Thinking About Strategy

Teaching note
-Third (updated English) edition, 2008-
Second (extended Dutch) edition, 1999
First (Dutch) edition, 1997

J.W. Stoelhorst

Amsterdam Business School

University of Amsterdam

Contents
1. Introduction
2. The ‘standard model’ of strategy
3. The design school: Strategy as a conceptual process
4. The planning school: Strategy as a formal process
5. The rise of the consultants: Selling powerful oversimplifications
6. The positioning school: Strategy as fit
6.1 Industrial organization economics
6.2 The work of Porter
7. The resource-based school: Strategy as stretch
7.1 The resource-based view
7.2 The work of Prahalad and Hamel
8. The process school: Strategy as collective learning
9. The field of strategic management: Taking stock

References

1
1. Introduction
The purpose of this teaching note is to give an overview of the field of strategic
management as it has developed since its inception in the 1960s. Most textbooks on
strategic management used in business schools have a tendency to present the theories
and concepts of the field as if there were one best way to develop strategy. Such an
approach suppresses both the complexity of strategic management and the fact that
strategy can be approached in many different ways. In fact, in the course of the
theoretical development of the field, different authors have written about strategic
management from very different perspectives. More often than not, these authors have
disagreed about the best way to approach strategic management. Moreover, as a relatively
young field, even today the thinking about strategic management is still developing. In
other words, the implicit message of many textbooks that they represent the one and only
way to tackle strategic management is rather misleading.

This teaching note takes a view of strategic management as a field of inquiry aimed at
developing better theories of strategy. The field is presented in terms of its historical
development and the most important schools of thought within the field are discussed.
We will meet some of the more prominent strategy scholars and we will see how their
ideas have shaped the thinking in the field. As will become clear below, the field of
strategic management is a collection of concepts, empirical research findings, theories,
and controversies that result from the work of different individuals with their own
particular views of strategy. And, like any academic discipline, this field continues to
develop as new scholars take up research questions that their predecessors left
unanswered.

The first thing to ask is what the ideas of strategy scholars are about. Three aspects of
strategic management can be distinguished: the process, the content, and the context of
strategy. When strategy scholars think about the process of strategy they are interested in
where strategies come from. How do firms actually develop strategies and how could
they do so more effectively? When strategy scholars think about the content of strategy
they are interested in what good strategies are. Which types of strategy are there, and
which strategies can give firms a competitive advantage? Finally, when strategy scholars
think about the context of strategy they are interested in how specific organizational or
environmental contexts affect the process or content of strategy. Do different types of
organizations and different types of industries require different strategies and/or different
ways of developing these strategies? As we will see, some of the schools of thought in
the strategic management field are more concerned with the process of strategy, while
others primarily focus on the content.

2. The ‘Standard Model’ Of Strategy

The typical textbook conception of strategic management is of a three-step process in
which strategic analysis is followed by strategic choice and strategy implementation. We
may think of this approach to strategic management as the ‘standard model’ of strategy

2
(see figure 1). A typical way to develop strategy on the basis of the standard model would
be to start with formulating organizational objectives. In doing so, management should
take into account the expectations of the firm’s stakeholders. The organizational
objectives then direct the analytical phase, which consists of an internal and an external
analysis. The goal of the external analysis is to understand the critical success factors in
the firm’s industry and to identify the opportunities and threats that may affect the firm’s
ability to meet its objectives. The goal of the internal analysis is to understand the firm’s
distinctive competence and to identify the strengths and weaknesses that may affect the
firm’s ability to meet its objectives. The resulting strengths, weaknesses, opportunities
and threats are confronted in a SWOT analysis that leads to the identification of the
strategic issues that the firm faces. The formulation of these strategic issues is the
conclusion of the analysis phase. In essence, the strategic issues highlight the main
questions that a firm needs to confront to meet its objectives. The next step is to generate
strategic options, or in other words, possible strategies to deal with the strategic issues. In
choosing among these strategic options, the firm should consider their suitability (does
the strategy deal with the strategic issues?), acceptability (is the strategy acceptable to the
firm’s stakeholders?), and feasibility (will the firm be able to execute the strategy?). This
concludes the strategic choice stage. The last stage considers the implementation of the
strategy. First, chosen strategy is broken down into detailed plans, then responsibilities
and budgets are assigned, and finally performance measures to control the
implementation of the strategy are agreed upon. The strategy implementation phase may
for instance take the form of breaking down a corporate strategy into business unit
strategies, or business unit strategies into functional strategies.

Where does the standard model of strategy come from? In essence, it is the joint product
of two prescriptive schools of thought within the field of strategic management: the
design school and the planning school. Two more prescriptive schools of thought, the
positioning school and the resource-based school, have added substance to the way in
which internal and external analyses should be executed, although each of these two
schools has done so on the basis of its own particular view of what strategy is all about.
Together, these four prescriptive schools of thought have inspired the approach to
strategy that is typical of most textbooks. This approach has strong normative overtones:
the implicit message is that the standard model is the right way to develop strategy. A
fifth school of thought, the process school, has taken issue with this normative message.
Proponents of the process school do not agree that strategy is (or should be) only (or even
mostly) about rational analysis and top-down implementation. The process school is
primarily descriptive in nature: rather than telling managers what to do, authors in the
process school tend to observe how strategy actually takes shape in the everyday practice
of firms. What they find is typically quite different from the approach to strategy that the
standard model prescribes.

We may conclude that when we look beyond the standard textbook model of strategy and
probe a little deeper into the ideas behind it, we basically find different schools of thought
with different ideas about strategy. These ideas are sometimes complementary, but often
contradictory. The standard model of strategy certainly has value, because it helps us
organize and apply many of the concepts and tools that the field of strategic management

3
has developed. But it most certainly is not a failsafe way to develop successful strategy.
To better understand both the value and the limitations of the standard model, we need to
consider its roots in the four prescriptive schools as well as the criticism that has been
directed against it by the process school. In doing so, we will also come to understand
how the field of strategic management developed over the years. This development can
roughly be summarized in terms of the relative influence of the five different schools of
thought that will be discussed below:

The prescriptive schools of thought:

1960s – The design school
1970s – The planning school
1980s – The positioning school
1990s – The resource-based school
The descriptive school of thought:
1980s and onwards – The process school

3. The Design School: Strategy As A Conceptual Process

The design school was developed at Harvard Business School in the 1960s and is
typically associated with the work of Kenneth Andrews. The basic ideas of the design
school were laid down in 1965 in the book Business Policy (Learned et al., 1965) that
was based on the way Andrews and his colleagues had been teaching strategy in the years
leading up to this publication. Some of the main concepts in the approach to strategy of
this school of thought went back to earlier work by the sociologist Philip Selznick. In his
book Leadership in Administration (1957), Selznick had already introduced the concept
of a firm’s ‘distinctive competence’ and he also discussed the need to bring the internal
situation of the organization in line with external expectations. These notions were also
central to the approach to strategy developed by the design school. At the core of this
approach is the idea that the specific characteristics of the firm should be confronted with
the external situation it faces. This idea has of course been made instrumental in the so-
called SWOT analysis (strengths, weaknesses, opportunities, and threats).

