Different Perspectives of Business Strategy - Literature review Example

?Strategy has many definitions. Drawing from different theories and perspectives, critically discuss what strategy means. With rapidly changing needsand demands of the time, the definition of strategy has changed from what it was a few decades earlier. According to Afuah (2009) strategy outlines a set of activities that an organization decides to pursue in order to fill in the gaps in the market. Comparing previous and contemporary definitions of strategy will help clearly distinguish how the concept of strategy has changed over a period of time. One of the early definitions of strategy was given by Chandler (1962) as strategy is “the pattern of objectives, purposes, or goals and major policies and plans for achieving these goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be”. Comparing this definition with one of the contemporary definitions presented by Hitt, Ireland and Hoskisson (2007) which says “a strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage” shows that the focus of definitions has changed drastically. Previously business goals and policies were the center of attention while defining strategy whereas now the focus has been shifted towards competition and strategy is used not only as a way to achieve the goals and objectives of a company but also to gain competitive advantage. These are just two definitions hence presenting only the half truth about the strategy; a lot more come to fore when theories and perspectives on strategy are studied in detail. Work in the field of strategic management is immense; upon searching literature, works of Michael Porter and Henry Mintzberg seems to be quite prominent in refining the concept of strategy. While the two has worked a lot in this dimension their work apparently contradicts with each other while Michael Porter focuses on analytical tools for strategy formulation, Henry Mintzberg is more focused on the thought processes leading to strategy formulation and planning. This contradiction in the views of the two is because of their focus on different aspects of strategy (Heracleous 2003). While Mintzberg suggests that strategy may be deliberate or emergent based on the decisions and actions in question Porter suggest that strategy is the use of efficient tools to add value to the processes which may help sustain the market position and remain competitive (Heracleous 2003). Studying in detail the concept of strategy as presented by the two authors reveals that Porter’s work has been much focused on the surface where a particular activity suggests taking a particular step; this means using a particular tool to identify a particular course of action that can help select a best strategy at a given point in time. On the other hand, Mintzberg’s work is much more process-focused which suggests how strategies emerge over a period of time. Heracleous (2003) while comparing the work of both Porter and Mintzberg stated that Mintzberg emphasized “the creative and synthetic” aspects of the strategy whereas Porter emphasized its “convergent and analytical” aspects (p.47). Porter’s work on strategy management is much focused on tools and frameworks to formulate strategy where process is focused and strategy is developed to decide on a future course of action. Enders et al (2006) in their work combined different perspectives on strategy, perspectives that mainly focus on deliberate strategy formulation, and come up with a value process framework. In their work, mainly Porter’s theories on strategy were focused. Following figure shows the value process framework as structured from Porter’s work on strategy thinking and planning. Figure I – Value Process Framework integrating different Strategy Frameworks (Source: Enders et al 2006, p. 12) Besides Porter, Mintzberg has also presented different views on strategy. The two authors have presented two different concepts. This variation in concepts of strategy clarifies that the concept of strategy is not straight forward; one school of thought suggests that strategy is what is adopted by an organization or a person at a particular point of time whereas the other school of thought embarks that strategy is emergent and it keeps on evolving with the passage of time (Booth & Segon 2008). In other words, definition of strategy changes with the change in scenarios where strategies are thought, planned, formulated and implemented. Mintzberg (1987a) suggested that strategy must be defined keeping in view five aspects that play major role in strategic management, hence giving five basic definitions of strategy as; Strategy as a plan for future Strategy as a pattern from past Strategy as a position on a certain decision Strategy as a perspective on various aspects / scenarios Strategy as a ploy to defeat competition Yet these five definitions are not adequate to clarify everything about the concept of strategy. The concept is further elaborated by Mintzberg et al (1998) when the authors define ten different schools of thoughts suggesting how the strategy is formulated; the authors suggested that upon studying the literature on strategy formation ten distinct viewpoints came to fore and each one defines strategy in a unique manner (Mintzberg et al 1998). According to the authors each school of thought on strategy is narrow and takes one stance and hence can be defined using a single worded adjective. Following figure presents these schools along with mentioning the prominent characteristic in each school. Figure II – School of Thoughts on Strategy Formation (Source: Mintzberg et al 1998, p. 3) Referring to these ten schools on strategy formation, Mintzberg et al (1998) stated that none of these schools define everything about the strategy hence we cannot say that this is strategy referring to any single school. Every school presents a different view of strategy; therefore it is fair to conclude that strategy in different scenarios has different meanings and each concept applies to a specific situation and specific needs of an organization. Another theory on strategy formation given by Mintzberg (1987b) suggests that strategy is more a matter of crafting than planning. Planning gives an idea of top management sitting in a room and planning about different courses of actions in an orderly manner to be implemented by the junior staff in a specified timeframe. While this was the idea taken by the word strategy few decades back now the concept of strategy formation is neither restricted to senior management alone nor it is a planning for future only. Mintzberg (1987b) suggests that strategy is not only a plan for future but is also patterns from the past; similarly it is not necessarily deliberate it is emergent as well. Furthermore, it is not only designed in a pre-set manner rather it can be formulated in different ways even the strangest ways too. Yet another perspective on strategy that differentiates Mintzberg’s work from the conventional view on strategy is that strategy confirms with stability. Mintzberg explains that planning literature on strategy suggests that strategy is adapting all the time and it is adjusting to the changing world and making courses of actions to survive