COURSE NAME: CONTRIBUTORS TO STRATEGIC MANAGEMENT
COURSE CODE: BUS 6150
GROUP 3
Group MembersAdmission. No.
Karani Neils Muriuki653929
Huha Purity653947
Ndururu Terry637220
Ronak Divyesh Shah634477
Emma Kariuki633818
Vinit Shikotra641404
Nelly Yamo 636119
THE POSITIONING SCHOOL OF STRATEGIC MANAGEMENT
AND
THE ENTREPRENEURIAL SCHOOL OF STRATEGIC MANAGEMENT
Contents
TOC o “1-3” h z u THE POSITIONING SCHOOL OF STRATEGIC MANAGEMENT PAGEREF _Toc517776382 h 4Introduction PAGEREF _Toc517776383 h 4Concepts PAGEREF _Toc517776384 h 4Prescriptive Approach PAGEREF _Toc517776385 h 4Strategy Content PAGEREF _Toc517776386 h 5Economics PAGEREF _Toc517776387 h 6Strategy Evolution PAGEREF _Toc517776388 h 6FIRST WAVE PAGEREF _Toc517776389 h 6Sun Tsu PAGEREF _Toc517776390 h 6Von Clausewitz PAGEREF _Toc517776391 h 6SECOND WAVE PAGEREF _Toc517776392 h 7Generic Strategy PAGEREF _Toc517776393 h 7BCG Matrix Analysis PAGEREF _Toc517776394 h 8PIMS PAGEREF _Toc517776395 h 9THIRD WAVE PAGEREF _Toc517776396 h 9Porter’s 5 Forces PAGEREF _Toc517776397 h 9Value Chain Analysis PAGEREF _Toc517776398 h 10View of the Environment PAGEREF _Toc517776399 h 10Capability Development PAGEREF _Toc517776400 h 11Critique PAGEREF _Toc517776401 h 12Development of Strategic Management Paradigm PAGEREF _Toc517776402 h 12Conclusion PAGEREF _Toc517776403 h 12THE ENTREPRENEURIAL SCHOOL OF STRATEGIC MANAGEMENT PAGEREF _Toc517776404 h 13Introduction PAGEREF _Toc517776405 h 13Innovation Process PAGEREF _Toc517776406 h 13Environmental view PAGEREF _Toc517776407 h 14Strategy Evolution PAGEREF _Toc517776408 h 14Capability Development PAGEREF _Toc517776409 h 14Critique of the school PAGEREF _Toc517776410 h 15Development of Strategic Management Paradigm PAGEREF _Toc517776411 h 16References PAGEREF _Toc517776412 h 17
THE POSITIONING SCHOOL OF STRATEGIC MANAGEMENTIntroductionThe positioning school of strategic management thought is a long standing one that has been in practice especially in the 20th and 21st centuries (Johnsen, 2015). It is founded on the premise that the best way for a firm to be competitive is for it to appropriately position itself in the minds of stakeholders; especially customers. This paper examines this school of thought by deliberating on its main concepts, its view on environment, evolution, capability development, criticisms, and its contribution to the development of strategic management paradigm.
ConceptsThe positioning school of strategic management has a host of concepts that are often used in describing and or implementing it. While this is the case, this paper will examine the main concepts and has thus narrowed down to six main concepts as listed below.
Prescriptive school
Generic strategy – the 3rd wave
Strategy content
Cost leadership – 3rd wave
Differentiation – 3rd wave
Focus – 3rd wave
Centered on economics
These concepts are further explained in the subsections below with the main focus being to outline their relevance to the school of thought.
Prescriptive ApproachThe positioning school of thought belongs to a broader prescriptive school of thought in strategic management is one of the two categories of schools of thought; the other one being the descriptive school of thought. It is typified by four characteristics as listed below.
It adopts a top-down approach
Focus is on content rather than context of strategies
Strategies are premeditated
The top down approach is where upper echelons of management formulate strategies and plans for the rest of organizational members. The other members are only required to execute what has already been planned from above (McKiernan, 2017).
The focus of the prescriptive school is on strategy content rather than its context. It is more of what is supposed to be done rather than how it is to be done. In the descriptive school, focus is on how strategies are to be executed rather than what the strategies should entail.
Finally, all strategies in the prescriptive school are premeditated. It entails management to create a solid and sacred plan that is not subject to changes during implementation. This approach is contrary to the descriptive school of thought where it demands spontaneity in strategy formulation meaning that the plan may change if and when the context changes (Hill, Jones, ; Schilling, 2014).