Mintzberg et al. (1998, p.29-32) distill seven assumptions about strategy from writings of
the proponents of this school:

1. Strategy formation should be a deliberate process of conscious thought

Developing strategies is not an intuitive or natural skill, but must be learned formally.
Effective strategies are the result of a tightly controlled process of human thinking.
2. Responsibility for that control and consciousness must rest with the chief executive
officer
The manager at the apex of the organizational hierarchy is the architect of organizational
purpose: that person is the strategist.
3. The model of strategy formation must be kept simple and informal

4
The main goal of a model for developing strategy is to support ‘acts of judgment’.
Elaboration and formalization of the process of strategy formation will sap the design
approach of its essence.
4. Strategies should be one of a kind
The best strategies are the result of a creative design process that builds on the firm’s
distinctive competence. Strategies do not result from a system of general variables but are
tailored to the specific situation of the firm.
5. The design process is complete when strategies appear fully formulated as perspective
Strategies are the result of an explicit choice for an overall concept for the business.
These choices appear at a specific point in time, fully formulated, and ready to be
implemented.
6. These strategies should be explicit and simple
Strategies must be clearly articulated so that other members of the organization can
understand them. This means that strategies are best kept simple.
7. Only after strategies have been formulated can they be implemented
Consistent with the classical notions of rationality – analysis followed by prescription
followed by action – the design school clearly separates thinking from acting and makes a
sharp distinction between strategy formulation and strategy implementation.

Mintzberg’s (1990a,b) critique of the design school is largely focused on the fact that this
school underplays the importance of hands-on learning. This starts with something as
fundamental as assessing the strengths and weaknesses of the firm. The design school
assumes that these strengths and weaknesses are generally known, but this is not
necessarily the case. Top managers may be too far removed from the daily operations to
have sufficiently intimate knowledge of strengths and weaknesses, and lower level
managers may very well disagree about what the distinctive competence of their firm is.
Moreover, it could well be that strengths and weaknesses are situation specific and that
changes in external circumstances make specific competences more or less relevant. Such
complications require a tight link between thinking and acting to learn about the strengths
and weaknesses of a firm as they evolve over time. But this link is severed by the
separation of strategy formulation from strategy implementation. If a strategy doesn’t
work, top management will tend to blame this on implementation failures, while lower
level managers will tend to blame failure on the strategy itself. If top management is only
responsible for formulation and lower level management is only responsible for
implementation it is very unlikely that learning will take place.

The limitations of the approach favored by the design school are best seen when
considering the assumptions that it makes about strategy (Mintzberg et al., 1998, p.43-
44):

1. One brain can, in principle, handle all of the information relevant for strategy
formation.
2. That brain is able to have full, detailed, intimate knowledge of the situation in
question.

5
3. The relevant knowledge must be established before a new intended strategy has to be
implemented – in other words, the situation has to remain relatively stable or at least
predictable.
4. The organization in question must be prepared to cope with a centrally articulated
strategy.

We may conclude that while the approach of the design school has made an important
contribution to the strategy literature, it is not the only nor necessarily the best way to
approach strategy. With its emphasis on confronting the internal and external situation of
a firm, the design school has laid the foundations for the standard model of strategic
management. It has also introduced important concepts such as environmental fit and
distinctive competence to the literature. But at the same time, it makes a number of
assumptions that may limit its effectiveness in guiding complex organizations that
operate in dynamic environments.

4. The Planning School: Strategy As A Formal Process

Like the design school, the foundations for the planning school were laid in 1965. This
was the year Igor Ansoff published his book Corporate Strategy. The perspective on
strategy in this book was in many ways similar to the perspective developed at the
Harvard Business School. According to Mintzberg et al. (1998), when comparing the
assumptions of the planning school to those of the design school, the difference is one
and a half assumption. The main difference is that the planning school advocates a formal
and very elaborate system for the development of strategy. This is in contrast to the
informal and simple system advocated by the design school. Another, more subtle
difference is that given the elaborate nature of the strategic planning approach, part of the
responsibility for the firm’s strategy lies with the strategic planning staff. On this latter
point, the planning school does not differ from the design school in principle: the
assumption is still that the CEO is the architect of the strategy. However, in practice the
involvement of strategic planning specialists means that part of the responsibility shifts
from the CEO to his strategic planning staff.

The planning school developed an impressive arsenal of flowcharts, checklists, and

analytical tools to support a rational and stepwise approach to strategic management. In
addition to this, it also advocated breaking down the overall strategy into more specific
strategic plans and applying detailed strategic control through budgets and performance
measurement. Such an approach would lead to a hierarchy of plans, budgets, and controls
that, together, should result in the firm meeting its objectives. Mintzberg et al. (1998.
p.58) summarize the assumptions of the planning approach to strategy as follows:

1. Strategies result from a controlled, conscious process of formal planning, decomposed

into distinct steps, each delineated by checklists and supported by techniques.
2. Responsibility for that overall process rests with the chief executive in principle;
responsibility for its execution rests with staff planners in practice.

6
3. Strategies appear from this process full blown, to be made explicit so that they can be
implemented through detailed attention to objectives, budgets, programs, and operating
plans of various kinds.

In the 1970s, the ideas of the planning school became very influential. Many firms
established sizable strategic planning departments that were given responsibility for
elaborate yearly strategic planning processes that were tightly linked to investment and
budget decisions. But by the early 1980s, there was widespread disappointment about the
results of this formal approach to strategy. Mintzberg (1990, 1994) argues that empirical
research shows that the planning approach simply does not work and that this is the result
of the inflexibility and detached nature of a formal strategy process. Moreover, there is a
fundamental problem with the idea that strategy can ever result from breaking down the
process into ever more detailed analyses. This denies the fact that the development of
strategy is a matter of synthesizing information. No matter how many steps are specified
and no matter how many checklists and tools are offered to support the process, somehow
there will ultimately need to be an answer to the question: what does all this information
mean? Ansoff’s (1965) original approach consists of flow charts with 57 boxes, and as
Mintzberg (1994) cynically observes: adding one more box that says ‘add insight’ will
not save the planning approach.

The most important contribution of the planning school has perhaps been that it was
successful in putting its ideas into practice, although only to find that the success of these
ideas were limited. Frustration about its limited success has subsequently spurred much
fruitful empirical research into the process of strategy (often of the descriptive kind that
informs the ideas of the process school: how are strategies actually developed and why
does strategic planning typically not work as envisaged?).

