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Student Name
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Executive Summary
Having a clear and focussed strategy is crucial for a company to maintain its
competitive advantage and be successful. It provides a sense of direction useful for
guiding day-to-day decisions and can be adapted to suit the changing environment.
The current environment is ever-changing and more unpredictable than ever, so an
effective strategy must be developed in order to keep up with these changes and the
competitors in the market; as shown in the fiercely competitive UK grocery market.
The effectiveness of a strategy is thought to depend on how well it aligns with both
history and culture. It is likely that some components of a strategy will have been
used in the past and previous experiences of managers and employees can support
the new strategy and any decisions made. It is important that both managers and
employees hold the values, practices and beliefs of the company so they are
committed and actively contribute to the achievement of the strategic goal. By
aligning strategy with history and culture, a company may increase the chances of
the success and growth in the market.
This report first examines the theory on the influence of history and culture on
strategic development. It then provides a more in-depth analysis, with reference to
WM Morrison PLC, to understand how this theory can be applied to a successful
organisation operating in a highly competitive market.
2
Table of Contents
Executive Summary................................................................................................................................. 2
Table of Contents .................................................................................................................................... 3
1.0. Introduction ................................................................................................................................ 4
2.0. The effect of a company’s history and culture on its strategy ................................................... 4
2.1. How does a company’s history affect its strategy ........................................................... 4
2.2 How does a company’s culture affect its strategy .......................................................... 7
3.0 Application of relevant theory to WM Morrison PLC ............................................................... 10
3.1 WM Morrison PLC – Company Overview ...................................................................... 10
3.2 The effect of history on Morrisons’ strategy ................................................................. 11
3.3 The effect of culture on Morrisons’ strategy................................................................. 13
4.0 Conclusion ................................................................................................................................. 14
3
1.0. Introduction
Most companies have some history. A company’s history contributes to its identity
(O’Mara, 1999), so is a key consideration when making business decisions. As
history is unique and cannot be imitated (Gulati et al., 2013), it’s important that a
company learns from its own previous experiences.
The first suggestion that companies learn from previous experiences was the
experience curve (Figure 1), suggesting that the knowledge acquired from
experience can reduce the time and therefore cost of producing a product.
4
Figure 1: The experience curve (Henderson, 1968)
5
Although a previous strategy may have been successful, this doesn’t guarantee that
components of that strategy will be successful in the future. Change is the one true
constant in the business environment (Alexander, 2015) and a company that does
not change in line with this may no longer be relevant to their external environment
(Riley, 2015). A strategy developing incrementally influenced by history but failing to
keep up with a changing environment is said to be going through strategic drift
(Figure 3).
6
Once a certain decision has been made so many times, it is ‘locked-in’ (Johnson et
al., 2017) and reinforced by technology, objects, the value system, day-to-day
behaviours, industry standards and training (Figure 4).
Johnson et al., (2010) compare this lock-in with ‘furrows in the road’ becoming
deeper as more traffic goes along, giving the traffic no option but to go along those
furrows. A company experiencing a lock-in will find it incredibly costly to implement
change, often making it impossible (Rixen & Viola, 2009).
Every company has a culture (Davis & McIntosh, 2005), often embedded in its DNA
(Eaton & Kilby, 2015). Culture has the potential to be an incredibly powerful factor in
strategic development (Rick, 2013). No matter how well planned a strategy is, it must
be executed effectively in order to be successful (Johnston, 2017). For employees to
actively execute the strategy, they must hold the company’s beliefs and values and
understand the intended direction of the company (Davoren, 2017). This supports
the findings of Johnson et al., (2017) that for a strategy to be successful it must be
aligned with culture. It is therefore vital that before a strategy is developed, the
7
existing culture should be measured and if necessary a target culture should be
defined (McAleese & Hargie, 2004).
The initial driver in a company is its mission, which feeds into the two paths dictated
by strategy and culture. Strategy dictates the guiding path whilst culture dictates the
driving path (Figure 5).
