General Points about Business

Business strategy has dominated the area of business studies for many decades. It has almost become a cliché to say that strategy is of great importance to any business and its growth. However, the general idea about strategy blurs within the mire of many concepts, terminologies, jargons, and scholarly publications. However, the importance of this small word to business is undeniable. For the very simple reason that all successful and star performing companies have followed a strategic plan in order to attain their goal. The question always pops up – what made the star performing companies like GE, Toyota, and Mitsubishis of the world be on top? The answer is always to be found in their “strategic sense, their clear organization, their management systems, and their excellent top people” (Schwartz and Davis 30). The essentials of being on top remains in the firm’s capability of sustaining its long run profit and average market share or in other words remain competitive. How to achieve this depends on strategy of the organization and this is what we will see from the following review of literature on strategy. Even though is such an important concept, very few people actually know what it is. Therefore it is important to familiarize business with the basic concepts of strategy and its applications. Further it is important to understand the association of strategy with concepts like culture, marketing, networking, etc. this is essential to understand the organizational fit of the strategy.

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Keeping in mind, the various aspects of strategy, the following bibliography has been segregated in the manner presented briefly below. In this paper, various aspects of strategy will be studies. The beginning of the review will show what strategy is and why is it important for any business. Then the bibliography will present papers which will demonstrate the different associations of strategy and the importance of strategy in a changing business environment.

Jay Barney argues in his article named “Strategic Factor Markets: Expectations, Luck, and Business Strategy” that it is simply not enough to understand what strategy will help a firm create imperfectly competitive product market, but it is equally important to estimate the cost factor of implementing the strategy. He argues that if cost of implementing the strategy becomes more than the return, firms will fail to generate above normal economic profit from the process. Barney believes that access and control of such resources is essential to maintain above normal economic profit for a firm. In this pursuit, only environmental analysis is not enough. What is required is to analyze the firm’s skills and capabilities which become a source of accurate expectations. Therefore, Barney suggests that in order to implement strategies for above normal economic profit, firms must undertake an analysis of the unique skills and capabilities rather than analyzing the competitive environment.

This article again moves away from the idea of Michael Porter where he states that in order to identify a firm’s strategies it is important to undertake external analysis. The importance of such analysis lies in the fact that it is done to identify the internal and external strengths of the organization which is strategy researchers except Mintzberg.

David L. Deephouse, in his article named “To Be Different, Or To be the same? It’s A Question (And Theory) Of Strategic Balance” presents the effect on performance of firm-level strategic similarities. He argues that previous research has shown that firms are under constant pressure to either be different or remain same. The reason behind differentiating is to reduce competition and legitimacy improves performance of the company. This article provides a theory of strategic balance between the concept of differentiating and idea of conformity. The theory as presented by Deephouse provides similarities where firms balance the pressure of competition and legitimation. In order to support his theory, Deephouse presents an empirical study of commercial banks. He provides suggestions in the conclusion of the paper.

The article provides a theory building process and provides an empirical support for theory building. Therefore the credibility of the paper cannot be negated. Further, the paper also provides a definitive answer to firms whether it should differentiate or be similar to others depending on its internal and external environment. The article presents similar view as that of Porter.

Ha˚kan Ha˚kansson and Ivan Snehota in their article “No business is an island: The network concept of business strategy” argue that in all organization environmental interface of business strategy it is important to see the networking paradigm. Thus, they apply they apply the network approach in this interface. They first examine a few assumptions underlying the strategic management theories. Then the network model of the organization-environment interface is reviewed. They then discuss three important aspects of strategic management which are organizational boundaries, determinants of organizational effectiveness, and the process of managing business strategy. Their study concludes that changes are necessary to bring forth the required assumptions of business strategy model. Their argument is that the continuous link, coordination and working of two or more organizations effectively give it its role and meaning. They argue that when this proposition is applied it will alter the shift in focus away from the way organizations allocates its internal resources towards a manner in which allocates its own activities and resources to other parties who are related to its context. Therefore this study provides an alternative view of strategic management from the increasing need of cooperation and coalition – as also mentioned by Mintzberg (Mintzberg, The Strategy Concept II: Another Look at Why Organizations Need Strategies) – and providing a new meaning to organizational effectiveness.

