David Abbam Adjei

INSTITUTE OF CHARTERED ACCOUNTANTS

STRATEGIC CASE STUDY

TOPIC:
OVERVIEW OF STRATEGY

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INTRODUCTION

Managing activities that are internal to the firm is only part of the modern Manager’s
responsibilities. The modern Manager must also respond to the challenges posed by the firm’s
immediate and remote external environments. The immediate external environment includes
competitors, suppliers, increasingly scarce resources, government agencies and their ever more
numerous regulations, and customers whose preferences continuously shift strangely. The
remote external environment comprises economic and social conditions, political priorities,
and technological developments, all of which must be anticipated, monitored, assessed, and
incorporated into the Manager’s decision making. Consistently, the Manager is compelled to
subordinate the demands of the firm’s internal activities and external environment to the
multiple and often inconsistent requirements of its stakeholders: owners, top managers,
employees, communities, customers, and the country. To deal effectively with everything that
affects the growth and profitability of a firm, Managers are required to employ processes that
they feel will position the firm optimally in its competitive environment by maximizing the
anticipation of environmental changes and of unexpected internal and competitive demands.

To earn profits and continue to grow, firms and managers need to perfect the processes that
respond to increases in the size and number of competing firms; to the expanded role of
government as a buyer, seller, regulator, and competitor in the free enterprise system; and to
greater business involvement in international trade. Perhaps the most significant improvement
in these management processes is strategy.

THE CONCEPT OF STRATEGY

The word strategy has entered the field of management more recently. At first, the word was
used in terms of Military Science to mean what a manager does to offset actual or potential
actions of competitors. The word is still being used in the same sense, though by few people.
The word strategy is derived from Greek called ‘Strategos’, which means general. The word
strategy, therefore, means the art of the general.

In management, the concept of strategy is taken in slightly different form as compared to its
usage in military form. In management strategy is taken more broadly. However, in this broad
form, various experts do not agree about the precise definition and scope of strategy.

If every business could grow indefinitely, the total market would grow to an infinite size on a
finite earth. It has never happened. Competitors perpetually crowd each other out. The fittest
survive and prosper until they displace their competitors or outgrow their resources. What
explains this evolutionary process? Why do business competitors achieve the equilibrium they
do? The answer could be a strategy

In an effort to define strategy, we shall concentrate on two main expositions on the concept by
Henry Mentzbeg, 1987 and Johnson, Scholes and Whittington, 2011.

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Henry Mintzbeg, 1987

Mintzberg is a noted management thinker and prolific writer on strategy. Mintzberg provides
five definitions of strategy with 5Ps:

 Plan
 Ploy
 Pattern
 Position
 Perspective.

Plan. Strategy is a plan - some sort of consciously intended course of action, a guideline (or
set of guidelines) to deal with a situation. By this definition strategies have two essential
characteristics: they are made in advance of the actions to which they apply, and they are
developed consciously and purposefully. It is always better for the organizations to have a plan
of action much in advance to be prepared for any unforeseen internal and external situations.
And a well-planned strategy is a plan to deal with such situations. A plan needs to be made
with a long-term and a futuristic approach in mind with its execution and development followed
up in a detailed and intricate manner.

Ploy. As plan, a strategy can be a ploy too, really just a specific manoeuvre intended to outwit
an opponent or competitor. Here, the strategy is planned and executed with a specific intention
to beat and outperform the competition in the market gaining the competitive edge and
advantage. In this scenario, the organizations can come up with something very bizarre and
unexpected and surprise the market environment that also creates the waves of commotion
within the minds of the competitors. An example Mintzberg gives describes a situation in which
a corporation might threaten to expand their plant capacity in order to dissuade their competitor
from building a new plant. In this example of strategy as ploy, the actual strategy, is the threat,
not the expansion itself, and therefore can be considered a ploy.

Pattern. If strategies can be intended (whether as general plans or specific ploys), they can
also be realised. In other words, defining strategy as plan is not sufficient; we also need a
definition that encompasses the resulting behaviour: Strategy is a pattern - specifically, a
pattern in a stream of actions. Strategy is consistency in behaviour, whether or not intended.
The definitions of strategy as plan and pattern can be quite independent of one another: plans
may go unrealised, while patterns may appear without preconception.

Plans are intended strategy, whereas patterns are realised strategy; from this we can distinguish
deliberate strategies, where intentions that existed previously were realised, and emergent
strategies where patterns developed in the absence of intentions, or despite them.

However, defining strategies as plans, ploys, or patterns fails to answer the question “strategies
about what?”. Referring to other writers’ findings, Mintzberg concludes that the answer to this
question is that strategy is “potentially about anything. About products and processes,

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customers and citizens, social responsibilities and self-interests, control and color”. Regardless
of the seemingly unlimited possibilities regarding the answer to this question, two parts of the
content of strategies need to be noted because they are of particular importance and,
accordingly, play major roles. One of these parts of the content of strategies is found in the
fourth definition given by Mintzberg, that is, strategy as position.

Position. Strategy is a position - specifically a means of locating an organisation in an

"environment". By this definition strategy becomes the mediating force, or "match", between
organisation and environment, that is, between the internal and the external context. The aspect
of position in formulating the organizational strategy needs to be carefully understood,
designed, planned, and executed as it will define the overall position of the organization in the
market considering all the internal and external factors.

According to Mintzberg, this definition is compatible with all of the previous definitions; “a
position can be preselected and aspired to through a plan (or ploy) and/or it can be reached,
perhaps even found, through a pattern of behaviour. In this regard, Strategy is essentially a
descriptive idea that includes an organization’s choice of niche or position and its primary
decision rules for coping with that niche or position”.

Position focuses on how the organization wants to portray itself in the market and in the minds
of the consumers that will gain it a competitive advantage. What will be the core values, unique
selling propositions, nature and attributes of the offerings of products and services, and the
overall brand strength and value proposition? Working on all these factors in a detailed manner
will help the organization carve a distinctive position in the market with an edge over others.

Perspective. Strategy is a perspective - its content consisting not just of a chosen position, but
of an ingrained or deep-rooted way of perceiving the world. Strategy in this respect is to the
organisation what personality is to the individual. What is of key importance is that strategy is
a perspective shared by members of an organisation, through their intentions and / or by their
actions. In effect, when we talk of strategy in this context, we are entering the realm of the
collective mind - individuals united by common thinking and / or behaviour.

This definition argues that more than anything, strategy is a concept. The essential proposition
of this argument is that all strategies are ideas that occur only in the minds of “interested parties
- those who pursue them, are influenced by that pursuit, or care to observe others doing so”.
Regardless of how they may appear, Mintzberg theorizes that although plans and positions may
be replaceable, perspectives are final, meaning that once they’ve been established, they become
much more difficult to change. He explains this further, stating that “a perspective may become
so deeply ingrained in the behavior of an organization that the associated beliefs can become
subconscious in the minds of its members. When that happens, perspective can come to look
more like a pattern than like a plan”. This means that strategy as perspective can be seen more
in the consistency of the behaviors of the organization’s members rather than in the expression
of intent.

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The organization formulates strategy by dwelling on the crucial and important details such as
how does the target audience think about the organization? How do employees of the company
perceive the management and the brand as a whole? What is the perspective of the investors
and other stakeholders of the organization? The culmination and thought patterns of all these
individual perspectives work as the valuable source of information for the company and help
it to make a strategic choice.

As is evident through Mintzberg’s article, no one relationship, or even a single definition, takes
priority over the others, although there are numerous relationships that exist among the five
definitions. As he explains, “In some ways, these definitions compete (meaning they can
substitute for each other), but in perhaps more important ways, they complement. Not all plans
become patterns, nor or all patterns that develop planned; some ploys are less than positions,
while other strategies are more than positions yet less than perspectives”. While each definition
holds its unique aspects and theories, overall, when they are analyzed using the various
relationships and characteristics Mintzberg gives, they each contribute crucial components to
one’s ability to understand strategy, which then encourages that individual to look more closely
at the central questions about organizations in general.

Johnson, Scholes and Whittington, 2011

Johnson, Scholes, and Whittington in their book, Exploring Corporate Strategy, define strategy
‘as the direction and scope of an organisation over the long-term: which
achieves advantage for the organisation through its configuration of resources within a
challenging environment, to meet the needs of markets and to fulfil stakeholder expectations".

According to them, the words ‘strategy’ and ‘strategic decisions’ are typically associated with
the following issues:

1. The long-term direction of an organisation. Strategy explicitly recognises that strategic

change requires a ‘marathon and not a sprint’. Strategy involves long-term decisions about
what sort of company it should be, and realising these decisions would take plenty of time.
2. Strategic decisions are likely to be concerned with the scope of an organisation’s activities:
Does (and should) the organisation concentrate on one area of activity, or does it have
many? The issue of scope of activity is fundamental to strategic decisions because it
concerns the way in which those responsible for managing the organisation conceive
its boundaries. It is to do with what they want the organisation to be like and to be about.
3. Advantage for the organisation over competition. Advantage may be achieved in different
ways and may also mean different things. For example, in the public sector, strategic
advantage could be thought of as providing better value services than other providers, thus
attracting support and funding from government.
4. Strategic fit with the business environment. Organisations need appropriate positioning in
their environment, for example in terms of the extent to which products or services meet
clearly identified market needs. This might take the form of a small business trying to find

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a particular niche in a market, or a multinational corporation seeking to buy up businesses

that have already found successful market positions.
5. The organisation’s resources and competences. Following ‘the resource-based view’ of
strategy, strategy is about exploiting the strategic capability of an organisation, in terms of
its resources and competences, to provide competitive advantage and/or yield new
opportunities. It is not just about countering environmental threats and taking advantage
of environmental opportunities; it is also about matching organisational resources to these
threats and opportunities. There would be little point in trying to take advantage of some
new opportunity if the resources needed were not available or could not be made available,
or if the strategy was rooted in an inadequate resource-base.
6. The values and expectations of powerful actors in and around the organisation. These actors
– individuals, groups or even other organisations – can drive fundamental issues such as
whether an organisation is expansionist or more concerned with consolidation, or where
the boundaries are drawn for the organisation’s activities. The beliefs and values of these
stakeholders will have a greater or lesser influence on the strategy development of an
organisation, depending on the power of each.

According to Johnson, Scholes and Whittington, the characteristics of strategic decisions

highlights some implications:

1. Complexity is a defining feature of strategy and strategic decisions and is especially so in

organisations with wide geographical scope, such as multinational firms, or wide ranges of
products or services.
2. Uncertainty is inherent in strategy, because nobody can be sure about the future. For
Yahoo!, for example, the Internet environment is one of constant and unforeseeable
innovation.
3. Operational decisions are linked to strategy. This link between overall strategy and
operational aspects of the organisation is important for two other reasons. First, if the
operational aspects of the organisation are not in line with the strategy, then, no matter how
well considered the strategy is, it will not succeed. Second, it is at the operational level that
real strategic advantage can be achieved. Indeed, competence in particular operational
activities might determine which strategic developments might make most sense.
4. Integration is required for effective strategy. Managers have to cross functional and
operational boundaries to deal with strategic problems and come to agreements with other
managers who, inevitably, have different interests and perhaps different priorities.
5. Relationships and networks outside the organisation are important in strategy, for example
with suppliers, distributors and customers. For Facebook, advertisers and users are crucial
sets of relationships.
6. Change is typically a crucial component of strategy. Change is often difficult because of
the heritage of resources and because of organisational culture. Sometimes barriers to
change seem to include a top management that is afraid of taking hard decisions and a lack
of clear accountability amongst lower-level management.

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LEVELS OF STRATEGY

Strategies exist at a number of levels in an organisation and it is at the heart of every business.
All businesses have competition, and it is strategy that allows one business to rise above the
others to become successful. Even if you have a great idea for a business, and you have a great
product, you are unlikely to go anywhere without strategy. To help understand strategy in
business, we need to look at four levels of strategy that are typically used by organizations.
Only when all four of these levels are carefully considered will the business be able to get on
the right path toward a prosperous future.

Corporate Level Strategy

This is concerned with the overall scope and direction of an organization and how value will
be added to the different parts (business units) of an organization. It is formulated by the top
management and affect the whole organization. A corporate-level strategy is an action taken
to gain a competitive advantage through the selection and management of a mix of businesses
competing in several industries or product markets.

A corporate-level strategy is utilized to help increase competitive advantage of a firm over its
competitors and to continue to offer a unique product or service to consumers.

In general, a corporate strategy has the following characteristics:

1. It is generally long range in nature, though it is valid for short-range situations.

2. It is action-oriented and is more specific than mission and goals.
3. It is multi-dimensional and integrated.
4. It is formulated at the top management level, though middle and lower level managers
are associated in their formulation and in designing sub-strategies.
5. It is generally meant to cope with a competitive and complex environment.
6. It flows out of the goals and objectives of the enterprise and is meant to translate them
into realities.
7. It is concerned with perceiving opportunities and threats and seizing initiatives to cope
with them.
8. It is concerned with the deployment of limited organisational resources in the best
possible manner.
9. It provides unified criteria to managers in the function of decision making.
10. It is intended to handle complexity and reduce uncertainty of the environment.
11. It is meant to fill in the need of organisations for a sense of dynamic direction, focus and
cohesiveness.
12. It includes the determination of business lines, expansion and growth, vertical and
horizontal integration, diversification, takeovers and mergers, new investment and
divestment areas, research and development projects, and so on.

