The developments of how strategy is performed within organizations have changed by means of more clear characterization and contextualization: For example, strategy can now be observed from three distinct dimensions (Chakravarthy & White, 2002; Pettigrew, 1997). These three dimensions are referred to as the strategy process, strategy content, and strategy context, and refer to how, who, when, what and where the strategy is conducted. Below, the definition of De Wit and Meyer (2010) gives more depth to the meaning of each of these dimensions, and this is followed by a review of the literature on the discussion of whether these dimensions should be viewed as separate or together.
The process through which strategy comes into existence within organization is commonly referred to as the strategy process. According to De Wit and Meyer (2010) this is usually through a set of questions relating to the key words how, who, and when. ‘How’ in strategy process questions is the means by which strategy is analysed, formulated, implemented and evaluated. ‘Who’
defines the people that are involved at each of these phases during the strategy process, and ‘when’ refers to the time-line, with indication of when the activities defined by ‘how’ will take place. According to Chakravarthy and Doz (1992) the strategy process is involved mostly with effectively shaping
strategies within the organizations. Furthermore, they distinguish strategy process from strategy content, as it focuses on the strategic positioning of the organizations, based on their strategic context, rather than the process used to influence strategic positioning.
Strategy content is widely regarded as the product of the strategy process throughout the literature. As defined by De Wit and Meyer (2010) strategy content is related to the keyword ‘what’. This can be interpreted as what the strategy produces. Chakravarthy and Doz (1992) referred to the characteristics of strategy content, in addition to what is produced through a strategy process.
Furthermore, according to Montgomery, Wernerfelt, and Balakrishnan, (1989) it is the product of the strategy process known as strategy content that is used to approach the scope or ways of competing within individual markets. The situation in which the strategy process and content is determined is critical to strategy development.
Strategy context is a significantly different concept compared to the other two dimensions because it dictates the circumstances under which both strategy content and strategy process are determined. As defined by De Wit and Meyer (2010)strategy context is concerned with the key word ‘where’, that refers to both the internal and external environment (Chakravarthy & White, 2002). It seeks to find where the strategy process and strategy content is located within the organization’s environment. Therefore, the application of the strategy process is considered successful when the content is attained, and the context is defined.
The literature has revealed some criticism with regard to strategy content. The development of topologies for strategic content may provide useful metaphors (Porter, 1998). Nevertheless while this is beneficial for planning what is expected from the strategy as a product, it does not allow strategists to capture
the complexity and dynamics of the relationship between the strategy process and its content (Webb & Pettigrew, 1999). Different views exist within the literature on whether the three strategy dimensions should be separated or not.
While most researchers have separated the dimensions of strategy as described above, according to Vänttinen, and Pyhältö (2009) the division of strategic management into these three dimensions is artificial. Even though the concept of separation has been widely accepted in academia, practical research has found that the idea of separation between these dimensions does not hold in empirical research, which results in a criticism of artificiality, as these dimensions are so interrelated. According to Haugstad (2007) the separation of dimensions is purely theoretical, because in practice this is not meaningful, and the strategy concepts become blurred.
Modern Strategy process: ‘processual approach’, ‘strategy as practice’
and ‘post-processual strategy approach’.
Strategy research has been actively pursued in the business environment since the middle 1960s, and has undergone much in-depth investigation since then.
Originally strategists were interested in the content of strategy, looking at what strategic decisions were. Modern approaches to strategy tend to look more at the process of strategy, and this places the focus on how strategy comes into existence. It was Bourgeois (1980) who distinguished between strategy content and strategy process, while Chakravarthy & Doz (1992) identified that deliberate strategy that developed from the content view on strategy is likely to be based on secondary data: this implies that the quality of the strategy may be disconnected from the actual context.
The research in strategic management has changed its viewpoint of how strategy is actually performed within organizations. Predominantly this has been through restructuring the type of questions used to formulate strategy.
Several authors have demonstrated the difference between deliberate and emergent strategy as opposed to processual strategy approach, which focuses on the processes rather than the output of the strategy(Johnson et al., 2008).
According to Regnér (2008), the processual approach to strategy focuses more on the engagement of actors and the contextual aspect to strategy. The focus on the process of strategy rather than its content has caused a paradigm shift, which is discussed in more detail below.
