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Strategy is a complex subject. Currently there is widespread disagreement among theorists and academics as to what strategy actually is. The intent of this paper is to address the question of 'Why is there so much disagreement about what strategy is?'
In order to find out the reasons for these widespread disagreements, the paper will highlight the variety of theories inherent within the strategic discipline. The purpose of this will be to gain an understating of the variety within the subject which will provide context for the disagreement. A conclusion will then be drawn as to why the theories and acdemics that underpin strategic management cause these disagreements.
The structure of the paper will involve an introduction and a brieft look at defintions from respected academics within the field. The three dimensions of strategy, the significant strategic schools of thought and the noteworthy theories will then be examined. This will lead to a better understanding on debates such as internal vs. external and emergent vs. deliberate strategies which will also be outlined. Following this, the horizon will broaden to the economic, sociological and psychological disciplines and their contribution to the strategic management field.
The results of the papar found that there is significant variety of ideas when it comes to identifying what strategy is. The schools of thought developed by Mintzberg & Lampel, and Whittington's four theories on strategy highlighted this variety and provided a solid foundation on debates such as internal vs. external and emergent vs deliberate. The disciplines of economic, sociological and psychological also provided an interesting insigh into 'what strategy is' from three different points of view.
Ultimately the paper concluded that disagreements over 'what strategy is' are both helpful and constructive as it helps improve the body of knowledge within the discipline of strategy. Thus disagreements among scholars and diversity are an important strength of the strategy field. The theories outlined highlighted the diverse and complex nature of strategy thus providing an understanding as to there is such disagreements in relation to strategy.
"There is always a better strategy than the one you have; you just haven't thought of it yet" - Sir Brian Pitman, former CEO of Lloyds TSB. Strategy in business is like the environment which it covers - it is constantly in a state of flux. Over the last 50 years strategy has witnessed a signiï¬cant growth in the diversity of topics and variety of research methods (Hoskisson et. al, 1999). During this time the debate over 'what strategy is' has been fuelled considerably. It is commonly acknowledged that the diversity of strategic management is by and large the result of the different disciplines which take corporate strategy as their object of study, ranging from economic to sociology and psychology (Pettigrew, 2001). The diversity is also attributable to the multiple theories and definitions formed by scholars and academics. This has resulted in widespread disagreement among theorists, practitioners and researchers as to what strategy is. In simple terms, strategy means looking at the long-term future to determine what the company wants to become, and putting in place a plan, how to get there. However as this paper will demonstrate a universal and timeless definition of strategy is not as simple as that.
This disagreement on 'what strategy is' has ensued since it was first applied to print in mainstream business in 1962, with the publication of Alfred Chandler's book "Strategy and Structure: Chapters in the History of the Industrial Enterprise". Here Chandler understood strategy to be '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 those goals'. Mintzberg (2007) views strategy as 'a pattern in a stream of decisions', while according to Porter (1996) strategy is 'the creation of a unique and valuable position, involving a different set of activities'. More broadly, Johnson et. al (2011) view it as 'the long-term direction of an organisation' whereas Barney & Hesterly (2006) consider it to be a 'firm's theory about how to compete successfully'. These varying understandings of strategy are understandable given the diverse nature of the subject.
It is this electric nature which underpins the concept of strategy and causes disagreements amongst scholars and academics. Disagreements are fuelled further through contradictory positions inherent within the strategy field, whereby strategy is observed on a scale ranging from internal to external or deliberate to emergent. The economic, sociological and psychological perspectives also offer different point-of-views on strategy which complicates things further. These perspectives along with common theories and schools of thought on strategy will be discussed below to outline the differing general views on strategy. However first, the three dimensions of strategy will be examined to lay a foundation and provide context for the rest of the paper.
Strategy Dimension - Context/Content/Process
As highlighted above concluding on an exact definition of strategy for academics within the field is an exhausting process given the complexities of what exactly strategy involves. However despite this it is generally accepted that every strategic challenge and opportunity we face can be recognised within the three dimensions of strategy described by De Wit and Meyer (2004). These are the strategy context (Why?), the strategy content (What?), and the strategy process (How?). It is important to understand that these are not separate parts of strategy, rather they should be understood as interdependent parts of a whole.
The strategy context dimension deals with how the internal and external context of organisations influences strategy. It involves the wider, often competitive analysis of the industry that the organisation operates in. This is in addition to an organisational analysis of the resources and activities that make up the organisations.