5. The Rise Of The Consultants: Selling Powerful Oversimplifications

The discussion of the design school and the planning school shows what the basic ideas
behind the standard model of strategic management are. Note that the standard model has
little to say about the content of strategy. Its focus is mainly on the process by which
strategies should be developed. The standard model advocates a rational, deliberate, and
stepwise approach to the development of strategy. But it does not give any guidelines to
what the strategies resulting from this process could, or should, be. From the point of
view of the design school this should come as no surprise. After all, this school of
thought holds that strategies should be unique, so why bother to categorize them?
However, from the point of view of the planning school, with its emphasis on formal
analysis, we could perhaps expect some insight in which strategies are more or less
successful. And indeed, one of Ansoff’s (1965) best-known models is his 2x2 matrix that
classifies growth strategies into market penetration (existing product/existing market),
product development (new product/existing market), market development (existing
product/new market), and diversification (new product/new market). The message that is
linked to this model is directly related to the question that is central to the thinking about
the content of strategy: what explains differences in performance among firms?

7
According to Ansoff’s model, the chances of successful growth diminish as a firm looks
for growth in activities that are farther away from its current products and markets. In
other words, the chance of success is highest for market penetration and lowest for
diversification, especially if such diversification is unrelated to the technologies that
underlie the firm’s current activities.

Nevertheless, in the 1970s diversification was extremely popular and the use of portfolio
tools to help manage diversified firms was widespread. These portfolio tools were
developed by strategy consultancy firms such as the Boston Consulting Group (BCG) and
McKinsey & Company. In contrast to the process focus of the design and planning
school, portfolio models were very much about the content of strategy and were meant to
specify what a good strategy was. Of the different portfolio models, the BCG ‘growth-
share’ matrix is no doubt the best known. The Boston Consulting Group, founded in 1963
by Bruce Henderson, held that good strategies are not just based on experience and
intuition. Instead, the focus of BCG was to discover ‘meaningful quantitative
relationships’ and to sell ‘powerful oversimplifications’.1 The most important quantitative
relationship on which the company built its advice was the ‘experience curve’ (costs per
unit decline as a function of cumulative output) and the most influential
oversimplification was no doubt the growth-share matrix that classified business units
into ‘cash-cows’ (low growth market/high relative market share), ‘questions marks’ (high
growth market/high relative market share), ‘stars’ (high growth market/low relative
market share) and ‘dogs’ (low growth market/low relative market share).

The formula for good strategy derived from this 2x2 matrix turns on the need to balance
the types of activities in which a multi-business firm is active. A firm should have enough
cash-cows and stars, dogs need to be divested, and the cash flows generated by the cash
cows need to be used to turn question marks into stars and stars into cash-cows. Upon
closer scrutiny, this formula is based on three underlying ideas. The first is the idea of the
experience curve: if the costs incurred by the firm are strongly correlated with cumulative
output, then it is a logical consequence that relative market share is the main driver of
competitive advantage. The second idea is the product life cycle: gaining market share in
the growth phase requires investments that can pay off when the firm is able to gain a
dominant position when the market matures. The third idea is portfolio management:
firms should balance the short term and long term ‘risk and return’ of their activities. On
the logic of the product life cycle, the market for any product will eventually decline and
all businesses will ultimately turn into dogs. Firms should therefore manage their cash
flows in ways that help them survive over time.

During the 1970s a number of other consultancy firms like McKinsey and Arthur D.
Little developed their own portfolio models. Although these models used more variables
to assess the position of business units than just market growth and relative market share,
they were fundamentally similar to the BCG model in the sense that they saw cash flow
as the main link between the business units in a multi-business firm and investment
decisions as the crux of strategy. It was this rather limited view of what strategy was

1
Bruce Henderson, quoted in Ghemawat (1999)

8
about that led to fundamental criticism of portfolio models around 1980. Portfolio
planning came to be seen as an approach to strategy that resulted in risk adverse behavior
and that undermined long run competitive advantage. A paper by McKinsey consultants
concluded that ‘packaged techniques … rarely beat existing competition’,2 and two
Harvard professors, Robert Hayes and William Abernathy wrote an article titled
‘Managing Our Way to Economic Decline’ that mounted a full blown critique on the idea
that detached analytical techniques like portfolio models would allow managers to run
their firms without an in depth understanding of the markets and technologies that are
central to their firm’s operations.

Although portfolio models are still part and parcel of the toolbox of strategists, today the
thinking about the content of strategy no longer puts such a strong emphasis on
diversification, market share, and cash flows. The ideas about the variables that explain
the relative success or failure of firms changed when Porter introduced a more
theoretically grounded approach to thinking about the sources of competitive advantage.

6. The Positioning School: Strategy As Fit

Michael Porter’s book Competitive Strategy (1980) is largely responsible for the success
of the positioning school, which dominated the approach to strategy in the 1980s. With
this book, Porter made two fundamental contributions to the field of strategic
management. First, his work put the content of strategy center stage and thus
complemented the ideas about the process of strategy from the design school and the
planning school. Second, his work provided better theoretical foundations for thinking
about strategy research because it built on a well-established economic research tradition.

Mintzberg (1990) considers the work of Porter as the third wave of the positioning
approach to strategy. In this view, the first positioning wave is linked to insights derived
from military strategy.3 The second positioning wave is linked to the work of the strategy
consultants discussed above. Much like Porter’s work, these earlier positioning
approaches also consider strategy in terms of building favorable positions in a particular
context (for instance, a dominant market share in a growing market). However, by using
insights from ‘industrial organization’ (IO), a research tradition within economics that
studies the nature and outcome of competition in different industries, Porter was able to
develop his ideas about positioning much further than had been done before him.

6.1 Industrial organization

When Porter published his seminal book, industrial organization economists had already
been studying competition for decades. Their main interest was the relationship between

2
Quoted in Ghemawat (1999)
3
Authors on military strategy that are often quoted are Sun Tzu (first century BC) and Von Clausewitz
(19th Century). See Quinn (1980, p.155-168) for an interpretation of insights from military strategists for
firms.

9
industry structure and firm performance. Up until the late 1970s, the main theoretical
framework in IO was the so-called S-C-P paradigm (for ‘Structure-Conduct-
Performance). ‘Structure’ refers to the structure of the industry, ‘conduct’ refers to the
(strategic) behavior of individual firms, and ‘performance’ to different possible
dimensions on which industries and firms can differ from each other, such as profitability
or innovativeness. The basic idea in this approach to IO is that industry structure
determines much of the performance of the firms within an industry, but that individual
firms can do better or worse than the industry average by choosing successful strategies.

Economists are typically interested in overall welfare rather than the performance of
individual firms. The basic idea in economics is that welfare for society as a whole is
maximized when markets are perfectly competitive. In such markets, the price
mechanism can do its work to balance supply and demand efficiently. Perfect
competition is a situation where the following assumptions hold:

-The large numbers assumption:

Markets consist of a large number of buyers and suppliers that are small in relation to the
size of the market. As a result everybody is a price taker: nobody has any power to affect
the price in the market.
-The homogeneity assumption:
Demand is homogeneous. As a result, firms compete only on price.
-The mobility assumption:
All the resources that are necessary to enter the market are widely available. As a result
entry to and exit from the market are simple and costless (except for the price of
acquiring the resources)
-The rationality assumption:
Buyers and supplier have complete information about the market (they know demand,
supply, and prices). Buyers maximize their utility and suppliers their profit.

