Business Strategy – Schools of Thoughts

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Introduction

Within the last decade, effort has been made to identify paradigms (Schendel 1994, p. 2) and come up with new approaches (Rumelt, et al. 1994) to the concept of strategy. Indeed the diversity of the field makes it improbable to be treated as a Lakatosian research programme (Chalmers 1982, p. 34) having the center of accepted basic assumptions that are agreed upon. According to Mintzerb (1990, p.108), there are ten different schools of strategy. Some of these are prescriptive while others are descriptive as discussed in this paper.

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Schools of thought

The Design School

This school of thought was among the first schools that elaborated the issue of strategy. It had significant persuasion on theoretical education as well as technical expertise, particularly in the 1970s. It describes strategy as seeking to achieve the essential fit between internal strengths and weaknesses of an organization against a backdrop of the external threats and opportunities outside the organization. Sole decision is made by senior management and passed down to the subordinates for implementation. This was the principle outlook of the strategy process in the 1970s given its inherent relationship with theoretical education as well as technical expertise. Decisions in this kind of strategy are neither formally analytical nor informally intuitive.

The planning school

This school of thought developed alongside the design school and continues to be of significant influence today. It became quite predominant during the mid-1970s but faltered in the 1980’s. The planning school basically shares the most of the design school’s assumptions but for one important difference. The strategy process in the planning school is both analytical and official. The process can also be analyzed to be categorized into various classes set down by checklists and backed up by given systems. This signifies that higher-ranking managers are substituted by planners in the workforce because they are the decision makers in the operations of the organizations. The process can work best if redesigned in a way that it can support strategy making and encourage creativity.

The Positioning school

This school of thought is another example of the prescriptive schools that was quite prominent during the 1980’s. It was supported by Michael Porter in the 1980s following research work on strategic positioning; Porter was an academician and a consultant in the area of military strategy. According to this school of thought, strategic views are chosen by conducting a formalized investigation of business conditions. The planners therefore became analysts of the situation. This proved especially lucrative to consultants and academicians who were involved in the analysis of data for companies and institutions interested in strategic planning. Although this included strategic groups as in the game theories as well as value chains, it remarkably portrayed an analytical influence.

The entrepreneurial school

Similar to the design school, the entrepreneurial school bases the process on the chief executive. It however shifts the process in the mystery of intuition contrary to the design and planning schools. The process shifts strategies to vague visions or perspectives from the more precise designs and plans. The idea was tried at different business situations from start-ups, to private companies, and businesses about to collapse that needed turnarounds. It was however asserted that every organization needs the discernment of a visionary leader in strategy.

The Cognitive School

There had been interest in the origin of strategies in the academic world. Questions regarding the mental processes behind the development of strategies have often been asked. This is because strategies are believed to develop from people’s mentality in form of representations, frames or plans. Recent scholars in this field lay more emphasis on the intellect behind strategy creation. Another branch of this school has adopted a more subjective interpretative view of the strategy process. According to this branch, cognition is used to construct strategies as innovative construes. It contradicts the mapping of reality in an objective way.

The Learning School

The learning school became the most popular of the prescriptive schools of thought challenging their omnipresent nature. The model was different from the earlier schools that supposed strategies developed from individuals’ decisions rather than immaculately conceived and implemented. It developed strategy making as learning. The view perceived strategies as emergent, that is strategists are found throughout the organization when work is done and not only at the top or with the planners of the. Formulation and implementation of strategy therefore intertwined each other and are not independent of each other.

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The Power School

This school of thought is different from the above mentioned in that it bases the process of strategy making on the power the strategists wield. There is micro power which develops strategies within the organization. The process is political and involves bargaining, persuasion, and confrontation by the insiders in the organization. On the other hand, macro power views the institution as a solitary unit which maximally uses its power to settle on the strategies which are in its interest, as compared to other partners in the association.

The Cultural School

The cultural school is a direct opposite of the power school and focuses on the common interest and integration of the parties in the relationship. Strategy formation is a social process that takes into account the culture of the individual companies involved. The school of thought concentrates on the hampering of significant strategic change by the existing culture of a people or business entity. Soon after the Japanese impact of administration and management was recognized around 1980, culture became a concern to Europe and America, as they became aware that strategic benefit can be a result of distinctive cultural aspects that cannot be emulated. While everyone thought they had a successful strategy in conquering the U.S markets, they had actually made several mistakes and learned from them abandoning their initial strategy in the process. They solved the challenges that were facing them until they successfully penetrated the U.S markets with goods such Honda motorbikes.

The Environmental School

The school of though focuses on how organizations uses their freedom to formulate strategies that are for their own benefit. The idea behind this is that the surrounding conditions such as markets or the operations of other businesses in the same field affect the strategy made. The Contingency Theory, which is among other theories in this school of thought, argues that, particular environmental circumstances can influence the responses expected from institutions. Another theory the “population ecology” sets limits to strategic choices that can be made due to environmental factors.

The Configuration School

The Configuration School of Thought is the most widespread and integrative literature which is universally applied in recent studies. The academic and descriptive nature of it views organizations as configurations of similar characteristics and behavior. This serves to integrate the claims of the above schools of thoughts. While each configuration is in effect on its own, all adhere to the prevailing conditions like relative stability. The result is dynamic configurations of start ups and turnarounds under dramatic conditions.

