Strategic integration is the gradual combination and transformation of independent components of business organizations into cohesive and synergistic entities. Strategic integration is an important element in the process of improving organizational performance because it facilitates the continuous alignment of business strategies within the ever changing business environment. Firms use strategic integration to confront the consequences of both predictable transitions and unpredictable challenges that are bound to occur at different levels of business operations. Business strategies, corporate strategies, and functional strategies are the three main levels of strategies that organizations seeking systematic integration adopt for purposes of creating sustainable competitiveness.
DELINEATING STRATEGIC INTEGRATION
Although strategic integration is closely related to strategic management, clear distinctions must be drawn between the two concepts of organizational strategy. Strategic integration aims at achieving synergy through creation of compatibility and interdependence across varied organizational groups, processes, and activities that are autonomous in nature. On the other hand, strategic management identifies long term goals and guides resource allocation and utilization for achieving sustainable competitive advantage either within independent organizational units or in the organization as a whole, without necessarily streamlining the variations across organizational groups, processes, and activities. Therefore, strategic management can be perceived as a component of strategic integration.
The process of strategic integration involves crafting and implementing strategic objectives from an informed perspective of an organization's competitive environment.
Therefore, it is important to begin the integration process by analyzing how the current mission, objectives, and values affect the interests of all the stakeholders in the organization. The current mission identifies the current underlying strategies that define an organization's approach to resource utility. Values express the institutional identity through organizational culture and practices, whereas organizational objectives define the scope of results that organizations seek to accomplish (such as profitability, increased market share, innovation, or financial efficiency).
A conclusive review of organizational structures, resources capabilities, industry trends, and the external environment of a business organization marks the starting point for efforts geared towards determining the weaknesses and competitive advantages of the organization. Upon the successful review of core competencies of an organization, strategic integration can be implemented and evaluated through appropriate corporate governance systems, strategic management practices, strategic leadership, and strategic control. The process of strategic integration must always be accompanied by subsequent adjustments in the management and coordination of functions and roles both external and internal to the organization.
Strategic approach to internal integration involves streamlining the internal operations of an organization (such as maintenance, sales, purchasing, advertising, manufacturing, marketing, and bookkeeping). All the staff of an organization should be involved in the strategic integration process and provided with adequate access to all the relevant information that pertains to the integrated approach to operations. In addition, individual responsibilities along the complex chain of production should be clearly defined.
Organizations can make use of both manual methods and information technology (IT) to link internal systems and communicate procedure modifications across all levels of the chain of production. For example, the Toyota Production System utilizes instructional manuals called Kanbans to relay product output specification instructions across the different sections of the production lines.
Strategic approach to external integration involves streamlining functional activities that affect external stakeholders (such as suppliers, financial institutions, customers, distributors, and agents). Integration of strategies governing external stakeholders requires the implementation of effective networking and communication systems such as electronic data relay systems and internet to provide adequate links between external and internal organizational stake-holders. Successful strategic integration of external factors
facilitates effective sharing and interpretation of critical information among all the organization's stakeholders. Processes that govern activities of external stakeholders enable business organizations to initiate demand forecasts, determine inventory levels, and monitor the feedback of stakeholders.
IMPLICATIONS OF STRATEGIC INTEGRATION
The perpetually dynamic environments under which businesses operate require a gradual approach toward strategic integration in order to determine and pursue the appropriate organizational priorities. It is imperative for managers to adopt broad-based strategic integration methods that are suitable to particular needs of their organizations. This calls for integration of strategies by improving the existing organizational structures and processes as well as creating new structures to accommodate new organizational order. The adoption of strategic integration portends the following implications to business organizations:
Adjusting structures and relationships that affect functional groups and related processes in organizations. For example, this could take the form of bundling individual products that achieve greater profit margins through shared organizational processes.
- Adjusting targets, reward systems, and metrics to reflect changes in procedures and approach to production. It may be necessary to increase staff incentives while modifying metrics for tracking shared cross-functional activities.
- Creating budgetary plans and supplements to cover any extra cross-functional estimates that may arise from the integration processes.
- Automating and upgrading communication structures across functional groups and processes within the organization to achieve efficiency through effective flow and sharing of information.
- Standardizing of business processes and data versions to incorporate the interests of both internal and external stakeholders.
In a 2008 article titled “Integration as a Strategy,” John Schmidt contends that strategic integration can be perfected through continuous adaptation to change and linkage of complex organizational responsibilities without underestimating the significance of innovation at different levels of the end-to-end chain processes. As such, organizational resources should be mobilized to reinforce successful accomplishment of strategic objectives and achievement of optimum performance and results.
Strategic integration is a tactical approach to management that involves high initial investments on resource acquisition and employee training programs. However, the process carries long-term advantages that minimize costs of increasing business flexibility over time. Managers can achieve knowledge-based strategic integration by investing in advanced IT systems. For example, Wal-Mart's success in retaining its position as the largest retailer in the United States is credited to the company's successful strategic integration of IT in streamlining operations between the head office and Wal-Mart branches throughout the United States. Therefore, the significance of information technology can be realized fully if managers view information technology as a strategic function rather than simply a routine organizational function.
Schmidt, John. “Integration as a Strategy.” Information Enterprise Data Management, 23 June 2008. Available from: http://blogs.informatica.com/enterprise_data_management/index.php/2008/06/integration-as-strategy/.
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