Page 26 - E2 Integrated Workbook STUDENT 2018

Chapter 2

1. 3 Disadvantages of the rational/formal approach

 Inappropriate in dynamic environments – a new strategy may
only be established say every five years, which may quickly
become inappropriate if the environment changes.

 Bureaucratic and inflexible – radical ideas are often rejected and
organisations may not be able to take advantage of new
opportunities which present themselves.

 Difficulty getting the necessary participation to implement the
strategy – successful implementation requires the support of
middle and junior management and the nature of the rational
approach may alienate these levels of management.

 Stifles innovation and creativity – the rational/formal approach
encourages conformity among managers.

 Complex and costly for small businesses with informal structures
and systems.

1.4 Uncertainty

Managers’ perception of uncertainty will be increased by two factors – complexity
and dynamism.

Complexity. This refers to the number of variables which can impact on the
organisation and how difficult they are to predict or understand. Also if the
relationship between the variables is complex, this will also increase uncertainty.

Dynamism. This is the rate of change of the business environment. Increased
dynamism means that management’s models of ‘how things work’ will become out of
date much quicker. It also suggests that competitors will be able to respond more
quickly to a firm’s initiatives.

High uncertainty affects business strategy in several ways.

 Reduces the planning horizon.

 May lead to conservative strategies.

 Increases information needs of the organisation.

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