Discussion

The origin of business strategy is commonly traced to the early 1960s with the publishing of three major books in the discipline according to Argyris and Schoen (1996, p. 40). These are: Business policy: text and cases, Policy and Structure, and Corporate strategy. The design school, the planning school and the positioning school by Selznick and others, Ansoff, and Porter respectively forms the prescriptive category of business strategy. The concepts have a positive view of knowledge under which the top most management is responsible for the formulation of strategy. The view in these three schools is that centralized and planned processes result in precise well operated strategies. They ignore the entire capability of inside of an organization. This is the major critic of the prescriptive schools of strategy.

The remaining seven are descriptive and ranges and focuses on what is learnt in the process of doing business. These schools entail coming up with solutions to problems and not necessary implementing a preset strategy (Senge 1990, p. 45)

What is strategy anyway?

From the above schools of thought, there is clearly no agreement into the definition of strategy. It originates from the Greek word strategos (Demsetz 1993, p.173) and has a long history with the military to mean the actions of the generals. This meaning is not directly translated into business to mean what the top managements do. The lack of agreement has left different authors to define strategy in their own ways. Examples from some reputable authors below show the discrepancies that exist in the definition of the word.

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According to Quinn and Voyer (1998, p. 11), strategy is the pattern that integrates institutions important goals, policies and actions as a whole. A good strategy marshals and allocates the institution unique resources and viable posture. This depends on, the relative internal competencies and shortcomings, together with environmental factors and contingent moves that allows firms to have a competitive advantage

Andrews (1998, p.51), defines it as the patterns of decisions in a company that determines and reflects its objective, produce the principal policies for achieving these and determine the range of business the company is to pursue. The strategy also includes the kind of human resource to be deployed in achieving all the aforementioned.

Hax and Majluf (1996, p. 21) have stated nine different ways of defining strategy as to:

  1. “determine and reveals the organizational purpose in terms of long term objectives, actions programs, and resource allocation priorities’” (Hax & Majluf, 1996, p. 21).
  2. “selects the business the organization is in or is to be in” (Hax & Majluf, 1996, p. 21).
  3. “attempts to achieve a long term, sustainable advantage in each of its business by responding appropriately to the opportunities and threats in the firms environment, and the strengths and weaknesses of the organization (Hax & Majluf, 1996, p. 21).
  4. “identifies the distinct managerial tasks at the at the corporate business and functional levels” (Hax & Majluf, 1996, p. 21).
  5. “is a coherent unifying and , and integrative pattern of decision” (Hax & Majluf, 1996, p. 21).
  6. “defines the nature of economic and non-economic contributions it intends to make to its shareholders” (Hax & Majluf, 1996, p. 21).
  7. “is an expression of the strategic intent of the organization” (Hax & Majluf, 1996, p. 21).
  8. “is aimed at developing and nurturing of the core competencies of the firm” (Hax & Majluf, 1996, p. 21).
  9. “is a means for investing selectively in tangible and intangible resources to develop the capabilities that assures a competitive advantage” (Hax & Majluf, 1996, p. 21).

A look at the definitions clearly shows the complex nature of the term strategy. The term strategy has been used for various functions that there is no clear definition of the meaning (Rumelt 1980, p. 109)

Strategy therefore is a concept constructed to embrace everything that is important in the successful operations of business.

Strategy process

Business strategy has continuously changed in the last fifty years. Considering the various definitions of business strategy as described above, strategy process is also vast in meaning. A working meaning discussed below is therefore a combination of the different meanings integrated together. According to Foss and Knudsen (1996, p.351) strategy framework entails the steps that are required to be taken and the relative order in which the steps are to be executed. The steps include: analysis, decision making, and implementation of the business strategy (Montgomery 1995, p.201). The business process involves formulation and implementation; processes that actually overlap in practice and divides into three categories. These include analysis, choice, and implementation which are further subdivided severally.

Strategic analysis

This is the first stage of a business process and defines the organizational objectives of an institution. Detailed facts on the company’s position both internally and externally are laid down and specifications are made to where the company wishes to be within a certain time frame. It is at this stage of a business strategy process that companies develop mission statements which normally express a list of company aims. The overall information that can portray the organization’s situation is determined by examining the organization’s strong points and faults.

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Strategic choice

This stage of the business strategy process entails laying out of the company’s available options with a view to picking up the best for implementation. All factors such as the company mission, environment, capabilities and values are taken into account before that decision is reached. A careful and critical appraisal of the available options for the company then follows. This determines where and how each option can be implemented and the best suitable option for the company is settled for.

Strategy implementation

Implementation involves first examining the available company resources, assessing their capability in order to determine their readiness to implement the strategy. A task record which stipulates how the selected strategy is to be put into practice is then primed by the organization. Finally, as the project continues, the company scrutinizes and assesses the process to evaluate improvement alongside pre-agreed objectives.

