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Typology in Strategy

Chandler, 1962
Strategy determines the basic long-term goals of an enterprise and the adoption of courses of action and the allocation of resources necessary for achieving these

goals.

Learned et al., 1969


Strategy is the pattern of objectives, purposes or goals and major policies or plans for achieving these goals, stated in such a way as to define what business the company is in or is to be in and the kind of business it is or is to be.

Mintzberg, 1979
Strategy is a mediating force between the organization and its environment; consistent patterns in streams of organizational decisions to deal with the environment .

Quinn, 1980
A strategy is the pattern or plan that integrates an organizations major goals, policies and action sequences into a cohesive whole. A well-formulated strategy helps to marshal and allocate organizational resources into a unique and viable posture based upon their relative internal competences and shortcomings, anticipated environmental changes, and contingent moves by intelligent opponents.

Wernerfelt, 1984
Strategy is to create a situation where a resource position makes it more difficult for

others to catch up

There has been no consensus on the definition of strategy but there has been an agreement that no consensus on its definition exists
(Bourgeois, 1980; Gluck, Kaufman, & Walleck, 1982; Glueck, 1980; Hatten, 1979; Hofer & Schendel, 1978; Lenz, 1980; Rumelt, 1979)

Hambrick (1983) accords this lack of consistency to two factors: Strategy is multidimensional (eg. Cost position, price policy, service, leverage, product quality etc. (Porter, Competitive strategy)) Strategy is situational and varies by industry

Strategic Management evolved as a theoretical discipline in response to the frustrations of managers at the limited help the study of economics was able to give

them in the running of their businesses.


(Kay, 1993)

Different authors have tried to classify the models that have emerged in strategy. They are also referred as planning schools. I have tried to briefly summarise and present

taxonomy of planning schools as suggested by


authors over a period of time. I call them evolving notions of strategy

Chaffee (1985): From literature


Linear strategy Adaptive strategy Interpretive strategy

Linear Strategy
Chandler, 1962: Strategy is the determination of basic long term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals (Strategy and Structure, 1962, p.13) Focus: Means, ends Aim of strategy: Goal achievement Terms associated: Strategy planning, strategy formulation, strategy implementation

Adaptive Strategy
Hofers definition (1973): Strategy is concerned with the development of a viable match between the opportunities and risk present in the external environment and the organisations capabilities and resources for exploiting these opportunities. Focus: Means Aim of strategy: Co alignment with the environment Terms associated: Strategic management, strategic choice, strategic design, strategic fit, strategic thrust.

Interpretive Strategy
It is defined as orienting metaphors or frames of reference that allow the organisation and its environment to be understood by organisational stakeholders. Stake holders are motivated to believe and act in ways that are expected to produce favourable results for the organisation. Focus: Participants and potential participants in the organisation Aim of strategy: Legitimacy Terms associated: Strategic norms

Bailey and Johnson (1992): Configurational approach


Planning Logical incremental Rational command Muddling through

Externally dependent
Embattled command

Planning: This process is driven by precise strategic objectives against which strategic options are evaluated. Systematic analysis and procedures are in place to aid the search for solutions to strategic issues and for achieving goals. Logical incremental: The process is characterised by standardised procedures used to develop potential strategic options which are assessed against objectives.

Rational command: It is about a senior figure whose aspirations for the future provide the focus for strategic direction, approximating to a vision. However, there exist clear strategic objectives, which form a basis against which potential options can be evaluated. A final decision to follow a particular strategic option, although influenced by the senior figure, will only be made after consideration of both business and internal environments. Muddling through: Strategy develops through a process of bargaining and negotiation between groups or individuals; and compromise which accommodates conflicting interests of powerful groups and individuals

Externally dependent: Strategy is determined and imposed by external forces. These forces may represent a dominant environment, a parent organisation, legislation, or direct governmental pressure. As such freedom of strategic choice is restricted and strategic change is likely to be instigated from outside. Embattled command: Strategy reflects the vested and conflicting interests of particular groups which influence strategy development through the provision of "appropriate" information or control of resources; and gain influence by blocking or restricting implementation.

Whittington (1993)

Classical style
It is implemented in an environment where institutions shared a common and coherent set of goals and a technology environment that, if not stable, certainly suggested a coherent and fiscally predictable future. Plans had simple, clear, and consistent outcomes in mind. The process as a whole was the sum of a distinct set of highly ordered components.

Systemic style
This form of planning is necessary when an organisation composed of individuals with different goals is addressing a stable (or at least predictable) near-term future. Planning was felt to be possible if only the disparate goals and complex social systems could be interwoven into a coherent and unified framework. Such a framework, often called a systemic approach, would allow individuals to pursue local goals while still providing benefit to the whole of the organisation.

Processual style
Planners face the environment of rapid change and represent very heterogeneous constituencies with differing goals. Planners in this environment are called processual planners, because they understand the futility of long term centralized planning and instead focus on pursuing the best of a limited number of options before them.

Evolutionary style
In this style of planning, planners see no clear long-term path and observe that the environment often changes far more quickly than one can change the plan. In these environments, only the fit survive, and early winners are used as models for future technology directions.

Mintzberg, Ahlstrand, Lampel (1998)

(Prescriptive Schools) Design Planning Positioning

(Descriptive Schools) Entrepreneurial Cognitive Learning Power Cultural Environmental Configuration

Design School
This approach regards strategy formation as a

process of conception, matching the internal


situation of the organisation to the external situation of the environment. Thus the strategy of the organisation is designed to represent the best possible fit.

Planning School
Here strategy formation is seen as a formal

process, which follows a rigorous set of steps


from analysis of the situation to the

development and exploration of various

alternative scenarios.