Under these conditions the market will reach an equilibrium between supply and demand
at a price level where all suppliers make minimal profit: just enough to sustain their
activities. This price level is also the price level that maximizes overall welfare by
allocating scarce resources to their most valued use. Any profit above what is strictly
necessary to sustain a firm’s operations is seen as ‘supra-normal’. Such supra-normal
profit comes at the expense of consumers and from the perspective of overall welfare this
should be avoided. The best way to do avoid the welfare loss of supra-normal profits is to
bring markets closer to the ideal of perfect competition.

IO economists study competition from the perspective of overall welfare. The focus of
their research is to help governments keep markets competitive and their research
findings inform anti-trust legislation. The starting point of anti-trust legislation is
typically the observation that markets deviate from the first assumption of the
neoclassical model: in many markets, the number of suppliers is in fact quite limited.
Moreover, in contrast to the assumptions of the neoclassical model, these suppliers are
sometimes very profitable, yet this does not trigger new entry. Apparently, there are
barriers to competition that keep new entrants out, and apparently suppliers may have

10
enough market power to drive up the prices for consumers. The central goal of IO
research is therefore to (1) understand the relationship between industry structure and
profitability,4 and (2) to understand barriers to competition in order to advise
governments about policies to reduce these barriers in order to increase social welfare.

6.2 The work of Porter

Whereas I/O economists aim their research at policy makers in government, Porter aimed
his work at managers. In contrast to governments, the interest of managers is not to
increase social welfare by stimulating competition, but rather to pursue supra-normal
profits by protect their firms from the forces of competition. In essence, Porter took the
findings of IO research and turned them around. Rather than using the insights from I/O
to derive government policies to reduce barriers to competition and make markets more
competitive, Porter used these insights to derive strategies to increase the profitability of
individual firms by raising barriers to competition.

Porter’s well-known 5-forces model (threat of entry, competitive rivalry, threat of

substitutes, bargaining power of buyers, and bargaining power of suppliers) is his way to
help managers understand the ‘S’ of industry structure. The basic idea is that stronger
forces lead to more pressure on the profit margins of the firm’s in the industry. Industries
where the five forces are weak are therefore more attractive than industries where the
forces are strong. Porter’s three generic strategies (cost leadership, differentiation, and
focus) are his way to help managers think about the ‘C’ of conduct. The basic idea is that
these strategies can be used to secure favorable positions within the industry: positions in
which the firm in question is better protected from the five forces than its competitors.
The ‘P’ of performance that Porter is interested in is the profitability of firms. Profitable
firms are those firms that occupy favorable positions in attractive industries.

The approach to strategy in the positioning school does not differ all that much from the
approach in the design and planning school. Strategy formation is still seen as a
deliberate and conscious thought process that should result in fully articulated strategies
that are subsequently implemented. The main difference is that Porter’s work develops
the thinking about the content of strategy in much more detail. The five forces model
guides industry analysis, and thus specifies where to look for opportunities and threats.
And Porter explicitly considers what successful strategies could be given different types
of industry structure. Note that the positioning school has a quite different idea about
strategy than the design school. In the design school, the idea is to design strategies that
are unique. In the positioning school the idea is to select strategies that are generic. This
implies that the essence of the approach of the positioning school to strategy lies in the
analysis that precedes the strategic choice: strategy is primarily about selecting favorable
positions in attractive industries.
4
An important aspect of industry structure has always been the concentration of an industry. This is
typically expressed in a ‘C-x’ ratio, the percentage of the total market that is controlled by the x largest
firms. The result of one of the first publications by Joe Bain, one of the founders of the S-C-P approach to
industrial organization, was that industries where the C-8 ratio was above 70% where almost twice as
profitable as industries with a C-8 of less than 70% (Ghemawat 1999).

11
We may summarize the concept of strategy in the positioning school as follows:

1. Strategies as fit
The essence of strategy is to find an optimal fit between a firm and its environment by
taking favorable competitive positions in attractive industries.
2. There are barriers to competition
Profit is the result of taking positions where the firm is protected by barriers to
competition from forces that would otherwise put pressure on the profit margins of the
firm.
3. Strategies are generic positions in the market
Favorable positions can be taken on the basis of a limited number of generic strategies
4. The essence of strategy is analysis
Developing a strategy is largely a matter of analysis of the external environment with the
goal of identifying (1) attractive industries, (2) favorable positions within these
industries, and (3) generic strategies that allow the firm to occupy these positions.

The contribution of the positioning school in general, and the work of Porter in particular,
have been enormously important for the development of the field of strategic
management. This school of thought added content to the standard model (at least with
respect to the external analysis) and developed theoretically grounded ideas about the
sources of performance differences among firms. The link to economic theory and
research was also an important contribution to making the field more scientific. Whereas
the design and planning school, as well as earlier contributions to the positioning school
by consultants, were largely based on formalizing experience, Porter’s work put the field
on a more theory driven track. At the same time, approaching strategy from the point of
view of economic theory is also one of the main weaknesses of the positioning school.
Economic theory tends to see the firm as a ‘black box’: for economists what goes on
inside firms is hardly relevant to explain how markets work. As a result, IO research has
always had more to say about the ‘S’ of industry structure than about the ‘C’ of the
strategic conduct of firms. This carries over to the positioning school, which also tends to
focus on explanations of performance differences in terms of industry structure, rather
than in terms of differences between firms. This may lead to a relatively deterministic
view of strategy, where the environment is seen as the main reason of the success of
firms and managerial actions do not seem to matter all that much. The resource-based
school was in large part developed as a reaction to this view.

7. The Resource-based School: Strategy As Stretch

The resource-based school is the last of the four prescriptive schools that have
contributed to the standard model of strategy. It is also the youngest of these four schools:
its major influence on the field of strategic management took shape in the wake of the
publication of the article ‘The Core Competence of the Corporation’ by Prahalad and
Hamel (1990). The resource-based school can be seen as a reaction to the outside-in
approach to strategy developed in the positioning school. The focus of the positioning

12
school on the importance of the external environment meant that concepts and models to
conduct an in depth internal analysis remained underdeveloped.5 The resource-based
school sought to fill this gap. Unlike the positioning school its primary focus is not on
products that firms sell but on the resources that they employ to produce their products.
The main interest of the resource-based school is to understand the relationship between
differences among firms in terms of their resources, competencies, and capabilities on the
one hand, and performance differentials among these firms on the other hand.