While previous approaches to strategy initially postulated a sequence of phases that were undertaken within the deliberate approach, the emergent approach is considered to involve more interaction between its phases. The processual approach is a mixture of both, adding an experimental and learning approach. Pettigrew (1992) and Pettigrew et al. (2003) identified that the processual approach to strategy came into existence during the early 1990s as a consequence of a merging of Market Based Strategy (further developed by Porter, 1998) with Resource Based Strategy (Barney, 2001). By combining these two concepts of conducting strategy, the processual approach took shape.
The concept of processual strategy approach was developed based on the idea of aligning internal resources to external factors as a process of formatting the organization. The processual approach focuses more on how this was done rather than the results that would be achieved. Day-to-day activities form patterns that become formalized into practices and business processes (Ackermann, Eden, & Brown, 2005; Whittington, 2006).
When it was introduced, processual strategy approach was considered revolutionary as it took a completely different approach to the way it viewed strategy. This naturally attracted an amount of criticism. Whittington (1996) stated that processual strategy approach focuses too much on the overall
paid to day-to-day activities. Furthermore, there was criticism that the micro level activities were not understood (Regnér, 2003, 2008): it was through the natural investigation of the shortfall of these aspects of the processual approach to strategy that strategy as practice approach was born.
The strategy as practice perspective of strategy started at the turn of this century. It was through the development of a practice rather than process view to strategy that this concept came into existence, as an extension to a processual strategy approach (Jarzabkowski, 2005; Johnson et al., 2003).
Whittington (2006) defined strategy as practice approach, theorizing strategy in a framework as “practitioners” (strategist, the actors that do things),
“practices” (tools that they use) and “praxis” (‘micro element of strategy, what they actually do’, or ‘activities’). This provides a better overview of what is meant by the idea of strategy as practice approach. Around the same time similar concepts were developed that were not contradictory to processual strategy approach, which found that strategy emerges through the interaction between actors and the strategy context (Jarzabkowski, 2003). Furthermore, a third perception of strategy as practice approach is that it is more than simply an extension of processual strategy approach (Chia & MacKay, 2007). In this perception, strategy is viewed as a practice that emerges in a social context.
Strategy as practice approach is currently the leading viewpoint on how strategy research is conducted. However, Chia & MacKay, (2007) have taken the ideas of strategy as practice approach a step further by distinguishing strategy as practice approach from processual strategy approach, describing it as post-processual strategy approach. This is based on the idea that practice is the centre of the research, rather than the micro-macro activities conducted by actors. This has led to a distinct approach to strategy that focuses on the field of practices as a way of investigating the emergence of strategy. In this view of practices, events, individuals and doings are all parts of practice complexes.
Initial debate over deliberate and emergent strategy was dismissed by the ideas of focusing strategy research on its process rather than its content. As strategy research became interested in processes it became clear that more investigation was required into the micro level of activities. More recent research has viewed strategy research as a practice rather than a process, based on the same ideas. However, some current researchers are determined to distinguish themselves from processual approaches by making strategy practices the centre of investigation. Table 2.1 shows the anatomy of strategy process stages. The next section will provide an explanation of strategy process phases including tool and activity bases.
Table 2.1: The Anatomy of strategy process stages
Source: The author
Strategy process phases, including activities Introduction
The strategy process is the stages that an organization goes through when involved with its strategy. The understanding of the individual phases is not a simple matter, because within the literature it has been found that some researchers have identified three stages while others have identified four.
There are two groups of researchers who have found that there are three stages: the first group defined three stages based on the idea that the analysis of the internal and external environment is the formulation phase (e.g.
Dudzevičiūtė & Peleckienė, 2010). The other group of researchers, who found that there are three phases, based themselves on the idea of integrating the formulation and implementation stage (e.g. Feurer, Chaharbaghi, & Wargin, 1995; Mintzberg, 1994; Mintzberg et al., 2003). However, the mainstream approach of researchers is to view the strategy process as four phases, in which there is a separate phase for analysing the internal and external environment (Acur & Bititci, 2004; Bear & Pawlak, 2010), and distinguishing between the formulation and implementation phase. Each of these is presented in more detail to understand the key differences between the positions that these researchers have assumed about the phases of the strategy process.
