Transcript Slide 6.1 Chapter 6 Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009 Slide 6.2 Approaches to strategy Managerial choice and constraints Bernard Burnes,

Slide 6.1
Chapter 6
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.2
Approaches to strategy
Managerial choice and constraints
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.3
Strategy
Strategy is concerned with decision-making.
Decisions about:
 The Past
 The Present
 The Future.
Strategy is concerned with coping with change:
 Sit back
 React
 Anticipate.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.4
Definitions of strategy
1960s

Ansoff



Focus on the external environment
Product-market mix.
Chandler


Determination of long-range business goals
The courses of action necessary to achieve these.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.5
Figure 6.1
Product–market mix
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.6
Figure 6.2
SWOT analysis
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.7
Johnson and Scholes (1993)
Strategy:
 Concerns the full scope of the organisation’s
activities.
 Is the process of matching the organisation’s
activities to its environment.
 Is the process of matching its activities to its
resource capability.
 Has major resource implications.
 Affects operational decisions.
 Is affected by the values and beliefs of those who
have power in the organisation.
 Affects the long-term direction of the organisation.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.8
Strategic management
Strategic management is concerned with complexity
arising out of ambiguous and non-routine situations with
organisation-wide rather than operations-specific
implications. … Nor is strategic management concerned
only with taking decisions about major issues facing the
organisation. It is also concerned with ensuring that the
strategy is put into effect. It can be thought of as having
three elements within it … understanding the strategic
position of an organisation, strategic choices for the
future and turning strategy into action.
(Johnson and Scholes, 2002: 15–16)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.9
Mintzberg on strategy
Five definitions:
 Plan –
Intended actions
 Ploy –
Manoeuvre
 Pattern –
Consistent trend of behaviour
 Position –
Avoiding competition
 Perspective – Common view.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.10
Johnson’s three basic
views of strategy
1. The rationalistic view – which sees strategy as the
outcome of a series of preplanned actions designed to
achieve the stated goals of an organisation in an
optimal fashion.
2. The adaptive or incremental view – which sees
strategy evolving through an accumulation of relatively
small changes over time.
3. The interpretative view – which sees strategy as the
product of individual and collective attempts to make
sense of, i.e. interpret, past events.
Johnson (1987)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.11
Making sense of strategy

Prescriptive:




Ansoff
Chandler
Porter.
Analytical:





Mintzberg
Pettigrew
Child and Smith
Stacey
Hamel and Prahalad.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.12
The strength of the Prescriptive school

Firstly, the proponents set out deliberately to address the needs
of industry and commerce by providing them with a blueprint for
strategy formulation and implementation.

Secondly, they interacted closely with a number of leading
consultants, notably the Boston Consultancy Group, and
business schools, notably Harvard, to promote their work and
tailor it to the needs of organisations. By reinforcing and
promoting each other, this triple alliance of researchers,
consultants and educators created an iron orthodoxy that
organisations, especially large ones, felt they ignored at their
peril.

Lastly, because all three groups in this triple alliance were in
effect engaged in a business activity, selling strategy as a
product, they were able to invest in promoting and developing
their product in a way that others were not.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.13
Criticisms of the Prescriptive
approach to strategy
• Hard data are no more reliable, and in some cases
less so, than qualitative data.
• Organisations and managers are not rational entities
and do not apply a rational approach to decisionmaking.
• An organisation’s strategy is as likely to emerge from
unplanned actions and their unintended
consequences over a period of time as it is from any
deliberate process of planning and implementation.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.14
Criticisms of the Analytical
approach to strategy
To observe [as the proponents of Analytical
stream of strategy do] that organizations are
complex, that change is inevitably incremental,
and that strategy is inevitably adaptive, however
true, helps very little in deciding what to do.
Managers wish to be told of a process which they
can at least partially control and, whatever its
weaknesses, that is what rationalist [Prescriptive]
strategy appears to offer.
(Kay, 1993:357)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.15
Planned and Emergent strategies
Deliberate strategy focuses on control – making sure that
managerial intentions are realized in action – while
emergent strategy emphasizes learning – coming to
understand through the taking of actions what those
intentions should be in the first place. ... The concept of
emergent strategy ... opens the door to strategic
learning, because it acknowledges the organization’s
capacity to experiment. A single action can be taken,
feedback can be received, and the process can continue
until the organization converges on the pattern that
becomes its strategy.
(Mintzberg et al, 1998a: 189–190)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.16
Figure 6.3
Emergent strategy
Source: Adapted with permission from Mintzberg, H., Patterns in Strategy Formation, Management Science, 24(9), (1978). Copyright 1978, the Institute for Operations Research and the
Management Sciences , 7240 Parkway Drive, Suite 300, Hanover, Maryland 21076
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.17
Figure 6.4
Constraints on managerial choice
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.18
Managers have choice
But choice is constrained by
 National objectives, practices and cultures:



GM and USA
Japan and Toyota.
Industry and sector norms:


Cars – Lean Production
Agriculture – State Intervention.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.19
Managers have choice (Continued)

Business environment:



Stable
Dynamic.
Organisational characteristics:




Structure
Culture
Politics
Managerial style.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.20
Remember
Constraints can be manipulated.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.21
Chapter 7
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.22
Applying strategy
Models, levels and tools
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.23
Strategy in practice

The Competitive Forces model




The Strategic Conflict model



Cost leadership
Product differentiation
Specialisation by focus.
Out-manoeuvre the opposition
Manipulate the market.
The Resource-Based model



Firm-specific resources
Distinctive competences
Serendipity.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.24
Points to note






All strategies have weaknesses as well as
strengths.
They tend to be situation-specific.
Managers need to be familiar with the available
range of strategies and tools.
They should use the ones best suited to their
circumstances.
Strategies need necessarily be mutually
exclusive.
They may be interchangeable and/or
complementary.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.25
Levels of strategy



Corporate
Business
Functional.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.26
Levels of strategic decision-making

The corporate level. Strategy at this level concerns the
direction, composition and co-ordination of the various
businesses and activities that comprise a large and
diversified organisation, such as Rupert Murdoch’s News
International or Richard Branson’s Virgin empire.

The business level. Strategy at this level relates to the
operation and direction of each of the individual
businesses within a group of companies.

The functional level. Strategy at this level concerns
individual business functions and processes such as
finance, marketing, manufacturing, technology and
human resources.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.27
Types of corporate strategy






Stability strategy
Growth strategy
Portfolio extension
Retrenchment strategy
Harvesting strategy
Combination strategy.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.28
Business-level strategy
... the mission of the business, the
attractiveness of the industry in which the
business belongs, and the competitive position
of the business unit within the industry. These
are the inputs that determine the strategic
agenda of a business and lead to the
formulation and implementation of its strategy.
(Hax and Majluf, 1996: 46)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.29
Functional-level strategy
This has often been neglected by Western organisations
because of:

The concentration at both the corporate and business levels on
the external world, i.e. the market, led to a lack of interest in the
internal operation of organisations. The assumption was that
the internal world was malleable, and could and should adjust
to the priorities set by corporate and business strategists.

The key elements of functional level strategy, especially
concerning finance, marketing, R&D and technology, were in
effect determined and constrained by corporate strategists.
Indeed, in many organisations, even the human resource
strategy was determined at the corporate level.

Even though the 1980s saw a renewed interest in functionallevel strategy, this tended to be one-sided, stressing soft,
personnel-type issues.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.30
Strategic types




Defenders.
Prospectors.
Analysers.
Reactors.
Miles and Snow (1978)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.31
Strategic types

Defenders. These seek internal stability and efficiency by
producing only a limited set of products, directed at a
narrow but relatively stable segment of the overall market,
which they defend aggressively. Such organisations are
characterised by tight control, extensive division of labour
and a high degree of formalisation and centralisation.

Prospectors. These are almost the opposite of defenders.
They aim for internal flexibility in order to develop and
exploit new products and markets. To operate effectively in
a dynamic environment they have a loose structure, low
division of labour and formalisation, and a high degree of
decentralisation.
Miles and Snow (1978)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.32
Strategic types (Continued)

Analysers. These types of organisation seek to capitalise
on the best of both the preceding types. They aim to
minimise risk and maximise profit. They move into new
markets only after viability has been proved by
prospectors. Their internal arrangements are
characterised by moderately centralised control; with tight
control over current activities but looser controls over new
undertakings.

Reactors. This is a residual strategy. These types of
organisation exhibit inconsistent and unstable patterns
caused by pursuing one of the other three strategies
erratically. In general, reactors respond inappropriately,
perform poorly, and lack the confidence to commit
themselves fully to a specific strategy for the future.
Miles and Snow (1978)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.33
Strategic planning tools
Examples
 Prescriptive


Growth-Share Matrix
Analytical

Scenario/Vision Building.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.34
Figure 7.3
BCG Growth-Share Matrix
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.35
What is a scenario?
A scenario is ‘… a detailed and plausible
view of how the business environment of an
organisation might develop in the future
based on groupings of key environmental
influences and drivers of change about which
there is a high level of uncertainty’.
(Johnson and Scholes, 2002: 107)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.36
Vision-building
Compelling visions have two components:
 A core ideology which describes the
organisation’s core values and purpose; and
 A strong and bold vision of the organisation’s
future which identifies specific goals and
changes.
Collins and Porras (1997)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.37
The major elements of
vision-building



The conception by a company’s senior
management team of an ‘ideal’ future state for
their organisation.
The identification of the organisation’s mission, its
rationale for existence.
A clear statement of desired outcomes and the
desired conditions and competences needed to
achieve these.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.38
Criticisms of the scenario/vision- building
approach



They are prone to subjectivity and bias. The fact that
any five management specialists can interpret the
same situation in totally different ways is an oft-quoted
example of this type of criticism.
They can encourage retrospection. People’s ideas of
the future are informed by their knowledge and
experience of the past. Since experience is not
always the best teacher, scenarios and visions may
be based on false assumptions.
Participants can be strongly influenced in their
preference of scenario by their own sectional and
personal interests.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.39
Criticisms of the scenario/vision- building
approach (Continued)




The process cannot be carried out by novices and
can, therefore, be time-consuming and expensive in
terms of senior management time and outside
experts.
There is much debate about how many scenarios to
construct and how they should be used.
The more radical the vision or scenario, the more
difficult it will be to get managers and others to
commit to it.
Visions often require strong visionary leaders, which
are in short supply.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.40
The Prescriptive view
Strategy:
 Is a rational/economic process
 Matches products to markets
 Uses mathematical models of trends
 Is top-down
 Consists of detailed plans
 Drives change.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.41
The Analytical view
Strategy
 Is a rational and a social process
 Emerges from the continual stream of choices
organisations make on a day-to-day basis
 Is bottom-up and top-down
 Choice is constrained by structure, resources,
culture and vision
 Emerges from change.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.42
Additional Material
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.43
Child and Smith’s firm-in-sector
perspective



The ‘objective conditions’ for success. Though each
firm within a sector may pursue a different strategy,
these will all tend to focus on or be determined by similar
success factors such as customer satisfaction, quality,
profitability, etc.
The prevailing managerial consensus. ‘… at least
within well-established sectors, the senior managers of
constituent firms hold very similar constructs of the
sector’s operational dynamics which effectively furnish
the rules of the game for the sector’.
The collaborative networks operating in the sector.
‘… a sector does not only consist of product competitors;
it is also a network of potential and actual collaborators’.
Such collaborations may be with customers, suppliers,
outside experts or even competitors.
(Child and Smith, 1987: 566–569)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.44
Morgan’s organisational metaphors








