Strategy formulation is a process that has been associated with the senior management over the years. The corporate management has formulated strategy, which has defined the future of organizations (Lee, 2009). Therefore, the work of forming strategy has always been a preserve of the top level managers.
Changes in the business environment have changed the factors that affect corporations performance and strategy. As such, previously used microeconomic model has become obsolete with the passage of time. In the old microeconomic model, a strategy should be formulated at the top of the organizational structure and then communicated down the structure for implementation (MacLennan, 2011). This model has been very rigid and limits the amount of input employees can provide to the strategy. Since there are many changes in the business environment that may require businesses to adopt new ideas, new strategy formulation models have emerged.
One such model is formulating a strategy as an emergent process. Using this model, an organization defines its vision and goals depending on the prevailing environmental conditions. This model provides an organization with flexibility to seize opportunities within its environment and adapt to changes that may occur. Formulating strategy as an emergent process has proved successful as demonstrated in the case of Honda and its American market (Mumford, 2008). Honda had no fixed strategy on how to penetrate and operate the American market.The two executives who led the company in the American market adopted a strategy formulation model that depended on the market environment. Honda had been using dealer credit to sell its motorbikes in the united states. However, due to the flexibility afforded by the emergent strategy formulation model, the managers were able to explore cash on delivery as a means of selling motorbikes successfully. Industry players using the microeconomic strategy formulation model could not initiate such a change due to the rigidity of the process. When Honda took this risky step, it expected an uproar from dealers. However, the decision was accepted and actually became an industry standard since other companies adopted it.
The microeconomic strategy formulation model accorded the top level management the sole duty of formulating a strategy for an organization (Mintzberg, 2007). This was a narrow view of the strategy formulation process that would limit an organization from exploiting its full potential. Honda, like other Japanese corporations refused to adopt a narrow view of strategy. To demonstrate this, Honda allowed employees of low status to contribute to the strategy formulation process. For instance, the sales director was able to give a suggestion regarding the most appropriate slogan for the company in the American market. The director’s suggestion prevailed over the choice of the company’s executives leading to the adoption of the slogan. This would never have happened in organizations with a narrow perspective regarding strategy. In such organizations, the sales director’s mandate would only have been implementing the strategies made by the organization’s corporate management. Therefore, the high returns that accompanied the new slogan would have been foregone due to a rigid strategy formulation model
The success of formulating strategy as an emergent process helped Honda to tap into an untapped market. The untapped American market could not have been tapped if the Honda company was to follow convention knowledge at the time. Convention knowledge indicated that the most appropriate action for Honda to take would have been to compete in the existing market. However, because the company had embraced a broad definition of strategy, it had had more opportunities than its competitors. The willingness of Honda’s leader’s to venture into novel market segments enabled the company to gain market leadership and increase its revenues through large sales volumes(Pascale,1984).