STRATEGY AND STRATEGIC MANAGEMENT CONCEPTS, Schemes and Mind Maps of Strategic Management

Download STRATEGY AND STRATEGIC MANAGEMENT CONCEPTS and more Schemes and Mind Maps Strategic Management in PDF only on Docsity! Business Administration and Management 43DOI: 10.15240/tul/001/2014-1-004 1, XVII, 2014 Introduction When reviewing strategic thinking, we realize how this phenomenon has gone through different phases and semantic contexts. With a millen- nium distancing the word from its origins, the word strategy has had several meanings but without ever losing its semantic roots. In the beginning, strategy took on a military significance and represented the action of commanding or leading armies in times of war, i.e. a military campaign [30]. It meant a way of prevailing over the adversary, a tool of victory in war and only afterwards was it applied to other contexts and fields of human relationships: political, economics, business, among others, but always retaining in all its uses the semantic root, to define paths [76]. After several phases and meanings, the concept of strategy has evolved into a field of knowledge in management, strategic mana- gement, with content, concepts and practical reasoning, ending up by carving out its own role in the academic and business fields [25]. Management uses this old military concept to associate the activities of a general with those of an organization’s manager [76]. Since it represents an important tool for business management in a competitive and turbulent marketplace, the main objective of strategy involves preparing the organization to confront the current hostile environment, to this end systematically and objectively deploying the skills, qualifications and internal resources of the enterprise [25]. On the other hand, the concept of strategy still seems to be a very vague concept and subject to various interpretations [14]. An exact definition of strategy may not actually be fundamental, however, within the context of organizational knowledge management, specifically the knowledge that new professionals bring into companies, grasping which type of strategic understanding new managers bring into the organization is clearly of importance [15], [58], [74]. Thus, we may question whether concepts of strategy and strategic management are understood by business managers, especially the younger, the newly graduated in management. Therefore, this research aims to assess the acquired knowledge of university management students relating to strategy and strategic management concepts with the purpose of answering the following question: What is strategy and strategic management to future managers? Are they understood and recognized? To answer this question, this study seeks to examine management student understanding as to the meaning of these two concepts. As specific objectives, we seek : (i) to build a model explaining the definition of strategy according to the perceptions of students graduating in management, and (ii) to identify which concept of strategic management in the existing literature comes closest to the perceptions of current management students. To understand the perceptions of indivi- duals about a particular concept, we adopt phenomenography type research practices. The main feature of the research method is its description of a phenomenon as it is expe- rienced, emphasizing the collective significance of the studied phenomena, and should in no way be confused with phenomenological studies. Phenomenology is far more concerned with the individual experience of the people involved than with the phenomena studied [2]. The study is justified due to the sheer importance of the themes of strategy and STRATEGY AND STRATEGIC MANAGEMENT CONCEPTS: ARE THEY RECOGNISED BY MANAGEMENT STUDENTS? Emerson Wagner Mainardes, João J. Ferreira, Mário L. Raposo EM_01_14_zlom 20.3.2014 8:44 Stránka 43 strategic management to contemporary organizations [74]. In this sense, the survey sought to contribute towards management knowledge in the organizational environment by clarifying what is the real understanding of management graduates on the themes of strategy and strategic management. According to Tseng [83] and Obembe [60], knowledge management in an organization begins by identifying the knowledge that individuals bring in from outside the company. In this case, the development of organizational strategy depends on understanding the perceptions of their managers on what strategy and strategic management actually is. The identification of perceptions of future managers on the two concepts, as used in this study, contributes significantly to organizational mana- gement practice. This enables the organization’s management strategies as organizational knowledge on the field of strategy can hardly be managed should each manager understand the concept differently. The study findings may also be expected to contribute to Higher Education Institutions (HEI), by identifying what level of understan- ding their graduating management students attain regarding the subjects under analysis. The research contribution also extends to the academic world by presenting the concepts of strategy and strategic management most present and active in the minds of future managers, findings rarely encountered in the literature. There are few studies relating strategy as a theoretical approach and its practical application in organizations [42], [68]. Thus, this study contributes to research