the challenge; however this is contradicted by Mintzberg when the author stated “no stability means no strategy” (Mintzberg 1987b, p. 71). Concluding on the crafting perspectives on strategy suggested by Mintzberg (1987b, p. 73) it can be stated that “to manage strategy is to craft thought and action, control and learning, stability and change”. Besides the works of two main authors, that is Porter and Mintzberg, there are other authors and researchers who have contributed towards refining the concept of strategy. Levy (1994) has explained the concept of strategy in the light of chaos theory and elaborated that understanding chaos theory helps understand the concept of strategy. Author explained that understanding how complex and dynamic the industrial systems are will help understand how strategy formulation can save the situation. Levy (1994, p. 167) explained that “by understanding industries as complex systems, managers can improve decision making and search for innovative solutions”. Hall (2005) have mentioned different perspectives on strategy and applied the concept on real life example of South West Airlines. Hall (2005) presented the concept of strategy based on four aspects as strategy as a rational thought, strategy as revolution, strategy as technology leadership and strategy as resource allocation. There is yet another perspective on strategy shared by Rumelt (1979) which suggested that only ill-structured situations require strategic thinking and upon identification of such situations a strategy may be required to be formulated to tackle the identified issues. Pascale (1984) has elaborated different perspectives on strategy and has based his work mainly on six views explaining ins and outs of the concept of strategy. First and foremost perspective discussed by Pascale (1984, p. 64) suggested that strategy can lead to success if the managers adopt a more "strategic accommodation," or "adaptive persistence” oriented approach towards strategy. This suggests that strategy must not be dictated from the top management for the lower staff to follow rather strategy formulation comes from front line staff and top management only provides guidance on improving the aspects. Second perspective on strategy as presented by Pascale (1984) suggested that strategy formulation doesn’t require rearranging boxes without changing the behavior inside boxes; this perspective suggested that strategy is a concept that doesn’t evolve only by the superficial rearrangement of different organizational lines rather what is actually required is change in behavior and not specifically organizational restructuring. Third perspective on strategy presented by Pascale (1984) suggested that mere focus on formal systems in organizations usually doesn’t lead to good strategy formulation rather the roots of strategy lies in informal systems hence it is always required that both formal and informal system must work in close coordination to make an organization function smoothly. Fourth perspective on strategy suggested that the managers must have a style that staff understands and responds to well; Pascale (1984) suggested that people in an organization understands well the behaviors and responses of managers and responds to their responsibilities accordingly; only when they know what is expected of them they can prioritize their work and deliver on the expectations. Pascale (1984, p. 66) stated that “a manager's style breathes life into strategy and systems”. Fifth perspective suggested that staff and socialization among staff members is a very important process of strategy planning; Pascale (1984) suggested that there should always be a ‘meticulous socialization process’ to foster strategic management thinking. Finally, the sixth perspective on strategy presented by Pascale (1984) suggested that only when everyone in the organization shares a similar value system will they be able to contribute effectively towards strategic management process hence there should be shared value system in action in organizations. Concluding all the theories and perspectives on strategy shared in this essay it can be said that “strategy is a strongly contextual concept” (Rumelt 1979, p. 196). Specifically talking about the viewpoints presented by Porter and Mintzberg, Heracleous (2003) suggests that the models advocated by both of them are necessary as Heracleous (2003, p. 48) stated “focusing on different aspects of strategy (the longitudinal vs. the cross-sectional problem) leads these authors to advocate corresponding thinking modes, which in the final analysis are both necessary and complementary”. Therefore we can say that the perspective on strategy to be followed in a particular situation will solely depend upon the situation in question. One cannot say one perspective is right and the other is wrong, however all the theories and perspectives are necessary and complements each other. Concluding the discussion strategy can be defined as a course of action that can either be born out of a particular situation instantly or may evolve over a period of time, may it be a deliberate or emergent effort it is a contextual concept that requires input from the circumstances in question. One can learn it from chaos or simply from the routine tasks suggesting a best course of action; hence it can come from the staff or top management; all of it highly depends upon the situation and circumstances under consideration. References Afuah, A 2009, Strategic Innovation: New Game Strategies for Competitive Advantage, New York: Routledge. Booth, C & Segon, M 2008, A Stakeholder Perspective of Strategy Formation, International Review of Business Research Papers 4 (5), pp. 320-334. Chandler, A 1962, Strategy and Structure: Chapters in the history of American Industrial Enterprise, Cambridge, Mass: MIT Press. Enders, A, Konig, A & Hungenberg, H 2006, Towards an Integrated Perspective of Strategy: The Value-Process Framework, available at [accessed on 27th Feb, 2013] Hall, A 2005, Strategic Theory: An Analysis of Theories of Strategy with a Special Application to Southwest Airlines, Master Thesis, USA: Capella University Heracleous, L 2003, Strategy and Organization: Realizing Strategic Management, Cambridge: Cambridge University Press. Hitt, M A, Ireland, R D & Hokisson, R E 2007, Strategic Management: Competitiveness and Globalization, Mason, OH: Thompson/SouthWestern Levy, D 1994, Chaos Theory and Strategy: Theory, Application, and Managerial Implications, Strategic Management Journal 15 (1994), pp. 167-178. Mintzberg, H 1987(a), The Strategy Concept 1: Five Ps for Strategy, California Management Review 30 (1), pp. 11-24. Mintzberg, H 1987(b), Crafting Strategy, Harvard Business Review, July-August 1987, pp. 66-75. Mintzberg, M, Ahlstrand, B & Lampel, J 1998, Strategy Safari: A guided Tour through the Wilds of Strategic Management, New York: The Free Press. Pascale, R T 1984, Perspectives on Strategy: The Real Story Behind Honda's Success, California Management Review XXVI (3), pp. 47-72. Rumelt, R P 1979, Evaluation of Strategy: Theory and Models." In Schendel, D E & Charles, W H (eds.), Strategic Management: A New View of Business Policy and Planning, Boston: Little Brown, pp. 196-211. Read More