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Corporate strategy deals with three key issues facing the corporation as a whole.

1. Directional strategy – the firm’s overall orientation towards growth, stability and
retrenchment. The two basic growth strategies are concentration and diversification. The
growth of a company could be achieved through merger, acquisition, takeover, joint
ventures and strategic alliances. Turnaround, divestment and liquidation are the various
types of retrenchment strategy.
2. Portfolio analysis – The industries or markets in which the firm competes through its
products and business units. In portfolio analysis, top management views its product lines
and business units as a series of portfolio investment and constantly keep analysing for a
profitable return.
3. Parenting strategy – the manner in which the management coordinates activities and
transfers resources and cultivate capabilities among product lines and business units.

Business Level Strategy

The second level is business-level strategy, which is about how the various businesses included
in the corporate strategy should compete in their particular markets (for this reason, business-
level strategy is sometimes called ‘competitive strategy’).

An organization's core competencies should be focused on satisfying customer needs or

preferences in order to achieve above average returns. This is done through Business-level
strategies. Business level strategies detail actions taken to provide value to customers and gain
a competitive advantage by exploiting core competencies in specific, individual product or
service markets. Business-level strategy is concerned with a firm's position in an industry,
relative to competitors

This typically concerns issues such as pricing strategy, innovation or differentiation, for
instance by better quality or a distinctive distribution channel. So, whereas corporate-level
strategy involves decisions about the organisation as a whole, business level strategy decisions
relate to particular strategic business units (SBUs) within the overall organisation.

A strategic business unit is a part of an organisation for which there is a distinct external market
for goods or services that is different from another SBU. An SBU is responsible for its own
products, services and markets and, therefore, it is also responsible for developing its own
strategy. Generally, an SBU is independent in its business, operations, has its own managerial
resources and has all its assets under its control.

Firms choose from among two main business-level strategies to establish and defend their
desired strategic position against competitors: cost leadership and differentiation. Each
business-level strategy helps the firm to establish and exploit a particular competitive

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advantage within a particular competitive scope. How firms integrate the activities they
perform within each different business-level strategy demonstrates how they differ from one
another.

The cost leadership strategy is an integrated set of actions taken to produce goods or services
with features that are acceptable to customers at the lowest cost, relative to that of competitors.
Cost leaders concentrate on finding ways to lower their costs relative to those of their
competitors by constantly rethinking how to complete their primary and support activities to
reduce costs still further while maintaining competitive levels of differentiation.

The differentiation strategy is an integrated set of actions taken to produce goods or services
(at an acceptable cost) that customers perceive as being different in ways that are important to
them. While cost leaders serve an industry’s typical customer, differentiators target customers
who perceive that value is created for them by the manner in which the firm’s products differ
from those produced and marketed by competitors.

The following are illustrative examples of SBUs.

1. Customer Segment: A bank is structured with a separate division that services high net
worth individuals.
2. Products: An office furniture manufacturer is structured as two divisions: fashion and
standard. The divisions share a brand and administrative functions such as human resources
and information systems.
3. Services: A telecom company has a data centre division that offers services such as data
collection, processing and sale to third-paties.

In very simple organisations with only one business, the corporate strategy and the business-
level strategy are nearly identical. None the less, even here, it is useful to distinguish a
corporate-level strategy, because this provides the framework for whether and under what
conditions other business opportunities might be added or rejected.

The purpose of a business-level strategy is to create differences between the firm’s position
and those of its competitors. To position itself differently from competitors, a firm must decide
whether it intends to perform activities differently or to perform different activities. In fact,
“choosing to perform activities differently or to perform different activities than rivals” is the
essence of business-level strategy. Thus, the firm’s business-level strategy is a deliberate
choice about how it will perform the value chain’s primary and support activities in ways that
create unique value.

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Functional Level Strategy

All organizations irrespective of the size, nature and scope of business must perform the
functions like marketing, finance, production and operations, human resource management
Research & Development etc. Careful planning, execution and coordination of these functions
are highly essential for effective strategic planning, implementation and control.

Functional strategies are formulated at the functional / departmental levels and developed from
the business strategy or corporate strategy. The main functional strategies include marketing,
financial, human resources and production strategies for the implementation of corporate
strategy.

So, for instance to increase market share, the functional level strategy might include marketing
to improve brand recognition, quality improvement for the end products and the hiring of
specialized personnel. When these strategies are met, departmental management can create
individual assignments geared to support sectoral objectives. For Accounting, functional level
strategy could involve simplifying and automating the process of gathering information,
reducing errors in data provided to other departments and providing access to information in
real time.

For instance, if the company has an operational strategy of reducing costs, the functional
strategy for the accounting department will be to find where those costs can be cut, while the
functional strategy for the manufacturing floor will be to find ways to increase efficiency in
the manufacturing process.

The functional level approach should have the following key variables:

1. Alignment. The functional strategies must align with business and corporate strategies
alike. If the corporate approach is to improve the level of market share and the business
strategy involves the improvement of brand identification, the functional strategy should
not include updating the security systems because it is not in alignment with the other
strategies.
2. Detail. The functional strategy should have a high level of detail. There should be specific
goals for each department, and the respective managers should have specific criteria
through which the successes of the team are measured.
3. Existing Resources. Each functional strategy in place has to use current resources present
in each department, whether they are personnel, equipment or opportunity. The business
should not base the marketing department strategy on inaccessible or imaginary resources.
4. Progress. When trying to assess the level of progress being made, it is possible to get caught
up in the available data. The management should consider what the corporate and business
level strategies are and then provide frameworks to assist in determining whether there is
progress toward these objectives.

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Because functional level strategy is so specific, it is usually more difficult to set than corporate
and business strategy. But taking the time to hammer out the actionable strategies of each
department can help the firm align its goals from the top of the organization all the way down
to the individual employees. This will help the managers throughout the organization get a
better understanding of how their departments (and the employees that make them up) impact
the business and corporate level strategy. And when all the pieces of the business are united in
achieving a singular goal, success is inevitable.

Operational Level Strategy

This is at the operating end of the organization which is concerned with how the components
parts of an organization deliver effectively the corporate or business level strategies in terms
of resources, processes and people.