on strategy demon- strating that the field of strategy, comprising as it does of several concepts and approaches, generates confusion among management practitioners. After all, the same phenomenon is approached in several distinctly different ways and individuals working in management would also seem to hold various perspectives, often understanding neither the real meaning of strategy nor its management [41], [62]. Furthermore, this research aims to provide some insights for lecturers bearing in mind that student opinions and knowledge on this matter reflect the efficiency and the effectiveness of the strategy related learning process [31], potentially revealing a need to change the didactics of these classes. Another reason that led to this study was the method adopted, phenomenography, whose main characteristic is its ability to capture the perceptions of a group of people about a concept. After an exhaustive search of available scientific databases, only one study of a similar nature was found, the Shanahan and Gerber [75] research on the concept of quality in HEIs, which proved the inspiration for the research set out here. Most of the other phenomenography studies found deal with educational teaching methods [5], [13], [19], [36], [63], [82] or, in fewer cases, the behaviour of consumers [88]. In the field of strategy, they both represent an innovation and a new alternative for research. The paper is structured as follows: firstly, a literature review of the strategy and strategic management concepts from a historical perspective is carried out. Afterwards, the phenomenography research is described and explained. The methodology adopted in the survey is presented in the next section. Subsequently, the collected data are analysed and our model is tested. The article ends up with final considerations and future recom- mendations. 1. Strategy and Strategic Management: a Historical Perspective Strategy was created by the Greeks, who endowed the concept with a military conno- tation. The term derives from the Greek strategos, translated as a general in command of troops or the art of the general or plan to destroy enemies through effective use of resources [18], [76], [78]. This term in itself contained the idea of objectives to be achieved and plans of action to be performed in various scenarios, depending on the enemy’s behaviour [73]. According to Mintzberg and Quinn [53], strategy was already considered as an orga- nizational skill at the time of Pericles (450 BC), meaning management skills (administrative, leadership, public speaking, power). However, it was only after World War II that strategy fully entered into the business world, which has since grown significantly and needed guidance, lines and paths to be followed by their entire structures [18]. This growth increased organi- zational complexity and, together with the accelerated pace of environmental changes, Ekonomika a management 44 2014, XVII, 1 EM_01_14_zlom 20.3.2014 8:44 Stránka 44 Business Administration and Management 471, XVII, 2014 Tab. 1: Definitions of strategy in organizational contexts (part 2) Author(s) Definitions of Strategy [8] Ansoff (1979) Strategy is a set of rules for decision making under conditions of partial ignorance. Strategic decisions concern the firm's relationship with its ecosystem. [50] Mintzberg (1979) Strategy is a mediating force between the organization and its environment: consistent patterns in streams of organizational decisions to deal with the environment. [72] Schendel &Hofer (1979) Strategy provides suggested directions for the organization, which allows the company to achieve its objectives and to respond to opportunities and threats in the external environment. [18] Bracker (1980) Strategy has two characteristics: situational or environmental analysis that determines the company's position in the market and the proper use of company resources to achieve its objectives. [37] Hambrick (1980) Strategy is the pattern of decisions that guide the organization in its relationship with the environment, affect the processes and internal structures, as well as influencing the performance of organizations. [65] Porter (1980) Strategy is the company choice as to key decision variables such as price, promotion, quantity and quality. The company, to have good performance, must be correctly positioned in its industry. [52] Mintzberg &McHugh Strategy is a pattern in a chain of actions or decisions. It disrespects the possibilities for different (1985) strategies for several environment conditions. [66] Porter (1985) Strategy is a set of offensive or defensive actions to create a defensible position in an industry, to cope successfully with competitive forces and thus get a higher return on investment. [28] Fahey (1989) Strategy explains how the company will use its resources and capabilities to build and sustain the competitive advantages that favourably influence customer purchasing decisions. [39] Henderson (1989) Strategy is the focused use of imagination and logic to respond to the environment so that as a result it generates competitive advantage for the company. [9] Ansoff & McDonnell (1990) Strategy is a set of rules for decision making to guide the behaviour of an organization. There are four distinct types of rules: standards by which the present and future performance of the company is measured (objectives, targets); rules for the development of relationships with the external environment (product strategy and marketing, or business strategy), rules for establishing relations and internal processes in the organization (organizational concept); and rules by which the company shall conduct its activities in the day-to-day (operational policies). [6] Andrews (1991) Strategy is the pattern of settlement in a company that determines and reveals its objectives, purposes or goals, produces the principal policies and plans to achieve these targets and ascertains the scale of business that the company should get involved in, the type of economic and human organization and the nature of the economic and non-economic benefits generated for shareholders, employees and communities. [38] Henderson (1991) Strategy is the deliberate search for an action plan to develop and adjust the competitive advantage of a company. The differences between the organization and its competitors are the basis of its competitive advantage. [53] Mintzberg & Quinn Strategy is the deliberate search for an action plan to develop and adjust the competitive (1991) advantage of a company. The differences between the organization and its competitors are the basis of its competitive advantage. [69] Rumelt, Schendel Strategy is to define the direction of organizations. This includes issues of primary concern to & Teece (1994) the manager, or any person who seeks the reasons for success and failure between organizations. [81] Thompson & Strategy is a set of competitive changes and business approaches that managers perform to Strickland III (1995) achieve the best performance of the company. It is the managerial plan to enhance the organization’s position in the market, boost customer satisfaction and achieve performance targets. EM_01_14_zlom 20.3.2014 8:44 Stránka 47 development fully underway in the 1960s and 1970s. According to Porth [68], strategic manage- ment emerged as part of strategic planning, which is now regarded as one of its main instruments. It was incorporated into strategic management, which united planning and management in the same process. On the other hand, Stead and Stead [76] stated that strategic management is derived from the concept of enterprise policy. This concept explains the organization as a system in which economic resources are applied effectively with the company’s functional activities coordinated around generating profit. Once founded, strategic management expanded swiftly and produced both theoretical and practical models [22]. A broad range of models emerged out of market analysis in the 1960s, including the BCG Matrix, SWOT Model, the Experience Curve, and Portfolio Analysis, as well as important concepts such as the economic analysis of structure, behaviour and performance, distinctive competences, skills, and the so-called strategic planning systems [29], [54], [77]. Currently, strategic management is one of the most prominent and relevant areas in the management field. It constitutes a set of ma- nagement actions that enable company managers to keep it aligned with its environment and on the correct path of development, thereby bringing about the achievement of its objectives and its mission [25], [40], [56], [79], [17]. Despite its importance, Boyd et al. demonstrate that strategic management has many attributes of a still immature field of study, with little consensus and low levels of productivity. This result furthermore explains the reason there are several definitions for the same concept. According to Ansoff and McDonnell [9], strategic management constitutes a systematic approach to the management of changes, comprising: positioning the organization through strategy and planning, real time strategic response through the management of problems, and the systematic management of resistance during strategy implementation. On the other hand, Porth [68] believes that strategic management is definable as a cross- process of formulation, implementation and evaluation of the decisions that enable organizations to define and achieve their mission and ultimately to create value. Bowman et al. [16] strategic management focuses on issues concerning either the creation and sustainability of competitive advantage or the search for such an advantage. Furthermore, Grant [33] argued that strategic management involves a complex relationship between the organizational focus, the results obtained, and the broad spectrum of external and internal environmental variables of the organization. According to Dess et al. [25], strategic management in an organization must become a process and a single path guiding actions throughout the organization. It consists of organizational analysis, decisions and actions creating and sustaining competitive advantage. Ekonomika a management 48 2014, XVII, 1 Tab. 1: Definitions of strategy in organizational contexts (part 3) Author(s) Definitions of Strategy [48] Miller & Dess (1996) Strategy is a set of plans or decisions made in an effort to help organizations achieve their objectives. [67] Porter (1996) Strategy means performing different activities to those performed by rivals or performing the same activities differently. [88] Wright, Kroll & Parnell Strategy is the set of plans from top management to achieve results consistent with the (1997) organizational mission and objectives. [54] Mintzberg, Ahlstrand Strategy is the mediating force between the organization and its surroundings, focusing on & Lampel (1998) decisions and actions that come naturally. Strategy