A company’s strategy aims to carry out its corporate missions (Kokemuller, 2017).
These missions guide the company with a sense of direction. To achieve the
missions, a number of activities need to be executed based on the goals and
objectives set. These will be driven by the values, practices and behaviours held
within the company, so must align. This alignment is the glue that ensures a strategy
is executed effectively (Rick, 2014) and without it, the aim of a strategy will never be
fully achieved. Favaro (2014) believes that a good strategy misaligned with culture
will almost definitely be ineffective, but a company with a winning culture can
succeed even if its strategy is mediocre.
Johnson et al., (2014) believe that managers must understand the culture of the
company before developing and implementing a strategy. The culture of a company
consists of four layers (Figure 6).
8
Figure 6: The four layers of culture (Johnson et al., 2013)
A company’s values are easiest to identify as they are often part of the mission. The
beliefs are more specific but difficult to identify, as they are often unrecorded. The
behaviours are the way in which the company operates on a daily basis. At the core
of a company’s culture are the taken-for-granted assumptions, referred to as the
paradigm. This is the ‘collective experience’ that guides employees when responding
to different situations they may face (Johnson et al., 2014) and is represented in the
Cultural Web Theory (Figure 7).
9
The elements of the paradigm provide employees with a common understanding of
their company (Frost, 2010), influencing the way in which they choose to operate. As
a result, it has the potential to be an informer and driver of strategy (Johnson et al.,
2008). However, it is crucial for the strategy to be aligned with these elements to
discourage any challenges by influential and rebellious employees in subcultures.
If the paradigm is misaligned, Spender (2014) believes that the direct effect this has
on the company’s performance will be so significant that they should abandon the
paradigm and adopt a new one (Figure 8).
WM Morrison PLC is the fourth largest grocery retailer in the UK (Kantar, 2017).
Originally founded on Bradford market, the company opened its first supermarket in
1961 (Morrisons, 2017). Morrisons now has 491 supermarkets throughout the UK
and 1 in Gibraltar (Statisa, 2017; Ruddick, 2014). A detailed company history is
presented (appendix 1).
10
The company has grown significantly over the past few years despite some
uncertainty that saw profits fall (appendix 2). The company appears to have
overcome this, recently achieving a stronger sales performance than its competitors
(Wright, 2017).
From its beginnings, Morrisons was a company with family values and many believe
it still is (Bolton et al., 2003; Thompson & Martin, 2010). Despite the recent death of
the ‘driving force’ of the company, the Morrison family still hold a significant stake
(Butler, 2017; Bounds, 2017). Morrisons was known to be a northern firm ‘rooted in
the north with northern values’ (Wainright & Finch, 2008). However, the company’s
acquisition of Safeway in 2004 opened up access to the southern market and moved
the company from a regional to a national organisation. A partnership with Ocado
widened the customer base even further (appendix 3).
The company prides itself on its vertically integrated supply chain; sourcing and
processing most of the food sold through in-house manufacturing facilities
(Morrisons, 2017). This is a key strength (Stones, 2016) giving them a point of
difference in an increasingly competitive market. Morrisons has recently placed more
focus on this fact, recognising the personality of the company (Lauchlan, 2016) and
tailoring its strategy on this basis to utilise the unique strengths of its supply chain.
Morrisons origins as a market stall are reflected in the third of its priorities (appendix
4); ‘find local solutions’ (Morrisons, 2017). The company created ‘market street’ to
promote fresh and local food (Yoxall, 2009), giving customers the experience of a
market in a supermarket. As they now produce 1700 lines of food in-store every day
(Tottman, 2011), customers have an expectation of fresh and local food when they
visit Morrisons. These expectations have therefore locked in the production of local
food, as without it the company would lose its competitive advantage.