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Magnus Kald, Fredrik Nilsson and Birger Rapp in their paper named “On Strategy and Management Control: the Importance of Classifying the Strategy of the Business” provides a study of a number of contingency theories in the study of relationship between business strategy and the plan and use of management control. They argue that previous studies on strategy have been unable to provide an unambiguous finding and they believe to find an integrated reason behind it is difficult. Thus their study stems from a strong need to have a common frame of reference study of business strategy. They provide an integrated strategic variable such as pattern, position, and mission which will help in classifying strategy. In this article the authors show how these three variables influence and how they are influenced and how they help in bringing about a change in strategy and how organizations manage their product offering. This study shows how the three variables help in classification of strategy and use of the management control system. They put forth the analysis that studies which consider only one strategic variable puts forth erroneous result about the relationship between strategy and management control.

This article provides the view of strategic variable and how they help in establishing organizational control. This is helpful in understanding the effect of strategic variables and the strategy itself and management control.

Costas Markides, in his article “What Is Strategy and How Do You Know If You Have One?” believes that the field has been opened to a comical uncertainty. He feels that the meaning of strategy is truly not understood by many and has been blurred further. He feels strategy must be clear about three dimensions of its business:

  • What market it will target and which market it will not target.
  • Products that it will offer to the market and the products it will not offer.
  • The activities it will perform and the activities it will not perform.

Therefore according to Markides, it is important for a company to generate as many innovative strategic ideas as possible to have the luxury of choosing from the numerous strategies formulated. Further he also mentions that the strategy must fit the organization as well be flexible. Further Markides mentions that no strategy is unique.

This article provides a generic view of strategy and brings forth the confusion present in business world regarding strategy. However it does not answer the question it first posses – what is strategy. The article does not provide any insight which has not already been stated by Porter or other scholars. Moreover, he does not provide any empirical evidence over his claims. The article mostly reigns in generality.

Henry Mintzberg in his famous article “Patterns in Strategy Formation” argues that strategy has been defined as ex post facto and is thus deliberate plan conceived before taking a specific decision. Thus he defines strategy as a “pattern in a stream of decisions” (Mintzberg 935). The article provides the case study on strategies of Volkswagenwerk from 1934 to 1974 and that of the United States government’s operations in Vietnam from 1950 to 1973. From these studies Mintzberg concluded that (1) strategy formation can be viewed as a dynamic relation between environment and bureaucratic momentum where leadership plays the role of mediator between the two, (2) strategy formation follows a pattern within organizations like the life cycles and change continuity cycles within organizations, and (3) the study of the intended and the realized organizational strategy will lead to the core of this discipline.

This article provides insightful information regarding strategy formation and research. it also shows that strategy research must be aligned which empirical study and what methodology is important for such study. Overall the study provides important information regarding strategic orientation of a firm and how it interplays with the environment.

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In the article, “The Strategy Concept I: Five Ps for Strategy”, Henry Mintzberg presents the idea of strategy as a “plan”. He puts forth the idea of strategy as a dynamic concept. Therefore he believes the definition of strategy cannot be constricted to a single definition. In this article he presents the idea of strategy as five different definitions as plan, ploy, pattern, position and perspective. Here Mintzberg argues that strategy may or may not be deliberate plan. Rather he believes that all these may be converted into becoming one strategic outlook which is essential for all firms.

This article provides an important insight into the definition of strategy and how it may be dealt with initially. It provides the concept of emerging, planned and realized strategy. Above all it provides a constructive definition of strategy from different perspectives.