Operations strategy is a plan specifying how an organization will allocate resources in order to
support infrastructure and production. An operations strategy is typically driven by the overall
business strategy of the organization, and is designed to maximize the effectiveness of
production and support elements while minimizing costs.

Operations strategy has a long-term concern for how to best determine and develop the firm's
major operations resources so that there is a high degree of compatibility between these
resources and the business strategy. Very broad questions are addressed regarding how major
resources should be configured in order to achieve the firm's corporate objectives. Some of the
issues of relevance include long-term decisions regarding capacity, location, processes,
technology, and timing.

Through the development of operational strategies, the firm can evaluate and implement
efficient systems for the use of resources and personnel. Without a stable operations strategy,
companies may not be able to keep up with the changing markets and could start to lose to
trendier competitors.

One appropriate operational level strategy example was when Amazon began to use drones for
delivery. It was a change from its traditional brick-and-mortar approach coupled with physical
deliveries. To be effective, all parts of the company have to work together. Under the operations
level strategy, each department has to contribute to the mission statement and administer
strategies which underlie the overall business strategy.

A service driven operations strategy centres around customer service, product service or both.
For example, a business may be distinctive in providing a niche in quality customer service
and gain a loyal customer base for its efforts. This can include offering speedy self-checkout
registers to decrease the time customers spend waiting in line. Alternately, it could consist of
assuring rapid delivery of a product or a conveniently located drive-through for easy access.

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Another example is, a business could have one department focus on quality control as a priority,
while a separate department focuses on maintaining the highest standards of customer care.
With technological advances, it has become increasingly easier to offer real-time customer
service as well as providing high-tech solutions for rapid product tracking, delivery and access.

The firm's operations strategy must be conducive to developing a set of policies in both process
choice and infrastructure design (controls, procedures, systems, etc.) that are consistent with
the firm's distinctive competency. Most firms share access to the same processes and
technology, so they usually differ little in these areas. What is different is the degree to which
operations matches its processes and infrastructure to its distinctive competencies.

A major advantage of operational strategy is its focus on competition. Businesses that lag
behind their competitors can implement company-wide operational strategies to close the gap.
Companies that have a competitive advantage can apply operational strategies to maintain or
increase their advantage. These operational strategies then can be broken down and
implemented at the departmental level. The success of operational strategies are also easy to
measure, such as increased profits, reduced costs and higher market share in the industry.

Firms that fail to fully exploit the strategic power of operations will be hampered in their
competitive abilities and vulnerable to attack from those competitors who do exploit their
operations strategy. To do this effectively, operations must be involved throughout the whole
of the corporate strategy.

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HOW IS STRATEGY MANAGED? STRATEGIC MANAGEMENT

Strategies do not happen just by themselves. Strategy involves people, especially the managers
who decide and implement strategy. There must therefore, be a process to achieve it. The
strategic management process is the full set of commitments, decisions, and actions required
for a firm to achieve strategic competitiveness and earn above-average returns.

Johnson, Scholes and Whittington (2011) indicate that strategic management can be thought of
as having three main elements within it. Strategic management includes understanding the
strategic position of an organisation, making strategic choices for the future and managing
strategy in action.

The strategic position

Understanding the strategic position is concerned with identifying the impact on strategy of the
external environment, an organisation’s strategic capability (resources and competences) and
the expectations and influence of stakeholders.

The environment. The organisation exists in the context of a complex political, economic,
social, technological, environmental (i.e. green) and legal world. This environment changes
and is more complex for some organisations than for others. How this affects the organisation
could include an understanding of historical and environmental effects, as well as expected or
potential changes in environmental variables. Many of those variables will give rise to
opportunities and others will exert threats on the organisation – or both. A problem that has to
be faced is that the range of variables is likely to be so great that it may not be possible or
realistic to identify and understand each one. Therefore, it is necessary to distil out of this
complexity a view of the key environmental impacts on the organisation.

The strategic capability of the organisation – made up of resources and competences. One way
of thinking about the strategic capability of an organisation is to consider its strengths and
weaknesses (for example, where it is at a competitive advantage or disadvantage). The aim is
to form a view of the internal influences – and constraints – on strategic choices for the future.
It is usually a combination of resources and high levels of competence in particular activities,
called core competences, that provide advantages which competitors find difficult to imitate.

The major influences of stakeholder expectations on an organisation’s purposes. Purpose is

encapsulated in an organisation’s vision, mission and values. Here the issue of corporate
governance is important: who should the organisation primarily serve and how should
managers be held responsible for this? This raises issues of corporate social responsibility and
ethics. The stakeholder expectations explore how both variations in international corporate
governance systems and the power configurations within particular organisations can influence
purpose.

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Strategic choices
Strategic choices involve the options for strategy in terms of both the directions in which
strategy might move and the methods by which strategy might be pursued. For instance, an
organisation might have to choose between alternative diversification moves, for example
entering into new products and markets. As it diversifies, it has different methods available to
it, for example developing a new product itself or acquiring an organisation already active in
the area.

At the highest level in an organisation there are issues of corporate-level strategy, which are
concerned with the scope, or breadth, of an organisation. These include diversification
decisions about the portfolio of products and the spread of markets. Corporate-level strategy is
also concerned with the relationship between the separate parts of the business and how the
corporate ‘parent’ adds value to these various parts.

There are strategic choices in terms of how the organisation seeks to compete at the business
level. Typically, these involve pricing and differentiation strategies, and decisions about how
to compete or collaborate with competitors.

Organisations have to make choices about the methods by which they pursue their strategies.
Many organisations prefer to grow ‘organically’, in other words by building new businesses
with their own resources. Other organisations might develop by mergers/acquisitions and/or
strategic alliances with other organisations.

International strategy is a form of diversification, into new geographical markets. It is often at

least as challenging as diversification. International strategy examines choices organisations
have to make about which geographical markets to prioritise and how to enter them, by export,
licensing, direct investment or acquisition.

Strategy in action

Organising strategy in action is concerned with ensuring that chosen strategies are actually put
into action and are working in practice.

First of all, it is important to consider the strategy development processes of an organisation.

The strategies that an organisation actually pursues are typically a mixture of the intended and
the emergent. Intended strategies are the results of formal strategic planning and decision
making, but the strategy that is actually pursued is typically somewhat emergent, including
bottom-up initiatives, rapid responses to unanticipated opportunities and threats, and sheer
chance.

Structuring an organisation to support successful performance. This includes organisational

structures, processes and relationships (and the interaction between these elements).

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Resourcing strategies in the separate resource areas (people, information, finance and
technology) of an organisation in order to support overall strategies. The reverse is also
important to success, that is the extent to which new strategies are built on the particular
resource and competence strengths of an organisation.

