Understanding Strategy

Strategy is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competencies with the aim of fulfilling shareholder expectations.

Johnson et al 2006, p.9

Strategy is the ‘master plan’ for the company clearly outlining how it will achieve its mission and objectives: strategy “maximises competitive advantage and minimises competitive disadvantage” (Wheelan and Hunger 2000, p.12). When a company knows where it wants to go and answers the question “how will we get there” – the answer relates to the crafting and executing of its company’s strategy (Thompson et al., 2005). For a strategy to be successful it must ‘fit’ with the company’s external and internal situation. External factors include industry and competitive conditions and forces that may affect the business such as the economic factors outlined in Chapter 1 (Porter, 2008). Internally, the strategy must fit the company’s competitive capabilities and take cognisance of company structure, culture and resource strengths and weaknesses (Wheelan and Hunger, 2000, Thompson et al., 2005).

Business strategies can either be competitive (where the company is battling against all other firms in the industry) and/or cooperative (where the company works in collaboration with or allies itself to some rivals against others for competitive advantage) (Wheelan and Hunger, 2000). They can also be offensive (less focussed on taking defensive position) or move reconstructionist (looking at the market in a totally different way). Choice of which strategy to employ is one of the choices which should be made by a company, complimented then as appropriate by other strategic options such as mergers and acquisitions or strategic alliances such as the consideration of appropriate business partners in the construction sector as outlined in the previous section (Thompson et al., 2005). The company must also analyse its own current situation as well as the competition and industry in order to understand its resource capabilities and competitive strengths. This will expose the weaknesses and strengths of the company’s current strategy and competitive position.

In moving into new markets, Irish architectural practices need to need to be aware of their options before deciding which strategy to adopt. They need to be aware of their own competitive strengths in new markets which may be different to the home market. Their structure needs to be able to support the strategy selected or the company may need to restructure in order to do so also.

For architectural practices seeking work both in Ireland and overseas, they require a clearly defined strategy. The literature suggests that they will be more successful if they have strategies for growth overseas but that these are dependent on the innovation capabilities of their staff (InterTradeIreland, 2009). Therefore this study examines whether or not those practices with international offices are strategic in their approach and whether or not they have strategies in relation to creativity for their staff and/or their clients. The strategies adopted by a company determine the choices it makes in relation to the marketplace and how it will succeed in the long term. As discussed in the previous section, putting that strategy into action is critical to a company’s success or failure. The literature suggests that Irish architectural practices are weak at strategic planning however most of what has been written is based on data compiled before the full impact of the economic downturn became evident. This enquiry therefore explores whether or not this is still the case.

3.2.1 Competitive / Co-operative Strategies

The structuralist approach to strategic thinking is often based on the competition.

With this approach, awareness of the forces that shape industry competition is required so that the company’s strategy matches the competitive conditions of the marketplace (Porter, 2008). By understanding what these competitive forces are, company strategists can take actions to protect the firm and also initiate actions in order to produce competitive advantage. This may or may not involve working in co-operation with rivals in alliances and partnerships. This is a structuralist view of strategy which is explained as follows (Chan Kim and Mauborgne, 2005) ‘Market structure, given by supply and demand conditions, shapes sellers’ and buyers’

conduct, which, in turn, determines end performance’ (p.209).

Using this approach, most driving forces of industry change fall into one of the following, with those more likely to affect architectural practices highlighted to a greater or lesser extent below:

1. Growing use of the internet Less Likely

2. Increasing globalisation More Likely

3. Changes in the long-term industry growth rate More Likely 4. Changes in who buys the product and how they use it Likely

5. Product Innovation Likely

6. Technological Change and manufacturing process

Innovation Likely

7. Marketing Innovation Likely

8. Entry or exit of major firms More Likely

9. Diffusion of technical know-how across more companies

and more countries Less Likely

10. Changes in cost and efficiency More Likely

11. Growing buyer preferences for differentiated products Less Likely

instead of a commodity product

12. Reductions in uncertainty and business risk More Likely

13. Regulator influences Likely

14. Changing societal concerns, attitudes and lifestyles Likely

(Thompson Jr. et al 2005, p. 74)

Strategists’ task is to identify the major forces impacting their industry as opposed to the minor ones to understand the impact of these changes on the industry and company and prepare effectively. It is imperative to understand the market or markets as only then can an organisation decide on which offensive strategies to adopt.

3.2.2 Offensive Strategies

Competitive advantage is usually achieved by a company going on the offensive: that is using offensive strategies as opposed to defensive ones to secure cost advantage, differentiation advantage or resource advantage (Thompson et al., 2005). There are many types of offensive strategies that can be deployed by companies and can be summarised these as follows (Thomson Jr. and Strickland III, 1989, Thompson et al., 2005, Wheelan and Hunger, 2000):

Frontal Attack - going head to head with a competitor.

Flanking Manoeuvre - attacking that part of the market where the competitor is weak.

Bypass Attack - manoeuvring around competitors to capture unoccupied or less contested territories, changing the rules of the game.

Encirclement the company uses simultaneous attacks on many fronts and encircles the competitors’ position in terms of products or markets or both.

Guerrilla Warfare - ‘hit and run’ offensives by small challengers who attack industry leaders in locations and at times to suit them.

Strategy refers to the decisions a company will make and consists of the important actions necessary to realise those decisions. Competitive strategy refers to companies that take a competitive position differentiating themselves in the eyes of the customer, adding value through a mix of activities different from those used by competitors (Halliden, 2009). This is achieved by the company in various ways usually by the company considering one or more offensive strategies as outlined above.

While focussing on the competition may answer the question “what should the organisation be doing” there are other ways to answer that question which do not focus on the competition, rather they focus away from the competition - to uncontested markets where there is a lack of competition. This is particularly relevant for Irish architectural practices that may choose to look at new markets where the competition is not as strong or where they can offer different products in an uncontested area of an existing marketplace.

3.2.3 Reconstructionist Strategies

A ‘reconstructionist’ view would be to look at the market in a different way, focussing away from supply and more toward demand – and also away from competing and more towards the creation of value innovation releasing new demand by not allowing existing market structures limit what can be achieved (Chan Kim and Mauborgne, 2005). With such an approach, redefining a given problem can lead to a totally new solution and change the whole marketplace thereby creating a demand that did not exist previously, ‘reconstruction reshapes the boundary and the structure of an industry and creates a blue ocean of new market space’ (Chan Kim and Mauborgne 2005, p. 212). Reconstruction looks at the problem in a completely different way and re-defines it – thereby creating a whole new market and strategies which need to be re-defined to service that market accordingly.

In exploring Irish architectural practices’ strategies around internationalisation, this study will make conclusions as to whether or not those companies strategy is to respond (defensive) rather than to pre-empt (offensive) as a strategic approach. This thesis explores whether or not those practices seeking work internationally are now or have ever been strategic in their approach and how they implement those strategies.

Furthermore, the literature would suggest that having strategies in relation to the innovation capabilities of the company would better place Irish Architectural practices’ growth capabilities in working abroad. Therefore the strategic approaches they take in relation to how they view the competition or look at the market will contribute significantly to their successes abroad. How those strategies are implemented is critical to their success and is explored below.