The inclusion of analysis in the formulation phase has received interest from within the discipline of marketing. Advocators of this approach include Dudzevičiūtė and Peleckienė (2010), who presented the start of the strategy process with planning and formulation. This phase includes internal and external analysis as well as evaluating goals and developing a plan. The planning and formulation phase is superseded by the implementation and execution phase. This involves the translation of a high level strategy into specific actions through allocating resources and managing change. The final
phase is control and evaluation of the strategy. This phase assesses whether the implementation of the strategy was successful and to what extent. These are the three prescribed phases of the strategy process.
However, some researchers have found that the strategy process consists of three phases based on a combination of the formulation phase and the implementation phase. This is opposed to researchers who included analysis in the formulation phase; more academic debate exists which presents a case for why the formulation or implementation phases should or should not be integrated. One of the key ideas behind the separation between formulation and implementation phase is that it is considered to be artificial. According to Feurer et al., (1995), organizations are constantly analysing the environment;
therefore formulation and implementation are done simultaneously.
The argument that, within the strategy process, the phases of formulation and implementation are actually single phase has been strongly supported by Mintzberg (1994), on the basis that formulators implement strategy, and implementers formulate strategy. It has been found that strategy outcomes are a product of the formulation and implementation stage through a two-way relationship in which they affect each other (Feurer et al., 1995). Mintzberg, et al., (2003) described this relationship as ‘tangled’. However, not all researchers agree that there are only three phases in the strategy process and that environmental analysis and formulation, or formulation and implementation, are one phase within the strategy process.
As previously identified, the strategy process has been considered to have four phases by the mainstream literature. However, within that literature which presents the strategy process there are some different interpretations. This is only a small difference; some researchers refer to the first phase as the input stage rather than environmental scanning (e.g. Acur & Bititci, 2004),
reforming the input stage in a similar way to other researchers (e.g. Bear &
Pawlak, 2010). Therefore, there is little or no difference other than in terminology.
Nevertheless, the separation of the formulation and implementation phase is not settled (Acur & Bititci, 2004; Bear & Pawlak, 2010). Researchers have stated that the formulation and implementation stages should be separate, based on the original and most credible conception presented by Kenneth Andrews in the 1960s (Rumelt et al., 1994). This idea was supported by Chandler (1962) and Ansoff (1965) and this concept of separating both phases is active in more recent research (e.g. Moussetis, 2011).
Several researchers have suggested that improved strategy outcomes are achieved as a consequence of separating formulation and implementation phases. In search of ‘good’ strategic planning practice, Brews and Hunt (1999) identify the need to separate these phases. Bryant (1997) found that the implementation phase is most critical during the strategy process, implying that it is separate from formulation. Farjoun (2002) stated explicitly that there is a clear separation between these stages in the strategic management process.
Kessler and Kelley (2000) have presented a strategy implementation framework that separates the formulation and implementation phase, and several other researchers have proposed that there is a separation between these stages of the strategy process (Barney, 2001; Dooley, Fryxell, & Judge, 2000; Kaplan & Norton, 2001b, 2001c). In this research, an overview for each phase of the strategy process, including activities, will be provided in the next section.
Phase one (environmental analysis)
Environmental analysis has been recognized as the first phase in the strategy process. Even when included in the formulation phase, environmental analysis
cannot be left out of strategic planning, as it is a prerequisite (Beal, 2000;
Côté, Vézina, & Sabourin, 2005). Business performance is primarily influenced by environmental change that is outside of the organization’s control (Dobni & Luffman, 2003). This depends on whether change is taking place internally or externally to the organizations; in the case of internal change the organization is expected to be in control, while externally organizations can only anticipate these changes. Therefore it is necessary to conduct analysis of the organizations internally and externally for successful strategy formulation. In a survey conducted among CEOs, it was found that environmental analysis was perceived as an important part of their work.
Furthermore, there was a significant relationship between an increase in environmental analysis and an increase in organizational performance (Aloulou & Fayolle, 2005; Darnay & Magee, 2007).