Managing strategy very often involves strategic change. This will include the need to
understand how the context of an organisation should influence the approach to change and the
different types of roles for people in managing change. It also looks at the styles that can be
adopted for managing change and the levers by which change can be effected.

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APPROACHES TO ORGANISATIONAL STRATEGY

Business strategy is essential to the success of organizations. Given the importance of strategy
to organizational success, attempts have been made to study and capture the best approaches
to formulate and implement business strategy. Over the years, through different studies,
numerous different approaches to develop business strategy have been identified and promoted
in management literature.

The success of organizations is often attributed to effective business strategy. It is therefore

important for organizations to learn and understand the conditions as well as the process for
developing effective business strategy. Understanding what strategy really is and adopting the
ideal approach to develop strategy are as useful as learning about how to make organizations
successful.

We shall be looking at the following approaches to organisational strategy:

 Systems Based Approach

 Resource Based Approach
 Core Competence Based Approach
 Rational Based Approach
 Adaptive Based Approach, And
 Emergent Based Approach

Systems based approach to Strategy

In an increasingly complex business environment, companies need to reassess their strategic

choices on a regular basis. Facing a world of growing global uncertainty and confusing
complexity raises the question of how to manage these challenges. Strategic management tries
to provide companies with the tools they need to effectively prepare for constant environmental
changes. However, “because of the increasing rate of change in our environment and its
uncertainty, both problems and their solutions have a decreasing life expectancy. For this
reason, there is a greater need for decision-making systems that can learn and adapt rapidly
than there is for optimizing systems that cannot” (Ackoff, 1981).

The view of organizations as open social systems that must interact with their environments in
order to survive is known as the systems theory approach. Organizations depend on their
environments for several essential resources: customers who purchase the product or service,
suppliers who provide materials, employees who provide labour or management, shareholders
who invest, and governments that regulate.

According to systems theory, a system consists of several elements that have attributes and
interact with each other. Katz and Kahn (1966) identify five different subsystems as being of

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interest in the analysis of the behaviour of an organization: (1) production subsystems

concerned with the work that gets done, (2) supportive subsystems of procurement, disposal
and institutional relations, (3) maintenance systems for tying people into their functional roles,
(4) adaptive subsystems concerned with organizational change and (5) managerial systems for
the direction, adjudication, and control of the many subsystems and activities of the structure.

The system is enclosed from the environment by a system boundary and interacts with the
environment through inputs and outputs (e.g., information, material, energy, etc.). The function
of a system can be described as the difference between the input and output variables.

This perspective can be applied to the strategic management and planning of a company, i.e.,
the company is seen as a system and its units (e.g., production, purchase, development, sales,
administration etc.) as subsystems. The company is embedded in a complex environment (i.e.,
market, branch, politics, etc.), which determines its success. The difference between input and
output variables is the value added by the company.

Systems theory is not an organizational theory in itself but an approach to analysing

organizational phenomena. Thus, in systems theory a theoretical framework is developed for
describing general empirical relationships. For a particular problem the system and its
boundaries are often quite arbitrarily selected.

Theoretically, systems can be considered either open or closed. Open organizations exchange
information, energy, or resources with their environments, whereas closed systems do not. In
reality, because no social systems can be completely closed or open, they are usually identified
as relatively closed or relatively open. The distinction between closed and open systems is
determined by the level of sensitivity to the external environment. Closed systems are
insensitive to environmental deviations, whereas open systems are responsive to changes in the
environment.

After an organization adapts to environmental changes, its actions and messages represent its
output. The automobile industry is constantly enticing car consumers to try the latest models,
hoping that it has responded to changing expectations. Recently, many auto manufacturers have
attempted to colour their products as “green” or environmentally friendly. However, messages
are not enough. If the cars are not really friendlier to the environment, then these messages
eventually will fall on sceptical ears and impugn the credibility of the organization. An
organization measures the effectiveness of its output by seeking feedback. If its actions and
messages were not effective then the process is repeated until the appropriate solution is found.
If the organization is not able to adapt to the environmental variation then it will eventually
cease to exist.

This theory can also be useful in understanding the role of research and feedback in creating a
thoroughly analysed and consistent strategy. The analysis of information and creation of
strategy known as throughput helps to conceptualize and justify not only the research budget
of the public relations department but also the need for making decisions that strategically align

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the public communications of an organization with the information needed by publics. The
practical implementation of this approach keeps public relations from being used as a simple
publicity function, and places the function squarely in the strategic planning process.

Systems theory proves to be helpful when describing all kinds of systems (e.g., technical, social
or innovation systems) regardless of their specific “nature”. Systems theory enables us to deal
with complexity and a large amount of knowledge. It is an interdisciplinary means of
communication and permits analogy building between systems.

Systems theory, however, is not without some shortcomings. The first shortcoming relates to
measurement, and the second is the issue of whether the means by which an organization
survives really matter. Robbins (1990) noted that one criticism of this approach is that its focus
is on “the means necessary to achieve effectiveness rather than on organizational effectiveness
itself.”. Measuring the means, or process, of an organization can be very difficult when
compared to measuring specific end goals of the goal-attainment approach.

Resource based approach to Strategy

Resource based view (RBV) analyse and interpret resources of the organizations to understand
how organizations achieve sustainable competitive advantage. The RBV focuses on the
concept of difficult-to- imitate attributes of the firm as sources of superior performance and
competitive advantage (Barney, 1986; Hamel and Prahalad, 1996). Resources that cannot be
easily transferred or purchased, that require an extended learning curve or a major change in
the organization climate and culture, are more likely to be unique to the organization and,
therefore, more difficult to imitate by competitors.

The resource-based view offers strategists a means of evaluating potential factors that can be
deployed to confer a competitive edge. A key insight arising from the resource-based view is
that not all resources are of equal importance, nor do they possess the potential to become a
source of sustainable competitive advantage. The sustainability of any competitive advantage
depends on the extent to which resources can be imitated or substituted. Barney and others
point out that understanding the causal relationship between the sources of advantage and
successful strategies can be very difficult in practice. Thus, a great deal of managerial effort
must be invested in identifying, understanding and classifying core resources. In addition,
management must invest in organisational learning to develop, nurture and maintain key
resources.

According to RBV proponents, it is much more feasible to exploit external opportunities using
existing resources in a new way rather than trying to acquire new skills for each different
opportunity. In RBV model, resources are given the major role in helping companies to achieve
higher organizational performance. There are two types of resources: tangible/physical and
intangible.

