Strategic Management

1. Introduction

Abstract

Our concern in this book is with the behavior of complex organizations in turbulent environments. The current state of knowledge about such organizations can be divided into two parts. One comprises practical technology which offers prescriptions on how organizations should behave. The other part consists of theoretical insights which describe why and how organizations do behave. The scope and volume of both parts are impressive, but from a viewpoint of a practicing manager, there are still serious gaps in the knowledge.

2. The Overall Framework

Abstract

The keystone of modern industrial society is a large number of organizations whose principal occupation is to supply goods and/or services to their environment. In capitalist industrialized societies such organizations have been usually grouped into two major categories. One contains ‘for-profit’ business firms whose assets are owned by private individuals. The other is composed of ‘not-for-profits’ whose assets are publicly owned. Historically it has been assumed that the respective categories exhibit significantly different non-overlapping behaviors.

3. The Environment in a Historical Perspective

Abstract

Modern business history in the United States starts roughly in the 1820s and 1830s. First the construction of a network of canals, and then of a nationwide railroad system triggered a process of economic unification of the country. A stream of basic inventions — the steam engine, the cotton gin, the Bessemer steel process, the vulcanization of rubber — provided a technological base for a rapid industrial takeoff. Technological invention proceeded alongside social invention and the development of one of the most successful and influential organizations in history — the business firm.

4. Model of Budgeting Behavior

Abstract

The most visible and most prevalent decision-making activity in the ESO is the process of resource allocation. In this chapter we discuss budgeting as a key form of strategic behavior by the ESO.

5. Model of Environmental Turbulence

Abstract

At the end of Chapter 3, we identified four major factors which have contributed to the growing turbulence of the environment. In the preceding chapter we modelled one of these: the strategic budgeting. In this chapter we shall first model the remaining three factors: novelty, speed and predictability. Second, we shall integrate these factors into a scale of environmental turbulence. Third, we shall show how the scale of turbulence can be used to predict the success of an ESOs strategic behavior.

6. Strategic Capability

Abstract

Shifting attention inward from the environment to the workings of the ESO, we encounter two traditional models. One, found in microeconomic literature, describes the business firm as restless, aggressive and continuously seeking to maximize profit. The second model, used by organizational sociologists, depicts both firms and non-profits, at best, as passive, reacting to events, lacking rationality, ‘muddling through’ from one event to another. At its worst, sociologists see ESOs as bureaucratic, introverted, resisting change, seeking to isolate themselves from the environment.

7. Power

Abstract

We turn our attention from the effectiveness of a given strategic behavior to the manner in which that behavior is chosen. The choice is made by individuals and groups of individuals through a process which reflects their preferences. The choice depends both on what these preferences are and how they are brought to bear on the organization. We start with a discussion of this second aspect of strategic-behaviour: the use of power.

8. Aspirations and Culture

Abstract

We turn attention from the dynamics of power to the motivations which affect strategic choice. According to our basic hypothesis, all ESOs are strongly motivated to survive. The less dependent an ESO is on its market and the more assured its subsidy, the lower will be the commercial performance needed to guarantee survival. A business firm which is totally dependent on the market has to maintain at least a break-even through commercial transactions. A university, on the other hand, which is heavily supported by income from endowment, alumni gifts, state grants, etc, typically operates at a continuous commercial deficit. Thus the basic survival drive induces higher performance aspirations in the firm than it does in non-profits.

9. Strategic Leadership

Abstract

In an ESO the work-taking technocracy carries no formal responsibility for the success and survival of the enterprise. Nevertheless, as technocracy gains power, it exercises an increasing influence on the strategic work of the enterprise. In smaller firms workers frequently identify with the interests of the owner-managers, but in both large firms and non-profits they increasingly use their power to promote parochial, personal, and group interests. As we have already discussed, the early influence was over conditions of work at the work place. But increasingly, technocracy, particularly the white collar specialists, has become influential over the strategic activity.

10. Model of Strategic Choice

Abstract

As we have done earlier in the book, we follow an exploratory discussion with an attempt to bring together the several determinants of strategic choice.

11. Transition Behavior

Abstract

In this chapter we turn attention to the process by which ESOs change strategic behavior. In a majority of cases the change is triggered by events in the outside environment, but strategic change is also frequently caused by internal power shifts. We start our discussion with the environmentally induced change.

12. Model of Transition Behavior

Abstract

In earlier chapters we have identified five levels of strategic behavior: stable, reactive, anticipating, exploring and creative. In the preceding chapter we identified three modes of behavior within or across these levels:

1.

In budgeting behavior an ESO confines itself to progressive non-dramatic changes in the allocation and size of its budgets.

 

2.

In strategically adaptive behavior an ESO may make dramatic reallocation and expansions/contractions of the budgets, as well as incremental changes in products, markets, technology, or in its managerial capability, or in logistic capability. But all of the changes are consistent with the historical culture of the ESO.

 

3.

In strategically discontinuous behavior an ESO makes a shift in the strategic thrust, or in the strategic action potential, or both. The behavior is discontinuous, contrary to the norms of the historical culture of the ESO.

 

13. The Basic Axioms

Abstract

This book is, above all, an exercise in the comprehension of complexity. All individuals who call themselves scientists are united by a common drive to perceive order in reality and to capture this perception in ways which increases human understanding of the awesome complexity which management academics call ‘the real world’.