In a sequel to the previous article, “The Strategy Concept II: Another Look at Why Organizations Need Strategies”, Henry Mintzberg presents then reason why organizations need strategy. Mintzberg puts forth the conventional ideas of why an organization needs strategy like, setting direction for the organization, focus effort, define the organization, and provide consistency. The idea that he presents that it si wrong to view a strategic process as solely top-down, rather it is better if the process is bottom-up. However he cautions that overemphasis on a strategy without compatibility with internal and external environment will deter the organizational growth and take away the organization’s capacity to become flexible.

This article presents the key concepts behind strategy and why it should or should not be implemented. It shows that strategy is important but overdose of it may impede growth. Therefore, strategy in the right context and quantity will help in growth of the organization or otherwise will make the organization complacent.

Michael Porter in another article named “Changing Patterns of International Competition” shows how the changing nature of the business environment changes the strategy undertaken by an organization. The article discusses the competitive strategies to be employed by firms in order to survive in an increasingly competitive international market. Here Porter argues that in order to be competitive in international arena it is important for American companies, like Japanese companies, must strive to attain an overall goal rather than reach targets on a country-by-country basis. He also mentions that a firm must realign its global strategy, activities its configuration and coordination in order to achieve comparative as well as competitive advantage. Here Porter mentions that two areas become important in order to have a successful global strategy – coalition and organizational structure. This will enable companies to figure out how companies will operate in increasingly competitive global environment.

This article provides insightful recommendation for businesses which are operating globally or are planning to expand. The main point that is brought out that geographic control entails organizational control and relation with remotely located business units. The example that Porter uses of the Japanese firms in order to describe the central control of Japanese firm expanding to be the main draw back in their international operations says that a level of autonomy for regional units is necessary. However, Japanese firms’ organizational style is unique and American and European firms must follow it by leaving their county centered heritage.

Michael Porter in his famous article on strategy called “What is Strategy?” argues that in order to achieve operational effectiveness i.e. performing the routine business activities like selling, producing, and delivering better than rivals by being more competitive and reaping the competitive advantage of business operations. Porter argues that high degree of competition in industry brings forth operational effectiveness within a company however; relative competitiveness is lost in bargain. Porter states that more the benchmarking the companies do more would be the competitive convergence implying more indistinguishable the companies become from each other. Therefore in order to be different from others companies must adopt a strategic position which will help the company to achieve sustainable competitive advantage by preserving the distinctive character of the company. This actually means performing different activities from the rival or performing similar activities in a different manner. (Porter)

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This article is important for the study of strategy as it provides the basis for the development of Porter’s competitive strategy building process of a business.

Reference

Barney, Jay B. “Strategic Factor Markets: Expectations, Luck, And Business Strategy.” Management Science vol. 32 No. 10 (1986): 1231-1241.

Deephouse, David L. “On Strategy and Management Control:.” Strategic Management Journal vol. 20 (1999): 147–166.

Ha˚kansson, Ha˚kan and Ivan Snehota. “No business is an island: The network concept of business strategy.” Scandenavian Journal of Management vol. 22 (2006): 256–270.

Kald, Magnus, Fredrik Nilsson and Birger Rappt. “On Strategy and Management Control: The Importance of Classifying the Strategy of the Bnsiness.” British Journal of Management vol. 11 (2000): 197-212.

Markides, Costas. “What is strategy and how do you know if you have one?” Business Strategy Review Vol. 15 No. 2 (2004): 5-12.

Mintzberg, Henry. “Patterns in Strategy Formation.” Management Science Vol. 24 No. 9 (1978): 934-948.

“The Strategy Concept I: Five Ps for Strategy.” California Management Review Vol. 30 No. 1 (1987): 11-24.

“The Strategy Concept II: Another Look at Why Organizations Need Strategies.” California Management Review vol. 30 no. 1 (1987): 25-32.

Porter, Michael E. “Changing Patterns of International Competition.” California Management Review vol. XXVIII No. 2 (1986): 9-40.

“What is Stratgy?” Harvard Business Review (1996): 2-19.

Schwartz, Howard and Stanley M. Davis. “Matching Corporate Culture and Business Strategy.” Organizational Dynamics (1981): 30-50. 2009. Web.

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