Richards Rumelt: The evaluation of Business Strategy
Richards Rumelt: The evaluation of Business Strategy
1. Consistency: the strategy must not present mutually inconsistent goals and policies.
Rumelt argues that inconsistency in strategy is not merely a flaw in logic. One of the main purposes of strategy is to provide a sensible framework for organizational action, which fits organizational objectives and values. Rumelt cities the examples of high- technology organisations facing a strategic choice between offering customized high-cost products with high custom-engineering content and standardized lower cost products that are sold at higher volume. If senior management does not clearly spell out a consistent view of the organisation’s position on these issues, there will always be conflict between the sales, design, engineering and manufacturing functions.
2. Consonance: the strategy must represent an adaptive response to the external environment and to critical changes occurring within it.
Rumelt’s test of consonance focuses on the organisation’s ability to match and at the same time adapt to it environment, while competing with other organisations that are also trying to adopt and prosper. However, he argues, the main difficulty in evaluating consonance is that most of the critical threats to an organization come from the external environment, and so threaten all organisationsin that industry. Strategic decision- makers may be so absorbed on how to achieve competitive advantage over their rivals that the threats is only recognized after the damage is done. Rumelt also points out that forecasting techniques such as trends analysis do not normally expose potentially critical changes that come about as result of interaction between trends.
3. Advantage: the strategy must provide for the creation and/or maintenance of a competitive advantage in the selected area of activity.
The test of competitive advantage is to see whether the strategy will allow the organization to capture the value it
1. Consistency: the strategy must not present mutually inconsistent goals and policies.
Rumelt argues that inconsistency in strategy is not merely a flaw in logic. One of the main purposes of strategy is to provide a sensible framework for organizational action, which fits organizational objectives and values. Rumelt cities the examples of high- technology organisations facing a strategic choice between offering customized high-cost products with high custom-engineering content and standardized lower cost products that are sold at higher volume. If senior management does not clearly spell out a consistent view of the organisation’s position on these issues, there will always be conflict between the sales, design, engineering and manufacturing functions.
2. Consonance: the strategy must represent an adaptive response to the external environment and to critical changes occurring within it.
Rumelt’s test of consonance focuses on the organisation’s ability to match and at the same time adapt to it environment, while competing with other organisations that are also trying to adopt and prosper. However, he argues, the main difficulty in evaluating consonance is that most of the critical threats to an organization come from the external environment, and so threaten all organisationsin that industry. Strategic decision- makers may be so absorbed on how to achieve competitive advantage over their rivals that the threats is only recognized after the damage is done. Rumelt also points out that forecasting techniques such as trends analysis do not normally expose potentially critical changes that come about as result of interaction between trends.
3. Advantage: the strategy must provide for the creation and/or maintenance of a competitive advantage in the selected area of activity.
The test of competitive advantage is to see whether the strategy will allow the organization to capture the value it