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General Idea about Strategic Management

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The strategic management perspective is not one unified and coherent system of management but rather can be described as a combination of semantically different concepts with different historical antecedents.

Because of this rather eclectic approach it cannot be spoken of as one strategic management theory.

Different researchers in the field use different ways of solving existing problems in the strategy area.

In addition, most researchers do not rely on one comprehensive theoretical framework but use different theoretical aspects from a variety of theories.

The field of strategic management till now has not found its intellectual roots (Teece, 1990: 40).

“Most scholars would agree that strategic management lacks an overarching paradigm, but they do not agree on the implications of that. To some it is a major weakness, while others consider it an advantage and opportunity” (Fredrickson, 1990: 2).

Strategy researchers do not only use economic theories, they also use political, psychological and sociological perspectives.

Some scholars in this context state that “the strategy field is too pluralistic” (Foss, 1996: 1). It could be argued that such a situation is a benefit, because as many relevant aspects as possible are taken into consideration.

This, however, is only partly correct because in the extreme, it leads to a situation where no theoretical advances can be made because no constructive communication between different researchers of the field is reached.

Strategic management, can be seen as a field in which the degree of “functional dependence” (Whitley, 1984) between researchers is low, and as a field that increasingly disintegrates (Foss, 1996: 17).

Characteristics of strategy and strategic management
Strategic management is a very complex area of study. The main aspect of the complexity can be seen in the fact that there is no coherent and unified theory of strategy. Numerous and often competing theories attempt go give explanations for segments of the strategic phenomenon. In addition, no universally accepted definition of strategy exists.

Chandler (1962: 13) defines strategy as “[. . .] the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.”

Andrews (1971: 28) sees strategy as “[. . .] 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 is to be in and the kind of company it is or is to be.” Porter (1985: 1) describes strategy as “the search for a favorable competitive position in an industry.”

Itami (1987: 2) sees strategy as “[...] what determines the framework of a firm’s business activities and provides guidelines for coordinating activities so that the firm can cope with and influence the changing environment.

Strategy articulates the firm’s preferred relationships with its environment and the type of organization it is striving to become.”

Various strategic frameworks are designed to facilitate learning and understanding and represent analytical tools and forms of simplification for a complex reality.

They are not definitive but rather help to reduce complexity to understandable elements. Another reason for the complex character of strategic management lies in the fact that the various structures and typologies encountered are attempts to represent the holistic nature of strategy in terms of the important components.

Strategy exclusively deals with performance. However, some uncertainty exists about what is meant by performance and how it is measured.

Strategic management is concerned with performance and at the same time it is concerned with the firm as a whole.

As the market system has come to dominate exchange transactions under an increasingly international capitalist system of governance, the holistic nature of strategic management has been represented increasingly as an open system in which the firm is the focus of attention.

Strategic management involves ways of thinking about firms or organizations which are different from usual ways.

In addition, it involves considering (especially large) organizations as having considerable choice over where they are going and how they are going to get there.

Firms are different because they do different things, are positioned differently, possess and have access to different resources, have different resource endowments, have different capabilities and competencies, and have different values.

This implies that firms conduct themselves in different ways and change their directions in different ways.

The uniqueness of strategy means that theories in this field should be adopted with caution and that “general” strategic management theories cannot provide specific direction.

Rather, strategic tools help firms to develop a unique value-creating strategy.
The prospect of making an appropriate strategic decision is based on the amount of knowledge possessed and the ability to synthesize this knowledge.

It is also based on the frames of references (judgments) used in making strategic decisions.

Complexity and ambiguity problems are compounded by the existence of three broad perspectives in strategic management which attempt to explain how we think and behave.

These perspectives usually compete against each other and frequently provide equally plausible explanations for phenomena observed.

The perspectives can be classified in terms of a (n) (economic) rational approach, a (behavioral) learning approach and a (thinking) cognitive approach.

Strategic management involves making (frequently irreversible decisions under conditions of risk and uncertainty in situations which do not lend themselves easily to the generation of mathematical probability distributions.

It is precisely under conditions of risk and uncertainty (and when strongly influenced by emotions) that behavior is prone to deviate from rationality both systematically and unsystematically in both expected and unexpected ways to produce unexpected outcomes.

Most theories in the social sciences are concerned with identifying the conditions and circumstances required to achieve stability.

Unlike those theories, strategic management is concerned with change. Strategy deals with making dynamic choices about where an organization should be to maintain or improve performance (Teece, 1990: 49).

In most cases strategic action involves keeping certain components of an organization stable while encouraging various forms of change in other components. “While equilibrium analysis yields valuable insights into certain public policy issues, it is of limited use to managers of the strategic process. Indeed, it obscures more than clarifies” (Teece, 1990: 50).

Many approaches have influenced strategy development (formation/formulation) over the last 40 years.

In the last decade the resource-based view of the firm and more recently the dynamic capabilities view have come to dominate thinking.

These incorporate many of the features of previous approaches and provide feasible means of bridging the gap between the different orientations to strategic management. Williamson (1991) states in this context:

The leading efficiency approaches to business strategy are the resource-based view and the dynamic capabilities approach [. . .). It is not obvious to me how these two literatures will play out – either individually or in combination. Plainly, they deal with core issues. Possibly they will be joined.
(Williamson, 1991: 76)

The outlined characteristics of strategic management and strategy are the relevant features of the field as understood in this book.

The dominance of the resource-based view and dynamic capabilities view in the recent literature is taken into account by using these approaches as the main theoretical pillars of the theory based conceptual framework.

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