Strategic management involve development and implementation of strategy in an organisation. Different perspectives of strategic management have been adapted in different organisational settings. Each of these perspectives has its own different principles on how the various aspects of strategic management are to be handled. However some of the principles of strategic management are similar in most of the perspectives.
Different perspectives are useful in different situations and so organisations should adapt the perspectives that best suits the context.There are two main approaches to strategic management; the industrial organisational approach and the sociological approach. The industrial organizational approach is related to the economic theory. It is concerned with things like allocation of resources, competition and economies of scale.
It caries the assumptions of the economic theory, that there is rationalism and profit maximization interests among the stakeholders. The sociological approach is concerned with interpersonal interaction in the organization. It assumes that the stakeholders are bounded by rationalism and behave in the right way.To this approach the greatest interest is not profit maximization. The main difference of these two approaches is their approach one viewing the organization as an economic system and the other as a social system.
The other difference between the approaches is their view on profit maximization. The industrial organisation approach treats the organisation as an economic entity whose main interest is profit maximization while the sociological approach views the organisation as a social system whose main objective is the social welfare of the society as opposed to profit maximization (Mintzberg 1987).Strategies in an organisation can be made at different levels. There are corporate strategies for the whole organisations as well as functional unit strategies and business unit strategies.
There are two main categories of strategic management, descriptive and prescriptive. The prescriptive strategic management deal more with how strategies are formulated. It describes the steps and principles necessary to come up with an effective strategy for an organization (Mintzberg H. 1990 37).There are three schools under prescriptive category of strategic management.
These schools of thoughts have various differences but they have some similarities in their nature. They all uphold rationality and objectivity. They assure that all possible choices can be determined through analysis. This analysis should be rational and objective. According to these prescriptive schools of strategic management the choices in a business situation can also be determined through conceptualisation or planning (Royer 2005 p. 78)According to Chandler (1962: 13) strategy is “the determination of the basic long term goals and the objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.
” There are ten schools of strategic management that were identified by Henry Mintzberg (1990). These ten schools can be grouped into the two categories of strategic management. One of the schools in the prescriptive category is the Design school. According to this school strategies are formulated by analysing the strengths, weakness, opportunities and threats of the organization.
This school of thoughts was initiated by Selznick (1957) but was not developed much. In the design school the strategies were made by the managers of an organization and communicated down to the workers who were supposed to follow them to achieve the organisation’s goals. As explained by Mintzberg, Ahlstrand and Lampel (1998; 222) the process was supposed to be formal and divisible into steps that could be evaluated. Techniques were to be utilised to control budgets and programs.
The second school was planning school and was initiated by Ansoff (1965).It supported much of the design school but differed on the formality and steps of the process. While the design view the managers made the strategies and passed them down through a formal series of steps in the planning school staff planners came into the picture. The third school of strategic management is positioning school. This school was advanced by Porter (1980). In this school analysis of the industry situation is done in a formal way to reduce strategy to a generic position.
The strategy planners are replaced by analysts who are mostly consultants. The other schools are grouped under descriptive strategic management.This category of strategic management deals mostly with strategy development. Entrepreneurial school gave much focus and attribute to entrepreneurship.
Though all the other schools recognize the importance of entrepreneurship in the society, it is the entrepreneurial school that have laid much emphasis on this. Entrepreneurial school stressed that organization needed to have a leader who had a unique vision. This vision was not of a formal or precise form but was subjective to the leader’s intuition and perspective. Unlike the design school entrepreneurial did not have a series of formal steps of doing things.
The process was not clear nor did it have checklists on which to carry out evaluation. The process in entrepreneurial school was vague and unclear. It entirely depended on individuals. However, it was very crucial for new businesses which required unique ideas, privately owned companies and business that were getting into new and uncertain markets as well as situation that needed rapid changes. In the modern business environment ideas in this school can be very useful especially for the high growth companies.
It is also very useful for starting businesses which needs many rapid changes.Cognitive school dealt with the development of strategies. It seeks to determine where strategies originate. Cognitive school of strategic management have resulted into much research being done on the mental processes that lead to the formation of strategies.
The research was aimed at understanding these mental processes that led to the development of strategies. This research has developed into evaluation of biases in strategy formulation and information processing. The later development in cognitive school viewed formulation of strategies as a result of creative interpretation.In these, strategies depended on the creativity of the person making the strategies. This resulted to the process being more subjective.
The earlier view was more objective in trying to compare reality with some models in order to formulate strategies. In the modern business world, cognitive school especially the new view of creative interpretation, is very useful in marketing strategy formulation in marketing needs high level of creativity whereby one projects the likely future outcomes and interprets that creatively to be able to come up with an action plan on how to tackle the situation.This have become crucial for businesses because environment. The earlier view of cognitive school where reality is mapped to certain models or frames is useful in some technical aspects of businesses today. Models are highly used in insurance in calculating premiums and probabilities.
