Strategy is the root of all the operations that come into play in any field of life. It is not often that simple as it is described to be, so if it is being tried to explain in a line or two, it would surely loose its essence. Some common words that are somehow related to strategy are purpose, objective, aim, decisions, key strengths and weaknesses to name a few.
It is defined as a purposeful exploration for a sequence of actions that aim to keep the business ahead of its competitors and give them some specific advantage. This is often done by developing a unique strength which is not easily accessible by others. The essence of strategy formulation lies in doing the SWOT analysis of the company as suggested by Michael porter. (Montgomery C.A., 1996)
While, Strategy is also defined as the move that would take you from current position to a future desired position and doing it through gaining maintainable advantage over its competitors. (Ansoff, 1965& Porter 1980). Strategy is also defined as an observable pattern that comes out of a series of actions or key decisions. (Mintzberg, 1994) According to Chandler, "Strategy is the determination of the basic long term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals."
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Strategic Management is defined as extraction of present actions for the future and in turn becoming an action vehicle so as to integrate and institutionalize the apparatus of change. (Kanter R M, 1984) Pearce and Robinson (1988) stated strategic management as a set of verdicts and activities that lead to formulation and realization of strategies that would help the organisation to achieve the goals.
Strategic management is also defined as fulfilment of corporate objectives, ensuring the structure of the company is relevant to the goals, maximising the use of resources and translating the external environment in coherence with the company. (Burns, 1992) The main components of strategic management include strategic analysis and planning, strategy formulation and strategic decision making, strategic choice and strategy implementation.
Strategic analysis includes identification of operational strengths and weaknesses, environmental constraints, defining the area of competition, resource allocation, and structure of management. While strategic planning is done keeping in mind the sensitivity of time, risk and future forecast.
Strategy formulation is relevant to any organisation in defining the missions, visions and objectives of the firm. These are defined by seeing the values of the organisation. This phase requires the formulation of strategies on involvement of people, allotment of finance and actions required to bring the strategies in action.
While, Strategic choice defines the alternatives of the action that can be taken keeping in mind the resource strength, capability, will-power and its advantage over its competitors.
Strategy implementation includes putting the defined strategies by the organisation into action keeping in mind the constraints of people, resources, leadership, organisational capability and structure apart from external restraints of the likes of political and geographical resources. It is highly dependent on the technological advancement, and knowledge house of the company.
All of these four factors are inter-related and inter-dependent as an influence of one of them would effect rest of them. (Morden T, 2007)
Even before the strategy is made, it has to be clearly defined as to what is the main outcome that is desired out of the implementation of this strategy. This refers to the implementation of any strategy at different levels. All the strategies ends up on one of these levels, i.e. corporate level strategy, Business level strategy and operational level of the strategy.
The Corporate level strategy focuses basically on the overall health of the organisation and deals with the value addition of each department of the concerned firm. This is also concerned with the well being of the share holder's interests. Business level strategy discusses the relevance of each business in coherence with the corporate strategy so as to competitive in their respective markets. It emphasizes on the optimal usage of resources while maximising the output and minimising the waste. It generally consists of strategic decisions like pricing, market segmentation and differentiation of the product. The Operational level of strategy stresses on the effectiveness of each part of the organisation in order to complete the strategies set by the corporate level and Business level strategists. This is done keeping in mind the optimal usage of people, resources and process being used in the industry. (Johnson, G& Scholes, K & Whittington R, 2008)
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Strategy formulation is the stepping stone in order to go ahead. Whittington gave his four approaches that are primary so as to formulate the strategy.
Classical - It is defined as the level which differentiates formulation from implementation of a strategy. It includes defining the mission of the organisation and setting objectives, doing SWOT analysis and defining the strategies of the organisation. It also includes preparation of plans so as to implement the strategies. It also leaves some space for feedback and modification as each level is properly sequenced.
