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What is Strategy?

Essay – MART 434
Professor Phil Osborne
1st April 2010
J e n n y C h i n g W e n L i u I D # 6 0 1 6 1 9 2
What is Strategy? Essay – MART 43434

Introduction

Nowadays, strategy is studied more than it was in the past. Many articles and books
have been written since the fifties about the meaning of strategy. There are many
models and approaches about strategy, in which we can find agreements and
disagreements between the authors that defined them.
According to the Oxford English Dictionary strategy is “a plan that designed to

achieve a particular long-‐term aim, or the art of planning and directing military
activity in a war or battle (often contrasted with tactics).” However, we know that
this general definition doesn’t satisfy our issues with strategy. There is a general
consensus that strategy has different meanings depending on the context in which it
is used.
Most authors agree that strategy is about competitive advantage, the ability to deal
with changes, and planning and implementing tactics successfully. All of these topics
are extremely interesting to every organization in every country, which explains the
growing importance of strategy in our society and why it is so popular to discuss.
The main purpose of this essay is to define strategy, present the agreements and
disagreements about it, and suggest how it can be developed by an organization.
During the discussion below we will present the distinctive views of numerous
authors, their diverse models, and elements of strategy that they created. Accenture
– a global management consulting, technology services and outsourcing company –
will be used as example to clarify how to define a company’s strategy.
2


Strategy: what is this about?

Strategy first became popular during the 1960s and its relevance has been
increasing. Many authors and researchers have been writing articles and books
about it. The principle studies will be presented and discussed here. First we will
have a timeline about strategy from 1950 to 2000:
1950´ 1960´ 1970´ 1980´ 1990´ 2000'
- Area still - SWOT - Industry - Competitive - Competitive - Blue Ocean

incipient as a Analysis structure strategy (Porter) advantage: Strategy
field of analysis (Porter) analysis of
knowledge - BCG Matrix - Competitive resources and
- Strategic units advantage, value competencies of
- Experience
of business chain (Porter) organization
curve
- Formal - Better asset - Ethic code
processes for management
elaboration of - Corporate
strategies - Corporate governance
culture
- Social - Sustainability
responsibilities - Stakeholders’
importance - Balanced
Scorecard - BSC
In 1950 the topic strategy was an incipient area that started to be more discussed. In
1960’s the SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis, BCG
(Boston Consulting Group) Matrix and experience curve were created and they
developed more discussion about strategy. In 1970, Porter created the industry
structure analysis. Also strategic units of business were developed, along with formal
processes for elaboration strategies and social responsibilities started to become
important in a company. In 1980, Porter introduced the themes of competitive
strategy, competitive advantage and value chain. The aspects of better asset
management, corporate culture and the importance of stakeholders in the
3


companies were introduced in most of the organizations. In 1990, competitive

advantage, where analyses the resources and the competencies of an organization,
was introduced and ethic code, corporate governance, sustainability became
important in the organizations. Also, Balanced Scorecard (BSC), a strategic
performance management tool, was created and expanded in many organizations in
every country. After that, many models were created, but they are really similar with
the BSC. One interesting model is the Blue ocean strategy that was created by W.
Chan Kim and Renée Mauborgne in the 2000’s. This historical account makes
strategy increases its importance and it is essential to have the understanding of it
for all work in a company.
WALKER et al. (2003) defined strategy as a “fundamental pattern of present and

planned objectives, resource deployments, and interactions of an organization with
markets, competitors, and other environment factors.” His definition suggests that
strategy should identify what objectives need to be accomplished, where it is
necessary to focus, and how allocate resources and activities to each product or
service to meet environmental opportunities and to gain competitive advantage.
CRAVENS & PIERCY (2003) stated that “corporate strategy consists of the decisions
made by top management and the resulting actions taken to achieve the objectives
set for the business. Structure (composition of the corporation), systems (formal
policies and procedures that enable the organization to operate) and process
(informal aspects of organization to operate) are aspects of strategy that consider
how organization controls and coordinates the activities of various business units
and staff functions”. JAIN (2004) stated that “strategy in a firm is the pattern of
major objectives, purposes, or goals and essential policies and plans for achieving
those goals, stated in such a way as to define what business the company is in or to
be in and the kind of company it is or is to be”. Strategy is about knowing where we
want to go and what is the best choice to reach the goal and purpose of a company.
4


