Page 9 - CIMA SCS Workbook August 2018 - Day 2 Suggested Solutions

CIMA AUGUST 2018 – STRATEGIC CASE STUDY

EXERCISE 3

Email

To: Den Rice, CFO
From: Senior Manager
Subject: Strategy and structure

The purpose of this email is to look at the different ways in which strategy can be formulated and
assess their relevance to FNG. It will then deal with the structure of the company and consider
any changes that might be required.

Approach to formulating strategy

Rational approach

The rational approach to formulating strategy means adopting a formal and systematic process of
identifying goals and then selecting strategies to achieve those goals. Developing the strategy is
broken down into a number of well-defined stages, and considerable time is devoted to thinking
matters through at each stage before adopting the chosen plan of action.

This approach can also be referred to as the traditional, formal or top-down approach. It is
generally better suited to organisations that operate in a stable industry, where change tends to
be slow and gradual and the future can be predicted with a degree of confidence.

FNG has been in existence for over 130 years and, whilst there has been change in that industry
throughout that period, the last two decades have undoubtedly been the most extreme. The
newspaper industry could be described as having been relatively stable for most of FNG’s life;
demand for news stories was constant, and the technology used to make and distribute papers
would have evolved gradually.

With this in mind, it made sense for the Board of FNG to adopt the rational approach in
formulating strategy; time invested in understanding the company’s position and agreeing a plan
for the future would have been worthwhile, largely due to the expectation that what the
company believes the future to hold would be proved accurate.

However, the advent of the internet in the late 1990s, together with the increased technology
available in the form of high speed broadband and mobile devices to access news on the move
has been highly disruptive to the industry. Consumers have shown an appetite for accessing news
in real time and in different formats to what was considered ‘the norm’ in the past, and it is
possible that FNG’s approach to formulating strategy may have resulted in its declining
performance in recent years. Quite simply, its rigid approach to developing strategy meant that it
did not predict or could not react quickly enough to the change in its industry. One of the main
criticisms of the rational approach is that formal planning reduces initiative and innovative
thinking.

Emergent approach

Under this approach, strategies emerge over time in response to the environment. They are tried
and developed as they are implemented, and plans evolve as the market circumstances change.

68 KAPLAN PUBLISHING