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According to Hanson, 2005 well coordinated commitments and set of actions which are designed to increase the core competency of an organization is termed as strategy. Most of the organizations have to use strategies in order to compete in this competitive world and have to utilize their core competency very well. Moreover the organizations have to follow the strategies which get rid off their weaknesses. This essay deals about taxonomy and gives clear picture on the strategy structures and components. In this essay the strategic thoughts are taken from the theorists from schools of management thoughts. The main theorists we going to deal are Sun Tzu, Mitzberg and Porter.
In today's work environment, managers can go with two types of approaches. They are approaching with the science and the decision making art. In the scientific way of decision making, it is very easier to follow. But for the betterment of work there should be an approach of artistic manner in decision making. It yields more productivity. Sun Tzu, a warrior of china used strategies in war field. He has written a book 'The art of War'. This book mainly deals with the strategies that have to adopt in a war period. The strategies of this book were mostly adopted nowadays in organization management. It is mentioned that strategy should be made taking our environment in considerations. The book comprises of six principles and they are about Win all with out fighting, Avoid Strengths- attack weaknesses, Deception and fore knowledge, speed and preparation, shape your opponent and character based leadership.
In Win all without fighting, if an organization shows more aggressiveness in competing with the competitors there is more possibility that it will affect the organization performance. More concentration should be given in focusing on the strengths of organization. This self understanding of an organization will leads to the organization development. This will bring out new strategies and turnout to be success of organization.
In Avoid strengths and attack weaknesses, it can be understood that an organization should attack on the competitor's weakness rather than competing with strengths of competitor. In most of the organizations the weaknesses will be in the area of supply chain, manufacturing and logistics and if an organization focuses on these areas then it will lead competitor to focus on his weakness rather than building up strategies.
In deception and foreknowledge principle, Mc Neilly explains that the fall of competitors can be made by sending wrong signals to the competitors. In order to get prevention from the competitor's deception signals, the organizations should possess foreknowledge on the competitor's strengths, weaknesses, competitor's strategy and plans. This will gives a clear idea on preventing the organization from deception.
In the speed and preparation principle, it is argued that an organization operating at speed will create shock waves to competitors as it difficult to understand the strengths and weaknesses of the organization. So if an organization is with speed and preparation, it can easily take over other organizations which are moving in a slow pace. The managerial decision makers of organization have to plan according to the resource available and also competitor's environment has to be taken into consideration while planning.
While going through the principles of shaping of opponents, it is explained that in order to gain the advantage over the competitor it is very important to make your competitor to follow the rules and plans which you divided. Moreover if there are more tie-ups with other organizations it will also gives strong competitive advantage. As business will grow stronger upon alliances it is worth to make alliances. This also makes our competitors weak. Before making any alliances there should be a thorough study on the alliances plans, strategies and rules.
In character based leadership principle, it is mentioned that an organization should be in a manner that the management has to share the vision with its employees. Such organizations will lead to great development. If the management lacks in characteristics then the competitor's organizations can easily pass over.
Most of the organizations in today's world is following the principles suggested by Sun Tzu. It is argued that there are more areas of management which aren't explored yet.
Michael Porter gave influential thoughts on modern day strategic management. He portrayed five forces for survival of an organization in prevailing environment. Those forces are termed as threat of entrants, bargaining power of suppliers and buyers, threat of substitute products and rivalry among existing firms. These concepts are very much helpful for the competitive environment of today's world. Let us look on these concepts in detail.
In threat of new entrant, identification of new entrant is very important as the new entrant can deal with unique way of distribution channel and also they might bring additional production capacity. This will make the existing competitor to reduce the value of his price and thus resulting in less revenue. New entrants will try to discover new ways of capturing the market. So it is very important for the existing organizations to take care of their position in the market. These new entrants can be put down by making the barriers of entry more difficult.
In barriers of entry, an organization has to be in a position that it is not affected by the entry of new entrant. For example in the telecommunication sector, an organization can provide more offers to its customer and so it will be difficult for the new entrants to provide that much offers to the customers. The barriers can also applicable in dealing with economies of sale, product differentiation, capital requirements, switching costs, access to distribution channels, cost advantages independent of scale and government policy. Thus by providing barriers of entry, it is easier for an organization to control its market share.
The bargaining power of suppliers explains that the profitability of an organization will be affected if the supplier is large in size and when there are limited numbers of suppliers. If the suppliers bargain more then the profit will become less for the organization.
In threat of substitute products, an organization will face more difficulties when there are more alternatives for its product. As the substitute products will have its own market share it will affect the growth of the organization.
Intensity of Rivalry among competitors will highly affect the company's growth. As both the firms compete with each other there are more chances to sell their product for lower price. This will definitely affect the sustainability of the company.
To gain competitive advantage in an organization these five forces developed by porter will be very much helpful.
Henry Mintzberg, another theorist had an different approach on strategy. According to Mintzberg strategy should not be made into fixed plan. It should be modified according to the environment. Like porter, Mintzberg also developed a theory based on strategy. These theories are famously called as five P's strategy. The five P's are plan, ploy, pattern, position and perspective. While looking detail into these P's, plan should be the course of action by the organization, ploy deals with organization tactics, pattern is about the removal of false actions handled the organization, position is about organizations position in the market and perspective is about the the organizations position in its competitive environment.
Henry Mintzberg also proposed ten schools of thought namely: the design school, the planning school, the positioning school, the cognitive school, the entrepreneurial school, the learning school, power school, cultural school, environmental school and configuration school (Makipaa, 2004). The aforementioned schools of thought can be classified under three major types. The first three schools come under the prescriptive nature viz. the process and methodologies involving the formulation of strategies. The next six schools can be grouped under the descriptive type implying the description of what these strategies mean. Hybrid type is the third and final type under which the remaining schools are arranged.
Next we move on to the comparison and analyzing process. The various factors that are considered are structure, description, benefits, and criticism.
Based on strategy, a likely trade off is observed between the strengths and weaknesses in the design school of thought. The various opportunities available in the external business environment is also considered(Makipaa, 2004). In the case of the positioning school, strategy formulation is done as an analytical process and it stresses the point that there exist few specific strategies (positions) in an industry (Sekhar, 2009). In the entrepreneurial school of thought, charisma forms the crux and the strategy is established based on intuition, wisdom and experience of the charismatic leader (Makipaa, 2004).
Under structure, various classifications are possible. One such is that the design school of thought's structure is informal and prescriptive. This is not the case with positioning school of thought whose structure is specific and narrow. The entrepreneurial school of thought's structure is visionary (Sekhar, 2009).
Benefits and criticism form the major discussion board for any school of thought. Each school has its own benefits and criticism. If one considers the design school, the observation is that the approach followed is more logical and well-structured. On the other hand, it is not flexible and various risks are not taken into perspective when formulating the strategy. The positioning school's approach is useful in cases where less competition is involved and also in cases where the selection is desired strategy is easy. The drawback is that it is more suitable to suit the quantifiable and economic considerations. The approach advocated by the entrepreneurial school is that of a visionary CEO who pursues in fulfilling the organization's vision. Moreover, the ideas are more relevant to the organization's vision. (Sekhar, 2009). The major consequence as a result is that since these strategies are based on intuitions and perceptions there is a high probability of the decisions going wrong.(Makipaa, 2004).