Discussion

The strategy process is often cyclical because of constant dynamic external environment that forces the changes to occur (Nonaka & Takeuchi, 1995, p. 46). New assumptions are considered and the analysis stage is constantly revisited as challenges come along. In some cases, by the time the strategy is fully implemented, a totally different strategy may have been implemented due to the adjustments that are made (Starkey, 1996, p.88). The robust nature of a strategy is beneficial to companies by forcing the top management performs better (Hamel1994, p.19). The managers will have to plan in advance, try to anticipate any challenge and consider a theoretical solution to the apparent problem. The strategies also provide a clear cut difference between the long term and sort term differences in objectives. The managers secure a unified company approach by focusing on the main objectives of the company to be carried out. The managers have to exercise performance measurements on a constant basis which is an element of control over the company and the strategy as a whole.

Usage of strategy and the strategy process

Proper usage of strategy and strategic processes are beneficial to businesses while misapplication may lead to loss of revenue. It is therefore imperative to carry out a good strategy to improve the business. This involves several steps outlined below that are tuned to enhance this improvement.

Action planning

Companies that wish to successfully implement a strategy must first have an action plan with specifics of the strategy. Assigning of work should be done only to individuals who can perform such task. Targets should also be set to be met by both the individuals and as an institution.

Organizational structure

Those whom are successful should check on the organizational structure and confirm if they are still inline with the current technology. The organization structure should be appropriate for the intended strategy. Firms should also make effort to organize for the necessary events associated with implementing the strategy.

Human resource factors

The human resource factors that is available and what is required should be carefully voter considered. The organizations communication needs should be examined and checked if they are in line with the strategy. In cases these do not rhyme, efforts should be made to reconcile them. The managers should be aware of the human resource needs that a new strategy would cost the company before implementation and the implications that it will have on the company as a whole. This kind of reasons determine whether the company grow through experience, introduce training or higher new employees.

The Annual Business plan

Funding is essential for the success of implementation of a strategy. This need should be well satisfied in advanced for instance, the funds could be planned for a year in advanced and incorporated in the budget. When this happens, implementation of strategies are likely to be successful than to without money.

Monitoring and control

This includes continuous periodic assessment to determine if the implementation of the strategy is on course. The process involves changing the strategy should there be need due to challenges met in order to attain the company’s core objective.

Linkage- The Foundation for Everything Else

This is tying together of the organization’s activities to see if the strategy implementation is in line with its entire objective in totality. All the different small strategies should all be well managed for the better good of the entire process. Vertical linkages lead to coordination within the organization across all levels of management. Horizontal Linkage provides coordination within the different but same level of management. These forms of coordination greatly enhance the implementation of strategies.

Conclusion

There is a generally increasing significance of knowledge intensive firms. Knowledge recognition is now perhaps the strategic asset in a majority of businesses (Drucker1993, p. 14). The main question therefore is whether traditional prescriptive strategy provides enough in understanding of business logic. May be it fails on the process where making of a strategy is best explained as a learning process? Also fail in content where the resourced based view provides a better understanding of a complex organization and structure and the environment. The next step in strategy is to combine the two perspectives of strategy and integrate them into one.

Reference

Andrew, K.,1998, The concept of corporate strategy: the strategy process. London: Prentice Hall.

Ansoff, H., 1965, Corporate strategy: an analytic approach to business policy for growth and expansion. New York: McGraw-Hill.

Argyris, C, & Schoen, D. A., 1996, Organizational learning II : theory, method and practice. Reading, Mass: Addison-Wesley.

Chalmer, A.., 1982, What is this thing called science? Milton Keynes: Open University Press.

Demtez, H.,1993, The theory of the firm revisited: the nature of the firm –origins, evolution, and development. Oxford: Oxford University Press

Drucker, P., 1993, Post capitalist society. Oxford: Butterworth-Heinemann

Foss, N. K. C.1996. Towards a competent theory of the firm. London: Routledge.

Hamel, G., 1994, The concept of core competence. Chichester: John Wiley & Sons.

Hax, A.. C. & Majluf, N.S.,1996, The strategy concept and process: a pragmatic approach. New Jersey: Prentice Hall

Mintzberg, H., 1990, Strategy formation: schools of thought. Philadelphia: Harper.

Montgomery, C.,1995, Resource based and evolutionary theories of the firm. Boston: Kluwer.

Nonaka, I. & Takeuchi, H., 1995.The knowledge creating company. New York: Oxford University press

Porter, M., 1980, Competitive strategy: techniques for analyzing industries and competitors. New York: Free Press.

Quinn, J. V., 1998, Evaluating business strategy: the strategy process. London: Prentice All

Rumelt, R.,1980, Evaluating business strategy. London: Prentice Hall.

Rumelt, R. P. et al.,1994, Fundamental issues on strategy: a research agenda. Boston: Harvard Business Review.

Schendel, D. 1994. Introduction to summer 1994 special issue-‘strategy search for a new paradigms’ Strategic management journal, Vol.15, p. 2

Selznick, P., 1957, Leadership in administration: a sociological interpretation. New York: Harper.

Senge, P., 1990, The fifth discipline: The art & practice of learning organization. London: Random.

Starkey, K., 1996, How organizations learn. London: International Thomson.

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