Positioning School
Under this approach, which is very heavily influenced by the works of Michael Porter, strategy formation as an analytical process

placing the business within the context of the


industry that it is in, and looking at how the

organisation can improve its competitive


positioning within that industry?

Entrepreneurial School
This approach regards strategy formation as a

visionary process, taking place within the


mind of the charismatic founder or leader of
an organisation.

Cognitive School
This approach, based upon the science of brain functioning, regards strategy formation

as a mental process, and analyses how people


perceive patterns and process information.

Learning School
This school of thought regards strategy formation as an emergent process, where the management of an organisation pays close attention to what works and doesn't work over time, and incorporates these 'lessons learned' into their overall plan of action.

Power School
Here strategy development is seen to be a process of

negotiation between power holders within the


company, and/or between the company and external
stakeholders.

Cultural School
This approach views strategy formation as a

collective process involving various groups


and departments within the company; the
strategy developed is thus a reflection of the corporate culture of the organisation.

Environmental School
Here strategy formation is seen to be a reactive

process: a response to the challenges imposed


by the external environment

Configuration School
In this final approach, the purpose of strategy formation is seen as a process of transforming

the organisation from one type of decisionmaking structure into another

Faulkner and Campbell (2003)


Rational Planning Process Logical Incremental Process

Evolutionary Imperative
Cultural constraint

Rational Planning Process


The rational planning process covers traditional strategic planning methods, which review past

plans and develop new ones on a rational


analytical basis, including gap analysis.

Logical Incremental Process


The logical incremental process states that companies often do not take implementation decisions and actions until absolutely necessary, with the latest available information, allowing

them to be flexible and adaptive.

Evolutionary Imperative
The evolutionary imperative school claims that the effect of natural selection, only what works

will succeed, comes between all planning and


decision-making

Cultural constraint
The cultural constraint school argues that a companys internal planning system will have

built-in cultural constraints in its thought


processes and behaviour

The Time line


1940s: Budgeting, budget is met, bills are paid, costs are not over run

1950s-60s: Emergence of business policy The Rational Approach Chandler (1962), Ansoff (1965), Learned, Christensen, Andrews & Gurth (1965) Acceptance of positioning theory. Originated with Jack Trout (1969). PIMS project

Late 1960s and 1970s:


Long range planning movement Strategic planning Use of portfolio matrix

1980s: Strategic management replaces business policy Competitive strategy: Porter (1980) Competitive advantage: Porter (1985) Introduction of value chain Strategic conflict: Shapiro (1989), Ghemawat (1986), Brandenburger and Nalebuff (1995) Benchmarking: Camp (1989), Lester (1989)

Resource based perspective: Firm-specific capabilities and assets, and the existence of isolating mechanisms are the fundamental determinants of firm performance. Roots traced back to Penrose (1959) & Selznick (1957) Proponents: Barney (1996), Grant (1991), Rumelt (1984), Teece (1984), Wernerfelt (1984), Montgomery (1995)

Resource:
Firm resources are strengths that firms can

use to conceive of and implement strategies that improve its efficiency and effectiveness (Barney, 1991). Anything that can be thought of as a strength or a weakness of a firm (Wernerfelt, 1984).

1990 onwards:

Dynamic capabilities perspective:

Refers to the ability of firms to integrate, build and reconfigure internal and external competences to sustain competitive advantage in rapidly changing environments (Teece et al., 1997) Proponents: Prahalad and Hamel (1990), Porter (1990), Teece, Pisano and Shuen (1997), Eisenhardt et al. (2000). oCore competence: It is important to know the one or two key things that your company does better than the competition (Prahalad and Hamel, 1990).

dynamic refers to the capacity to renew competences so as to achieve congruence with the changing business environment
capabilities emphasizes the key role of strategic management in appropriately adapting, integrating and reconfiguring internal and external organizational skills, resources, and functional competences to match the requirements of a changing environment

Adding value is the central purpose of

business activity, where adding value is defined as the difference between the market value of outputs and the cost of inputs including capital, all divided by the firm's net output (Kay, 1993). Kay claims that the role of strategic management is to identify your core competencies, and then assemble a collection of assets that will increase value added and provide a competitive advantage. He claims that there are 3 types of capabilities that can do this; innovation, reputation, and organizational structure.

Activity based view: Relate to the detailed processes and practices which constitute the day to day activity of organisation life and which relate to strategic outcomes. (Johnson, Melin, Whittington, 2003) Linking competitive strategy and functional strategy Proponents: Ward and Grundy (1996), Donaldson (1991), Mc Farlan (1991)

Stakeholder Theory oThe theory is concerned with the nature of these relationships in terms of both processors and outcomes for the firm and its stakeholders. oProponents: Freeman (1984), Clarkson (1995), Donaldson and Preston (1995)

Paradigms in Strategy research

RBV vs. Dynamic Capabilities


o RBV assumes that valuable assets can be purchased or selected ex ante, while dynamic capabilities assumes that the existence of valuable assets depends on the effective development and deployment of firm resources o The nature of rents in the RBV are Ricardian, while in dynamic capabilities they are Schumpeterian o RBV focuses on inimitable resources, while dynamic capabilities focuses on inimitable processes, positions and paths and the constraints imposed by technological opportunities

o RBV defines resource as anything that can


serve as strength or weakness, while the

dynamic capabilities approach focuses on


firm-specific asset positions that are difficult if not impossible to imitate because of transaction costs and transfer costs, and/or because the assets may embed tacit knowledge

o RBV focuses on strategies for exploiting firmspecific assets and only secondarily considers

managerial strategies for capability


development, while the dynamic capabilities

approach focuses on skill acquisition, learning


and accumulation of organizational and intangible or invisible assets (Itami & Roehl, 1987)

THE TREE

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