Strategy ContentThis aspect of the positioning school is derived from the fact that positioning is part and parcel of the prescriptive school of strategic management thought. It is a common characteristic of positioning school since it emphasizes the importance of ensuring that strategies are intact from the word go by including all relevant elements or contents. The reason for ensuring that this is the case is because such strategies are rarely subjected to change. As Johnsen (2015) notes, positioning strategies are intent on seeing the original strategies come to fruition without major deviations in processes used or outcomes gained. It is for this reason that the school of thought and its strategies are only preferred in times that are fairly predictable and not when there are major changes in the environment where the firm might need to make some strategic adjustments to adapt to the changing circumstances.
EconomicsAnother aspect of the positioning school of thought is that it bases its logic on economics. Specifically, the positioning school of thought reasons on the basis of industrial economics. It is for this reason that Michael Porter’s models are commonly featured into the strategic approaches related to positioning. The goal is to enable firms to be more competitive in their current and prospective markets. Its sister school of thought called planning is also a prescriptive approach but does not base its logic on economics. Instead, the planning school of thought bases its logic on system theory and cybernetics.
Strategy EvolutionJust like many other forms of schools of thought, the positioning strategy has also undergone evolution. Specifically, it has gone through three major phases of change as listed hereunder.
First wave – Origins in the Military Maxims
Second Wave – Search for Consulting Imperatives
Third Wave – The Development of Empirical PropositionFFIRST WAVE
Sun Tsu, in his book The Art of War (1971) critically examined the importance of knowing one’s enemy during battle. The generic strategies used during war were occupying higher grounds, fighting downhill, and locating armies’ water sources. Different tactics were used including dispersive, frontier, difficult, and local (McKiernan, 2017).
Von Clausewitz – in his work he wanted to substitute the well-known military strategies with a set of adaptable values or principles to direct the thinking of war. He reasoned that strategy rests on basic building blocks which guide in attack, defense and activity.
SECOND WAVEIn the second wave in late 1970’s, the overall purpose was to seek consulting imperatives that could be used universally in business. The Boston Consulting Group stands as the most phenomenal contributor to this wave at this stage of evolution. Their growth share matrix for classifying business segments and product lines according to dogs, cash cows, stars, and question marks is a model that is still in use in many contemporary business circles. The Profit Impact of Market Strategies (PIMS) was also developed during this phase and is strongly affiliated with the positioning school of strategic management thought (McKiernan, 2017).
Generic StrategyAnother popular concept with the positioning school of thought in strategic management is that it only deals with generic strategies. These are strategies that Michael Porter proposed for purposes of enhancing a firm’s competitiveness. They work on the premise that there are majorly two ways of enriching a firm’s competitiveness (Banker, Hu, Pavlou, ; Luftman, 2011). One of these ways is to lower its costs relative to other rival firms in the industry. Another way is to differentiate products relative to competitors in the market.
Another aspect of generic strategies is the scope of market coverage. In this case, a firm may choose to focus on a niche market or take the entire market as a whole without specifying any. Different firms may select different scopes of market coverage depending on their ability to serve and the intensity of competition in such markets.
Cost leadership
As already intimated above, cost leadership is all about pushing a firm’s costs lower relative to competitors. This is done to ensure that the final product costs the firm less thereby giving it the justification to price it lower than rivals. Cost leadership works on the premise that customers are economic beings who are easily influenced by price reductions and that the products have considerably high price elasticity. In Kenya, Airtel seems to be adopting this strategy and expects customers to prefer them to other service providers based on their lowly priced products.
Differentiation
Differentiation refers to the approach in business where a firm makes its products and brands unique relative to others in the market. While cost leadership is adopted by firms seeking to provide affordable products to customers, differentiation seeks to provide customers with quality products that satisfy specific needs. It is a strategy that is easily adopted by big firms since they have the ability to undertake research into the needs that customers have and thereby tailor products to their expectations. Such products need to be materially different from others or should at least look different from others. In Kenya, Safaricom is known to be good in differentiating its products such as the flexible Tunukiwa offers where other companies have static offers on the products.
