Strategy Formation Types

Fredrickson and Mitchell (1984) argue that strategy formation is a decision-making process and suggest that a firm’s strategy is a result of many individual interrelated strategic decisions. Mintzberg (1978) identifies two fundamental approaches to strategy formation: deliberate versus emergent. Deliberate strategy formation is

intended and formally planned, which is similar to the rational approach to decision- making. Emergent strategy, on the other hand, is more intuitive, action-oriented, spontaneous and realised in the absence of intentions, which is similar to the ‘satisfying’ approach to decision-making. Emergent strategies represent decision- making under conditions of bounded rationality when the information is incomplete and cognitive limitations are in place (Slevin and Covin, 1997). As a result, there are two sides to the strategy formation process: strategy could be intended when

practitioners formulate a strategy through a conscious process before the decisions are made or a strategy could be formed incrementally, perhaps even unintentionally (Dibrell, Down and Bull, 2007).

Mintzberg and Waters (1985) state that a number of strategies can be characterised as more deliberate or more emergent. Drawing on the above, they conceptualise a variety of real-world strategy formation modes (SDM) (types) as existing in a three- dimensional ‘space’: level of organisational control, level of environmental stability and the existence of precise, articulated intentions. A strategy formation mode is defined as ‘the activities and the cognitive, social/organizational and political processes through which strategies are intentionally or unintentionally formed’ (Balabanis and Spyropoulou, 2007 p.45). This definition highlights the fact that strategy formation modes embrace different aspects of strategy formation, which means that there is a lot of overlap between them and other constructs (e.g.

organisational structure, communication process). This can lead to major limitations for the research discussed below (see p. 29).

Mintzberg is undoubtedly a seminal author in the area of strategy formation and as a result, much work has used his theories as a platform, developing different typologies of strategy development modes (e.g. Miller, 1987; Hart, 1992; Dess, Lumpkin and Covin, 1997; Bailey, Johnson and Daniels, 2000).

To make the analysis of the literature easier to understand, different typologies of strategy formation modes are compared and based upon these seven general strategic types are outlined, namely: planning, autonomous, interactive, responsive, traditional, controlling and entrepreneurial (see Table 2.1). These are derived from the interpretations of the author of the current work. First, the general strategic types

Table 2.1: Generic Strategic Types General

strategic type

SDMs Authors

1.Planning Planning Mintzberg and Waters 1985, Mintzberg and Lampel 1999, Hart 1992, Bailey, Johnson and Daniels 2000, Miller 1987 Rationality Hart 1992

Rational Mintzberg and Lampel 1999 Design Mintzberg and Lampel 1999 Cognitive Mintzberg and Lampel 1999 2.Autonomous Imposed Mintzberg and Waters 1985 Unconnected Mintzberg and Waters 1985 Positioning Mintzberg and Lampel 1999 Environmental Mintzberg and Lampel 1999 Enforced choice Bailey, Johnson and Daniels 2000 3.Interactive Consensus Mintzberg and Waters 1985

Interaction Miller 1987 Transactive Hart 1992

Participative Dess, Lumpkin and Covin 1997, Mintzberg and Lampel 1999, Balabanis and Spyropoulou 2007 Power Bailey, Johnson and Daniels 2000

4.Responsive Adaptive Dess, Lumpkin and Covin 1997, Mintzberg and Lampel 1999, Balabanis and Spyropoulou 2007 Learning Bailey, Johnson and Daniels 2000

Incremental Bailey, Johnson and Daniels 2000 5.Traditional Ideological Mintzberg and Waters 1985

Symbolic Hart 1992

Simplistic Dess, Lumpkin and Covin 1997, Mintzberg and Lampel 1999, Balabanis and Spyropoulou 2007 Cultural Bailey, Johnson and Daniels 2000

6.Controlling Umbrella Mintzberg and Waters 1985 Process Mintzberg and Waters 1985