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Tangible resources or assets are physical things. Land, buildings, machinery, equipment and
capital – all these assets are tangible. Physical resources can easily be bought in the market so
they confer little advantage to the companies in the long run because rivals can soon acquire
the identical assets.

Intangible resources or assets are everything else that has no physical presence but can still
be owned by the company. Brand reputation, trademarks, intellectual property are all intangible
resources or assets. Unlike physical resources, brand reputation is built over a long time and is
something that other companies cannot buy from the market. Intangible resources usually stay
within a company and are the main source of sustainable competitive advantage.

The two critical assumptions of RBV are that resources must also be heterogeneous and
immobile.

Heterogeneous. The first assumption is that skills, capabilities and other resources that
organizations possess differ from one company to another. If organizations would have the
same amount and mix of resources, they could not employ different strategies to outcompete
each other. What one company would do, the other could simply follow and no competitive
advantage could be achieved. This is the scenario of perfect competition, yet real world markets
are far from perfectly competitive and some companies, which are exposed to the same external
and competitive forces (same external conditions), are able to implement different strategies
and outperform each other. Therefore, RBV assumes that companies achieve competitive
advantage by using their different bundles of resources.

The competition between Apple Inc. and Samsung Electronics is a good example of how two
companies that operate in the same industry and thus, are exposed to the same external forces,
can achieve different organizational performance due to the difference in resources. Apple
competes with Samsung in tablets and smartphones markets, where Apple sells its products at
much higher prices and, as a result, reaps higher profit margins. Why Samsung does not follow
the same strategy? Simply because Samsung does not have the same brand reputation or is
capable to design user-friendly products like Apple does.

Immobile. The second assumption of RBV is that resources are not mobile and do not move
from company to company, at least in short-run. Due to this immobility, companies cannot
replicate rivals’ resources and implement the same strategies. Intangible resources, such as
brand equity, processes, knowledge or intellectual property are usually immobile.

In the resource-based view, strategists select the strategy or competitive position that best
exploits the internal resources and capabilities relative to external opportunities. Given that
strategic resources represent a complex network of inter-related assets and capabilities,
organisations can adopt many possible competitive positions.

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The key managerial tasks under this strategy are:

a. Identify the firm's potential key resources.

b. Evaluate whether these resources fulfil the following criteria (also known
as VRIN (Barney, 1986) criteria:
1. Valuable (V) - Resources are valuable if it provides strategic value to the firm.
Resources provide value if it helps firms in exploiting market opportunities or helps
in reducing market threats. There is no advantage of possessing a resource if it does
not add or enhance value of the firm
2. Rare (R)- Resources must be difficult to find among the existing and potential
competitors of the firm. Hence resources must be rare or unique to offer competitive
advantages. Resources that are possessed by a several firms in the market place
cannot provide competitive advantage, as they cannot design and execute a unique
business strategy in comparison with other competitors
3. Imperfectly imitable (I) - Imperfect imitability means making copy or imitate the
resources will not be feasible. Bottlenecks for imperfect imitability can be many,
namely, difficulties in acquiring resource, ambiguous relationship between capability
and competitive advantage or complexity of resources. Resources can be basis of
sustained competitive advantage only if firms that do not hold these resources cannot
acquire them.
4. Non-Substitutable (N)- Non-substitutability of resources implies that resources can’t
be substituted by another alternative resource. Here, competitor can’t achieve same
performance by replacing resources with other alternative resources.
c. Develop, nurture and protect resources that pass these evaluations.

Hooley et al. suggest the following classification of competitive positions:

 Price positioning
 Quality positioning
 Innovation positioning
 Service positioning
 Benefit positioning
 Tailored positioning (one-to-one marketing)

Barney also emphasized that ‘resources are valuable when they enable a firm to conceive of or
implement strategies that improve its efficiency and effectiveness’. As per this theory, the
competitive advantage can be delivered to an organization when the organization is able to
utilize its resources in unique and valuable manner than the competitors of the firm (Colbert,
2004)

The resource-based view helps in determining the resources available within the firm and
relates them with the capabilities of the firm in a silent manner. This brings into consideration,
the profitability and the value factor associated with the firm (Colbert, 2004)

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RBV helps managers of firms to understand why competences can be perceived as a firms’
most important asset and, at the same time, to appreciate how those assets can be used to
improve business performance.

The resource-based theory also initiates the firm to examine whether the resources of the firm
are valuable to the expected level. Along with this, the availability of the resources is also
checked within the firm through this theory (Barney et al. 2001). The competitive advantages
attached to the resources are evaluated so that the firm can understand which resource is unique
in nature and is not available to the competitors of the firm.

Limitations of the RBV can be grouped into following three main areas.

1. Vagueness of terminology. The lack of commonality of terms with RBV research has
received a lot of criticism in the business literature. Researchers have described the
number of definitions as vast. The use of different terminology to explain results of RBV
studies makes it very difficult to compare the results of various studies. For example,
while some researchers outline distinct meanings for the core terms; resources,
competencies, and capabilities, other researchers use the terms interchangeably and this
suggests that the lack of commonality of terms limits the usefulness of results of RBV
research to strategic thinking. Conner comments that since everything in a firm may be
seen as a resource, ‘resources lose their explanatory power’(1991).
2. Tautological nature. Another significant assessment of the RBV is that the view is
essentially a tautology in nature (Porter, 1991; Foss, Knudsen, & Montgomery, 1995)..
These researchers also challenge the premise of the RBV suggesting that the view “seems
to assume what it seeks to explain”. Furthermore, the researchers posit that the lack of
clarity about core aspects of the RBV impede the development of theory and fruitful
debate.
3. Methodological issues. Each of the studies of resources and firm performance vary
substantially in terms of the methodology employed and the way the RBV research is
designed. Rouse and Daellenbach (1999) question the strong bias towards quantitative
research methods suggesting that such a methodology is not appropriate for RBV
research in general. The researchers suggest that the nature of advantages in
organizations should be firm-based and complex and, as such, qualitative and field-based
methodologies are much appropriate. Chan (2000) supports this position suggesting that
the field of research may not be fully understood until more qualitative contributions are
added to the conversation.

Core Competence Based Approach to Strategy

A mission of strategic management is to provide a firm with competitive advantage by internal

resource allocation and capabilities, i.e., is to ensure an organization on competing for future

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success. The strategic management field is focusing on the role of competencies and resources
that accumulate within a firm because the core competency of a company not only becomes
the distinct corporate signature but also provides the company with its competitive advantage
(Dierickx and Cool, 1989)

The term core competency was coined by the leading management experts, CK Prahalad and
Gary Hamel in an article in the famous Harvard Business Review. By providing a basis for
firms to compete and achieve sustainable competitive advantage, Prahalad and Hamel
pioneered the concept and laid the foundation for companies to follow in practice. According
to Prahalad and Hamel, the term “core competency” is “the collective learning in the
organization, especially how to co-ordinate diverse production skills and integrate multiple
streams of technologies. Core competence is communication, involvement and a deep
commitment to working across organizational boundaries. Core competence does not diminish
with use.”

