Case Study: Organizational Culture in Montenegrin Companies

The impact of organizational culture on the strategy is reflected in phases of formulation and implementation of an appropriate strategy.

Process of formulation of the strategy consists of the following phases: analysis of external environmental factors, analysis of internal factors of a company, generating of strategic alternatives, evaluations and selection of the best strategy. In the process of strategy formulation, the environment in which the company operates, i.e. opportunities and dangers that come from the environment must be examined first. The company observes events in the environment, interprets them, determines their significance and makes further forecasts. Then it is necessary to analyze internal capabilities of a company, which includes an analysis of material, financial and human resources in the company. Starting from these resources, a company will identify its own strengths and weaknesses with respect to competition. Based on internal and external analysis, a company will generate those strategic options that best align company capabilities with the situation in the environment. These options should enable a company to exploit its opportunities and avoid dangers that come from the environment, i.e. to exploit the strengths and minimize the weaknesses. In the next phase, a company evaluates strategic options and makes selection of the best. The company will choose those strategic options that contribute to the great extent to the achievement of strategic goals of the company.

The impact of organizational culture on business strategy, as it has been said, is reflected in the process of strategy formulation. In this regard, the organizational culture affects strategy as follows:

1. Organizational culture determines the way in which the company monitors its environment. What information a company will collect from the environment and what picture of the environment it will build in the process of external analyses depends on company's manner of collecting information. By its assumptions, values and beliefs, organizational culture determines the sources and manner of collection of information. Therefore, whether a company will choose qualitative or quantitative information and how it will monitor the environment depends on organizational culture, i.e. values and beliefs of employees and managers of that company. If the company is dominated by relations of openness and flexibility towards the environment, a company will have more developed practice and mechanisms of monitoring environment in relation to closed and less flexible companies. However, organizational culture affect s not only the external but also the internal analysis of a company. Evaluations of resources and capabilities in a company also depend on values and beliefs shared by employees and managers.

2. Organizational culture causes selective perception of events in the environment. Through mental patterns and interpretative schemes of employees, organizational culture affects perception in the process of making strategic decisions. This scheme represents a systematic knowledge of an individual of certain phenomena and helps him/her to interpret events around him/her. As known already, organizational culture, by its assumptions, values and beliefs determines a significant part of employees' mental patterns in a company. However, people have tendency to anticipate certain events that are not in accordance with their mental patterns. Such information is more difficult to remember, but is very easy and quickly forgotten. Since part of these patterns is determined by assumptions and values of organizational culture, it means that organizational culture represents a kind of a filter through which some information passes and some does not. Thus, organizational culture as such affects the people to see certain phenomenon and not to see the others. This can lead to significant errors in strategic decision making. That is why selective perception represents a cause for many failed investments, because in deciding to enter into a certain project some people take into account only those facts that support the chosen option, while rejecting others.

3. Organizational culture directs interpretations of events in the environment. To make decisions in a company to have an impact on formulation of the strategy, it is necessary for them to be interpreted in a way that will cause certain effects. Interpretation and explanation of these events depends on the mental patterns and experience of those who participate in the formulation of strategy. Given that a large part of mental patterns derived from organizational culture, it can be concluded that culture is a factor that determines the manner of how the internal and external factors of strategic choices would be understood and interpreted.

4. Organizational culture determines the reaction of a company and its choice of strategic option. If there is an agreement about the manner of interpreting information from the environment and their meaning, it does not mean that there is an agreement in which direction to direct actions and choose a certain strategic option. Direction in which activities should be focused in the selection of certain strategic option also depends on the assumptions, beliefs and values that prevail in organizational culture.

In the implementation phase culture can be a stimulating factor, i.e. it can support the defined strategy or represent its serious obstacle, when we say that culture does not support the defined strategy. To what extent culture will or will not support the defined strategy depends on degree to which organizational culture agrees with the chosen strategy. To implement the strategy it is necessary to take certain activities. In this regard, two situations may arise. The first is when undertaken activities are in accordance with cultural assumptions, values and norms and we say that the strategy is easy to implement in the company. Formulated strategy is not only compatible with the existing organizational culture, but is also a stimulating factor for implementation of a strategy and legitimizes the chosen strategy. Another situation is the case when the formulated strategy is incompatible with the existing organizational culture (due to pressure from the environment, change in leader and his associates, where new management formulates the strategy that contradicts the values and beliefs of the majority of employees and managers in the company or acquisition that represents the situation where one company acquires another, so the bought company usually changes its strategy and accepts the strategy imposed by the new owner). This results in implementation of such operational activities that are not in accordance with cultural assumptions, values and norms of behavior, i.e. they are not culturally acceptable for the company. Such activities are not easily to implement and we usually say that in such a case the culture becomes a barrier to implementation of the strategy and delegitimizes the same. This situation is referred to as a cultural risk. To reduce a cultural risk a company must behave in different ways:

Therefore, the influence of organizational culture on business strategy has been explained in the previous part of the paper on a theoretical level. In the following part the hypothesis about the influence of organizational culture on business strategy in Montenegro will be examined. In this regard, we started from the hypothesis that:

~ Organizational culture affects the choice of strategy in the company ~