This view can also be used in finance to calculate the outcomes of certain business activities in a very objective way. Both views of cognitive school deal with how strategies are developed but differ slightly on the method used.The later creative interpretation view is more subjective while the earlier model view is more objective (Hardy 1994). Cognitive school of strategic management though, is good for individual strategists but have many limitations especially where decisions of strategy formulation are to be made collectively with other stakeholders. The learning school emphasize on the value of learning new ideas to aid in the operations of businesses.
According to the learning school the results of the various actions in the businesses are considered and the lessons learnt arte incorporated in the strategies.In this school, strategies are not formed at once-strategy formulation is along process where strategies are made in a series of steps as the organization learn new lesson from the outcome of its activities. Following the learning school, the organization would not come up with a wholesome strategy for the long run. The strategies will be developed slowly and will change as changes occur in the outcomes of the business activities. The learning school can be used successfully where the business environment is very complex, uncertain and predictability is impossible.
In such a situation the management of the organization will slowly steer the strategy as they analyse the outcome of their actions. Action plans will be developed for very short durations after which they will be evaluated so as to come up with the next action plan. In this school, the strategists are found all over the organization. There are no leaders whose work is strategy formulation. Every one is the organization learns and adapts appropriately to the lessons learnt in the process.
The formulation and implementation of strategies is done by the same group of people.However, this school faces a limitation of not having a wholesome strategy. In a case of crises the organization using the learning school for strategic management will be very unstable. The many small action plans may not result into a good wholesome strategy that will be able to support the organization in unstable conditions or crisis. The power school view strategy formulation from the perspective of power. The process of strategy formulation is seen as negotiation between the various stakeholders.
Tin an organization context the various insiders of that organization negotiate in order to come up with a certain strategy.For the external stakeholders the negotiations are done so as to come up with the collective strategy. In these negotiations all the different perspectives of an issue are analysed and the best course of action is adopted. The negotiations entail persuasion, bargaining and confrontations.
An organization will always try to use its power in collective strategy making to further its interests. This process of strategy making is democratic and realistic and helps in formation of strategic alliances and joint ventures.After a strategy is made in this way, the stakeholders are not likely to resist to its implementation as negotiations were already done. Thus this school helps to co minimize resistance to change (Pettigrew et al 2002).
However, this process of strategic management can lead to division in an organization. Due to the use of politics division among the various stakeholders can results. Also a lot of wastage in terms of time and cost can result out of the process. The power school generally revolves around self interest with every entity trying to further its own interests.A business entity will push to have low prices from its suppliers while it will seek to set the highest price possible under prevailing market conditions for its customers. In the same stride the same business will push to have government policies and regulations favour it in its operations.
Within the organisation each of the employees will want and make efforts to be promoted. The cultural school, unlike the power school is concerned with the interests of all the stakeholders. The process of strategy formulation is based ion culture.It involves the various stakeholders within the organization to come up with a strategy that is in the line with the corporate culture of the organization.
The process is usually collective and co0-operative. This school upholds values beliefs and social factors in the strategy formulation process. However, this approach can encourage resistance to change. In a business environment it is very difficult to incorporate the interests of all stakeholders as actually these interests conflict in many ways. Thus making this school unrealistic in implementation.The environmental school emphasises on the role of the environment in the strategy management.
It views the environment as a major actor that determines the direction the strategy takes. The strategy making is viewed as a response to the external environment. The configuration school views strategy formation form transformation perspective. According to this school strategies are used to transform an organization from one structure to another.
It views an organization by its adopted characteristics which it holds for a certain period according to the context.The context of the organization defines the characteristics of it and influence the strategy the organization will have. The organization holds certain strategies when in a certain context but when the context changes the strategies are also changes to adapt to the new context strategy formation adopt to the time and context. However, in the business environment there are many changes some very small and unclear thus making the assumptions of adapting to a few changes impractical (Segal-Horn 1998).The different perspectives to strategic management have advanced different principles and approaches.
These principles and approaches fit different situation and contexts. No single approach will provide sufficient guidelines to strategy formation in all types of contexts. The organization should analyse the context in which they are operating so as to adopt the approach to strategy formation that best suits their context. Failure to consider the context will lead to an organization adopting an approach that will not be effective to its operations.Thus, context is very important aspect in strategy formulation as it guides the organization in the process (Grant 1995). Conclusion In the modern practice, there have been efforts to understand the various theories better, Mintzberg, Ahlstrand and Lampel (1998) emphasis the importance of having more wholesome view of strategy management rather than concentrate on one aspect.
Corporate strategy formulation today is a combination of different approaches issues and factors that are emergent in the business environment. Resource-based theory is one of the current views to strategic management.In this theory an organization is viewed by its capabilities. This theory evaluates both the external market context and the internal capabilities of the organization. The effectiveness of the organization will depend on the resources it has and how it will utilize them in consideration of the prevailing conditions. There are many perspectives to strategic management with similar and different characteristics and organizations should adopt the most appropriate approach according to its context and the prevailing condition.