Evolutionary - It sees the formulation of strategy as a progressive method which is guided by the market constraints and leads to the victory of the most efficient and productive organization guided by its strategy.
Processual - It sees the formation of strategy as an ongoing process which comes to the end through some constructive discussions and disagreements. Since, the strategy is an ongoing process; it is difficult to spell out the strategy even after an agreement has come.
Systematic - It defines the strategy as an outcome of social forces deep inside the society. The options are limited due to the cultural and institutional interests of the society as a whole and not considered in fragments.
(Armstrong, M, 2008)
After working thoroughly on the literature of Strategic management; Mintzberg, Ahlstrand and Lampel (1998) spotted out 10 primary schools of thoughts. These were later on classified into further three different categories as Prescriptive schools, Descriptive schools and configurational school. It is still unclear as to what is the key approach followed by each school since all are an integral part of strategy formulation or implementation. These schools can easily and happily co-exist together within one firm as in this competitive age it is pretty difficult to run the business with implementing only one school of thoughts. The school of thoughts included under Prescriptive schools are Design school which relates to strategy preparation as an abstract process. This school is responsible for over seeing the strengths, weaknesses, opportunities and threats under SWOT analysis which is like an internal check to the organisation. It acts like a bridge between the capability of the company and its possibility to achieve success. (Bennigson, 1999) Next in the list is Planning school which states that the strategy is formulated as per a sequence which includes setting objectives, evaluation of organisation and market and strategy evaluation as well. Here, most of the power lies in the hands of top management as they are the one's who sets the targets. Third school that works on the thoughts of prescriptive thoughts is positioning school which strategy was formed so to place the organisation properly into the market. Since, the market was seen as economic and competitive and the analysts play the pivotal role in success.
Another half of the coin is descriptive school of thoughts. It includes entrepreneurial school which sees strategy formulation as the vision of its topmost leaders and it is heavily relying on his thoughts, instincts, intuition, and experience. Another school of thought is Cognitive school, which sees the strategy formulation as the output of the mind of one person who is intellectually capable of processing the information in the right fashion. Then comes, the Learning school, which sees the strategy as an evolving process since eventually the strategies comes from the mind of lots of other people apart from top management. Thereafter, the power school refers to strategy formation as a play of power within the organisation and outside the organisation i.e. market. These powers are termed as micro and macro powers which include making the strategy work either by negotiating it or empowering it on employees and market.
The cultural school refers to the strategy formation as a thing which is reflected by the culture or beliefs of the organisation, including its history, employees, and the way they refer to each other, the way they dress. It stresses heavily on shared beliefs deeply imbibed in the organisation. While, the environmental school sees the strategy formation as an inert process which reacts to any change in the atmosphere. The key belief behind this school is that no strategy is permanent and it all depends on the market conditions or situations at that time, thus giving the central role to the environment. The last school that comes is configuration school which is seen to offer a chance of compromise, i.e. to connect with the theories of all the schools. Its key feature includes configuration and transformation. (Sadler, 1993)
COMPARISON AND CONTRAST:
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The first key difference between the different schools of thoughts is done on the basis of their approach towards strategy which is prescriptive or descriptive in nature. The prescriptive schools are stated as more relevant in framing any organisation's growth for long term as it helps to strategically manage the organisation. Each of the schools like design school, planning school and Positioning school mentions the relevance of properly planning the whole process i.e. properly recognising, planning and scrutinizing the whole strategy before it is brought into the final stage of being implemented. This is a far more balanced approach as equal importance is given to all the steps in the process and none of the steps are missed during this.
Although, on the contrary, Mintzberg and Walters (1985) were in the favour that strategies are made as an outcome of learning and not such a sequential process. They were in the favour that the strategies were projected, premeditated and evolutionary. Evolutionary method refers to the fact that strategies are made with respect to time and situation of the organisation and not in this sequenced process. Managers are well aware of the fact that each organisation has a different style of working, different beliefs, different targets and different approaches which means that each organisation has to follow a different set of strategies as there is no unique strategy to success. (Kilpatrick A, 1999)
In all of the Descriptive schools of thought, environment is considered as stagnant and it is assumed that it will remain favourable in the favour of the organisation. The key hypothesis behind this is that the direction of environment can be estimated and the strengths and weaknesses of the company can be easily squeezed out of it. Another key hypothesis is that the organisation has got lots of time to form a strategy and work out on it sequentially. Here, the design school is still heavily relied on the vision of their CEO. It has been found that strategies generally emerge out all of a sudden out of blue moon and are not generally thought in a sequential manner. Also, it has been found that generally the key strategies relating to the current operation of the organisation comes from bottom of the organisation. Also, the Planning school emphasizes of the analytical approach so as to make a strategy. While, this school would never come handy in an unstable environment where the organisation is supposed to take on rapid changes within mean time and does not have time for the proper analysis of the strategy. If not done fast enough, the organisation would be termed as a rigid organisation and cannot survive much in a competitive and fast changing world. This kind of approach does not give birth to the much needed fast paced innovation required to survive in this competitive world. (Pettigrew, A& Thomas, H& Whittington, R, 2006) The thoughts of this school were more visible in the 70's and 80's for all the companies of that period as in this age; they are termed to be as redundant.
On the contrary, Descriptive schools of thought are more on the realistic side of the strategy, as they are not bound by any law. They are capable of changing the environment in their own favour as a great entrepreneur is capable of doing it. It is very much clearly and easily visible in the making of McDonald's and Benetton who are led by great entrepreneurs. While, keeping in mind the factor of environment, it is sometimes considered to be as incomprehensive, which is dealt by Cognitive and Learning schools. These thoughts bring ahead the relevance of emerging with time and regards learning as an ongoing process. These schools emphasizes on making a broad policy and leaving some space for change in the middle due to the belief that a change might arise from any sub-system within any department in the organisation. These thoughts are clearly visible in case of the entrance of HONDA motors in the USA market which became successful with time and emerged as leaders in the market.
At the same time, Prescriptive schools also emphasize the relevance of power and politics which is practically speaking present everywhere in the system. This thought is presumed to be deeply motivated by the stream of political sciences. It states that presence of power and pressure is in the organisation and outside the organisation. This thought is clearly visible case of BRITISH AIRWAYS which when was faced with tough competition by VIRGIN AIRLINES tried to put pressure on them with their power and reach.
Also this leads to the depiction of a single face of the organisation in front of the society. Apart from this thought, another belief that is present in the prescriptive schools of thought is the belief that that whole organisation should develop a common outlook for the organisation. This helps the organisation in the long term union and instils in all the employees of the organisation a sense of belief and trust. It believes that for any strategy to be successful, the values of the company should work in support of it so that every employee gives their best to make it successful. This is clearly visible in case of BODYSHOP as it has stringent rules for being their products 100 % natural.
Another key belief in prescriptive school of thoughts is that for any strategy to be successful, it has to keep in mind the factor of environment as it might turn out to be the key factor. This factor determines whether the current market situation or current government policies or their future halves are in favour of the strategy to be implemented. (Volderba, H & Elfring, T, 2001)
Thus, we can clearly see that both the schools of thought are nothing else but are the different approaches of formulating a strategy. While, both of them deal with different theories, Descriptive school of thoughts emphasize more on strategy being an analytical process. They stress on the fact that for any strategy to be made, it should be properly analysed, formulated and structured before being implemented. It plays down the importance of environment and believes it to be in favour of the strategy. This school was more followed in the 70's and 80's, but now it is referred to as rigid since it is a fairly competitive world. While, the other half of the coin, i.e., Prescriptive school of thoughts, work on different beliefs varying from the strategy coming from entrepreneur of the organisation to it coming from an employee down bottom in the pyramid. This school of thought places quite importance on the role of environment, politics and power in the making of any strategy.
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