What is Externally Imposed Strategy (Meaning and Examples)

Definition of Imposed Strategy

An externally imposed strategy is when a company is forced to adopt a certain strategy in response to strong external factors in its business environment. In other words, this is a reactive strategy.

Imposed Strategy Meaning

Having to adopt an externally imposed strategy means that an organization does not have a measure of control over its own strategic direction. However, while the company is in a position of taking strategy choices based on external pressures, this does not mean that the organization should resign itself to fate. Instead, companies can internalize externally imposed strategies to achieve better results. Although external forces may necessitate a certain strategy, companies can still look for blue ocean spaces. They can make the most of a difficult situation by finding suitable gaps within the constraints imposed by the external forces.

Imposed Strategy Examples and Sources

Governmental Intervention

One of the biggest examples of externally imposed strategies are in countries with strong governmental policies. The strategies of public sector entities in such countries are heavily influenced by the approach and outlook of these governments. For instance, the government in some countries intervenes directly in sectors like education or medical care. This is often done with the aim of influencing the strategic direction of schools or hospitals which may be underperforming. When faced with such intervention, these organizations would have no choice but to adopt a strategy based on the constraints imposed upon them. An example of this is the political and legal pressures faced by companies like Apple and Google in European markets to conform to the local requirements on data privacy. Such kinds of local pressures can even leave companies with no choice but to adopt a multidomestic strategy approach.

Financial Pressures

Most companies, especially those which are publicly listed, have a certain level of exposure to imposed strategy due to financial market conditions. As an example, during the 2008 recession, many companies had to change their strategic direction, often just to survive. Other companies thrived with the imposed strategy required by the financial situation. For instance, when the US economy was facing a strong downturn at the time, Lego turned its attention to European and Asian markets. These markets were not as badly affected and although the company adopted this strategy in response to financial pressure in its main market, this worked out very well for the company, as it went on to record some of its highest profits during that time.

Even business entrepreneurs who have a specific vision or strategy in mind may be forced to adopt externally imposed strategies. This often happens when they want to grow their business with venture capital. These businesses may have strategies imposed on them by their investors as a necessary condition for securing the required funding.

External Force - hammer cracking a nut

Shareholder Demands

A company might also find itself having to take on a strategy imposed by shareholder demands. The biggest example of this is the case of activist shareholders. They try to use their equity position in the company to push certain strategic choices and guide the strategy direction of the company’s management.

Public Interest Groups

This is often seen in sectors or industries where the product or services have significant implications for social norms and issues. The concerns could be about safety, sustainability or ethics. For example, companies in the food service industry have long faced pressure to curb certain practices such as the usage of antibiotics in meat-based offerings. Even major food retail chains like McDonald’s had to bow to the pressure and change their strategy based on such strong external pressures.

Influence of Parent Company

Imposed strategy can also be seen within large multidivisional organizations. For instance, a parent company may try to impose its strategic direction and approach on other sub-divisions within the company.

Other External Forces

We do not need to look too hard to find an example of this as the impact of the Covid-19 pandemic should still be fresh in our minds. The strategy of almost every company was affected by this to some extent. The most common externally imposed strategy resulting from this example was of course, the phenomenon of working from home.

How to Use Imposed Strategy?

When external forces dictate a certain course of action and strategic direction for a company, the business would typically have no choice but to ‘go with the flow’. However, when using imposed strategy in business contexts, companies must consider their position carefully. They should brainstorm what actions they can take within the constraint of the strategic direction dictated by an imposed strategy. The most suitable actions can then be focused on as a deliberate strategy to consolidate their position. In other words, even when faced with an imposed strategy, companies must work towards converting them to deliberate strategies which can benefit the company further.

The different ways of reacting to imposed strategies are explained further below. In order to decide which of these approaches might be most suitable, companies need to weight the costs against the benefits.

Person signing a legal document

Partial Conformity

This is when a company seeks to conform to non-legal factors, such prevailing industry practice, societal pressure, or moral expectations. Companies adopting this approach are only seeking to do the bare minimum which they consider necessary to overcome the external pressure. Most consumers and stakeholders are likely to see through the half-hearted attempt to conform to these imposed forces. Hence, this approach does not present much benefit to the company in most cases.

Full Conformity

When a company goes beyond the minimum non-legal expectations and what other competitors in the market may be doing, they are in full conformity. This approach is often taken by companies which fully understand what their stakeholders want. They are ready to take additional steps to meet these expectations even if it may pose some financial challenges such as increased cost or practical challenges such as drastic changes to organizational culture. Naturally, such an approach is welcomed by concerned stakeholders. This is a clear case of converting imposed strategy into a deliberate strategy.

Partial Compliance

Unlike conformity, compliance is often related to legal requirements or regulations. A company may seek to only comply partially with the ‘letter of the law’. This means that the company only tries to meet the bare minimum required by the relevant law or regulation. Often, the company taking this approach would even seek to find some loopholes in the law to try and continue with their own deliberate strategy. Unlike partial conformity, the general public are not always aware of the extent of the compliance of companies unless their shortcomings are constantly mentioned in mainstream media coverage. Hence, this kind of approach is not all that rare as companies feel that they can get away with it.

Full Compliance

This is when a company ensures that it follows the ‘spirit of the law’. Organizations following this approach fully understand why a certain law or regulation exists and go out of their way to ensure that they tick all the boxes correctly. In this approach, the imposed strategy often becomes a part of the company policy and implemented consistently across the company’s divisions. Just like full conformity, this approach is also likely to lead to additional challenges, especially to the corporate structure and company policy.

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