Topic 2: Theories of Strategy

Semester 2, 2021
Week 3: Lecture 2
 Lecture Outline
 Introduction
 Aims and Objectives of the Lecture
 Define Theories
 Theories of Strategy
• Classical Approach Theory
• Evolutionary Theory
• Processual Approach Theory
• Systemic Approach Theory
 Conclusion
 Aims & Objectives of the Lecture

• Understand the origin of Theories of Strategy.

• Understand the four (4) Theories of Strategy
namely; Classical, Evolutionary, Processual
and Systemic Theory.
• To ground ourselves properly with the
Theories of Strategy in order to understand the
10 Schools of Thought that will be covered in
class.
 Introduction
• Four (4) main Theories of Strategy commonly
known as four generic approaches to Strategy
or sometimes known as :”Theories of Action”.
• They are: Classical, Evolutionary, Processual
and Systemic Theories.
• Note that they are many theories that
contribute towards strategy formation and
strategic management.
 What are Theories?
• Theories are analytical tools for understanding,
explaining and making predictions about a
given subject matter.

• They are concepts, definitions and propositions

that explain or predict these events or situations
by illustrating the relationships between
variables.
 Conti…
• Theories contain basic assumptions about key
relationships in business.
• It tell us what to look out for, what our first
step should be and what to expect as a result of
our actions.
• They present systematic way of understanding
events or situations.
 Theories of Strategy

• The book from Richard Whittington (2002),

titled “What is Strategy – Does it Matter” had
identified four (4) different perspectives to
strategy which includes;
1. Classical approach
2. Evolutionary approach
3. Processual approach
4. Systemic approach
 Theories of Strategy
1. Classical approach
Classical approach –
• Associated with authors such as Igor Ansoff
(1965, 1991) and Michael Porter (1980, 1985)
• Oldest and most influential
• Relies on rational planning
• Classical approach gives text book answers
• Here strategy is a rational process of deliberate
calculation and analysis
 Conti…
• Designed to maximize long-term advantage
and usually profit maximization through
rational planning.
• Both outside world and organization itself can
be made predictable and shaped according to
the careful plans of top management.
• For classicist, good planning is what it takes to
master internal and external environments.
 2. Evolutionary Approach

• Evolutionists such as Hannan & Freeman

(1983) and Oliver Williamson (1991) argued
that strategy in classical sense of rational
future-oriented planning is irrelevant
• Environment is unpredictable
• The dynamic, hostile and competitive nature of
market means that long-term survival cannot
be planned for.
 Conti…

• Businesses are like species of biological

evolution.
• Competitive processes ruthlessly select out
others who are powerless to change themselves
quickly enough to ward of extinction (survival
of the fittest).
• From evolutionary perspective, it is the market
(environment), not managers who make
important choices.
 3. Processual Approach

• Processualist argue that strategy emerges –

more – front a “pragmatic-process” of
learning and compromise than from a rational
series of leaps forward (Mintzberg, 1987).

• Processualists see strategy as emerging from

processes governed by chance, confusion and
conservatism (Whittington 1993).
 4. Systemic Approach

• Systemic approach emphasizes that objectives

of strategy and modes of strategy making
depend on the strategist’ social characteristics
and social context within which they operate.

• Strategists are influenced by their social

systems (norms, rules, roles, culture, ethics).
 Conclusion
• Classicists believe in rational or objective
approach.
• Evolutionarists and Processualists are
doubtful that rational approach is the best
strategy.
• Evolutionists believe that the environment is
the biggest factor in business since it is too
unpredictable and changeable for the firm.
 Conclusion
• Processualists believe it is not the environment
or calculated rationality that are important.
Instead, they think it is in compromise and
adjustment, both internal and external that matter
resulting in emergent strategies.

• Systemic approach takes into consideration the

ends and means of business strategy depends on
what is the prevailing social systems.
The End!

Thank You