Strategic Management theory

In many textbooks the definition of a strategy will be similar to the following: management’s plans to achieve outcomes that are consistent with the company’s defined missions and goals. Someone else would define strategy as a plan, a direction, a guide or a path to get from where we are now to the desired point. But is a strategy just a plan or there is something more to it? How are those plans being made? Can and should those plans/strategies be changed as the environment changes?

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It is important to distinguish different levels of strategies, as corporate-level strategy, business-unit strategy and the functional-level strategy organizations may adopt. Corporate-level strategy is about “overall purpose and scope of an organization and how the value will be added to different business units” (G. Johnson, K. Scholes, 2002) or as M. Porter (1987) puts it, “a companywide strategy”… “what makes the corporate whole add up more than the sum of its business unit parts”. Business unit strategy, which will mainly be addressed to in this paper, according to the K.

Sholes and G. Johnson (2002) is “about how to compete successfully in a particular markets”, or in other words it is a “competitive strategy (M. Porter, 1987). Strategy formation is viewed from different perspectives, or so-called the schools of thought. The ten schools of thought, as introduced by H. Mintzberg, B. Ahlstrand and J. Lampel (1998) fall under three groupings. The Design, the Planning and Positioning school are more of a prescriptive nature, concerned with how the strategies should be formulated.

The Entrepreneurial, Cognitive, Learning, Power, Cultural and Environmental schools are less preoccupied with prescribing how should the strategies be made, and rather describe how do they in fact get made, therefore are of a descriptive nature (H. Mintzberg et all, 1998).

There is also one, last school of thought, called Configuration, which describes processes as transformation, meaning it incorporates elements of all the schools, but each in its own time and place. The major difference with this school is that it “offers the possibility of reconciliation” (H.Mintzberg et all, 1998). If strategy is to be viewed as a plan that takes a company from where it is now, to the desired point then of course, certain plans/strategies are desirable in order to avoid complete chaos.

But what happens if our strategy is outdated? What if competition is way in front of us just because we blindly follow our previously set strategy? Should a company give priority to the emergent strategies? What if we do not have enough expertise or capabilities to execute the strategy as we pictured it?

What about the creative side of the business and the breakthrough idea creation? Do they get killed from the start because a company has to execute its strategy and it does not fit in? D. Sull (1999) explains that even though ‘strategic frames’ are helpful in staying focused, they are also one of the reasons why companies go from good to bad. Managers, according to him, simply get blinded by the strategic frames and fail to exploit new options and opportunities.

According to M.Porter (1998), companies should adopt certain strategic position rather than “staying flexible, incorporating new ideas and building up on their critical resources and core competencies” which is also viewed as a competitive strategy. In line with that, M. Porter (2000) argues that “jumping from strategy to strategy makes it impossible to be good in implementing any of them”. Further he continues that resource/competency view on strategy bares a risk of becoming too inward. Not pursuing a distinct strategy and being “stuck in the middle” according to Porter is a recipe for a disaster.

Strategic management has evolved through years and so have the methods and the tools managers use for development of the strategies and strategic planning. However those tools and methods, or so to call them strategic ‘models’, tend to consider a certain problematic area within the business environment and analyze it without having a look at the whole picture. Those modes will be analyzed through the three main processes in strategic management, the strategy formulation, strategy implementation and strategy evaluation.