Command Hart 1992, Bailey, Johnson and Daniels 2000, Mintzberg and Lampel 1999 Configurational Hart 1992, Bailey, Johnson and Daniels 2000, Mintzberg and Lampel 1999

7.Entrepreneurial Entrepreneurial Mintzberg and Waters 1985, Mintzberg and Lampel 1999, Dess, Lumpkin and Covin 1997, Balabanis and Spyropoulou 2007 Assertive Miller 1987

‘Planning’ involves formal planning, systematic collection and analysis of internal and external information, evaluation of different options and formulation of detailed

implementation plans (e.g. Mintzberg and Waters, 1985). This is the closest type to ‘pure’ deliberate rational strategy formation.

In the ‘traditional’ strategy-making type the main emphasis is on a routine way of doing business, following norms, rules and rituals, which are based on the mission and vision of the firm (e.g. Hart, 1992; Balabanis and Spyropoulou, 2007). The disadvantage of this group of strategy formation modes is that the concepts of formalisation and corporate culture are incorporated into its definition (e.g. Miller, 1987; Dess, Lumpkin and Covin, 1997).

The ‘controlling’ type highlights the degree to which strategy-making is centralised and determined by either a powerful individual or a small team (e.g. Mintzberg and Lampel, 1999), which overlaps with the concept of organisational structure, more specifically of centralisation (Jaworski and Kohli, 1993; Donaldson, 2000).

The main idea behind the ‘autonomous’ approach is that the strategy is developed independently from decision-makers. This type is opposite to the ‘controlling’ type described above as the decision-makers have little control over the process of strategy formation. The strategy can be either imposed by outside forces or, contrarily, sub-units within the organisation can realise their own strategy (e.g. Mintzberg and Lampel, 1999; Bailey, Johnson and Daniels, 2000). This approach does not make clear how decisions are actually made but rather focuses on the context of the decision-making process.

The ‘interactive’ type is the result of continual communication that involves

interchanges between different stakeholders (i.e. employees, suppliers, customers, government and regulators) (e.g. Miller, 1987). However, in this case, the process of strategy formation overlaps with concepts of interfunctional and external

communication (e.g. Fisher, Maltz and Jaworski, 1997; Goebel, Marshall and Locander, 2004; Auh and Menguc, 2005).

‘Responsive’ strategy-development emphasises continuous adaptation to the business environment (which includes customers and other stakeholders’ needs)

(e.g. Dess, Lumpkin and Covin, 1997). Nevertheless, adaptation to the environment is an outcome of the decision-making process rather than a type of strategy

formation (c.f. Moorman and Miner, 1998b).

‘Entrepreneurial’ strategy-development refers to innovativeness, independency, risk- taking, proactiveness and competitive aggressiveness in decision-making

(e.g. Balabanis and Spyropoulou, 2007). However, entrepreneurial strategy

formation highlights certain features of the strategy content (for example competitive aggressiveness and innovativeness) rather than focusing on how decisions are made.

As a result, the main drawback of past strategy formation research as presented above is the conceptual overlap between how strategic decisions are made, the contextual factors influencing it (structural and environmental characteristics), the content of the strategy itself and its outcomes. For example, a ‘command’ strategy development mode (see Table 2.1) refers to the situation when strategy making is centralised and formalised by a powerful individual or small team (Hart, 1992; Bailey, Johnson and Daniels, 2000); this SDM already includes the structural characteristics of the organisation. Similarly, in ‘environmental’ SDM, the environmental influences are inherent in the strategy-making process (Mintzberg and Lampel, 1999).

However, organisational structure and environmental turbulence are not an intrinsic part of the strategy process per se; they are the context within which strategies are made.