The market origins are also reflected in the uniform, particularly of those working on
market street; with white hats and striped aprons making the store feel like a street
market (Thompson & Martin, 2010). The market street concept has been
implemented in all 492 stores at a considerable cost, including the uniform and
11
training of all employees. With a similarly high cost implication of changing this it has
arguably been locked in, as these costs would likely outweigh the benefits. This may
be the reason why they continue to adopt the idea in new stores, such as the St Ives
store recruiting local foodmakers (Mansfield, 2017). However, this may be due to the
fact that the concept is believed to be incredibly successful and crucial to the
company’s turnaround (Foster, 2015).
Morrisons began as a family business and was led by that same family until the
retirement of Ken Morrison (Morrisons, 2008). He was made life president of the
company and was influential until his death. The family retains a significant stake in
the company and the family values are embedded in its operations. The company’s
vertically integrated supply chain demonstrates this, with manufacturing and
distribution done in-house by one of ‘the family’ rather than a supplier or third party.
Once this commitment was made and technology purchased, it would likely be
locked in to ensure a return on the capital investment.
Ken shunned both loyalty cards and online shopping, believing they were ‘gimmicks’
(Finch & Bowers, 2003) and were not profitable (Kuenssberg, 2014). These have
since been introduced, suggesting that history may not always be the deciding factor
in strategic development and may be overruled by the current management’s beliefs
and expectations.
12
market share potentially lost by Ken’s stubbornness causing the company to be
locked out.
The open office layouts found at each Morrisons site highlight the accessibility of
senior management. This is a symbol of the togetherness within the company;
encouraging trust, communication and collaboration (Byrom, 2017). Togetherness is
a part of Morrisons strategy and is reflected in its second of the 5 ways of working
(appendix 5); teamwork.
The control systems found at Morrisons are rewarding rather than punishing. A key
focus of these is loyalty, with long service celebrated regularly (Morrisons, 2017).
Colleagues receive long service awards despite being on a warning, emphasising
the focus on loyalty and not performance. The company wants to retain engaged
employees holding the company’s values, so their strategy is focussed on employee
retention (Morrisons, 2011). The company’s bonus scheme also encourages team
performance, with 3% available to all employees if their team’s targets are met
(Morrisons, 2017).
13
Morrisons northern roots can still be seen in its strategic direction. Most decisions
are made at the head office in Bradford (Tomlinson, 2002), referred to as ‘global HQ’
(Saunders, 2017). The directors and top management are based there, with one
director losing his job after refusing to move to the Bradford office (Ruddick, 2015).
As these are the people likely to have the most support for the company’s beliefs
and behaviours, the fact that their decisions are made ‘up north’ will no doubt have a
large impact on what those decisions are and how they affect the strategy. This was
one of the reasons there was a ‘culture clash’ when the company acquired Safeway
(McLaughlin, 2016) as decisions the company made in the north did not necessarily
work in the south. One example of this is the company’s focus on price (Bolton et al.,
2003), which was believed to be much less effective in the south than in the north
(Ruddick, 2015). Morrisons found this incredibly hard to change, as low prices were
firmly embedded in their history, culture and strategy.
4.0 Conclusion
This report analysed the influence of history and culture on strategic development.
There are many different views on how to develop an effective strategy, but there is
no doubt that an effective strategy is crucial to success. Both history and culture are
thought to have significant effects on a company’s strategy and there are a number
of theories that explain these effects in more detail. These help to understand how a
strategy can use history and culture to its advantage once it is implemented.
The case study on Morrisons shows how the company’s history as a family owned
northern market stall has heavily influenced both its culture and its strategy. The
company is focussed on being a vertically integrated team that work together across
the supply chain; from the point of production to the point of consumption.
14
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Appendices
Source: Vinter (2015). Morrisons surprises analysts with good Christmas sales – but there’s still a
big problem. Retrieved from http://www.londonlovesbusiness.com/business-
news/retail/morrisons-surprises-analysts-with-good-christmas-sales-but-theres-still-a-big-
problem/11673.article
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Appendix 3: Morrisons Customer Base