WHITTINGTON (1993) presents four basics conceptions about strategy: classic,
evolutionary, systemic and procedural. Each of them has different implications on
how to “make strategy”. The assumptions of these four approaches could be plotted
in two vectors: results and processes (see Picture below):

RESULTS
Maximize profits

classic evolutionary

PROCESSES
Deliberate Emerging

systemic procedural

Pluralistic

The classic vision is the oldest and more

influential. In this vision strategy is a rational
process of account and analysis, designed to
maximize the long-‐term advantages. The principle
authors of this approach are CHANDLER, ANSOFF
and PORTER.
CHANDLER (1962) studied the organizational problems of four American

companies in the beginning of the century. He concluded that the organizational
structure of the American companies changed for a predictable reason as a function
of the strategy adopted by them. For this author, strategy is “the determination of
the basic long term goals and objectives of an enterprise and the adoption of action
5


and allocation of resources necessary for carrying out these goals.” He states that
this structure was able to provide time and information to the executives to dedicate
themselves to long term planning, since the operational activities were the
responsibility of the division manager. ANSOFF & MCDONNELL (1988) say that the
company's performance is optimized when its external strategy and exit potential
are set by the internal turbulence of the external environment. Through a
methodology for mapping the company's current situation and tools to implement
strategic management, ANSOFF & MCDONNELL (1988) propose means for
maximizing the returns of the company. Michael Porter was a pioneer in bringing the
idea of competitive advantage. PORTER (1980, 1985, 1987) created the three basic
concepts of perform strategic analysis. The first concept is the relative attractiveness
of different sectors in terms of long-‐term profits. The sectors vary according to five
basic “competitive forces”: threat of new entrants, threat of substitutes, bargaining
power of suppliers, bargaining power of buyers and rivalry among existing firms. The
second concept is that a company can only take three defensible positions that will
give them the success with the five competitive forces, provide a superior return on
their investments for its shareholders and have a better performance than its
competitors in the long run: overall cost leadership, differentiation, and focus on
specific consumer. His last concept is that analysis of the sources of competitive
advantage had to occur not in the company as a whole, but at the level of distinct
activities that a company has to design, produce, market, deliver and support your
product. The value chain has five primary activities (logistics of entry, operations,
logistics of foreign, marketing and sales, services) and four secondary supports
(acquisition, development of technology, human resource management, company’s
infrastructure).
6


For CHANDLER, PORTER and ANSOFF & MCDONNELL, strategy is a rational process, is
planned, and is based on analytical processes. This view of strategy predominated in
the 1960’s to the 1980’s. New forms of thinking were emerged with the economic,
social and political atmosphere of the 1990’s.
For the evolutionary approaches, the market ensures the maximization of profit.
Relying on competitive processes of natural selection, evolutionary theorists do not
propose methods of rational planning. They believe that any method adopted by
managers will be tested in the market and only those that have the best
performance will survive.
The evolutionary perspective of strategy is related to organizational ecologists

seeking to explain how the political, social and economic atmosphere affects the
relative abundance and diversity of organizations. A research of this idea proposes
three observations. The first is that diversity is a property of organizational clusters.
The second is that organizations often have difficulty in providing and implementing
changes quickly enough to environmental demands. The last one is that community
organizations rarely appear and disappear constantly. HANNAN & FREEMAN (1977)
present the theory of structural inertia to explain environmental determinism. This
7


theory asserts that existing organizations often have difficulties in changing their
strategy and structure to follow the demands of changing environments. It
emphasizes that most of the organizational innovations occur in the early history of
the organization. Analyzing the importance of individual action in the process of
organizational adaptation, HANNAN & FREEMAN (1989) reported that individuals are
responsible for influencing the success and survival of the organization; however,
individuals often can not determine in advance what changes will occur of change
the strategy or the structure of their organizations at the speed necessary to monitor
environmental change. The evolutionary view is fatalistic – it says that investing in
long-‐term strategy may not be productive. Organizations maximize their chances of
survival in the short term reaching a perfect fit with the environment in which they
are inserted.
The procedural approaches share the skepticism of evolutionists about the rational
planning strategy. This strategy, in the view of the proceedings, is the way in which
managers try to simplify and coordinate a world that is very complex and chaotic for
understanding. Some of the main theorists of this approach are MINTZBERG (1987)
and HAMEL & PRAHALAD (1994). MINTZBERG (1987) proposes the metaphor that
strategy is a "craft". In a complex world full of surprises, the strategist must retain
the proximity, perception and adaptability of a craftsman. The process of shaping
the strategy is ongoing and adaptive, where the formation and implementation of
the strategy are interdependent.
MINTZBERG (1994) proposes to replace the