A study by Groom and David (2001) investigated internal and external environment analysis. It was found that usually internal analysis was done well, but that external analysis was conducted poorly. In the case of SMEs, Burke and Gaughran (2006) suggested that this is likely to be a consequence of limited resources available to thoroughly investigate the external environment. Furthermore, a great deal of skill is required, and access to external information is not always possible, therefore the process of external analysis is more prone to error. To increase the accuracy of external environmental analysis, it has been suggested that seven types of information must be identified: ‘Broad Scope Information’, ‘Timely Information’, ‘Current Information’, ‘Aggregated Information’, ‘Accurate Information’, and
‘Personal and Impersonal Information’ (Ashill & Jobber, 2001, p. 53).
External environment analysis looks to investigate the forces that are out of the control of the organization and that are likely to impact the organization.
Its main purpose has been identified as gaining competitive advantage (Analoui & Karami, 2002). Several researchers have identified the key dimensions of external analysis to be: ‘political’, ‘economic’, ‘social and (Dobni & Luffman, 2003; Hitt, Ireland, & Hoskisson, 2012; Macmillan &
Tampoe, 2000), and technological which can be abbreviated into PEST (Dobni & Luffman, 2003; Hitt et al., 2012). Through this analysis it is possible to identify external threats and opportunities. It is through analysing these external factors that organizations may define their position, and environmental analysis is regarded as essential to the success of organizations.
From the literature of external environmental analysis, several researchers have suggested factors to investigate. Ashill and Jobber (2001) suggested that these factors are: “distributor, competition, end user, suppliers and natural/physical factors, market characteristics”. As part of the external analysis, and analysis of the industry environment, some researchers suggest a five forces model based on: ‘Threat of New Entrants’, ‘Threat of Substitutes’
(Hitt, Ireland, & Hoskisson, 2007; Macmillan & Tampoe, 2000; Porter, 2008),
‘Bargaining Power of Suppliers’ (Macmillan & Tampoe, 2000; Porter, 2008),
‘Bargaining Power of Buyer’s (Porter, 2008), & ‘Industry Rivalry’ (Hitt et al., 2007)”. Originally, Porter mentioned a sixth force known as ‘Government Ideologies and Policies’.
The activity of internal environmental analysis is less complicated for organizations then external analysis (Groom & David, 2001). This is because an organization has information about itself readily available, and if this is not the case then activities can be initiated to obtain that information. However, internal analysis is a strategic activity that organizations must perform to gain maximum competitive advantage. This is done through identifying which activities organizations should perform. Throughout the literature researchers
have emphasized the need for organizations to identify unique ways of using their strengths and competencies to formulate successful strategies (Mintzberg et al., 2003). Therefore the key to organizational success predominantly lies internally; and it is only internally that an organization can gain competitive advantage, because the external environment is the same for all organizations.
A rigorous internal analysis consists of investigating an organization’s resources (Hitt et al., 2007), capabilities (Hitt et al., 2007; Hooley, Broderick,
& Möller, 1998) and core competencies (Hooley et al., 1998; Hooley, Greenley, Cadogan, & Fahy, 2005a).
The investigation of these three factors is complicated, and their configuration is essential to the success of the organizations. Essentially, organizational resources and capabilities are created throughout the organization’s lifetime (Teece, 1992, 2009), a lengthy process when modified according to the organizational strategy. It is on the combination of resources and capabilities that core competencies are defined (Hooley et al., 1998), and through the application of internal analysis an organization can gain a competitive advantage.
An organization may start a strategy process by reviewing how they may take advantage of external opportunities based on internally available resources, capabilities and competencies.
There is not a single correct approach to completing an internal analysis;
moreover, different approaches include different factors and methods.
However, SWOT (Strengths, Weaknesses, Opportunities, and Threats) is predominantly used to conduct an internal analysis(Porter, 2008) . Alternative approaches to an internal analysis have been suggested by Gică (2011); for example, Value Chain Analysis to investigate support activities to the organization’s product or service. Another approach is a resource-based view
to provide a detailed analysis of the resources available within an organization. As there are several approaches available, the organizations must identify its resources, capabilities and competencies that allow it to take advantage of its current situation regardless of the approach used to obtain this information. The following part will indicate the strategic activities of the
to provide a detailed analysis of the resources available within an organization. As there are several approaches available, the organizations must identify its resources, capabilities and competencies that allow it to take advantage of its current situation regardless of the approach used to obtain this information. The following part will indicate the strategic activities of the