7.1 The resource-based view

We already saw that economist tend to see the firm as a ‘black box’. In the neoclassical
model of market, the mobility assumption means that all firms have access to all the
resources that are necessary to enter a market. In combination with the assumptions that
demand is homogeneous and that everybody has full information and is perfectly rational,
it should come as no surprise economists are not all that interested in what happens inside
firms. Given the assumptions of the neoclassical model, all firms in a particular market
will be the same. They will produce similar products on the basis of similar resources and
can only compete on price.

The resource-based view (RBV) of the firm takes a very different view. Its premises are
the following (Foss, 1997):

-Firms differ from each other

-These differences are relatively stable
-These differences lead to differences in performance

Originally developed during the late 1980s and early 1990s, the RBV opens the black box
of the firm and looks at how differences in the resources that firms control can help
explain why some firms perform better than others (e.g. Wernerfelt, 1984; Barney 1991;
Peteraf, 1993). The approach to strategy of the RBV goes back to the work of economist
Edith Penrose. In her book The Theory of the Growth of the Firm (1959), she defines
firms as ‘… a collection of resources bound together in an administrative framework’
(1995, p.xi). This puts the resources of firms and the way in which these resources are
managed center stage. Penrose emphasizes that resources can be used in different ways
(in her words: they can deliver different ‘services’). On this basis she developed a theory
of diversification in which firms grow through their continuous efforts to use their
resources in productive ways.

5
This is despite Porter’s (1985) book ‘Competitive Advantage’ in which he developed his ‘value chain’
model to conduct internal analyses. Porter’s value chain model has turned out to be less of a contribution to
the strategic management literature than his 5-Forces model. One reason for this is the functional
orientation of the model, which seems to deny that value is actually created in business processes that run
across functional departments. For a later view on the internal dimension of strategy that comes closer to
the ideas of the RBV, see Porter (1996).

13
Given her focus on how firms grow, Penrose was mostly interested in corporate strategy
(where do firms choose to compete?). Most of the work in the RBV has been concerned
with competitive strategy (how do firms achieve competitive advantage?). A central
question has been which characteristics make resources a source of sustained competitive
advantage. According to Barney (1991), this is the case when resources are:

-Valuable
-Rare
-Inimitable
-Non-substitutable

In other words, according to the RBV, a firm will be able to make ‘supra-normal’ profits
when it has valuable resources that other firms do not have. Moreover, the abnormal
profits can be sustained over time when competitors cannot imitate these valuable and
rare resources and when there are no resources available that can substitute the resources
by performing the same function.

7.2 The work of Prahalad and Hamel

Although the RBV had already begun to develop in the 1980s in the scientific journals,
Prahalad and Hamel are largely responsible for the popularity of the resource-based
approach to strategy (Wernerfelt, 1995). Their publication about core competencies is
probably the most influential management article of the 1990s. Prahalad and Hamel’s
perspective on strategy can be understood as a more practice-oriented version of the
RBV. Their perspective is less formal than the RBV and pays more attention to the role
of managers in developing and deploying resources. Furthermore, their perspective pays
more attention to the dynamics of competition (how is competitive advantage developed
over time?).

Prahalad and Hamel define core competencies as ‘the collective learning of the
organization, especially how to coordinate diverse production skills and integrate
multiple streams of technology’ (1990, p. 82). While this is not a very clear definition, it
is at least clear that the focus is on organizational learning and the ability to combine
different types of productive knowledge. Prahalad and Hamel’s examples suggest that
core competencies consist of specific technological knowledge (one of their favorite
examples is Canon, a company that has core competencies in microelectronics, optics,
and fine mechanics that allow it to be successful in such diverse fields as copiers,
cameras, and photolithographic equipment). To show the fundamental role that core
competencies play in competition, Prahalad and Hamel develop a metaphor of the firm as
a tree. The core competencies can then be seen as the roots of the tree. The trunk of the
tree consists of so-called ‘core products’, from which the branches (the business units)
grow. It is from these branches that the leaves and fruits (the firm’s end products) grow.
In other words, the end products are ultimately nourished by the core competencies, even
though these core competencies are often hidden from sight.

14
According to Prahalad and Hamel, not all areas of (technical) knowledge and learning
within the firm are automatically core competencies. A competence can only be called
‘core’ when:

-It adds value for buyers in the end products

-It is difficult to imitate
-It gives access to a variety of markets

There is some obvious overlap between the first two tests of Prahalad and Hamel and
Barney’s criteria for resources as a source of competitive advantage. The third test
introduces a different type of criterion, which can be understood when we realize that
Prahalad and Hamel (like Penrose before them) are explicitly concerned with diversified
(multi-business) firms. Whereas much of the RBV literature primarily deals with
competitive strategy at the level of a specific business unit, Prahalad and Hamel primarily
deal with corporate strategy across business units. In fact, their core competence paper is
positioned as a critique of the type of cash flow driven approach to corporate strategy
propagated by portfolio models such as the BCG matrix. This is also where their concept
of the core competence of the corporation adds something to the older concept of
‘distinctive competence’. In essence, their metaphor of the firm as a tree offers an
alternative logic to consider the composition of a portfolio of business units: the link
between business units should not be seen in terms of cash flows that help balance risk
and return, but in terms of knowledge flows that create synergies.

In addition to adding a corporate strategy dimension to the basic ideas of the RBV,
Hamel and Prahalad also add a distinctly Schumpeterian flavor the RBV. Schumpeter
(1950) was an economist who emphasized the crucial role of entrepreneurs in shaping
markets and industries through acts of innovation. In Hamel and Prahalad’s work (1989,
1994), these ideas take the form of a very voluntaristic view of strategy. Whereas the
positioning school thinks of strategy in terms of ‘fit’, Prahalad and Hamel (1993) think of
it in terms of ‘strectch’. Rather than analyzing the existing competitive environment,
managers should become entrepreneurs that change this environment in their favor. The
message is: don’t be a rule taker, be a rule maker.

The view of strategy of the resource-based school (especially in the more popular version
of Prahalad and Hamel) can be summarized as follows:

1. Strategy as stretch
The environment is malleable and the essence of strategy is to change the rules of the
game in your favor.
2. Resources are the ultimate sources of competitive advantage
Firms differ from each other in terms of the resources they control. These differences are
what explain differences in the performance of firms.
3. Strategy is therefore about having a clear vision for the future and developing unique
resource combinations to realize this vision.
A firm should have a clear ‘strategic intent’ that helps focus the identification,
development, and deployment of core competencies.

15
The resource-based school has made a major contribution to the strategic management
field by balancing out the largely external focus of the positioning school with a focus on
internal sources of competitive advantage. Whereas the emphasis of the positioning
school is on taking favorable positions in product markets, the resource-based school
calls attention to the resources that underlie these product market positions. The main
criticisms of the resource-based school are twofold. First, the RBV is not always very
clear about what relevant resources are. Second, in the more popular managerial
contributions to the school such as the one by Prahalad and Hamel, the tone is often
overly voluntaristic. In reality managers may often be quite limited in what they can do to
shape the competitive environment in their favor.