strategic planning with strategic thinking.
While strategic planning (classic posture) is
related to the analysis, strategic thinking is
based on synthesis and involves intuition and
creativity. The result of strategic thinking is an
integrated company.
For MINTZBERG (1994), "the preparation of the strategy is a process that may follow
in the other direction. We think to act, but also act to think". HAMEL & PRAHALAD
8


(1994) argue that companies should be thought of as a set of core competencies. In
other words, skills and technologies enable a company to provide benefits to
customers. The core competence can be defined as a cumulative basic capacity -‐ if
someone learns something by doing X they can take advantage of this learning by
creating Y and Z. To learn basic skills the company must map their products and
services, seeking to discover what benefits are offered to customers. HAMEL &
PRAHALAD (1994) question traditional (classical) competition and propose to replace
strategic planning with strategic architecture. Strategic architecture is not a detailed
plan. It is an overview with new features and new skills to leverage existing skills and
reconfigure the interface with the customer. HAMEL & PRAHALAD (1994) reinforce
the importance of synthesis in the process of formulating strategy. The successful
organizations have strategic intent -‐ a widely shared aspiration. The procedural view
of strategy has four conceptions of it that are radically different from the classical
perspective. First, strategy can be heuristic decision-‐making, a tool used to simplify
reality into something that managers can relate to; second, plans may be only the
"sticks" of managers providing security and direction; third, strategy can emerge in
retrospect, after the action has already happened and forth, strategy is not related
solely to the choice of markets and the control performance but also the cultivation
of internal powers. The procedural vision sees strategy as an emergent process of
learning and adaptation and can be considered pragmatic.
WHINTTIGTON (1993) supports the systemic

perspective of strategy. The growth of
international competition, the entry of non
Anglo-‐Saxon nations into the capitalist world
and the transformation of companies in a
pluralistic environment have created the need
for competition and cooperation between
firms in a pluralistic environment, where
history and society influence the strategy.
The systemic perspective suggests that the goals and practices of strategy depend on
the specific social system where it is being formulated and that the strategy reflects
9


this specificity. Systemic theorists insist that the rational behind the strategy is
peculiar to specific sociological contexts. The rules that guide strategy are derived
from the cultural norms of society and are influenced by the class and occupation of
the strategist, family values, and other social values. The very notion of strategy can
be different in different cultures. For deterministic cultures (Chinese, Islamic
fundamentalists), the idea of strategy contains within it a proactive that is difficult to
understand. Systemic approaches emphasize that the processes and strategic goals
reflect the social systems where the strategy is being formulated, and are influenced
by changes in the market, in the state, in the cultural systems, in the demography,
etc. KNIGHTS & MORGAN (1991) argue that strategy is not simply a technique or a
body of knowledge -‐ strategy is essentially a speech, influenced by people in the
organization and is the influencer of these same people. In short the systemic
approach is relativistic. In other words, the purpose and means of strategy are fully
related to social systems where they occur. The systemic approach is best suited to
the reality of the new millennium -‐ a paradoxical reality – where there is an increase
of economic globalization, there is also an emphasis on cultural and social
differences.
We cannot say that one of these four different approaches is right and the other one
is wrong. All of these approaches can be used depending on the context and
situation of the organization; they diverge and complement each other. The
organization should choose what would fit best for them; they can choose to follow
one or more of these approaches.
CHAFFEE (1985) mentioned three models of strategy: linear, adaptive and

interpretative. The first one is focused on planning, i.e. to reach long-‐term goals. The
adaptive model is based on the relationship between the opportunities and risks
present in the market and the capabilities and resources for available to exploit
these opportunities. In the interpretative model, strategy is defined by metaphors or
frames of reference that allow companies and their environment to be understood
by organizational stakeholders.
10


