B300: Strategy for Business Part 2, S1, Chapter 2 Wednesday 7 May 2008 Below is the summary of Chapter 2 from

Section of the book strategy for Business done by Dr. John Jackson, Training Director of OU, UK

Chapter 2: Theories of Strategy by Richard Whittington

Whittingtons Theories of Strategy What Whittington (2001) has tried to do is collate various theories about strategy over the last 40 years or so and put them into four categories. He has taken a Western viewpoint. The way he has done so is to place certain approaches to strategy in four decades. As you know, there are several different definitions of strategy from Mazzucatos on page 1 of the Reader, Porters on page 11 and the classical one of Chandlers on page 34. What Whittington has done is to place the prevailing approaches to strategy in the early 1960s USA in the classical approach to strategy according to Chandler s definition, as well as from contemporaries such as Ansoff and Sloan. This definition and perspective falls into the content aspect of strategy, i.e. it states WHAT strategy is. In the Classic perspective, the focus is on a rational, logical approach, which appears to be more appropriate to large, mature and stable industries. This was the context of the USA, when very large American firms dominated the industrial world. The American economy was healthy, robust and growing and expectations in the USA were that people would keep on buying new products, especially cars, to fulfil the American Dream. Fuel was plentiful and cheap in the USA. The Classical perspective looks more at the rational approach, in which planning plays such an important part. It was prominent during the 1960s in the USA, the research being undertaken into large, successful manufacturing companies, e.g. GM, Du Pont, in which there was a top-down, rational, logical approach to formulating strategy. Implementation was the responsibility of the operational managers (Whittington, Reader, p. 34). Thus, the Classical approach does seem more appropriate for mature and stable industries. The industry therefore does seem to have an influence on the performance of the individual firms the industry specific factors. This falls into the Structure-Conduct-Performance (SCP) category of how strategy emerges see Reader, p. 1 Porters Five Forces model, which can be applied to an industry to analyse its attractiveness for making a profit for competitive advantage, would be appropriate for analysing such large and stable industries.

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The other perspectives deviate from the purely rational, logical approach. This is an important distinction as bounded rationality (see the processual perspective) is still a rational intention see Miller et al, Reader One. In exploring Whittingtons chapter, you will see that this shows how the Processual perspectives developed within the turbulent 70s oil crises in the West, coal miners strikes in the UK and the general incursion of Japanese manufactured goods, such as cars and motorcycles. The processual perspective is about politics and negotiation it is about satisficing. The Evolutionary perspective developed during the market led 80s, which was about survival letting the environment do the selecting, not the managers (Whittington, Reader, p. 41). In the UK, de-regularisation, and privatisation were taking place, as well as withdrawal of subsidiaries for struggling industries, such as the car and steel industries. Similar initiatives were taking place in the USA. This was the time of Margaret Thatcher in the UK and Ronald Reagan in the USA, leading to the economic approaches called Thatcherism and Reaganomics. In the UK, it was the end of socialist government In the 90s, with the acceleration of globalisation, supported by the rapid development of electronics and telecommunications and the power of the computer, large organisations started to think global, act local. To be successful or to survive in the evolutionary, processual and systemic approaches, there is perhaps more importance attributed to the firm-specific, resource based view than the classical perspective. The Evolutionary and Processual perspectives seem to be more appropriate to industries which are in flux or are in the early growth stage see the Industry Life Cycle (Grant, Reader, pp. 109/110). These are considered to fall into the process aspect of strategy, i.e. they state HOW strategy is developed or emerges. The Systemic perspective has aspects of both classical and processual approaches and it also has a process characteristic, i.e. strategy is developed by concentrating on local needs and culture. In real life, organisations do NOT make decisions based on a particular strategic perspective based on Whittingtons categorisations. They do not sit around the Board Room saying they will use this particular strategic approach. When researching a particular organisations strategic approach, you may find they have a tendency towards a particular one depending on the industry they are within, e.g. stable, turbulent, highly competitive, etc. However, you may well find aspects of ALL four perspectives in their strategic formulation. John Jackson 17th January 2008

Page2 B300 AOU Spring 2008 Part 2/S1/Chap2 prepared by Dr. Chadli Belarbi / Wednesday 7 May 2008