Why business managers should understand strategy.

Chandler (1962) offers a generalised explanation of strategy: “The determination of the basic long-term goal and objectives of an enterprise, and the adoption of courses of action and allocation of resources necessary for those goals.” Jabrowski et al. (2007, pp.7-8) proposes strategy as “situated, socially accomplished activity”.

As decision-makers, Managers are charged with the responsibility of implementing an organisation’s aims, its mission or realising its vision (perhaps determined by directors or stakeholders). The aims for an organisation can vary but are usually focussed about being effective, which can be profitability or effective expenditure – both often via attaining competitive advantage. Mintzberg (1985) argues that strategy concerns all aspects of a business and that distinguishing between trivial detail (“tactics”) and important decisions (“strategy”) may only be an artificial product of hindsight. Therefore as any decision could have strategic consequence; it is of primary importance that managers understand strategy – to better inform, even the routine/operational, decision making processes.

Mintzberg (1996) proposed 5 Ps to understand strategy, as summarised in the table below:

PlanA deliberate course of action, made in advance of actions.
PloyA specific manoeuvre to outwit a competitor
PatternStrategy can be realised from consistency of behaviour (deliberate or emergent)
PositionLocating an organisation within its environment – strategy mediates the internal with the external
PerspectiveA way of perceiving the world – shared in an organisation.

These formulations help managers to contextualise strategy in their organisations. An organisation without a formal ‘Annual strategic review’ document may initially appear without strategy. The manager may realise that they are perhaps as much responsible to the formulation of strategy, in what the Mitzberg describes as ‘Pattern’, through their day to day decisions.

Mintzberg’s 5 Ps are not mutually exclusive conflicting definitions of strategy but as he states, “they complement”. The limitations of these formulations are that human behaviour is not accounted for in the processes of strategy (conception nor in particular, its implementation). Richard Whittington (2006) offered 3 Ps to illustrate strategy as actions, as opposed to an intangible concept – as illustrated in Figure 1.

Figure 1 A conceptual framework for analysing strategy as practice. Jabrowski et al. (2007)

This model helps managers appreciate a very fundamental aspect of strategy: The people involved – the roles they play wand what they do. For example, an operations manager may decide to extend opening hours of a service center. This will perhaps involve changing personnel working hours…

OU (2014a, p.42) suggests that, as Classical scholar of strategy, Igor Ansoff “built upon Chandler’s work” and that some truths were self-evident such as the importance of: competencies and capabilities, organisation structure linked to strategy, success of a top-down approach and the need to maintain a ‘fit’ between the organisation and its environment. As OU (2014, p.42) states, “For Ansoff, strategy was all about making decisions.”

Ansoff outlined four types of decisions that vary in their impact on the company’s success:

  • Strategic – determining the company’s overall direction, goals and boundaries
  • Policy – Guidelines for subsequent actions
  • Programme – the sequential actions required to achieve objectives prescribed by policy.
  • Standard Operating Procedures (SOP) – the routine or day-day decisions made.

Ansoff proposed a linear, sequential, four stage decision-making model:

  1. perception of the need to make a decision
  2. formulation of alternative courses of action
  3. evaluation of alternatives
  4. choice of an alternative for implementation.

Managers are the decision-makers of the business, as discussed earlier, and as such it is important that managers appreciate Ansoff’s concepts on decision-making. It is important they appreciate that scope of decisions made (e.g. strategic or operating) so they can appreciate the subsequent impact. The four-stage decision making model is an optimised process by which managers can adhere to as a form of best practice by means of a checklist. The process ensures that managers consider the options (opportunities) available to them.

Whittington (2002) describes the Processual approach to the strategy as being concerned with an organisation’s competitive advantage (i.e. success) being derived from its leverage (efficient utilisation) of internal resources. Managers control resources especially in divisionalised structures – e.g. a manager may determine the availability of the logistics resource to other departments. Managers should understand the resource based view (RBP) as discussed by OU (2014a, pp.58 – 59) whereby the approach to strategy consist of an analysis of internal resources and capabilities to reshape and impact the industry and achieve an ‘Environmental Fit’.

Barney (2004) proposes the VRIO (Value Rarity, Imitability and Organisation) framework to understand value of resources. Managers should appreciate the ‘Value’ of resources to be able to discern which resources contribute to competitive advantage and how that value may change over time and thus determine the time a company may benefit from that resource. A manager must appreciate the ‘Rarity’ of a resource to better use it for competitive advantage or, in the case of common resources, to avoid competitive disadvantage by not having it.

Managers should understand the concept of Imitability because resources they control may determine a company’s success and therefore may be directly copied or substituted by competitors. Alternatively they may want to copy or substitute a competitor’s resources and understanding the inherent difficulties (or ease), such as costs, would be key to that process.

Managers who appreciate how resources interact with the Organisational structure may have a better understanding of how best to leverage the resources. For example, a sales manager may need to control complementary resources (those which do not themselves generate competitive advantage in isolation) such as an incentive scheme, to better utilise his human resources of dedicated experienced salespersons.

Grief (2009) argues that although planning is involved, strategy should be a continuous process (not an annual event) because the business’ environment is dynamic. Grief (2009) emphasises “dialogue” for engagement, acknowledging people component. It is important that managers maintain flexibility, trusting in their own experience and intuition, and not follow rigid prescribed doctrines so as to be able to adapt resources and the business to the dynamic environment and industry they are in.

Managers should understand strategy to make better decisions and appreciate the implications of decisions throughout an organisation. Understanding strategy helps understand competitors and no organisation exists in isolation. The approach, however, that should be undertaken to understand strategy is not to focus, in an insular manner, on just one or two concepts or guidelines; but on a variety of, ideally opposing, ideas in order to take an holistic approach to strategy.

References

Barney, J. B. (20140 Gaining and Sustaining Competitive Advantage, 4th Ed, Harlow, Pearson Ed, pp. 129-44

Chandler, A.D.(1962) Strategy and Structure, Cambridge, MA, MITPress.

Grief, S. (2009) ‘Strategy should continuously evolve’, London, Fifty Lesson Ltd. [Online]. Available at http://openuniversity.fiftylessons.com.libezproxy.open.ac.uk/viewlesson.asp?l=735 (Accessed 19th September 2015)

Jarzabkowski, P., Balogun, J. and Siedl, D. (2007) ‘Strategizing: the challenges of a practice perspective’, Human Relations, vol. 60, no. 1, pp. 5–29.

Mintzberg, H. and Waters, J. A. (1985) “Of Strategies, Deliberate and Emergent,” Strategic Management Journal, 6/3:257–272.

Mintzberg, H. (1986) ‘The Strategy Concept 1: Five Ps For Strategy’, California Management Review, Vol. 30, 1, pp. 11-24

Whittington (2002) What is Strategy and Does it Matter? Cengage Learning EMEA

Whittington, R. (2006) ‘Completing the practice turn in strategy research’, Organization Studies, vol. 27, no. 5, pp. 613–34.

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