Focus
The focus strategy refers to an approach where a firm specifies a certain market in which it will participate (Leitner & Güldenberg, 2010). Such a sector is usually a subset of a bigger market that is rather impossible or more competitive to take it as a whole. While the company may also be participating in the entire market, its emphasis is on excelling in a certain subset of the market. A good example of a company in Kenya that adopts such a strategy is Telkom. While the firm is participating in the telecommunication market, its major area of concentration is providing Internet solutions. One can tell this from the fact that most of its advertisements are about how efficient their Internet solutions are. The strategy is good for firms that feel they are disadvantaged resource-wise to compete in the entire market with bigger firms and that it serves them better if they can be competitive and excel in a certain sector of the market.
BCG Matrix AnalysisBCG (The growth-share table) – this was part of the “portfolio planning” which brought up the question on how the allocation of funds should be done for different businesses of a diversified firm. Corporations relied on capital budgeting and its return on investment for the various proposals. The growth share matrix is required to be insert these choices in a systematic framework.
BCG (Exploiting Experience) – the experience curve proposes that as the production increases by double the amount, the cost of production decreases by a constant margin.
PIMSThis recognizes the inconsistencies, such as the intensity and positioning of the market, and then use this data use to analyze and approximate the investment returns, profits gained and also the market share.
THIRD WAVEThe third wave came in the 1980’s and the lead contributor to the positioning school of thought where Michael Porter emphasized on firm’s competitiveness. One theory that is a product of this wave is the legendary porter’s five forces model of firm’s competitiveness where five forces.
Porter’s 5 ForcesThreat of new entrants – a company can gain access into an industry by defeating its barriers to entry into the industry.
Threat of substitutes – innovation can make a firm suffer in an industry, the competition in the industry depends on what extent can the product in the market be replaced by another product.
Threat of industry rivalry – market position is very crucial, firms can do anything to maintain this, they can attack one another, decide to coexist or even to form an alliance together,
Bargaining power of suppliers – there is usually a struggle with power in this situation, as it would be in the best interest of the supplier to charge the highest price possible to the customer.
Bargaining power of customers – low prices and better quality is what the customer wishes for in this scenario, this varies accordingly to how much they buy, the knowledge they have on the product and also the courage to experiment with other alternatives.
Apart from this model, Michael Porter also coined the value chain model where he separated primary activities from support activities of a firm. Even more importantly, the management guru came up with the popular generic strategies namely cost leadership, differentiation, and focus (McKiernan, 2017). These are the phenomenal strategies that are the face of positioning in the contemporary world of business.
Value Chain AnalysisThis strategy implies that a firm or a company can be split into the primary and support activity. Primary being operations, sales and marketing, logistics and others, while the support activities is just plays a supporting role to the primary activity in order to achieving the company goal, examples are HR department, technological development, procurement.
View of the EnvironmentAn important and distinctive aspect of the positioning school of thought in strategic management is that it assumes environment does not significantly change. It is for this reason that management believes in sticking to the plan and not adjusting it to fit changing times. It is therefore applicable in situations of relative stability. If management considers the situation in the market to be too competitive for the firm, they may stick to cooperative strategies in order to gain just enough from the market for it to survive. On the other hand, if management considers the situation in the market to be relatively fair, they may strategize to outwit other players to their advantage. The school of thought does not consider the fact that at some point the market may be too competitive and that it may be less competitive at other times.
The focus of the positioning approach is customers, and they are the most important stakeholders in the environment (Johnsen, 2015). All strategies encompassed herein seek to ensure that the customer finds a reason to buy from the firm. Differentiation does so by making products more visible to customers from their uniqueness. Cost leadership does so by ensuring that customers can afford the products being sold by a firm. Finally, focus does so by ensuring that the company is close to the customer and effectively respond to their needs without lagging. The role of management as a stakeholder is also elevated and they determine how the firm interacts with the environment. Employees, suppliers, and other stakeholders are considered to fulfill the facilitation role since they are not consulted during the formulation of strategies.
Management is in charge of examining the business environment and making strategies that match market dynamics. Since these plans are to be executed for a long time without change, they are expected to be as succinct as possible. In an unstable and constantly changing environment, positioning strategies tend to perform poorly because of their static nature. Other companies may change their strategies and outwit the ones that adopt positioning and other prescriptive schools of thought. To sum it all up, positioning believes and counts on the environment to be unchanging or the changes that may occur thereat are not significant to warrant changing of the already formulated strategies.
Capability DevelopmentThe school of thought of positioning helps in building capability in an organization by ensuring that firms are ready for market conditions. Management bears the responsibility of not only formulating plans but also ensuring that subordinates have the necessary resources required for the execution of the strategies. Since everything is premeditated, it means that management ensures that all possible scenarios are factored into the plans. Apart from plans and resources, management is also responsible for laying down required procedures that lead to the attainment of objectives. Its relation to strategy comes from the fact that its purpose is to ensure that a firm is competitive in the market (Johnsen, 2015).
