It is generally accepted that marketing strategies are developed with assessments of the market, managerial expectations and organisational capabilities.
However, strategy and planning remain two of the most misunderstood words in the business lexicon.
Mintzberg described strategy development as having five attributes:
- Planning – the direction of the organisation
- Ploys – to deal with and outwit the competition
- Patterns – a logical stream of actions
- Position – how the organisation is located in the marketplace
- Perspectives – Reflections of how the management team view the world.
Peter Drucker summarised these attribute as: What is our business? What should it be?
Mintzberg went on to describe eight types of strategy:
- Planned strategies: Deliberate and precise intentions
- Entrepreneurial strategies: Emerging from a personal vision (emphasised by businessmen like Elon Musk and SpaceX)
- Ideological strategies: The collective vision of the management team
- Process strategies: Which result from an organisation’s leadership taking control of a process
- Umbrella strategies: Based on objectives set by the organisation’s leadership.
- Disconnected strategies: Set by organisational sub-units and only loosely connected.
- Consensus strategies: Where members of an organisation converge on strategic patterns
- Imposed strategies: Where the external environment dictates a pattern of actions upon an organisation.
The extent to which strategies are achieved is often determined by the way in which organisational resources are allocated.
The need for an organisation to plan is straightforward:
- Plan to co-ordinate activities
- Plan to ensure the future is taken into account
- Plan to be rational
- Plan to control
Richardson and Richardson (1989) found eight critical problems for planning:
- How best to manage and identify organisational stakeholders.
- How to anticipate the long-term.
- How to plan for the foreseeable things that can go wrong.
- How to turn product or market dreams into reality.
- How to create cost-cutting and contribution-creating opportunities.
- How to create a responsive team culture which combines resources to meet changing market conditions and to increase customer satisfaction
- How to create a base for innovation
- How to make the most of the unexpected; both opportunities and to survive shocks.
Over the decades academics have disagreed on the best approach to take when developing strategies. Mintzberg describes the following strategic schools:
- The Design School: Where there is a focus on strengths, weaknesses, opportunities and threats (SWOT analysis). This leads to clear but simple strategies and there is very much a top down approach to strategy development.
- The Planning School: Where strategy is developed through formal distinct steps which are driven by planners and senior managers.
- The Positioning School: driven by academics like Michael Porter and the Boston Consulting Group. Strategy development is an analytical process based on generic strategies with a focus on hard data. This approach to strategy uses techniques like game theory and value chains.
- The Entrepreneurial School: Where the focus is on the chief executive or another figurehead e.g. Richard Branson, James Dyson, or Elon Musk. There can be real issues with this approach when the figurehead is no longer around. Apple suffered when Steve Jobs left and there were concerns following his death. Similarly the death of Anita Roddick of the Body Shop.
- The Cognitive School: Where the focus is on the mental processes underpinning strategy. The focus is on cognitive biases and how information is processed e.g. SERVQUAL
- The Learning School: where strategy is developed through a series of small incremental steps e.g. Kaizen. Strategy and implementation are inter-related.
- The Power School: Strategy development derives from those who hold power. It results from the politicking of organisational players. On the micro-organisational level this is the power plays of managers and union officials. On the macro level it relates to joint ventures and both vertical and horizontal integration.
- The Cultural School – where strategy is based on common interest. Social progress is created through the organisational culture. This is best exhibited by Japanese management culture in the 1970s and 1980s.
- The Environmental School: Strategy focuses on the demands placed on an organisation by its environment (‘contingency thinking’). Environment limits strategic options.
Mintzberg argues that each of these schools only views a part of the strategic picture. They are two-dimensional views of the strategic picture. He proposes a further strategic school which creates a 3D image; The Contingency School; which combines the best aspects of all the other options.
Whittington (1993) describes four approaches to strategy formulation:
- The Classical Approach: Which is underpinned by economic theory. There is a focus on profit maximisation. This approach requires rigorous intellectual analysis and there is a view that the internal and external environment can be controlled.
- The Evolutionary Approach: Where strategy cannot control the environment. Managers recognise strategic options and keep them open as long as possible. Long-term strategies are seen as unproductive and you are better off using a series of short-term strategies. An overall strategy emerges as short-term strategies succeed or fail.
- The Procession Approach: Small steps turn into a strategic pattern. One strategy builds on those which have come before.
- The Systematic Approach: The focus on the implementation of strategies is crucial and is influenced by the organisational culture. Strategy needs a social context. No one strategic approach is suitable for all organisations.
Too many businesses do not consider their approach to strategy. In SME’s, ‘the way we do things round here’ and the views of the business proprietor often dominate. Many businesses would be best placed to employ an external expert to help them manage the strategy development process. This individual can identify and debunk organisational biases.