative, current management to strategic one. In the practice, strategizing has been referred to as a set of managerial decisions and actions on forming and implementing strategies, primarily strategies of business organizations. Subsequently, such examinations have led to the formation of several scientific schools of strategic management, which have been considered and systematized in a well-known scientific paper of G. Mintzberg, B. Alstrend, and Dzh. Lempel [4].
The contemporary research of strategizing done by Ukrainian scholars are more and more oriented towards an issue related to taking into account factors of the uncertainty and a risk in the process of strategizing. Nevertheless, the factor of business unpredictability, as well as its influence on a process of strategizing and implementing strategies remains to be inconsiderably researched.
Paper objective. to analyse the main methodological approaches to a process of strategizing under constraints, the uncertainty, and unpredictability of the business.
Paper main body. the article analyses three issues of strategizing. The first one – a business organization always deals with numerous constraints in the process of drawing up a strategy. The theory of constraints claims that the sooner managers reveal constraints, the more substantiated decisions on developing a business and enhancing its productivity they make. Primarily, managers should pay attention to managerial, human resources, and organizational constraints, dysfunctions, and pathologies. All of them are rigorously analysed in the article. Managing constraints should be considered in the context of strategizing as its precondition and component.
The second issue – drawing up and implementing an organization’s strategy always occur under the greater or smaller uncertainty. The latter results in a risk, i.e. an opportunity or real threat of deviations of outcomes of certain decisions or actions from anticipated ones, a danger of losing resources compared to a variant intended for the rational use of resources, and the probability of the emergence of losses, shortfalls of revenues, or the appearance of additional expenses compared to a prognosticated variant. Evaluating a risk and managing a risk assume the special importance. The uncertainty forcing an organization to update a strategy and mechanisms for its implementation is recognized to be the strategic uncertainty. If a business faces such uncertainty, it needs the permanent renewal of information and analytical data concerning the future development of the global, national, and regional economy, as well as prior directions of activities of business organizations. Managers should attach particular attention to the prognostication and foresight studies alongside preparation of business scenarios. The author gradually considers their role in strategizing.
The third issue – undertaking a strategy for developing a business may face the factor of unpredictability. The article analyses the black swan theory and takes notice of so-called jokers. “Jokers” imply events, which, despite the extremely low likelihood of emergence, may occur suddenly and lead to serious consequences. Scientists identify the following types of “jokers”: a) “jokers” evolving according to a scenario of rising tension; b) “jokers” as sadden unexpected events or even catastrophes with serious consequences, which have happened in the past and will occur in the future; c) “black swans” (N. N. Taleb) – events, which are initially unexpected, abnormal, and make significant effect, but are accepted as a fact and considered to have been anticipated in doing a retrospective analysis. Nowadays, a number of economists make an analogy between the coronavirus and the very black swan.
How may we consider all these facts in strategic planning? K. Steinmüller, a German futurologist, suggests permanently predicting the emergence of “jokers”, analysing their possible influence on the business, and prognosticating hypothetical negative scenarios of events. Forming scenarios of imagined “jokers”, companies: a) test new strategic options and reveal a new perspective on these processes; b) make preventive decisions to ensure the resistance to external influences and negative scenarios of events; in many cases, this ensures the minimization of firm’s expenses and losses; c) draw up more robust organizations’ strategies [20]. N. N. Taleb recommends to build the resistance to negative events in general and to have an opportunity to use positive events [21].
Conclusion of the research. Drawing up a strategy for the development of a contemporary business organization occurs in a dynamic environment filled with constraints, the uncertainty, and unpredictable events. Traditional algorithms for strategizing cannot be always applied. Many strategies are not undertaken while those undertaken by a company are usually updated in the process of implementation. Owners and managers of business organizations should consider all these factors.
Short Abstract for an article
Abstract. The author has analysed contemporary scientific approaches to substantiating the essence of strategizing. The author has proven that: a) a business organization deals with numerous constraints (material, financial, human resources, managerial, etc.) already in the process of drawing up a strategy; b) implementing an organization’s strategy almost usually occurs under the greater or smaller uncertainty and risks; c) the factor of unpredictability may significantly affect strategizing. The author has formulated recommendations regarding applying instruments of the prognostication, foresight studies, and preparation of business scenarios. The author has attached special attention to so-called jokers with a powerful effect of influence because of the high extent of their unpredictability and uncertainty, as well as the necessity for prognosticating hypothetical negative scenarios for developing a business organization and for forming the resistance to them.

Keywords

 strategy, theory of constraints, uncertainty, unpredictability, “jokers”, “black swan”.

Reviewer

External reviewer

Article in PDF

 8-27

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Code DOI

 10.31359/2411-5584-2020-42-3-8

30.06.2020