Perspectives on strategy

Chapter 2

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Learning Objectives
• discuss the implications of adopting an emergent versus
a deliberate strategy
• determine the main features of the competitive
positioning and core competence strategies
• explain what strategic thinking is and outline the
components of strategic thinking
• profile the different sources of strategy, including the
planning approach, competitive positioning approach,
emergent approach, core competence approach and
knowledge-based strategy
• explain the different types of strategic decisions, different
levels of strategy and where strategy is carried out

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Perspectives on Strategy
Planned/prescriptive Emergent/incremental
strategy strategy

Collaborative Knowledge-based
Strategic management
strategy strategy

Competitive Resource/competence-
positioning strategy based strategy

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

Approaches to Strategic
Management
Approach Theory
Prescriptive or planned Strategic management is a
strategy highly formalized planning
process
Business objectives are set
and strategies are formulated
and implemented to achieve
them
Emergent or incremental Strategy emerges and
strategy develops incrementally over
time in the absence of rigid
planning
David Campbell, David Edgar & George Stonehouse
Business Strategy: an introduction
Advantages
Clear objectives provide focus
for the business
Objectives can be translated
into targets against which
performance can be measured
and monitored
Resources can be allocated to
specific objectives and
efficiency can be judged
The approach is logical and
rational
Emergent strategy increases
flexibility in a turbulent
environment, allowing the
business to respond to threats
and exploit opportunities
Changing stakeholder
interactions can mean that
strategy is often, of necessity,
emergent
Criticisms
There are often major
discrepancies between planned
and realized strategy
Rigid planning in a dynamic
and turbulent business
environment can be
unproductive
Prescriptions can stifle
creativity
Rigid adherence to plans may
mean missed business
opportunities
There is a danger of ‘strategic
drift’ as objectives lack clarity
It is more difficult to evaluate
performance as targets are
less well defined
Approaches to Strategic
Management
Approach Theory
Competitive positioning Competitive advantage results
from an organization’s position
in respect to its industry
The business analyses the
strength of the competitive
forces in its industry and
selects an appropriate generic
strategy. The business
configures its value-adding
activities to support this generic
strategy
The approach to strategy is
‘outside-in’
Resource or competence- Organizations must identify and
based strategy build core competences or
distinctive capabilities that can
be leveraged in a number of
markets
The approach to strategy is
‘inside-out’
David Campbell, David Edgar & George Stonehouse
Business Strategy: an introduction
Advantages
Well-developed analytical
frameworks like Porter’s five
forces, value chain and generic
strategies
Structured approach helps to
simplify the complexity of
business and the business
environment
Good for identifying
opportunities and threats in the
environment
The approach emphasizes the
importance of the individual
business in acquiring
competitive advantage
Strategic intent, vision and
creativity are emphasized
Criticisms
Neglects the importance of
business-specific competences
as opposed to industry-wide
factors
Some of the analytical
frameworks, for example
generic strategies, have been
widely criticized
Analytical frameworks are in
their infancy and are currently
poorly developed
The importance of the
environment in determining
competitive advantage is
underestimated
 Strategic Thinking
Liedtka (1998) argues that strategic thinking differs
from strategic planning, in that:

•The future cannot be predicted, only the shape of the

future, therefore detailed planning is fruitless

•Strategy formulation and implementation are

interactive processes and therefore dynamic and
complex. As such, they cannot be treated as
sequential or discrete activities

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Strategic Thinking cont.
• All managers play a key role in strategy
formulation and implementation and control, so
they need to operate with strategic intent, flexibility
and an understanding of the ‘bigger picture’

• As strategy and change are inescapably linked,

finding new strategic options and implementing
them successfully is harder and more important
than evaluating the options

• Finally, the planning process itself is seen as a

critical value-adding element, rather than the
actual resulting objectives.
David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Strategic Thinking cont.
Liedtka proposed five major attributes of strategic
thinking in practice:

•a systems perspective: or the ability to understand

the implications of strategic actions

•intent focused: the ability to allow individuals to focus

on the overall goals of the organization and not get
‘bogged down’ in details

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Strategic Thinking cont.
• thinking in time: being able to hold the past, present
and future in mind at the same time (scenario planning
is an excellent tool for this)

• being hypothesis driven: to ensure that critical and

creative thinking are embedded in strategy
development

• intelligent opportunism: being sensitive and responsive

to real opportunities, not every opportunity.

