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Theories of Strategy (Whittington) :star: (Systemic (heightened…
Theories of Strategy (Whittington) :star:
Classical
Profit prime goal
Key academics:
Alfred Chandler (1962), theorist Igor Ansoff (1965) and the businessman Alfred Sloan (1963).
Rational, cold objectivity
Thus was strategy formulation and control confirmed as the prime task of the top manager, strategy implementation as the responsibility of the operational managers in the divisions.
Rational economic man
Premise
strategy formation should be a controlled conscious process of thought, (REM)
control and consciousness must rest with the chief executive officer
implementation is a distinct phase in the strategy process
Criticism
Evolutionary
too abstract and unrealistic
Processual
Rejects rational economic man
environmental scanning, data analyses and calculated comparisons of strategic options advocated by Classical theorists of strategy tend always to be flawed and incomplete
Strategy is thus the product of political compromise, not profitmaximizing calculation.
technical sophistication of Classicists amounts to naive idealism
Systemic
Classical rationality nothing more than historically and culturally specific phenomena.
Systemic perspective challenges the universality of any single model of strategy
Systemic
Decision makers people rooted deeply in densely interwoven social systems
firms differ according to the social and economic systems in which they are embedded
different kinds of enterprise structures become feasible and successful in particular social contexts (Whitley)
not so much global multinationals as domestic companies with international subsidiaries
multinationals can retain strong local character
very notion of ‘strategy’ may be culturally peculiar
model of strategy that denigrates explicit reliance upon the state whereas traditional nationalism of the French and German states and developmental role of the Japanese state
state resources and national interests as WELL as profit and markets
rationality of the Classical approach to strategy may be a social construct, but nevertheless it is one that it can be dangerous to ignore.
Dominance of American textbooks
heightened sociological sensitivity
his or her particular social characteristics, and those of his or her immediate social system
Processual
share the Evolutionary scepticism about rational strategy-making, but are less confident about markets ensuring profit-maximizing outcomes
strategies emerge with much confusion and in small steps
fundamentals
cognitive limits on rational action (see Mintzberg)
boundedly rational
we are reluctant to embark on unlimited searches for relevant information
biased in our interpretation of data
prone to accept the first satisfactory option
micro-politics of organizations (see Pettigrew)
coalitions of individuals each of whom brings their own personal objectives and cognitive biases to the organization.
bargaining process
Strategy is thus the product of political compromise, not profit maximizing calculation.
more psychologically realistic theory of human behaviour
Implications for strategy
strategic conservatism due to political bargaining and bounded rationality
Strategic behaviour therefore tends to become entrenched in the ‘routines’ and ‘standard operating procedures’
markets are in fact typically quite tolerant of underperformance
-- Shareholders are unable to detect this underperformance because, like everybody else, they are not rational or informed enough to know
Logical incrementalism - Quinn
science of muddling through’,(Lindblom)
:explode: intel switch from RAM to processors
:explode: NyQuil. In testing, they realized this regular cold medicine kept putting people to sleep. The solution? Reposition the product as a nighttime cold remedy, which it’s been for over 25 years.
by recognizing and accommodating real-world imperfections that managers can be most effective
Strategies, then, are a way in which managers try to simplify and order a world which is too complex and chaotic for them to comprehend
link to complexity/emergence
distinction between ‘policy creation’ and ‘policy execution’ begins to blur - strategy as craft (Mintzberg)
the strategist needs to retain the closeness, the awareness and the adaptability of the craftsperson
may be informed by an underlying logic, or ‘strategic intent
Criticism
Systemic
Systemic perspective challenges the universality of any single model of strategy
Evolutionary
Markets achieve profit maximisation
natural selection
only best performers will survive
Markets, not managers, choose the prevailing strategies
down graded managerial strategy and emphasized environmental fit.
new niche opens up, it is initially flooded by new entrants, but then overpopulation drives a process of fierce competition, only fit survive
Implications for managerial strategy
differentiation to survive
evolutionists doubt that differentiation can be achieved deliberately
Businesses generally evolve more slowly than environment
More likely result of "good luck" than deliberate strategy
Warning against risks of overestimating impact of strategy, investing in long term strategies can be counter-productive
flexibility is evolutionarily inefficient
Competitive markets thus introduce a bias to strategic conservatism
markets are typically too competitive for expensive strategizing and too unpredictable to outguess
markets are too efficient to permit the creation of any sustainable advantage
economy is the best strategy, be efficient
most effective approach may be to experiment with as many different small initiatives as possible, to wait and see which flourish
best to let the environment do the selecting, not the managers.
:explode: Sony in its strategy during the 1980s, when it launched more than 160 different Walkman versions
:explode: The tentative Toyota deal may be most significant because it is another example of how GM’s strategy boils down to doing a little bit of everything until the market decides where it is going.
Criticisms
Processual
Reject perfect market
Systemic
Western only
Systemic perspective challenges the universality of any single model of strategy