The content dimension refers to the content of strategies and their probability of success. It looks at three levels of the business which should be aligned for a coherent strategy (Regan, 2012). They are the corporate-level, business-level and operational-level with the main difference between them being due to their sphere of influence.
The corporate level strategy is concerned with the overall scope of an organisation and how value is added to the constituent businesses of the organisational whole (Johnson et. al, 2011). The business level strategy is essentially a positioning strategy whereby organisations tend to secure for themselves an identity and position in their particular market. The third level of strategy is the operational level which is concerned primarily with successfully implementing the strategic decisions made at corporate and business level in terms of resources, processes and people.
This leads into the concept of process which examines how strategies are formed and implemented. During this phase strategies are thought about, conceived, compared and chosen. This is broken down to strategic thinking - which can be logical or creative, strategy formation - which can be deliberate or emergent, and strategic change - which can be revolutionary or evolutionary. The purpose of the strategy formulation process is to formulate an agreed outlook on how the organisation will succeed in the future.
These three dimensions of strategy underpin strategic thought and provide a solid foundation for the more specific theories and schools of thought that will be looked at below.
Theories of Strategy/Schools of Thought
Theories and schools of thought which look at strategy from different vantage points have evolved over time as the body of knowledge on strategy has become denser. In particular the schools of thought developed by Mintzberg & Lampel, and Whittington's four theories on strategy have received particular attention.
Mintzberg & Lampel (2002) identified ten schools of thought about strategy formation. The first three are prescriptive in nature as they look at how strategies should be formulated rather than how they actually form. They are the Design School (process for conception), Planning School (formal process of analysis), and Positioning School (analytical process of positioning the firm in its industry). The prescriptive idea supports the classical approach discussed below but differs in comparison to the next six schools as they move from prescription to description. They include the Entrepreneurial School (process of envisioning new possibilities and taking advantage of opportunities) , Cognitive School (mental process), Learning School (social learning process), Power School (process of negotiation), Cultural School (building collective uniqueness), and Environmental School (reactive process). The final school of thought is the Configuration School (process of quantum-like transformation), which seeks to be interactive by bringing together various elements. These schools of thought offer a good introduction to the entire field of strategic management and the various ways organisations can go about designing and implementing strategy.
Richard Whittington's "Theories of Strategy" further emphasises the variety of strategies and different perspectives that has led to disagreements on 'what strategy is'. He outlines four basic theories of strategy highlighted below which all have implications on how to go about carrying out strategic actions and how it matters for managerial practice.
Classical and evolutionary approaches see profit maximisation as the natural outcome out-come of strategy-making. For Classicists, profitability is the supreme goal of business, and rational/deliberate planning the means to achieve it (Narayan, 2000). The theory places great confidence in management's readiness and capacity to adopt profit-maximising strategies through rational long-term planning. Similar to the classical approach, the evolutionary perspective sees profit maximisation as the natural outcome of strategy making (Whittington, 2002). However rather than relying on managers, they expect markets to choose the prevailing strategies to secure profit maximisation. Thus environmental fit is more likely the result of chance and good fortune, than the outcome of a deliberate strategic choice. As the diagram highlights above it places greater emphasis on emergent strategies by concentrating on maximising changes of survival today as it regards the future as too volatile and unpredictable to plan for.
On the other hand systemic and processual approaches are more pluralistic, envisioning other possible outcomes as well as just profit (Whittington, 2001). The processual approach offers a more political view of strategy where strategies emerge from the interactions between individuals and between individuals and their environment. The result of this interaction is unpredictable because actions are often unintended and is guided not only by self-interest but also by collective bargaining and compromise. Like the evolutionary perspective it too doubts the value of rational long-term planning, seeing strategy best as an emergent process of learning and adaptation. Systemic theorists take a relativist position, arguing that the organisations differ according to the social and economic systems in which they are embedded (Whittington, 2002). Thus strategy should therefore be undertaken with sociological sensitivity - which will be discussed in further detail below.
Swings of a Pendulum - External vs. Internal Perspective
The theories outlined above offer differing perspectives on strategy to the extent that many scholars on the subject cannot even agree whether sustained competitive advantage comes from outside or from within the organisation. Hoskisson (1999) presented an engaging image of a pendulum that swung between the inside and outside of a firm to illustrate the evolution of strategic theories from the mid-1960s to the late-1990s. Over this period of time there has been an unbalance between the internal and the external perspective.