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Sources of Strategy
• planned strategy (also called deliberate or
prescriptive)

• competitive positioning strategy

• core competence-based strategy (or

resource-based or distinctive capability)

• emergent or learning strategy

• knowledge-based strategy.

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

Types of Strategic Decision

Strategic
level

Tactical level

Operational level

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Levels of Strategy
Strategic Tactical Operational
Focus of decision Achieving sustainable Implementation of Day-to-day operations
competitive advantage strategy

Level of decision- Senior management, Head of business unit or Supervisory

making board of directors functional area
Scope Whole organization Business unit or Department
functional area, for
example marketing
Time horizon Long term (years) Medium term (months to Short term
years) (days, weeks, month)
Certainty/uncertainty High uncertainty Some uncertainty High certainty

Complexity Highly complex Moderately complex Comparatively simple

Examples Decision to launch new Decision to advertise, Decision to reorder stock,
product, enter new alter price and so on scheduling of jobs
market, investment
decision and so on
David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Reading
Abraham, S. (2005) ‘Stretching strategic thinking’, Strategy & Leadership, 33(5): 5–12.
Ambrosini, V. and Bowman, C. (2009) ‘What are dynamic capabilities and are they a useful construct
in strategic management?’ International Journal of Management Reviews, 11(1): 29–49.
Barney, J.B. (1991) ‘Firm resources and sustained competitive advantage’, Journal of Management,
17(1): 99–120.
Easterby-Smith, M., Lyles, M.A. and Peteraf, M.A. (2009) ‘Dynamic capabilities: current debates and
future directions’, British Journal of Management, 20: S1–8.
Heracleous, L. (1998) ‘Strategic thinking or strategic planning’, Long Range Planning, 30(3): 481–7.
King, A.W. (2007) ‘Disentangling interfirm and intrafirm causal ambiguity: a conceptual model of
causal ambiguity and sustainable competitive advantage’, Academy of Management Review,
32(1): 156–78.
Mintzberg, H. (1990) ‘The design school: reconsidering the basic premises of strategic management’,
Strategic Management Journal, 11: 171-95.
Nonaka, I., Toyama, R. and Konno, N. (2000) ‘SECI, ba and leadership: a unified model of dynamic
knowledge creation’, Long Range Planning, 33(1): 5–34.
Quinn, J.B. (1992) The Intelligent Enterprise, New York: Free Press.
Rumelt, R.P. (1984) ‘Towards a strategic theory of the firm’, in R.B. Lamb (ed.), Competitive Strategic
Management, Englewood Cliffs, NJ: Prentice Hall.
Schoemaker, P.J. (1995) ‘Scenario planning: a tool for strategic thinking, Sloan Management Review,
36(2): 25–40.
Stacey, R. (2007) Strategic Management and Organisational Dynamics: Challenge of Complexity to
Ways of Thinking about Organisations, Harlow: Pearson Education.
Teece, D.J., Pisano, G. and Shuen, A. (1997) ‘Dynamic capabilities and strategic management’,
Strategic Management Journal, 18(7): 509–33.

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Review Questions
1. What are the potential implications for managers of
adopting an emergent approach to strategy rather than
a prescriptive approach?

2. What are the key factors that differentiate a positioning

strategy from a core competence-based approach?
 
3. What is strategic thinking and how could you
encourage it in an organization?
 
4. What is the difference in perspective between the
different levels of strategic decision-making (strategic,
tactical and operational)?

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction