Comparison and Contrast of Strategic Management Schools of Thought
Institutional or strategic management involves formulation, implementation and evaluation of decisions which should enable an organization to attain its long-term aims and objectives. Through the process of strategic management an organization is able to define its vision, mission, objectives and make up plans and policies for its projects and programs. This definition is done in line with the organization’s programs and projects that are designed for the purpose of attaining the organization’s goals. The process also involves resource allocation that is meant to assign resources for implementing the formulated plans and policies for the programs and projects involved.
There are various narrower concepts that define guidelines used in strategy formulation for organizations. These include the earlier planning and design school models to more current environmental, learning and cultural schools. Though consultants and academicians focus on these narrow perspectives it would be wiser for business managers to have a bigger picture of the situation in the organization and market. There should exist a wide systematic perspective and best practice rather than neater, narrow theory or technique.
Issues related to business strategy have been approached by use of differing concepts historically. These differences can be attributed to the differences that exist in the disciplines that different organizations deal with in their projects or programs. Thus, approaches may differ along the line of disciplines which include biology, economy, politics and philosophy-just to mention but a few. Mintzberg a management professor at MontrealMcGillUniversity explores the narrower concepts used in strategic management. There exists ten schools with the first three being prescriptive, whereas; the rest are descriptive in nature.
Prescriptive schools highlight more the issue about how strategies should be designed. On the other hand, the descriptive schools are more concerned with certain aspects in the strategy management process. Thus, the descriptive schools do more of describing how the strategies are made. The tenth school seeks to integrate all schools in strategic management processes. However, it is important to note that today’s organizations are complex because they exist in a turbulent world in comparison to the past. Thus, any strategy is only valued if it can help an organization attain its goals and objectives in the long-run. In this paper I will review two of these schools of thought-one of them will prescriptive, whereas; the other school will be descriptive.
The positioning School of thought (Prescriptive school).
The design school of thought views strategy formulation as a process that is analytical in nature. The central approach to improvement as per this school of thought depends on strategic the positioning of the organization in the context of its industry (Mintzberg, 1976). Thus, to improve an organization the scheme/formulated strategy should place the organization in a position within its industry that can allow it to improve. The method is based on militaristic strategizing that aims at the taking of the highest most advantegeous position in order to out-compete its competitors. This school’s concept could also br related to industrial organization-economics. Strategies that emanate from this concept’s process are articulated prior to implementaion (Porter, 1980). This is because analysts have to first calculate, analyse and then offer their results to managers that thereafter use it to make decisions in formulating strategies.
As a result, this school of thought emphasizes nothing more than being factual in the strategy analysis. It largely depends on analysis of collected that portrays the state of the industry in question. The use of this school of thought in strategic management transformed institutional management into a science whose processes should be carrried out based on scientific methods that include collecting and analyzing data. Thereafter, decisions are made based on infered information that results from data analysis. This school of thought focuses on hard facts and provides information in a systematic manner to the existent mode of looking at strategization.
Thus, this school of thought is effective for use in first stages in the development of strategy (Prahalad & Hamel, 1996). This because it is usually at this times that data analysis is done on data that relates to the organization. The application of this strategy to strategic management neglects other factors that may influence or affect the strategy made. There are various external factors that indeed may affect the strategy formulated and these include culture, politics, power, weather and social elements. It is thus biased towards that may be larger in terms of operations. Therefore, the school’s focus lies on the external environment that is within its competitors market. Thus, the market determines the deliberate positional strategies reached (Simon, 1993).
The Learning School of thought (descriptive school of thought)
This school of thought views strategy formulation as a process that is emergent in nature-a dynamic process that depends on the trends of times that come and go. The method actually relies on the history of the organization and the industry in which it lies in the formulation of its strategies (Mintzberg et al, 2005). Therefore, the method is analytical to some extent. The process involves paying close attention to what works and what does not work for the organization as time goes by in the running of daily business’ activities. The model’s basis lies in the learning before implementing theory-use of experience in making decisions. The process excludes all sorts of control and lets steps take a natural path (Levinthal & March, 1993). The lessons learned out of the experience and monitoring are incorporated into the plan of action. The methods argument is that the world is to intricately complicate for strategies to develop in a pop up mode and have them implemented as visions and plans with clarity. Therefore, according to this school of thought strategies must emerge gradually in bits over time and tasting which will allow organizations to learn and adapt. Thus, organizations are advised to learn and apply and if they do not succeed they could re-try the same or something else.
This school of thought offers a process and opportunity via which all people in the organization can learn a process without making it exclusively for the management, and thus; an omnipotent leader is unnecessary. The role of the leader becomes that of fostering an environment where learning can occur rather than preconceive strategy making (Hambrick & Mason, 1984). The process intertwines activities with learning and strategy formulation. Additionally it gives solutions for complex and unpredictable situations in strategy formulation. Thus, the method is efficient for continuously changing and complex scenario. As a result, it can be used well in combinations with emergent views that need experimentation especially in organizations of a professional nature.
Amidst the merits of this school of thought lie limitations that may make the attainment of a strategy elusive, expensive and time consuming. The learning school of thought could lead to no yielding of a strategy as the organization goes around in cycles trying to figure what works and what works not. Secondly, it could lead to a constant strategic drift with the management never able to agree as to what works or not. Therefore, this could affect an organization’s stability. The method cannot yield a solution promptly, and thus; is least useful in situations of crises where a quick strategy formulation is desired. Additionally, the step by step approach that builds up the all strategy may not result in a total sound strategy. Finally, the method could prove to be expensive over time because there are expenses that are linked to the learning process. It is totally unnecessary to cross a chasm by small steps.
Comparison and contrast of the two methods in terms of risk
Risk can be defined as the measurable probability of incurring losses or misfortune. In this case I will assess the potential risk level elements that can be associated with the two schools of thought. The positioning school of thought has an element of risk in its strategy formulation that is attributed to the fact that it does not take into consideration other exterior influencing factors. The fact that an organization does not take into account issues such as politics, culture and social set ups means that the organization is increasing its chances of encountering un-anticipated risks. These risks that may be of political or cultural origin are not catered for in the assessment of strategy formulation under the positioning school. However, this does not mean that they will not occur, but; the sad fact is that an organization that uses this school of thought may find itself disadvantaged when these risks present actual problems.
According to Cyert and March (1963) the positioning school may also encounter unpredictable risks in very dynamic industries with high environment changeability. In these instances the positioning school of thought puts the organization at high risk. This is because the projected estimates from analyzed data may only be relevant for a very short within which fresh changes in the environment of the industry will come up. These new unaccounted for changes put the organization at a high risk because it operates in uncertainty.
On the other hand, the learning school poses a risk that arises due to the turbulence in the market. The making of small incremental reactive steps may see an organization easily overtaken by rivals (Quinn, 1980). This is because while other organizations consciously strategize based on facts and the environment the learning organization makes reaction to what others have already done to influence the market. This response to reactions that may actually be decoy strategies from rivals puts an organization at a high risk of losses (Miller & Friesen, 1986). Similarly, the time taken for a company to learn from an experience may be too long for the company to react and counter losses that may have already occurred. Thus, the slow response due to the learning process may mean an organization is too much into trouble to ever recover.
Comparison and contrast in terms of uncertainty
Uncertainty can be defined as the element of not being sure about the strategy formulated. The school of learning has a high level of certainty than the school of planning. This is because the school of learning is based on experience and trial and error. This mode of strategy formulation is also more certain because it takes into account all the interplaying factors that influence an organization over time. The only instance under which the school’s certainty may go low is in cases where the environment involved in the industry is highly dynamic (Kipley, 2009). In such cases decisions made based on past experience may hold no water because the environment will have changed greatly for a short time before the experience is analyzed and decisions are made upon it.
On the other hand the positioning school has high uncertainty in contrast to the learning school. This is firstly attributed to the fact that it does not take into account the effects of the surrounding environment in which it operates. The neglect of forces such as politics and culture makes an organization’s strategy highly uncertain. This is because the environment in which it intends to deploy its strategy is idealized and not actual. However, there is similarity in terms of the level of uncertainty that arises in cases of very dynamic environments. In a dynamic environment the school’s analysis of the industry based of gathered facts may hold no relevance if the market changeability is very high.
Comparison and contrast in terms of effective resource allocation
Resource allocation in the school of learning prioritizes the potential areas where trial is anticipated to yield a new, beneficial hint or idea that can be applied in strategy formulation. This may prove futile in cases where nothing positive is learned because these resources will already be wasted. The organizations using this school of thought also prioritize allocation of more resources to areas where the organization’s management experience deems to be profitable. On the other hand, the positioning school of thought allocates more of its resources at strategy formulation to the gathering and analyzing of data and information by analysts and managers. After analysis the organizations using this school of thought then prioritize resource allocation meant for positioning in the identified market niche. Therefore, both schools allocate resources to the acquisition of knowledge first then followed by allocation to identified positive areas of strategizing.
Comparison and contrast in terms of Market structure influence
The learning school of thought plays a passive role in the influence of the market in which it operates. This is because the organization lies back and maintains a keen eye on the market to observe experience and learn its trends in order to apply the learned knowledge later. Therefore, organizations using this school of thought have least influence on the market because they don’t initiate anything new (De Geus, 1996). They instead learn from the market before formulating a strategy for action. On the other hand, the positioning school plays an active role in the market because its strategy is based on discovering new ideas that will be implemented so as to position the company high up in the market. The companies using the positioning school of thought use past and present information and data to analyze trends and come up with new formulated strategies. These new strategies may indeed influence the trends in the market, and thus; this school of thought actively influences the market.
Comparison in terms of fast moving environment approach
The influence that a fast moving environment has on these two schools of thought is similar. This is because both schools of thought widely base their decisions on observing the past and present market trend (learning school) and using information and data-both present and past-to analyze the environment (positioning school) before coming up with strategies. Therefore, both methods make an organizations strategies relevant in the short while because of the dynamism existent in a fast moving environment. Conclusively, both methods are disadvantegous in fast moving environments (Dess et al, 1990).
Grant and Romanelli (2003) states that contrastingly, the school of positioning could employ the statistical skills of projection and extrapolation to predict trends in a fast environment-a skill which the school of learning cannot use. This is because its principles are based waiting to experience before deciding and implementing (Eisenhardt, 1989).
Conclusively, the analysis shows that both schools of thought’s efficiencies are hampered in fast moving environs. However, the school of positoning can overcome this shortcoming by use of statistical extrapolation and projection. The learning school of thought could be best for situations that are very complex to analyze or comprehend. Thus, if statistical inference fails to show concrete applicable inferences then the learning school of thought would be the best option.
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