formation is not limited to intentional processes, but can occur as a pattern of actions formalized or otherwise. [12] Barney (2001) Strategy is the theory of the firm on how to compete successfully. It also considers performance as a factor influenced by strategy, as it can be considered that to compete successfully means having a satisfactory performance. Source: own elaboration EM_01_14_zlom 20.3.2014 8:44 Stránka 48 Business Administration and Management 491, XVII, 2014 These authors define four key attributes for strategic management: directed towards the overall organization objectives, includes multiple stakeholders in decision-making, requires incorporating short and long term perspectives and, involves the recognition of trade-offs between effectiveness and efficiency. Stead and Stead [76], in turn, defined strategic management as an ongoing process involving the efforts of strategic managers to adjust the organization to the environment in which it operates while developing competitive advantages. These competitive advantages enable the company to seize opportunities and minimize environmental threats. More generally, strategic management is a broad term that includes determining the mission and objective of the organization in the context of its external and internal environments. 2. Phenomenography Phenomenography is a relatively new approach for scientific research with the first published articles appearing at the beginning of the 1980s [44]. This approach seeks to qualitatively describe the different forms by which people experience, conceptualize, perceive, and understand several aspects of a particular phenomenon. This implies that phenomeno- graphy is not concerned only about the pheno- mena under research, nor, indeed, exclusively with the people experiencing them. On the contrary, it focuses upon the relationship between them, i.e., the ways in which people experience or think about the respective phenomenon [23]. Hence, a phenomenographic study aims to describe the variation in how a determined phenomenon (for example, a concept) is understood, experienced or perceived by a group of people [13]. A phenomenographic method argues that individuals perceive the world in different forms as experience is always only ever partial. At any point, time, and context, people discern and experience different aspects of any phenomenon to different degrees and extents [19]. Thus, different forms of living a phenomenon can be understood in terms of which aspects of the phenomenon are perceived [4]. Therefore, the focus of this type of research is on essential aspects of the collective and variation of experience, more than the wealth of individual experiences, leading to a limited number of qualitatively different categories in the description of the investigated phenomenon [82]. Thus, according to the rules of phenomenography, the different ways of living a phenomenon are not constituted of independent forms, but rather mutually interrelated [63]. These different ways are ordered in terms of conscience inclusivity, within which more inclusive forms also represent more complex forms of experiencing the phenomenon indicated for ever greater amplitude of knowledge on the phenomenon’s different aspects. In other words, an increasing number of aspects of the phenomenon are perceived as potentially different [4] articulating internal logical relationships between different forms of living and experiencing such a phenomenon [82]. Traditionally, the object of phenomeno- graphy research study has been described as variations in the human sensing and understanding of conceptions [44] or, more recently, conscience or ways of testing a determined phenomenon [87]. The results are analytically represented as a series of meanings (qualita- tively different) or even some ways of testing a phenomenon, called “categories” in order to distinguish between empirically interpreted categories and the hypothetical experience they represent, including also the structural relationships that connect these different forms of testing. These relations provide a briefing on the relations between different ways of experiencing a phenomenon [4]. The focus of phenomenography research on the collective experience (and not the individual) is usually misunderstood and deserves clarification. Marton [44] advises on definitions of the diverse forms of understan- ding reality. According to this author, these perspectives are not conceived by phenomeno- graphy as individual perceptions but rather as categories that depict a collective conception of a phenomenon. That is, phenomenography research aims to explore gamma meanings within a group as a group, and not the gamma meanings for each individual within the group [70]. Furthermore, Svensson [80] argues that the varieties of forms by which people test these phenomena are referred to as agreements and susceptible for presentation as description categories for the phenomenon in question. These categories establish the base for developing a hierarchy of agreements, EM_01_14_zlom 20.3.2014 8:44 Stránka 49 Tab. 2: Definitions of strategy based on the surveyed (part 1) Definition Analysis This definition of strategy was the most frequent in the responses collected. One reason is that many authors approach strategy in this sense [6], [9], [20], [21], [32], [43], [46], [53], [59], [61], [71], [78], [81], [84], [85]. It is presented as a more complete definition and involving the