The concept of core competency states that firms must play to their strengths or those areas or
functions in which they have competencies. In addition, the theory also defines what forms a
core competency and this is to do with it being not easy for competitors to imitate, it can be
reused across the markets that the firm caters to and the products it makes, and it must add
value to the end user or the consumers who get benefit from it. In other words, companies must
orient their strategies to tap into the core competencies and the core competency is the
fundamental basis for the value added by the firm.

At its simplest, a core competence is a unique capability that affords some type of competitive
advantage. It corresponds to a business process, and involves underlying skills, functions,
systems and knowledge. To determine if something is a core competence, the companies need
to find out, "Does this 'thing' give the company a unique advantage over its competitors and
help make the company profitable?"

Core competence is a firm-specific organizational signature that introduces winning products

to market that provides a firm with competitive advantage. The corporate signature emerges
from organizational knowledge, expertise, experience, systems, technology, skills, capabilities,
and resources. Those are the factors that differentiate the firm in the market, and that are
difficult to imitate by rivals, and finally, that develop new assets and specializations within the
organization in order to catch market opportunities.

A firm obtains organizational success with the help of core competence that contains distinct
qualities above, and that provides a company with rational resource usage to produce successful
products. New product development and new market penetration based on core competence
strategy enable the firm to have new growth alternatives. For example, competencies such as
technical know-how, quality improvement instruments, knowledge about consumer
requirements, and firm reputation make the firm build winning strategies. That is to say,
leveraging resources enhances company's competitive superiority. Moreover, core competence

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improves the quality of in-house operations by integrating technology, skills, experience, and
know-how.

To increase organizational efficiency depends mainly on executing core competence strategy.

In a sense, the real sources of competitive advantage are the management's ability to
consolidate corporate wide technologies and production skills into competencies that empower
the firm to adapt quickly to changing opportunities (Prahalad, Hamel, 1990).

Because human resources of firm use knowledge resources to reach organizational goals,
employees ought to join the efforts of developing core competence. These efforts are keys to
competitive success because competencies increase the organizational flexibility to effectively
respond to the business environment.

Core competence does not diminish with use. Unlike physical assets, which deteriorate over
time, competencies are enhanced as they are applied and shared. But competencies still need
to be nurtured and protected; knowledge fades if it is not used. Competencies are the glue that
binds existing businesses. They are also the engine for new business development.
Competencies evolve into sustainable core capabilities largely through organizational design,
which builds and supports capabilities by embedding people and processes into a cohesive
configuration.

Core competence encourages entrepreneurial activities in the organization to respond rapid

changes in the environment. That will result in firm survival in the long run. To stay in the
business depends more on exploiting competencies because it identifies the future priorities,
capabilities, and opportunities. In addition, core competence improves synergy among
organizational departments by collaborating resources, experiences, knowledge and skills.

Core competence has an ability to give a company power to control the future shape of markets
and industries, and to determine the destiny of organizations (Clark, 2000). Core competence
provides this power to firm with new product development. New products, which are built on
competencies, are successfully introduced into the marketplace because competencies involve
specific and distinctive organizational knowledge, skills, and values.

If we take the examples from real world companies and evaluate their core competencies, we
find that many firms have benefited from the application of this theory and that they have
succeeded in attaining competitive advantage and sustainable strategic advantage. For instance,
the core competencies of Walt Disney Corporation lie in its ability to animate and design its
shows, the art of storytelling that has been perfected by the company, and the operation of its
theme parks that is done in an efficient and productive manner. Hence, Walt Disney
Corporation would be well advised to configure its strategy around these core competencies
and build a business model that complements these competencies

The Rational Based Approach to Strategy

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This takes a logical and rational view of the strategic management process and strategies are
developed by undertaking a series of logical and rational steps. This approach will usually
involve having a strategic planning department within the organisation to carry out each of the
key steps and should lead to the best strategy being chosen.

The rational approach demonstrates that the actual preparation of a strategy is as a result of a
clear direction that the entity wants to take as well as various forms of appraisals. This approach
breaks down the process of strategy and strategic management into three distinct steps:

 Strategic position or analysis

 Strategic choice
 Strategic in action or implementation.

This can be represented in the diagram below. Broadly, information about the organisation and
its environment is collected and rational decisions are made about future courses of action.

The rational based model is a structured and sequential approach to strategy formulation, aimed
at seeking precise solutions to well-defined problems using precise methods. The decision
maker derives the necessary information by observation, statistical analysis, or modelling, and
makes a systematic analysis of such 'hard' quantitative data to choose from the various
alternative courses of actions.

While rational decisions strive to remove subjectivity, assumptions, and uncertainty from the
decision-making process, the method itself is based on many assumptions. The rational model
assumes that the decision maker has accurate information and knowledge of the situation, the
underlying cause and effect relationships to evaluate various situations, and the necessary tools
and competence. This need not always remain the case. Very often the quantity, quality,
accuracy, and integrity of information may be found wanting. Moreover, the reliance of
scientific data to generate the most optimal choice works well in theory, but human ability has
limits to gather, process, and understand all the information needed to optimize a decision
outcome. Such defects in information directly translate to a defect in the decision.

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This model also assumes that conditions remain stable. The real world always remains in a
constant state of flux and, very often, the information needed to make a decision either remains
incomplete or keeps constantly changing, forcing the decision makers to improvise.

Ultimately, how people make decisions depends on their culture, conventions, experience,
education, and many more factors. The pros and cons of the rational decision-making approach
suggests that it finds use as a facilitating tool to aid decision-making and supplement the
existing system in certain situations. Imposing it as a decision-making system by uprooting the
existing system may become counterproductive.

The rational approach to decisions is based on scientifically obtained data that allow informed
decision-making, reducing the chances of errors, distortions, assumptions, guesswork,
subjectivity, and all major causes for poor or inequitable judgments. Such an information and
knowledge-based approach promotes consistent and high-quality decisions, and reduces the
risk and uncertainties associated with decisions.

Another advantage of this approach is that it is methodical and provides a clear sense of
direction for everybody working in the organisation as the mission and objectives are clearly
defined.

This model also allows a clear evaluation of potential strategies to be undertaken and explicitly
includes implementation as part of the process. This is important as many good strategies are
let down by poor implementation. The methodology caters to addressing complex issues by
breaking it down into simple steps, and considering all aspects of the problem with all possible
solutions before making a final decision.

