External,
Market Orientation
As already noted, organizations
need to be oriented externally—toward customers, competitors, the market, and
the market's environment. In sharp contrast to the projection-based, internally
oriented, long-range planning systems, the goal is to develop market-driven
strategies that are sensitive to the customer.
Proactive
Strategies
A proactive strategy attempts to
influence events in the environment rather than simply react to environmental
forces as they occur. A proactive strategy is important for at least two
reasons. First, one way to be sure of detecting and quickly reacting to major
environmental changes is to participate in their creation. Second, because
environmental changes can be significant, it may be important to be able to
influence them. For example, it may be beneficial for an insurance firm to be
involved in tort reform strategy.
Importance
of the Information System
An external orientation puts
demands on the supporting information system. The determination of what
information is needed, how it can be obtained efficiently and effectively, and
how it should best be analyzed, processed, and stored can be 1cey to an
effective strategy development process.
On-Line
Analysis and Decision Making
Organizations are moving away
from relying only on the annual planning cycle and toward a more continuous,
on-line system of information gathering, analysis, and strategic decision making.
The design of such a system is demanding and requires new methods and concepts.
The system must be structured enough to provide assistance in an inherently
complex decision context, sensitive enough to detect the need to precipitate a
strategic choice, and flexible enough to be applied in a variety of
situations.
Entrepreneurial
Thrust
The importance of developing and
maintaining an entrepreneurial thrust is increasingly being recognized. There
is a need for the development of organizational forms and strategic market
management support systems that allow the firm to be responsive to opportunities.
The entrepreneurial skill is particularly important to large, diversified firms
and to firms involved in extremely fast-moving industries, such as high-tech
firms or industries that produce "hit" products such as video games,
CDs, or movies. The strategy in such contexts must include providing an
environment in which entrepreneurs can flourish.
Implementation
Implementation of strategy is
critical. There needs to be concern about whether the strategy fits the
organization—its structure, systems, people, and culture—or whether the organization
can be changed to make the strategy fit. The strategy needs to be linked to the
functional area policies and the operating plan. Chapter 15 is devoted to
implementation issues.
Global
Realities
Increasingly, the global
dimension is affecting strategy. Global markets are extremely relevant to many
businesses, from Boeing to McDonald's, and it is a rare firm that is not
affected by competitors either based in or with operations in other countries.
The global element represents both direct and indirect opportunities and
threats. The financial difficulty of a major country or a worldwide shortage of
some raw material may have a dramatic impact on an organization's strategy.
Chapter 14 focuses on global strategies.
Longer Time
Horizon
A major problem for many
businesses is the development of effective long-term objectives and strategies.
Many observers have suggested that the visible success of Japanese firms is
due, in part, to their ability to operate strategically with long time
horizons. Furthermore, some of the competitive problems of such industries as the
automobile, consumer electronics, and steel industries have been attributed by
management theorists to a short-term orientation. As managing with respect to a
longer time horizon is more difficult and places heavier demands on the
strategic decision-making process, there is an increased need for better
constructs and methods that reflect a long-term perspective.
Empirical
Research
Historically, the field of strategy
has been dominated by conceptual contributions based on personal experience and
insights, as the writings of Alfred Sloan, the architect of General Motors, and
Peter Drucker, the author of the classic book, The Practice of Management,
illustrate.6 More recently, an empirical research tradition has
begun. The qualitative case-study approach provides useful hypotheses and
insights. In addition, a host of quantitative research streams compare and
study the performance and characteristics of samples of business units over
time. These research streams can now be found in most of the basic disciplines
and in the field of strategy itself. They are an important indication that the
field is finally reaching a maturity in which theories can be, and are being, subjected
to scientific testing.
Interdisciplinary
Developments
One purpose of this book is to
draw on and integrate a variety of disciplines that are making important
conceptual and methodological contributions to strategic market management.
Among these disciplines, which have been remarkably isolated from strategic market management and each other, are the following:
Marketing
Marketing is by its very nature
concerned with the interaction between the firm and the marketplace. During the
last decade, strategic decisions have received increasing attention. Tools and
concepts such as product positioning, the product life cycle, brand equity,
brand loyalty, and customer-need analysis all have the potential to improve
strategic decision making.
Organizational
Behavior
Organizational behavior theorists
have built on the classic works of the early 1960s on strategy and
organizational structure. They have also considered the link between strategy
and other elements of the organization, such as systems and the management of
people. Of particular relevance is the concept of corporate culture and its
impact on strategy.
Finance and
Accounting
One major contribution of these
disciplines to strategy is shareholder value analysis (covered in Chapter
7)—the concept that strategists should be concerned with the impact of strategy
on the value of the firm. Another is a rich research tradition relating to
diversification efforts, acquisitions, and mergers, Finance has also contributed to an understanding of the concept of risk and its management.
Economics
The industrial organization
theory subarea of economics has been applied to strategy using concepts and
methods such as industry structure, exit barriers, entry barriers, and
strategic groups. Furthermore, the concept of transaction costs has been developed
and applied to the issue of vertical integration. Finally economists have
contributed to the experience curve concept, which has considerable strategic
implications.
Strategy
The discipline of strategy is not
only increasingly overlapping with other disciplines, but is itself maturing.
One sign of this maturity is the emergence of quantitative research streams;
another is the maturity of some of its tools and techniques. In addition, the
premier strategy journal, Strategic Management Journal, has given exposure for
more than two decades to the top academic efforts that provide theoretical and
empirical insights into strategy.
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