organization as a whole. Internalising this view of strategy ensures the manager follows a logical path in strategic business development in planning, establishing guidelines and policies, and encouraging practice able to achieve organizational goals. What this definition lacks is the relationship with the external environment because it reduces strategy to the internal company environment. In other words, it is marketplace company policy to compete and survive, based on forward planning. This proved to be the second most common response, also due to several authors citing the environment external to the organization as critical to the company’s strategic development [7], [8], [9], [10], [18], [26], [37], [38], [39], [45], [50], [54], [65], [67], [71], [72]. It is indeed a fact that a company is related to its external environment and all organizational strategic actions should consider aspects related to the respective prevailing environment. Thus, it is important to note that most new managers are aware that a company should be focused on the market where it operates. According to the respondent answers, the relationship between strategy and top management is not often quoted by authors. The high correlation between management and strategy is referred to by different authors [48], [49], [52], [87]. It should be noted that a common strategy in the studies is that this issue is traditionally handled by the managers running the organization, although most existing concepts are not very explicit about this. Respondents stated that strategy is linked to corporate objectives for medium and long term company goals; similar to that stated in the literature, where the definitions of strategy seldom mention the same relationship with its medium and long term goals [1], [9], [21]. In this sense, one can see that the classical school and its followers [86] is that which prescribes the need to plan strategically for the medium and long term. Quoted by Ansoff and McDonell [9], Bracker [18], Drucker [26], Fahey [28], and Michel [47], defining strategy as guiding organizational structure shows that the company’s resources and capabilities are determined according to organizational strategic options [11], and was not prominent among respondent answers. However, in accordance with the responses already given, we may consider that the specific structure necessary for the company to achieve its objectives is included within the scope of senior management decisions and planning strategies, words attaining greater incidence among respondents. Strategy as the means of achieving organizational success was previously put forward by Barney [11], Porter [66], and Wright et al. [87]. This type of definition relates company success to the effectiveness of its strategy and its implementation (through activities and practices). Also derived from the school of planning [54], the company mission and vision are proposed by Newman and Logan [59], Steiner and Miner [78], and Wright et al. [87]. This type of response by new managers expresses a certain difficulty in converting strategy into the organizational reality. This response is a simplification of the others. The path to be taken refers to the medium and long term, decisions and senior management responsibilities, the mission and vision of the organization, leading to planning, policies and practices. This reductionist definition has already been presented by Rumelt et al. [69]. Ekonomika a management 52 2014, XVII, 1 1. [...] Strategy is the development of plans, policies and practices to achieve the company objectives [...] (110 similar responses). 2. [...] Strategy is the way in which the company should behave or act in the market and relate to its external environment [...] (57citations). 3. [...] Strategy is the responsibility of senior company management and the result of their decisions [...] (33 cases). 4. [...] Strategy is to have medium and long term goals. Only a few respondents [...] (32 replies). 5. [...] Strategy is a guideline for structuring the company [...] (30 citations). 6. [...] Strategy is a means of achieving business success [...] (cited 19 times). 7. [...] Strategy is the vision and mission of the company [...]. (cited 18 times). 8. [...] Strategy is an indication of what direction the company should take [...] (cited by 15 respondents). EM_01_14_zlom 20.3.2014 8:44 Stránka 52 Business Administration and Management 531, XVII, 2014 Tab. 2: Definitions of strategy based on the surveyed (part 2) Definition Analysis The identification of organizational competitive advantages features in the definitions of strategy put forward by Ansoff [7], Cannon [20], Henderson [38], [39], and Newman and Logan [59]. Whereas the company's competitiveness is based on its advantages over competitors, it should be considered that these advantages are what influence the choice of a particular strategy and so the first step in choosing the strategy is to identify the company’s competitive advantages, as pointed out by some of the respondents. The decision of which strategy to follow depends on the collection and analysis of organizational information (and including its external environment). This analysis is performed by the top management of organizations, that is, in a setting that complements the fact that strategy is linked to the individuals running companies. Uncommon among the definitions of strategy found in the literature, the involvement of the entire organization