The rational method infuses the decision-making process with discipline, consistency, and
logic. It is a step-by-step approach that requires defining problem, identifying the weighing and
decision criteria, listing out the various alternatives, deliberating the present and future
consequences of each alternative, and rating each alternative on each criterion. Such a
sequential approach allows the decision maker to arrive at the optimal decision.

The problem is that the rational decision-making process requires careful consideration and
deliberation of data; this takes time, making this method unsuitable for quick-decisions. In the
age of fast-paced changes, seizing the opportunity at the spur of the moment plays a big part in
success, and the rational model does not live up to this task. Moreover, delay in making and
implementing a decision may result in dilution of the perceived benefit of such an alternative,
for the benefits may accrue only when taken at that time. As such, this model finds use mostly
in making long-term and policy decisions rather than short-term or floor level operational
decisions.

Rational decision-making is steeped in conservatism, and errs on the side of caution. Many a
time, the company makes it big when managers or leaders follow their gut instincts to take a
gamble and seize an opportunity. Similarly, many times success depends on being the pioneer

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in the field, or the first to launch a new and untested product, which may find wide acceptance.
Limiting decisions to analysis of available data may impede such approaches. The
unavailability of past tends or information about such new products or opportunities causes
rational decision makers to opt for more secure and conventional options.

The fruits of rational decisions become apparent only in the long run, and the rank and file
usually do not get to see immediate or tangible returns or benefits of the decision. This
combined with the insensitivity to human emotions causes a negative perception.

The Adaptive based approach to strategy

Adaptive management is an ongoing process of planning, doing, assessing, learning and
adapting, while also applying what was learned to the next iteration of a management process.
It is a flexible decision-making process that allows a conservation plan or project to be adjusted
as the results of various actions become better understood.

Put another way, adaptive management offers a way for managers to “learn while doing” and
apply what they learn from each action to subsequent strategies and actions. By facilitating the
testing, assessing and adapting of conservation actions, adaptive management encourages
innovation and experimentation, links science to decision-making and improves long-run
management outcomes.

In short, adaptive management is designed to mindfully facilitate action with a specific purpose
(strategic), facilitate learning while doing and facilitate stakeholder engagement and
empowerment (participatory).

Unlike the classical approach of sustainable competitive advantage, an adaptive approach to

strategy rests on the idea of serial temporary advantage. In unpredictable and non-flexible
environments, the emphasis is on continuous experimentation and real-time adjustment rather
than on long-term analysis and planning. Since advantage is temporary, the focus is on means,
not ends.

An adaptive approach works when the business environment is hard to predict and to shape,
and when advantage may be short-lived. Ongoing, substantial changes in technologies,
customer needs, competitive offerings, or industry structure may all signal the need for an
adaptive approach. Business environments increasingly require this mind-set: today, roughly
two-thirds of all industry sectors experience high volatility in demand, competitive rankings,
and earnings, making long-term plans obsolete more quickly.

Strategizing in the adaptive context requires a process of watching and responding to changes
in the environment by capturing change signals and managing a portfolio of experiments.
Adaptive firms continuously vary the way they do business by trying many novel approaches
and then scaling up and exploiting the most promising before repeating the cycle. Successful

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adaptive firms outperform rivals by iterating more rapidly and effectively than their
competitors.

Various features of strategic decision-making under adaptive approach are as follows:

1. Decision-making is basically meant for problem solving, rather than going for new
opportunities. Adaptation process is adopted to meet the threats by changed environment
as against the decision making to meet the anticipated changes in environment which
entrepreneurial approach suggests.
2. Decisions are made in sequential, incremental steps, one thing at a time necessitated by
environmental changes. The basic orientation is to maintain flexibility to adapt the
decisions to more pressing needs.
3. Various interest groups and stakeholders put considerable pressure on decision-making
process so as to protect their own interests. Thus, the ultimate decision is a compromised
one which may be, sometimes, at the cost of optimizing organizational effectiveness.
4. Since decision-making is incremental and fragmented, there is lack of integrative decision-
making. With the result, systems approach of decision-making is missing.

Emergent Based Approach to Strategy

The rational planning school defines an objective in advance, describes “where we are now,”
and uses a prescriptive approach in which “the three core areas—strategic analysis, strategic
development and strategy implementation—are linked together sequentially” (Lynch, 2000).

The emergent approach to strategy formulation has been characterized by trial,

experimentation, and discussion; that is, by a series of experimental approaches rather than a
final objective. Emergent strategy is undertaken by an organization that analyses its
environment constantly and implements its strategy simultaneously (Lynch, 2000).

According to Mintzberg, strategy is plan and pattern; that is, “organizations develop plans for
the future and they also evolve patterns out of their past” (1994). In addition, Mintzberg, an
early proponent of emergent strategy, says that a “realized pattern” that was not “expressly
intended” can emerge (1994). He defines emergent strategy as “actions … taken, one by one,
which converged in time in some sort of consistency or pattern” (1994). For example,
Mintzberg (1994) argues that a firm might gradually acquire diverse businesses until a strategy
of diversification emerges.

This pattern of decisions can come from two major sources, firstly it may come about from
the mind of an entrepreneurial chief executive who understands the customer and what they
want or it may come about as the company reacts to a highly changeable environment.

The idea of emergent strategies is that within an organization, strategy emerges out of practice
in a bottom-up or undirected way. Even though many attempts of emergent strategy making

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might fail, some are successful in changing the company’s overall direction. Emergent strategy
making is “most likely to emerge at a level where managers are directly in contact with new
technological developments and changes in market conditions, and have some budgetary
discretion” (Burgelman, 1991). In this view, strategic decision making is an ongoing and rather
inductive change process. It can be rather incremental and path-dependant as strategies are
continuously modified and thereby become accepted within the organization (Lowe and Jones,
2004).

Emergent strategies also rely on the organization’s ability to learn from the actual experiences
of employees at all levels

This approach to developing strategy may have a number of advantages:

1. It allows the company to develop strategy quickly in periods of rapid change

2. It uses the skills of entrepreneurial chief executives who do not feel hampered by a long
rational process
3. The emergent strategy is a much cheaper approach to developing strategy than the rational
model

Mintzberg alternative approach to strategic management is derived from his criticisms of the
rational model.

1. The rational model was not widely used in practice by organisations

2. The whole process was very time consuming and by the time a strategy is decided upon it
may be too late.
3. The rational model assumes that all the information is available to make the correct
decision, in real life this may not be the case and a totally rational approach is rarely
possible

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