Strategy? Corporate and Competitive Management

¶ … Strategy?

Corporate and Competitive Management Strategy

Business success is less a function of grandiose predictions than it is a result of being able to respond rapidly to real changes as they occur. That's why strategy has to be dynamic and anticipatory. (Welch, 2001)

In the first chapter of their book, Strategy Safari: A Guided Tour Through the Wilds of Strategic Management, the authors say this:

eventually situations change -- environments destabilize, niches disappear, opportunities open up...while formulas for strategic change may come easily, the management of that change, especially when it involves shifting perspective, comes hard." (Mintzberg, Lampel, & Ahlstrand, 2005)

Whether defined by one of the smartest and most successful corporate CEOs, Jack Welch of General Electric, or by experts in the field of studying corporate management strategy, managing change seems to be the key to successful strategies and profitable companies.

So, what is this field of corporate management strategy. Good definitons are easy to find, but varied in composition. Michael Porter defines what he calls a competitive strategy in terms of his "Five Forces Model." (Porter, 2008) Henry Mintzberg, Josheph Lampel, and Bruce Ahlstrand discuss the "Ten Schools," each of which focuses on one major aspect of strategy formation. (Mintzberg, Lampel, & Ahlstrand, 2005) Gary Hamel and C.K. Prahalad put the definition in terms of strategic intent and talk about the four types of competitive innovation. They use their Core Competence model to illustrate their own ideas of inside-out corporate strategy. (Prahalad & Hamel, 2008) the list of diverse perspectives of "strategy" goes on and on. The few named here cover a wide range and will suffice for our discussion. But first, let's get a handle on a general definition of corporate management strategy as it might be accepted by most companies.

Definitions of Strategy, Corporate Strategy, and Competitive Strategy

In its most basic form, strategy is defined as a comprehensive plan for accomplishing an organization's goals. (Corporate Level Strategy, 2003) Almost all "experts" agree that, in the corporate world, strategy takes on three shapes: general, corporate, and competitive.

As we said above, strategy is a plan, first of all, to get the corporation from here to there. It is also a pattern the company holds over time regarding what types of products it sells, what kinds of businesses it will acquire, or the price level at which it will sell its products or services. Any company or corporation also holds a position with it's products in particular markets. Perhaps most important is that a strategy involves a perspective. It is the company's vision and the direction it decides to take. (Nickols, 2004)

But, how do we delineate between corporate strategy and competitive strategy? Simply put, corporate strategy defines the markets and the businesses in which a company will operate. Its main focus is the financial goals of the company. It is about managing the value of an organization. it's also about vision.

Competitive strategy defines for the company the basis upon which it will compete.

It takes into account a company's strength and weaknesses and capabilities as they relate to the markets' characteristics and to other companies it competes with. it's more about mission and rather less about vision. (Russell-Jones, 2005)

Of course, we can't consider any definition of competitive strategy without raising the name of Michael Porter and his Five Competitive Forces model -- entry barriers for new competitors, threat of substitutes, bargaining power of buyers, bargaining power of suppliers, and rivalry among existing players -- which is used almost without exception, to make a competitive analysis of the attractiveness (or value) of an industry structure. (Porter, Competitive Strategy, 1998) and, though Porter's tool is widely used, most competitive strategies are put together with a combination of tools, such as SWOT and core competency analysis. The complaint about the Five Forces model is that, in some cases, it is too complex and difficult both to understand and apply. Others feel Five Forces is too cumbersome in its need for data and heavy-duty analysis and does not fit today's rapidly changing, dynamic market.

So where do we go with this thought that some of today's tools may not suffice as the market moves faster and companies need these dynamic, flexible analytical tools to update their strategies?

Where Is the Field of Strategy?

Disruptive Innovation? Four actions framework? Factor conditions? Demand conditions? Preemptive strategies? Five Forces? Ten Schools? Are any of these concepts/theories new and innovative? Do they pave the path toward the future of corporate and competitive strategizing? The answer is probably yes...and no.

It is difficult to find a brand new strategizing tool or model or school that is not just a rehashed version of our current standard, and quite effective, methods to analyze strategies. One innovative strategy to arise out of an existing concept is "Blue Ocean."

Though not new as a theory, the strategy proposed by Kim and Mauborgne in Blue Ocean Strategy urges companies to stop swimming in the "red" ocean which is filled with competition, and expand into relatively competitor-free markets of the blue ocean.

The blue ocean, they say, is filled only with untapped market space and opportunity for highly profitable growth. (Kim & Mauborgne, 2005) but then one might ask, why haven't all those intelligent CEOs fighting tooth and nail in the red ocean with all that competition swimmimg rapidly and in large schools over to the blue ocean?

Part of the reason, according to the authors, traces back to the foundation of business strategy where competitors compete to protect and enlarge their share of the market. This was exasperated by the rise of the Japanese in the 1970s and 1980s. Customers were deserting Western companies in droves, so the center of strategic thinking gravitated further towards the competition. A slew of competition-based strategies, which are very much in play today, emerged arguing that competition is at the core of the success and failure of firms, and that competition determines the appropriateness of a firm's activities that can contribute to its performance.