in the respective strategy was previously cited by Ackoff [1], Glueck [32], and Mintzberg and Quinn [53]. Though not often referred to by authors who conceptualize the strategy, we see that it increases the chance of success when all members of the company fully participate in the chosen strategy. This fact was pointed out by only 5 respondents. A subject virtually forgotten by both respondents and the literature, acquiring customers as a result of organizational strategy does merit mention by Fahey [28]. This correspondingly posits that one major objective behind developing organizational strategies is attracting and retaining customers, who generate the revenue necessary for the company to attain its financial results, besides fulfilling its mission and vision. Thus, attracting and retaining customers is very much linked to company marketing departments and often overlooked by other functional areas. Market orientation should align all participants towards the organization’s customers. Source: own elaboration 9. [...] Strategy depends on the competitive advantages of the company [...] (15 citations). 10. [...] Strategy is based on the collection and analysis of company and stakeholder information [...] (13 citations). 11. [...] Strategy involves the entire company [...] (5 citations). 12. [...] Strategy is a way to acquire customers [...] (2 citations). In summary, these twelve understandings of strategy expressed by managers new to the market amount to a vision of what strategy means to them. In addition to the set of views held on the subject, the term strategy was defined as: [...] Based on the collection and analysis of information internal and external to the company, in addition to the early identification of competitive organizational advantages, strategy is the set of decisions taken by senior company management (the path to follow, objectives in the medium and long term, the necessary structure, mobilization of the entire organization, the company mission and vision) that leads to the development of internal practices, action plans, policies and guidelines, which aim to improve the organization’s relationship with its external environment, geared to market. This results in the acquisition and retention of customers, leading to organizational success [...]. Thus, this ranges from a narrower vision to a broader view. Figure 1 sets out the understanding of strategy according to these managers and how it closely approximates the school of Planning, previously explained and described by Mintzberg et al. [54]. This school approaches the formation of strategy as a formal organisational process termed strategic planning. Among the main authors adopting the principles of this school are Ansoff [7], [8], Schendel and Hatten [71], Ackoff [1], McNichols [46], and Ansoff and McDonell [9]. Considering the answers obtained, respondents perceive that organizational strategy should be formalized by the setting of rules by the organization’s senior managers. This would seem to be what they most expect to encounter in real organizations. EM_01_14_zlom 20.3.2014 8:44 Stránka 53 Following the questionnaire, interviewees were requested they provide examples of strategies. Porter’s [65] generic competitive strategies (focus, differentiation, and cost leadership), and strategies for diversification, internationalization, and vertical integration stood out and were mentioned by most respondents. However, when asked to translate these strategies into real-world examples (at least three), most respondents left this question blank. Others cited: [...] To improve the quality of products / services, to plan the location of the business, innovate in products, use resources appro- priately, understand and adapt to the market where the company operates, to inform strategies for employees, develop motivation and the involvement of employees, use marketing, improve the company's techno- logies, enhance the brand of products, focus on customer service, develop action plans to build a good corporate image, increase the radius of company action , explore new markets, invest in employee training, invest in information technology, strategic alliances and cooperation, focus on e-commerce, hire skilled managers, do market research [...]. Indeed, some difficulty in translating the theoretical approaches learned during their degrees to the business environment was noted in the respondent responses. This fact is probably due to little or no working experience on behalf of students answering the survey, an important indicator both for the institution and its lecturers as well as other higher education entities running degrees in management. Students may be graduating with a good definition of an important concept (strategy) but they are confronting difficulties in applying it to organizations. The final section of the questionnaire dealt with strategic management, definitions and examples. When concerning the definition of the term, most citations divided up between two Ekonomika a management 54 2014, XVII, 1 Fig. 1: Set of visions on the definition of strategy Source: own elaboration EM_01_14_zlom 20.3.2014 8:44 Stránka 54 Business Administration and Management 571, XVII, 2014 [8] ANSOFF, H. Strategic management. London: Macmillian, 1979. ISBN 04-7026-585-X. [9] ANSOFF, H., MCDONNELL, E. Implanting strategic management. New Jersey: Prentice-Hall, 1990. ISBN 01-3451-808-X. 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