Organisations as machines
Organisations as organisms
Organisations as brains
Organisations as cultures
Organisations as political systems
Organisations as psychic prisons
Organisations as flux and transformations
Organisations as instruments of domination
Morgan (1986)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.45
Umbrella strategies
[Some organisations pursue] ... umbrella
strategies: the broad outlines are deliberate while
the details are allowed to emerge within them.
Thus emergent strategies are not bad and
deliberate ones good; effective strategies mix
these characteristics in ways that reflect the
conditions at hand, notably the ability to predict
as well as the need to react to unexpected
events.
(Mintzberg, 1994: 25)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.46
Whittington’s categorisations




The Classical approach: based on analysis and
quantification.
The Evolutionary approach: organisations are at the
mercy of the unpredictable and hostile vagaries of the
market.
The Processual approach: organisations are shifting
coalitions with different interests. Markets are
capricious and imperfect.
The Systemic approach: strategy can be a deliberate
process but only if the conditions within the host
society are favourable.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.47
Equifinality
... quite simply means that different sorts of internal
arrangements are perfectly compatible with identical
contextual or environmental states. The principle goes
against the idea of a quasi-ideal ‘match’ which is
inherent in the principle of correspondence. Whereas
correspondence [i.e. Contingency] theory suggests that
rigid and bureaucratic structures are not a good match
for volatile and shifting product markets, equifinality
theorists claim that it may very well turn out to be a
good match but only if the level and diversity of the
workforce is large and organization culture produces
motivated and flexible actors.
(Sorge, 1997: 13)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.48
The Strategic Conflict model

This model portrays competition as war between rival firms. Its
proponents tend draw on the work of military strategists such
as von Clausewitz and Sun Tzu.

It stresses the dynamic nature of strategy and the need to
respond to competitors who do not always behave as
anticipated.

Central to this approach is the view that a firm can achieve
increased profits by influencing the actions and behaviour of its
rivals and thus, in effect, manipulate the market environment.

This can be done in a number of ways, such as by investment
in capacity, R&D and advertising.

However, such moves will have little impact if they can be
easily undone; therefore, to be effective, they require
irreversible commitment.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.49
The Resource-Based model

The focus of the resource-based model of competitive
advantage is on the relationship between an organisation’s
resources and its performance.

The resource-based view sees above-average profitability
as coming from the effective deployment of superior or
unique resources that allow firms to have lower costs or
better products, rather than from tactical manoeuvring or
product market positioning.

Such resources include tangible assets, such as plant and
equipment; intangible assets, such as patents and brands;
and capabilities, such as the skills, knowledge and
aptitudes of individuals and groups.
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.50
Strategic questions

Corporate strategy is concerned with questions such as:






What is the mission of the organisation?
What are its unique attributes?
How should the business portfolio be managed?
Which existing businesses should be disposed of and which new
ones acquired?
What priority and role should be given to each of the businesses in
the current portfolio?
The central strategic concerns at the individual business
level are:



How should the firm position itself to compete in distinct,
identifiable and strategically relevant markets?
Which types of products should it offer to which groups of
customers?
How should the firm structure and manage the internal aspects of
the business in support of its chosen competitive approach?
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.51
Strategic questions (Continued)

Functional level strategy concerns itself with the
following issues:

How can the strategies formulated at the corporate and
business levels be translated into concrete operational terms
in such a way that the individual organisational functions and
processes (marketing, R&D, manufacturing, personnel,
finance, etc.) can pursue and achieve them?

How should the individual functions and processes of the
business organise themselves in order not only to achieve
their own aims, but also to ensure that they integrate with the
rest of the business to create synergy?
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.52
Main external and internal factors of matrices (adapted from Hax and
Majluf, 1996: 302)
Figure 7.4
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009
Slide 6.53
Mintzberg
... umbrella strategies: the broad outlines are
deliberate while the details are allowed to emerge
within them. Thus emergent strategies are not
bad and deliberate ones good; effective
strategies mix these characteristics in ways that
reflect the conditions at hand, notably the ability
to predict as well as the need to react to
unexpected events.
(Mintzberg, 1994: 25)
Bernard Burnes, Managing Change, 5th Edition, © Pearson Education Limited 2009