In the early development of the field, scholars such as Chandler (1962) and Ansoff (1965) emphasised an internal perspective. During this time strategies became developed by looking to improve internally and predominantly concerned with identifying firm's best practices and internal strengths that contribute to firm's success.
During the late 70s and 80s the "pendulum swung" toward the IO paradigm and an external focus. This period sharply contrasted with the firm-centred perspective. Scholars such as Bain and Porter argued organisations should focus strategies on the external environment. This external look fostered a move towards Industrial Organisation (IO) which looks to structural aspects of an industry to explain performance, and considers market position a crucial source of competitive advantage (Hoskisson e.t al, 1999). The theory holds that industry structure determined the behaviour or conduct of firms, whose joint conduct then determined the collective performance of the firms in the marketplace [Bain, 1968). Michael Porter expanded the application of Industrial Organization Economics by defining the relevant factors of a firm's external environment. This resulted in the famous Five Forces Model which can be used by firms to understand the structure of an industry which can then be used to facilitate competitor analysis and to gauge industry attractiveness (Porter, 1981).
In the 1990s a "pendulum swing" shifted the perspective from external to internal once again. The rise of the Resource Based View signalled a renewed interest in the firm's structure as the foundation upon which a firm could build its strategy. RBV links the internal characteristics of a firm to firm performance and was in open opposition to the industrial organisation view of the need to position and reposition in response to environmental shifts. The theory regards organisations as a bundle of resources, and that resources are valuable, rare, imperfectly imitable and imperfectly sustainable are a firm's main source of sustainable competitive advantage (Ambrosini, 2007). It states that firms could not build competitive advantages only based on seizing the resources available in the environment around them, or by implementing strategies to achieve favourable positions in their competitive industry (Barney, 1991). By definition, the RBV posture implied that the organization must develop its strategic resources from its own structure and within its own capabilities.
The Knowledge Based view of firm is another theory from an internal perspective that has received attention in recent times. It conceptualises organisations as centres of knowledge which stems from the experience, skills and expertise of the firms employees. The distinct capabilities of a firms workforce can provide a sustained source of competitive advantage over rivals, particularly as much of the knowledge difficult to imitate and socially complex (Hoskisson et. al, 1999).
There is also much debate within this internal/external debate concerning whether managers have the power to make strategic choices to direct organisations or alternatively if the outcomes of organisations are dictated by external environmental conditions. For Mintzberg strategy is pushed along by the sheer creativity of managers, because they explore new ways of doing things. Whittington (2001) points out that it is markets, not mangers that choose the prevailing strategies within a particular environment. This external view posits that managerial choice is limited as organisations are shaped and constrained by the environments they operate in. In reality it is probable a mix of internal and external perspective effects organisations and their strategies.
Emergent vs. Deliberate
Strategies are not just viewed as internal or external, they can also be viewed on a spectrum ranging between two other extremes - deliberate or an emergent process. Deliberate, planned, or intentional strategies occur in organizations but there has been increasing recognition that the strategic direction of the whole organization can be shaped by an emergent process which is more opportunistic, flexible, and responsive. In Porter's influential article "What is Strategy" he argues that strategy should have an horizon of a decade or more and is the creation of a unique and valuable position where activities should fit and reinforce each other. He emphasises that strategy is the conscious, analytical development of a distinct position in the environment. Porter's more deliberate strategic approach contrasts with Mintzberg's, who emphasises an emergent strategy.
For Mintzberg (1987), crafting strategy is a continuous and adaptive process, with formation and implementation inextricably entangled. This emergent strategic thinking involves intuition and creativity. Strategies must be free to appear at any time and at any place in the organization, typically through messy processes of informal learning that must necessarily be carried out by people at various levels who are deeply involved with the specific issues at hand (Mintzberg, 1994).
Strategic management theorists draw not merely on different paradigms, but on different disciplines - economics, psychology, and sociology (Dobbin & Baum, 2000). Each discipline provides a view of firm behaviour from a particular point of view. Economists have tended to argue that organisations are all about efficiency. Sociologists have responded with the view that organisations are all about power. While the psychology discipline focuses on cognitive approaches. These disciplines offer different perspectives on strategy and contribute to much of the debate inherent within the subject of strategic management
Much of the economic perspective is orientated toward the classical school mentioned above. From the economic perspective, organisations are primarily about efficiency, and firm behaviour is driven principally by competitive pressures and the quest to achieve this efficiency and competitive advantages (Dobbin & Baum, 2000). Therefore there is less emphasis placed on market power and the erection of barriers, and more emphasis placed on the ability to possess particular resources that other firms find it difficult or costly to produce (Hoskisson et. al, 1999). The Resource Based View of the Firm and Industrial Organisation mentioned above are major theoretical theories stemming from the economic perspective. Another influence is Transaction Cost Economics which postulates that firms have to make decisions about how to manage transactions in such a way that minimises risk. In effect, transaction cost theory provides a set of normative rules for strategically choosing among alternative arrangements e.g. should organisations go to market or produce internally (Masten & Meehan, 1989). Neo-Classical theory also shares the economic perspective where individualistic behaviour is guided by rationality and autonomy as organisations attempt to maximise their gains. Economic theories of organisations differ from the sociology of organisations since the latter attempts to cover the whole spectrum and also to develop theories of organisations which can be difficult to apply to all (Swedberg, 2003)
The business organisation is the dominant social organisation of our time, with greater impact on individual and social outcomes than any other social institution (Mitchell, 2000). Thus the sociological discipline has been receiving increasing attention in recent times and its focus on organisations as a foundation concept in the social sciences has given rise to many theories. One such theory is Resource Dependency Theory which posits that for organisations to survive it must secure resources from external environment. RDT recognises the influence of external factors on organisational behaviour and, although constrained by their context, managers can act to reduce environmental uncertainty and dependence (Hillman, 2009). Another sociological theory New-Institutionalism emphasises that organisations are open systems deeply embedded in social and political environments. Thus the environment has a strong influence on strategy. Organizational practices and structures are often reflections of or responses to rules, beliefs, and conventions built into the wider environment. Network Theory has also been influenced by the sociological perspective. It refers to the observed patterns of organisation in and between organisations. Durkheim described how networks produce social identity, and thereby shape the actions of individuals in the positive sense, of establishing accepted, rational, forms of action. Population Ecology Theory is another sociological orientated theory which is environmentally orientated. It postulates that only the organisations deemed fit by this environment will survive the in population of organisations.
The psychological perspective focuses on enhancing strategic thinking. The process of creating strategies can be a highly messy, political and continually changing process. Thus the psychological perspective aims to help managers make sense of the complex and ambiguous world when creating strategies. The discipline views strategy formation as a cognitive process that takes place in the mind of the strategist. These cognitive structures can be remarkably insensitive to important but subtle changes in the strategic environment (Sparrow, 1999). Thus often, strategy making requires a combination of imagination, insight and knowledge which cannot be achieved when using an inflexible, rational approach. Theories such as behaviourism make up the psychological perspective and involve collecting data concerning behaviour itself. It explanations on organisational behaviour are based on the relationship between observable behaviours and environmental events rather than on internal processes. Also the cognitive psychology approach refers to the mental process members within organisation go through to discover, analyse and solve problems. It is a useful approach that can be used to explain attitudes, attribution and groups dynamics within organisations. Another psychological perspective that refers to problem solving is the generative thinking perspective. It views logic as seen as trapping strategists within current orthodoxy. The theory favours producing more unorthodox insights, imaginative ideas and innovate solutions, instead of having a bland, conformist and conservative output. Thus the psychological offers a refreshing insight on the role of cognitive framework in strategy something that can be lacking from the rational analytical thinking of economics or the power orientated nature of the sociological perspective.
It's taken 50 years for the field of business strategy to reach this point, and this time has served to underline the point that there is no such thing as an optimal strategy that can be considered both timeless and universal. The theories outlined highlighted the diverse and complex nature of strategy thus providing an understanding as to there is such disagreements in relation to strategy. These disagreements over 'what strategy is' are both helpful and constructive as it helps improve the body of knowledge within the discipline of strategy. Thus disagreements among scholars and diversity are an important strength of the strategy field. Businesses evolve along with the environments they operate in at a rapid pace, so it is appropriate the theory of strategy which evolves with it. The business environment which strategy seeks to capture and explain will always be in a state of change. This change is certain, therefore strategists must innovate, learn, adapt, respond and reconfigure theories to represent the business environment in a relevant way. This will of course cause a few more disagreements along the way.