CritiqueThe main criticism against this school of thought is that it is not applicable in dynamic or changing environment. This is because strategies associated with the positioning school of thought are static and need to be pursued as they are without any adjustments. As Hill, Jones, ; Schilling (2014) finds, changing such strategies midway could result in more devastating outcomes than if the strategies were just allowed to flow as they were meant to. Its rigidity, though a source of strength through resilience, is also a source of weakness and criticism since it implies that other firms could adapt to changing environment and outwit it.
Development of Strategic Management ParadigmThe positioning school of thought is part of the three schools of thought confined within the prescriptive approaches to strategic management. It almost offers similar argument to that posited in the design and planning schools of thoughts. However, the positioning school of thought is different from the planning school because the latter is built on system theory ad cybernetics. It is also different from the design school because the design school is an integration of various approaches including planning and positioning among others. The positioning school and other prescriptive schools offers counterarguments to the schools of thoughts encompassed in the descriptive schools of thought.
ConclusionIn conclusion, the positioning school of strategic management thought is a significant one that is proving to be a force to reckon with in business circles. It is customer-focused through the three generic strategies of cost leadership, differentiation, and focus. Because it belongs to the prescriptive group of approaches, it implies that its strategies are premeditated and are not built for a highly dynamic environment. It develops a firm’s capability by ensuring that a firm has plans, resources, and procedures in place. It is a bit different from the design and planning school though they all belong to the prescriptive approaches. They are however opposite of descriptive approaches since these approaches are usually built for a changing environment.
THE ENTREPRENEURIAL SCHOOL OF STRATEGIC MANAGEMENTIntroductionStrategic management uses different philosophical approaches in order to understand business and what is required to maximize the efficiency in the same organization (Peter, 1946). Research and different forms of managerial practice have been used to determine which competitive paradigms have been discovered in the recent past and their effects in the business world. It is for this reason that strategic management incorporated the use of techniques such the school of thoughts which offers a number options that an organization which chooses to do business may take from the options and use an appropriate managerial mechanism to effect the school of their choice. Coherence and consistency are however important in determining the theoretical dimensions involved in these different schools and at the same time the methodological approaches used there in. Integration of these schools or theories has however been advised in the past so as to obtain the most output from particular strategy fields.
Innovation ProcessA school of thought can be defined as a range of thought or thoughts that are used by specific groups of researchers and used in the field of strategic management solely. The entrepreneurial school in particular which is a descriptive school is mainly surrounded by the vision created by the Chief Executive Officer (CEO) which is usually the main key for the strategy used (Hills et al., 2008). The strategy used in the entrepreneurial school is found in the mind of the company leader in the form of a long term direction or perspective that they may have about the future of the organization. The leader or as commonly known the CEO has many ideas on his mind but the main idea in his or her intuition in that it comes about from his past experience and vision. The implementation process of the thought is done by the leader at a close personal control while solving any new formulation that may be required at some point. The directives given by the leader allow the organization to become responsive thus affect the procedures and structures directed by the leader. As the leader, one is heard asking “How is this idea? How can I capitalize on it? Which is the best structure to use when effective this idea?” Such motivation is what drives the visionary leader to better heights and gain control of the current market.
Environmental viewIn the entrepreneurial school, a non-stable factor is the environment since it can be easily be manipulated or influenced. The entrepreneurs view the environment as a wide area where they can prove their innovation skills and bring in new services and products to the environment. The laws that exist in the current market are taken to be detachable in that the entrepreneur is not restricted thus can be diverse as possible. Factors like differentiation and low cost on production, allow the new players in the market to maximize their new environment and achieve their profit expectations. The entrepreneurs with the rich vision determine how their environment will be and not the environment which says this as is the case in other schools. This view of the independence of the entrepreneur to control all that is around them is important since it helps them when planning and budgeting for the future. In addition, the phenomenon also helps in understanding the market better and all the dynamics at play such as the target consumers and the best way to reduce costs in production and other departments (Selznick, 2011).