8. The Process School: Strategy As Collective Learning

The four schools discussed above are largely prescriptive: their aim is to offer an
effective approach to strategy formation. From around 1980 onwards, a number of
strategy scholars have distanced themselves from the normative overtones of the four
prescriptive schools and from the standard model that incorporates the main insights from
these four schools. Authors from the process school, like James Brian Quinn and Henry
Mintzberg, criticized the rational planning approach to strategy. In their criticism of the
overly rational model of decision making on which the standard model of strategy is
based, the proponents of the process school echo an older criticism of the neoclassical
model of decision making in economics.

This older criticism of the neoclassical model of decision making was developed in the
1950s by Herbert Simon and other members of the so-called Carnegie school. We already
saw that one of the assumptions of the neoclassical model is that all economic agents are
completely rational. ‘Homo economicus’, or economic man, is assumed to have full
information and to optimize her decisions given this information. Moreover, in the
neoclassical model, the firm itself is seen as an economic man. That is to say that the firm
is treated as a unitary agent: its decisions are supposed to be made in a similar way as
those of a single individual. Based on a number of case studies of decision-making in
organizations, members of the Carnegie school took issue with these assumptions of the
neoclassical model. First, they showed that decision making within firms has a political
dimension: the firms is not a unitary agent, but rather a political entity where different
groups may have different interests (Cyert and March, 1963). Second, they showed that
the view of the manager as an ‘economic man’ who has able to optimize the profitability
of his firm is not very realistic. Rather, decision-making is guided by ‘bounded
rationality’ and is aimed at ‘satisficing’ (Simon, 1976[1946]). That is to say that
economic agents typically do not have full information, do not have the cognitive
capacities to calculate the best decision, and are happy to make decisions that lead to
‘satisfactory’ outcomes that meet aspiration levels, rather than optimal outcomes.

Like the members of the Carnegie school before them, strategy scholars in the process
school set out to perform a number of descriptive case studies of decision making in

16
firms. The approach was to observe and describe the process by which strategies are
actually developed. What these studies found was quite different from the picture of the
strategy process prescribed by the standard model. The standard model sees strategy as a
very rational process that leads to clear plans that are subsequently implemented. In
contrast, the studies of the process school found that strategy processes involve much
more than ratio alone and that there is typically a substantial gap between the intended
strategy of a firm and the strategy that is actually realized.

In his book Strategies for Change: Logical Incrementalism, which is based on case
studies of change processes in ten large firms, Quinn (1980) describes the problem of the
standard model of strategy as follows:

‘It is virtually impossible for a manager to orchestrate all internal decisions, external environmental events,
behavioral and power relationships … informational needs, and actions of intelligent opponents so that they
come together at a precise moment.’

In other words, reality is simply too complex for a purely rational planning approach to
strategy. Strategic decisions are too complex to calculate the best course of action and
there are too many social and political factors that may interfere in the process to realize a
‘grand strategy’. But if the complexities of strategic decision making overwhelm the
cognitive capacities of human decision makers and the purely rational planning approach
will always come up short, what is the alternative? Quinn proposes a synthesis between
the planning approach of the standard model and what he refers to as the ‘power-
behavioral approach’. In keeping with the findings of the Carnegie school, this power-
behavioral approach takes into account ‘multiple goal structures, the politics of strategic
decisions, bargaining and negotiation processes, satisficing in decision making, the role
of coalitions, and the practice of ‘muddling’ …’. Quinn’s synthesis can be summarized as
follows:

-By themselves, neither of the approaches (the rational planning approach and the power-
behavioral approach) adequately describes the process of strategy formation as it takes
place in firms
-Effective strategies develop incrementally and opportunistically as a result of
coordinating activities in specific subsystems (such as acquisitions, divestitures, re-
organizations, and even formal planning)
-Given the cognitive limits of managers, this process can best be managed as a process of
logical incrementalism
-‘Logical incrementalism’ is not ‘muddling through’. It is a goal-oriented, active, and
effective approach to the integration of analytical and behavioral aspects of strategy
formation.

Note that despite his initial descriptive approach, Quinn’s discussion of ‘logical
incrementalism’ does eventually become rather prescriptive. In the end, he suggests that
an incremental approach does not just describe the actual process of strategy formation
better (at least in bigger firms), but that it is also the most effective way of going about
strategic management.

17
On the basis of case studies in a number of Canadian firms, Mintzberg (e.g. Mintzberg
and Waters, 1985) goes even further in his criticism of the standard model than Quinn.
According to Mintzberg, strategies are often ‘emergent’. Rather than being the result of a
deliberate planning process, strategies often emerge more or less spontaneously. When
this happens, the rationalization for the strategy is typically developed only after the
existence of the strategy is recognized. Mintzberg therefore defines strategy as a
consistent pattern in the actions of a firm. In the standard model strategy results from a
deliberate, top down, approach to planning for the future. In contrast, in Mintzberg’s
view strategy is a process by which firms arrive at a coherent and successful set of
activities through learning by doing without much top-down control.

Mintzberg (1994) elaborates on his critique of the standard model in his book The Rise
and Fall of Strategic Planning. 6 He highlights three fallacies in the rational planning
approach to strategy:

-The fallacy of predetermination

The planning approach assumes that firms can perfectly predict what the world will look
like in the future. It is misleading to think that firms can come up with a grand strategy
that can be a good guide to future behavior when environments change all the time.
-The fallacy of detachment
The planning approach assumes that thinking (strategic analysis) and acting (strategic
implementation) can be separated. This leads to an approach to strategy in which
management proceeds on the basis of abstractions (such as cash flows) rather than on the
basis of an intimate understanding of the real business processes that underlie these
abstractions. It is misleading to think that firms can be managed without tightly linking
hands-on knowledge of the actual business to developing strategy.
-The fallacy of formalization
The planning approach assumes that developing a strategy can be broken down into a
series of analytical steps guided by checklists and models. But strategy is not about
compiling a lot of information, but about synthesizing this information. It is a mistake to
think that something that depends on synthesis can be formalized.

Mintzberg then brings these three fallacies together in what he calls the grand fallacy of
strategic planning: ‘Because analysis is not synthesis, strategic planning has never been
strategy making’. According to Mintzberg, the essence of strategy is the series of insights
that result from a continuous process of collective learning, which can only be realized by
tightly linking thinking to acting.

The view of strategy in the process school can be summarized as follows (adapted from
Mintzberg, Ahlstrand en Lampel 1998):

1. Strategy as a collective learning process

6
Mintzberg’s critique led to a fairly acrimoneous debate with Igor Ansoff about the sense and nonsense of
strategic planning. See Mintzberg (1990, 1991), Ansoff (1991).