MINTZBERG (1999) created “ the ten schools of thought” that can be used to
categorize the field of strategic management. The ten schools are design (strategy is
a process of conception), planning (strategy is a formal process), position (strategy is
a analytical process), entrepreneurial (strategy is a visionary process), cognitive
(strategy is a mental process), learning (strategy is a emergent process), power
(strategy is a process of negotiation), cultural (strategy is a collective process),
environmental (strategy is a reactive process) and configuration (strategy is a
process of transformation).
11


According to TREACY & WIERSEMA (1993) and FLEURY & FLEURY (2003), any
competitive strategy can be classified into one of these three categories: operational
excellence, innovation in product or customer-‐oriented. The operational excellence
strategy is applied by companies that compete in markets where the main
determinant of competitiveness of product or services is the relationship between
quality and price. Companies that compete with Innovation in Product are
continuously investing to create new product concepts for customers and market
segments. The oriented client strategy is dedicated to the specific needs of
customers and seeks to specialize in developing products, systems and solutions that
meet their current and future demands. The authors emphasize that the process of
creating a competitive advantage is necessary to align the competitive strategy and
core competence. The choice of a strategy is associated with a jurisdiction in which
the company must be "more excellent than its competitors," and the other two
powers should support the first.
KIM & MAUBORGNE (2004) wrote a business strategy book called Blue Ocean
Strategy. This book is about the growth and profits that organizations can make by
creating a new demand in an unknown market: the ‘blue ocean’. The authors said
that it “is not a way to sustain high performance by competing in overcrowded
industries; the real opportunity is to create blue oceans of uncontested market
space”. A metaphor was used to explain their ideas. The Red ocean is all of the
industries that exist today, where they need to follow the competitive rules. The
Blue ocean is all of the industries that do not exist today, where the competition is
irrelevant and there are no rules yet. The potential of a market will be explored by
an organization using the blue ocean strategy. One example of creating a new
market is the company Cirque du Soleil that introduced a performance of circus with
ballet and opera.
12


COLLINS & RUKSTAD (2008) mentioned,
“The strategic sweet spot of a company
is where it meets customers needs in a
way that rivals can’t, given the context
in which it competes”. Customers are
the main goal of all companies and they
can reach their needs by a strategy to
capture them and give them products
and services that the others competitors
cannot. This can be related with the
blue ocean strategy, where the
companies try to reach what the others
cannot offer too.
Strategy is the form or manner determined by the company to achieve the final
target or objective of it. Through all the models studied above, we realize that we
can categorize the types of strategies that organizations have made over the years.
We learn from these models how to better plan our own strategy, but we must keep
in mind that there is not a recipe to determine a strategy; each organization should
analyze their goal and determine the strategy would best suit it.
For example, Accenture is a global leader company in management consulting,

technology services and application outsourcing, exists in 49 countries and has more
than 181 thousand employees and a turnover of US$21.58 billion in the fiscal year
2009. The company has a model of performance based on building a broad "business
network" with customers and partners. They improved their ability to provide
consulting services and application outsourcing through alliances and affiliated
companies in different areas of expertise. With its structure and intellectual capital,
Accenture finds innovations that shorten the time required for your customers to
reach their goals and has experience and capabilities in all industry segments.
Accenture collaborates with clients to help them achieve high performance. The
13


rapid growth of Accenture is based on its search for a relationship of long-‐term

partnership with its customers. Then, according to FLEURY & FLEURY (2003), any
competitive strategy can be classified into one of three categories: operational
excellence, innovation in product or customer-‐oriented. Considering Accenture,
where I was an intern in 2009, the strategy that it adopts is oriented to customers
because it is geared towards the needs of specific customers and seeks to specialize
in the development of its services, systems and solutions. Accenture prioritizes the
development of knowledge about each customer and their business. Considering
WHITTINGTON’s approach, we could consider Accenture to have a more
evolutionary approach than the others, because they consider what the market
(customers) are requiring to define their actions. If Accenture tries to reach the
sweet spot, mentioned by COLLINS & RUKSTAD (2008), they will achieve better their
goals.
According to FLEURY & FLEURY (2003), it is necessary to align competitive strategy
and core competence to create a competitive advantage in a company. The choice of
strategy (operational excellence, innovation in product or customer-‐oriented) is
associated with a skill, which the company must be better than its competitors. The
others two strategy choices should support the chosen choice by the company.
MILLS et al. (2002) stated that there are five types of organizational competencies:
essential Skills, organizational skills, support skills, distinctive skills and dynamic
capability. Essential skills are higher activities and skills at the corporate level, which
are key to the survival of the company and central to its strategy. Organizational
skills are key activities that are expected to be present in each company's business.
Support skills are valuable activities that support a range of skills. Distinctive skills
are the skills and activities that customers recognize as differentiating it from its
competitors; they come from competitive advantage. Dynamic capability is the
14