Strategy EvolutionThe entrepreneurial school views the development of strategy to be more effective and easy as compared to the rest of the schools. The CEO gives more attention to the objectives and coins them towards his or her own liking. This will be based on the available resources and the policies present in the organization. The visionary leader sees it that for the strategy to be successful there is a need to make the best of what they have and this includes organizing the strategy group to obtain the required outcome. Upon laying down all the required logistics, the vision now has to come to life and this is when the leader and his team have to get in and get their hands dirty in other words it is time to get to work. Development of strategies has over the years helped leaders learn about their environment and adjust accordingly. The factors then help the leaders adjust and control their environment to fit their main goals (Selznick, 2011). Strategies mainly involve taking up the strengths of the company and looking at the number of weaknesses, then weighing the options there in and making a definite plan to reach the objectives.
Capability DevelopmentAuthors of the entrepreneurial school have an effective way of applying the capability developments. First of all, the leaders view the opportunities as a proper way of improving their career opportunities. The entrepreneurs can progress their careers through the opportunities they start up. A programmer for example, may choose to open up his or her own software company and through this help improve his skills and those of other Information Technology experts in the long run helping everyone improve their careers journeys. Secondly, the authors find the most effective ways of developing the capabilities realized. The leaders find the best ways which are also meaningful to achieve the capabilities set for development to be achieved. It is always the best strategy to improve your staff capabilities as it will improve the level of service delivery given by the organization. Improving the roles and capabilities will also increase the production level since new ideas will be made after proper training is done (Peter, 1946).
Critique of the schoolI believe that the school of entrepreneurship has many benefits that have been realized over the years. The leader however, may not always be right maybe through the way he or she puts into effect the policies or even the nature of policies themselves that he or she makes during the inception of the business. The objectives sometimes may be misplaced if the leader does not use an effective team to back up the ideas put across. The school has effective ways in which it incorporates the environment surrounding the organization. However, the environment may be too complicated to comprehend. The CEO needs to have a clear plan where he can identify the surrounding factors and use them effectively (Jr Chandler & Chandler Jr, 1962). An example of this is the learning of the culture of those being targeted so as to understand their tastes and preferences. In the African and emerging economies, planning is required and the leader may fail on this if they do not initiate this process effectively and may run into hindrances in the future.
A company that employs this school of thought is also very obvious since it is based on the line of thought of one person leading the company. This means that incase the leader runs into difficulty, he or she will be forced to withdraw or the organization will choose to look for a replacement as soon as possible. Sometimes it was experienced that some leaders were too motivated and energized that sometimes pushed away the rest of the employees. This led to them being demotivated. However, the entrepreneurial school of thought never spoke of this factor and they chose to ignore its possibility of happening. Companies with this school of thought were forced to settle for the leader they had and just had to shut off any negativity or criticism they had towards their visionary leader.
Development of Strategic Management ParadigmStrategic management mainly revolves around the formulation and implementation of various goals and objectives. The process is continuous and requires the efforts of everyone from the organizational leader to the junior staff employees. The entrepreneurial school of thought authors have contributed to the effectiveness of this process through a number of ways. The Gurus advice that CEO or the leader in the organization moves to formulate goals that will help the organization achieve high productivity and profitability. In addition, the school also allows proper investigation to be done prior to the adoption of the services in the organization. The school also builds on other schools of thought. For instance, the school is descriptive in nature just as the learning and cognitive schools. Just like the latter group of schools, entrepreneurial school tries to describe the strategy in place in the organization in order to obtain proper basis for empirical research used. For this reason, I see no conflict between the entrepreneurial school and previous schools of thought.
ReferencesBanker, R. D., Hu, N., Pavlou, P. A., & Luftman, J. (2011). CIO reporting structure, strategic positioning, and firm performance. MIS quarterly, 35(2), 487-504.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
Johnsen, Å. (2015). Strategic management thinking and practice in the public sector: A strategic planning for all seasons? Financial Accountability & Management, 31(3), 243-268.
Leitner, K. H., & Güldenberg, S. (2010). Generic strategies and firm performance in SMEs: a longitudinal study of Austrian SMEs. Small Business Economics, 35(2), 169-189.
McKiernan, P. (2017). Historical Evolution of Strategic Management, Volumes I and II (Vol. 1). Taylor & Francis.
Hills, G. E., Hultman, C. M., & Miles, M. P. (2008). The evolution and development of entrepreneurial marketing. Journal of Small Business Management, 46(1), 99-112.
Jr Chandler, A. D., & Chandler Jr, A. D. (1962). Strategy and structure: chapters in the history of the industrial enterprise.
Peter, F. (1946). Drucker. The Practice of Management.
Selznick, P. (2011). Leadership in administration: A sociological interpretation. Quid Pro Books.