18
The complex and unpredictable nature of the organization’s environment … precludes
deliberate control; strategy making must above all take the form of a process of learning
over time … While the leader must learn too, and sometimes can be the main learner,
more commonly it is the collective system that learns: there are many potential strategists
in most organizations
2. Linking thinking and acting
Collective learning proceeds in emergent fashion, through behavior that stimulates
thinking retrospectively, so that sense can be made of action … at the limit, formulation
and implementation become indistinguishable
3. Process comes before content
The role of leadership becomes not to preconceive deliberate strategies, but to manage
the process of strategic learning, whereby novel strategies can emerge
4. Strategies appear first as patterns out of the past, only later, perhaps, as plans for the
future, and ultimately, as perspectives to guide ultimate behavior

The descriptive approach to strategy in general and the work of Mintzberg in particular
led to a view of strategy that is summarized in Figure 2. The intended strategy that is the
focus of the prescriptive schools is typically only partially realized. In addition to purely
rational concerns, there are a host of cognitive, political, and socio-cultural components
to strategy that may distract from the realization of the intended strategy (‘unrealized
strategy’). Moreover, the environment may not be as malleable as managers would like
and may impose part of the strategy on the firm. And, a stream of ongoing, unplanned
actions (‘emergent strategy’) can also lead to important contributions to the strategy that
is ultimately realized.

It may be clear that the descriptive approach to strategy has resulted in a much richer
picture of the process of strategy. As Figure 3 shows, strategic planning is but one of a
number of ways to deal with strategy (Idenburg 1993). But although many of the insights
from the process school were formulated in terms of useful criticisms of the standard
model of strategy, this does not mean that the process school itself is beyond criticism.
First, the process school has little to say about the content of strategy. Given its emphasis
on the process of strategy, it has not added much to our understanding of the sources of
competitive advantage. Second, and more fundamentally, there is an interesting tension at
the heart of the debate between advocates of a rational planning approach to strategy, on
the one hand, and their opponents from the process school, on the other hand. This
tension can be understood in terms of the distinction between ‘Ist’ (what is) and ‘Soll’
(what should be). It may be clear that the descriptive studies of strategy from the process
school have shown that in reality strategy is hardly the rational planning exercise that the
standard model advocates (‘Ist). But, by itself, this offers no conclusive proof that a
rational planning approach could not be more effective (‘Soll’). In that sense, although
the process school clearly has made a very strong case against putting too much faith in
strategic planning, given its merely descriptive nature it cannot claim to have made a
sufficient case to completely discard strategic planning.

19
9. The Strategic Management Field: Taking Stock
After this overview of the main schools of thought on strategy, we may ask ourselves
where the strategic management field stands today. After some fifty years of thinking
about strategy, what are the main points of agreement and disagreement among strategy
scholars and what are the open issues that are researched today?

Mintzberg, Ahlstrand en Lampel (1998) list the following points of agreement across
different schools of thought:7

Strategy concerns both organization and environment

A basic premise of thinking about strategy concerns the inseparability of organization and
environment … The organization uses strategy to deal with changing environments.
The substance of strategy is complex
Because change brings novel combinations of circumstances to the organization, the
substance of strategy remains unstructured, unprogrammed, nonroutine, and non-
repetitive.
Strategies exist on different levels
Firms have corporate strategy (What business shall we be in?) and business strategy
(How shall we compete in each business?).
Strategy involves issues of both content and process
The study of strategy includes both the actions taken, or the content of strategy, and the
processes by which actions are decided and implemented.
Strategy involves various thought processes
Strategy involves conceptual as well as analytical exercises. Some authors stress the
analytical dimension more than others, but most affirm that the heart of strategy making
is the conceptual work done by leaders of the organization.8
Strategies are not purely deliberate
Theorists agree that intended, emergent and realized strategies may differ from one
another.

Points of disagreement and issues that are currently on the research agenda can be
understood in terms of different views of the ‘process’, ‘content’ en ‘context’ of strategy:

Process: The role of management in strategy

There is clearly a difference in opinion with respect to the degree of control that
managers have over strategy. This is clear from the different views of the four
prescriptive schools, on the one hand, and the descriptive school, on the other hand. The
prescriptive schools stay close to the neoclassical economic model that emphasizes
7
Based on Chaffee (1985).
8
Schools that emphasize analysis are the planning school and the positioning school. The design school
and competence school (through such concepts as ‘strategic intent’) emphasize conceptual processes at the
apex of the organization. The process school can also be seen to emphasize conceptual processes (think of
Mintzberg’s emphasis on ‘synthesis’), but it does not accept that strategy only takes place at the apex of the
organization.

20
rationality and optimizing. According to the standard model, managers should, by their
mere brainpower, be able to come up with grand strategies that are so clear and
convincing in their consequences that implementation by the organization is guaranteed.
In contrast, the descriptive process school emphasizes cognitive limits and the importance
of socio-cultural processes and power relationships. Its view of strategy is closer to the
Carnegie model and emphasizes satisficing rather than optimizing. For as far as managers
can shape strategies (here seen as patterns in the actions of firms, rather than plans on
paper), they can do this at most through affirming existing patterns (emergent strategy),
by achieving incremental changes within the existing power relationships and socio-
cultural context (logical incrementalism), or perhaps by creating a convincing vision of
the future that lower levels in the organization can fill in independently (strategy as
perspective).

Content: The relationship between the firm and its environment

The second point on which opinions differ is the malleability of the environment. Here
the disagreement is clear from the different views of strategy in the two schools that are
primarily concerned with the content of strategy: the positioning and the resource-based
school. The ‘strategy as fit’ approach of the positioning school clearly tends to a view
that can be summarized as ‘environmental determinism’: the environment determines
what a successful strategy is and firms will therefore need to adapt to their environment.
On this view, competitive advantage can only result from the clever use of existing
barriers to competition. In contrast, the ‘strategy as stretch’ approach of the resource-
based school, especially in its more popular versions, clearly tends to a view that can be
summarized as ‘managerial voluntarism’: managers can change the world and build
competitive advantage for their firms by changing the rules of the game and creating
entirely new barriers to competition.

Context: The dynamics of competition

Note that none of the five schools has the context of strategy as its main concern.9 As a
result, it would seem that their ideas about the process or content of strategy have
universal validity. However, it would only seem logical that the process of strategy in a
small family owned firm might differ from the process in a large multinational. And it
also seems logical that the sources of competitive advantage during the emergence of a
new industry might be different from those on a declining market. When different types
of context are explicitly recognized (see for instance Porter, 1980; Mintzberg, Quinn and
Goshal, 1998), it is not clear how these contexts may change. How do growth markets
come about and how do they eventually turn into mature markets? And how can firms
develop competitive and maintain a competitive advantage when environments change?
Such questions highlight the fact that most of the theories and concepts in the strategic
management field are static in nature and do not incorporate an explicit time dimension.