ability of a company to adapt their skills through time; it is directly related to
important resources for change.
DAY (1994) agrees that two capabilities are especially important to achieve and
sustain a market orientation. “One capability is the market sensing capability, which
determines how well the organization is equipped to continuously sense changes in
its market sensing and to anticipate the responses to marketing actions. The other is
the customer-‐linking capability, which comprises the skills, abilities and processes
needed to achieve collaborative customer relationships so individual customer
needs are quickly apparent to all functions and well-‐defined procedures are in place
for responding to them.”
Thus, these capabilities stated by DAY (1994) and MILLS et al. (2002) should be
defined by the company in order to reach a better competitive advantage than other
competitors.
15


Conclusion

Defining the strategy of companies is a difficult task for all, COLLINS & RUKSTAD
(2008), in their article Can you say what your strategy is? said that “most executives
cannot articulate the objective, scope and advantage of their business in a simple
statement”. It could be difficult to define strategy with a simple answer but it is
possible to define a strategy when the goal is clear.
To define the strategy of a company

it is necessary to know what is the
objective and purpose of your
company. To simplify, we know that
strategy means knowing where we
want to go and decide upon how best
to get there.
Every organization must have a strategy to successfully reach their goals and
purposes. Through the above study, we realize that there are different models and
approaches we can follow to define the best strategy for our companies. A company
could define their strategy through Whittington’s approaches of strategy: classic
(analyze, plan and command; long term profit), evolutionary (the market determines
the actions; profit depends on the market), procedural (“follow the flow”; profit
come because of competences) and systemic (play with the locals rules; profit
function of local rules). Or a company could define its strategy through these three
categories: operational excellence, innovation in product or customer-‐oriented
(TREACY & WIERSEMA, 1993). It is essential to align competitive strategy and core
competence to achieve competitive advantage. The choice of strategy is associated
with the company’s skills, which must be better than its competitors’ skills to have
better competitive advantage over their competitors.

16


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19

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What is Strategy?

According to the Oxford English Dictionary strategy is “a plan that designed to

Strategy: what is this about?

1950´ 1960´ 1970´ 1980´ 1990´ 2000'

- Area still - SWOT - Industry - Competitive - Competitive - Blue Ocean

companies were introduced in most of the organizations. In 1990, competitive

WALKER et al. (2003) defined strategy as a “fundamental pattern of present and

The classic vision is the oldest and more

CHANDLER (1962) studied the organizational problems of four American

The evolutionary perspective of strategy is related to organizational ecologists

MINTZBERG (1994) proposes to replace the

WHINTTIGTON (1993) supports the systemic

CHAFFEE (1985) mentioned three models of strategy: linear, adaptive and

For example, Accenture is a global leader company in management consulting,

rapid growth of Accenture is based on its search for a relationship of long-­‐term

To define the strategy of a company

Chaffee, E. E. (1985) Three Models of Strategy. Academic Management Review, 10

Day, G. S. (1994) The Capabilities of Market-­‐Driven Organizations. Journal of

Fleury, A. & Fleury, M.T. (2004) Alinhando Estratégia a Competência. Revista de

Hannan, M. T. & Freeman, J. H. (1977) The population ecology of organizations.

Hannan, M. T. & Freeman, J. H. (1989) Organizational ecology. Cambridge, MA:

Mintzberg, H. & Lampbel, J. (1999) Reflecting on the strategy process. Sloan

Porter, M. E. (1980) Competitive Strategy: Techniques for Analyzing Industries and

Porter, M.E. (1985) Competitive Advantage. New York, Free Press.

Porter, M. E. (1987) From Competitive Advantage to Corporate Strategy. Harvard

Simpson, J. (no date) Oxford English Dictionary. [Online] Available from:

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