Research on strategy formation and decision-making requires the disentanglement of the decision-making process, contextual factors, strategy content and its

outcomes in order that precise conceptual definition of export decision-making can be identified (which the author of this research will refer to as ‘pure’ decision-making approaches). Only in that case is it possible to draw sound theoretical conclusions and provide recommendations for the improvement of a company’s performance. If the researcher fails to distinguish between the content, context factors, process and outcomes, it would be difficult to identify key success factors for the firm. For

example, even if the results indicated that a certain decision-making type would result in better performance, it would be unclear what the main factors leading to that

2.2.4 ‘Pure’ Decision-Making Approaches

As mentioned above, deliberate strategy formation is in line with the normative

approach to studying decision-making as it prescribes that decisions should be made on the basis of well-articulated intentions (e.g. Fredrickson 1983). Therefore,

Mintzberg (1985) suggests that planning is the closest process to pure deliberate decision-making in the real business world. In this case, there is a clear distinction between formulation of the initial intentions or objectives and their further

implementation. By now the concept of planning is well-established in the management and marketing literature (Dew et al., 2009).

On the other hand, emergent strategy formation is associated with descriptive decision-making as it describes how decisions are formed in reality (e.g. Mintzberg and Westley, 2001). Descriptive approaches challenge the idea of rationality of decision-making as managers in reality rarely make optimal choices. Instead, decision-making is argued to be more adaptive, responsive, creative and spontaneous (Brown and Eisenhardt, 1998).

The analysis of the decision theory literature and strategic management literature failed to provide the conceptualisation of a ‘pure’ more emergent approach to decision-making. Instead, researchers tend to focus on emergent approaches (e.g. entrepreneurial, intuitive), which do not represent ‘pure’ types (Lumpkin and Dess, 1996; Khatri and Ng, 2000; Sandler-Smith and Shafy, 2004; Miller and

Ireland, 2005).

At first glance, it appears that entrepreneurial decision-making has features similar to spontaneous and creative decision-making (e.g. Balabanis and Spyropoulou, 2007) (for example, innovativeness is often confused with creativity) (see p. 43). However, as mentioned above, entrepreneurial strategy formation highlights certain features of the strategy content (for example competitive aggressiveness and innovativeness) but does not explain how decisions are made. Moreover, when researchers

investigate entrepreneurial decision-making, they make prior judgements about the type of business they are dealing with (innovative, proactive, non-risk averse), whereas spontaneous and creative decision-making could occur in any type of business (Vera and Crossan, 2005). The assumption could be made that there is a

positive relationship between spontaneous and creative decision-making and entrepreneurial strategy formation. However, this is beyond the scope of investigation in the current study.

Some authors focus their research on an intuition-based approach to decision- making (e.g. Khatri and Ng, 2000; Miller and Ireland, 2005). Intuition is defined as ‘a cognitive conclusion based on the decision maker’s previous experiences and emotional inputs’ (Leybourne and Sadler-Smith, 2006 p. 484). It is claimed that people cannot have intuition about something they do not know anything about; intuitive responses are actually based on their previous experiences

(Campbell, 1991). Nevertheless, the concept of intuition also does not provide an explanation for how decisions are made but rather explains what they are based on. Spontaneous and creative decision-making can potentially be based on intuition, but it does not have to as it also can be based on the information available at hand (Weick, 1998). This means that equating the ‘pure’ emergent approach to the intuition-based approach significantly restricts the concept of emergent decision- making, which has a broader meaning and application.

The conceptualisation of the emergent more ‘pure’ decision-making approach is found in the organisation studies literature. Authors tend to associate spontaneous and creative decision-making with a concept of improvisation (Vera and Crossan, 2005). Improvisation has an emergent nature (Kyriakopoulos, 2011) and can be defined as ‘the spontaneous and creative process of attempting to achieve an objective in a new way’ (Vera and Crossan, 2004 p.733).

Thus, based on an analysis of the decision-making literature, planning and

improvisation can be considered to be the ‘pure’ decision-making approaches. They characterise the process of decision-making itself, whilst avoiding overlapping with other constructs.

As both planning and improvisation are the prime focus of this study, they require detailed attention. In the section below, their conceptualisation, operationalisation and possible outcomes are provided.