We may conclude that strategic management is still a relatively young discipline that is
still being developed. It is less than fifty years old, and attempts to ground its concepts in
economic theory (by the positioning and resource-based schools) and insights from the

9
Context does play a central role in many schools of thought in organization theory, such as contingency
theory.

21
social sciences (by the process school) have a history of less than thirty years and are still
ongoing. The main issues that have dominated the research agenda of the field over the
last 10 years have in large part been linked to understanding the dynamics of competitive
advantage over time, on the one hand, and to general changes in the economic context, on
the other, with a specific concern for the growing importance of knowledge as a resource
and the changing boundaries of firms. This has resulted in a lively interest in
organizational knowledge and learning and the mix of cooperation and competition that
dominates the interactions of firms that operate in networks. This interest, in turn, has led
to offshoots of the resource-based school such as the ‘knowledge-based view’ and the
‘dynamic capabilities view’, which are still being developed today.

References

Ansoff, H. Igor (1965), Corporate Strategy, New York: McGraw-Hill.

Ansoff, H. Igor (1991), Critique of Henry Mintzberg’s ‘The Design School: Reconsidering the
Basic Premises of Strategic Management’, Strategic Management Journal, 12, p. 449-461.

Barney, Jay B. (1991), Firm Resources and Sustained Competitive Advantage, Journal of
Manegement, 17, p. 99-120.

Chaffee, E. E. (1985), Three Models of Strategy, Academy of Management Review, 10,1, p. 89-
98.

Cyert, R.M. and J. March (1963), A Behavioral Theory of the Firm, Englewood Cliffs, NJ:
Prentice Hall.

Foss, Nicolai J. (Ed.) (1997), Resources, Firms and Strategies, A Reader in the Resource-Based
Perspective, Oxford: Oxford University Press

Ghemawat, Pankaj (1999), Strategy and the Business Landscape, Text and Cases, Reading, Mass.
Addison Wesley

Hamel, Gary and C.K. Prahalad (1989), Strategic Intent, Harvard Business Review, 67 (May-
June), p. 63-76

Hamel, Gary and C.K. Prahalad (1993), Strategy as Stretch and Leverage, Harvard Business
Review, 71 (March-April), p. 75-84

Hamel, Gary and C.K. Prahalad (1994), Competing for the Future, Boston MA: Harvard Business
School Press.

Hayes, Robert H. and William J. Abernathy (1980), Managing Our Way to Economic Decline,
Harvard Business Review, (July-August), p. 11-25.

Idenburg, Peter J. (1993), Four Styles of Strategy Development, Longe Range Planning, 26, p.
132-137.

22
Johnson, Gerry and Kevan Scholes (1997), Exploring Corporate Strategy, Text and Cases, 4th
ed., London etc.: Prentice Hall.

Learned, E.P., C.R. Christensen, K.R. Andrews and W.D. Guth (1965), Business Policy: Text and
Cases, Homewood, IL: Irwin, Inc.

Levit, Theodore (1960), Marketing Myopia, Harvard Business Review, 38 (July-August), p. 45-
56.

Mintzberg, Henry (1987), Crafting Strategy, Harvard Business Review, (July-August), p. 66-75.

Mintzberg, Henry (1990a), Strategievorming, Scriptum Management, (1994). Dutch translation

of: ‘Strategy Formation: Schools of Thought’, In: Perspectives on Strategic Management, J.
Frederickson (Ed.), Boston: Ballinger (1990).

Mintzberg, Henry (1990b), The Design School: Reconsidering the Basic Premises of Strategic
Management, Strategic Management Journal, 11, p. 171-195.

Mintzberg, Henry (1991), Learning 1, Planning 0, Reply to Igor Ansoff, Strategic Management
Journal, 12, p. 171-195.

Mintzberg, Henry (1994), The Rise and Fall of Strategic Planning, New York etc., Prentice Hall.

Mintzberg, Henry and J. Waters (1985), Of Strategies, Deliberate and Emergent, Strategic
Management Journal, 6, p. 257-272.

Mintzberg, Henry, James Brian Quinn and Sumantra Ghoshal (1998), The Strategy Process,
London etc. Prentice Hall.

Mintzberg, Henry, Bruce Ahlstrand and Joseph Lampel (1998), Strategy Safari, A Guided Tour
Through the Wilds of Strategic Management, London etc. Prentice Hall.

Penrose, Edith (1995), The Theory of the Growth of the Firm, Oxford: Oxford University Press
(3d edition)

Peteraf, Margaret A. (1993), The Cornerstones of Competitive Advantage: A Resource-based

View, Strategic Management Journal, 14, p. 179-191.

Porter, Michael E. (1980), Competitive Strategy: Techniques for Analyzing Industries and
Competitors, New York NY: The Free Press.

Porter, Michael E. (1985), Competitive Advantage: Creating and Sustaining Superior

Performance, New York NY: The Free Press.

Porter, Michael E. (1996), What is Strategy?, Harvard Business Review, November-December, p.

61-78.

Prahalad, C.K. and Gary Hamel (1990), The Core Competence of the Corporation, Harvard
Business Review 68 (May-June), p. 79-91.

23
Quinn, James Brian (1980), Strategies for Change: Logical Incrementalism, Homewood, IL:
Irwin, Inc.

Schumpeter, Joseph A. (1950), Capitalism, Socialism and Democracy, 3rd ed., New York:
Harper & Row.

Selznick, Philip (1957), Leadership in Administration: A Sociological Interpretation, New York:

Row, Peterson.

Simon, Herbert A. (1976), Administrative Behavior: A Study of Decision-making Processes in

Administrative Organization, 3ed., New York: The Free Press.

Stoelhorst, Jan-Willem (1997), In Search of a Dynamic Theory of the Firm, PhD. dissertation,
University of Twente.

Wernerfelt, Birger (1984), A Resource-based View of the Firm, Strategic Management Journal,
5, p. 171-180.

Wernerfelt, Birger (1995), The Resource-based View of the Firm: Ten Years After, Strategic
Management Journal, 16, p. 171-174.

24
Figure 1: The standard model of strategy

Objectives
Objectives
Mission,
Mission,
vision,
vision, intent
intent

External
External Internal
Internal
Strategic Analysis OO // TT S
S // W
W

SWOT
SWOT // II

Strategic
Strategic
Strategic Choice options
options &&
choice
choice

Strategy
. . . . . . . . . .
Implementation

Organizational
Organizational
&
& financial
financial
consequences
consequences

25
Figure 2: Mintzberg on strategy

Strategy formation

InInte
t
stsrtraenndded
ateteg ed
gyy Imposedstrategy
Imposed strategy

Realized
Realized
strategy
strategy
Unrealized
strategy

Emergent
strategy

Figure 3: Four views on the strategy process (Idenburg, 1993)

Goal Orientation
strong weak

strong

Logical Strategy as
incrementalism learning

Process
Orientation

Rational Emergent
planning strategy
weak

26