Whittington's four generic approaches to business strategy

Whittington's Four generic approaches to STRATEGY AND PARADOXES RELATIONG TO THE Business WORLD.

Description of Whittington's four generic approaches to strategy

In 1993, Richard Whittington proposed four generic approaches to strategy, applicable in business, synthesizing thus the different strategy schools that created the management literature.

The two variables Whittington uses to describe and differentiate the strategic concepts and trends are the strategic goals and the strategic processes, in other words, what the company wants to achieve and how it goes about to obtain it. The two variables are placed on two orthogonal axes, with the strategic goals on the vertical and the strategic outcomes on the horizontal one.

In this sense, the vertical axis will represent "the degree to which strategy stresses the single outcome of profit-maximization or deviates to allow other possibilities to intrude." In other words, this axes shows whether or not the company is solely interested in obtaining profit maximization or whether it has other strategic targets in site as well.

The horizontal axis represents "the process by which strategy is developed." This may obviously be a rational, thought out process or may simply occur due to accident or chance. According to the four quadrants that are formed, Whittington divides strategy into classical, evolutionary, processual and systemic. We will have a look at all four in turn.

Classical definition of the classical approach refers to theoreticians who "regard profit maximization as the supreme goal of business, with this to be achieved through deliberate planning." Placed in the left-hand quadrant, the classical approach encompasses, thus, a realistic and rational approach to business strategy. All classical economic textbooks argue that profit maximization is primary goal of any business. Additionally, in order to achieve this goal, the company's management has an organized plan of action, with specific controls and feedback from all levels of the company.

The company has a mission statement that is well-defined, together with a set of strategic, tactic and operational objectives that it strives to achieve. Analysis and planning is, in this case, a "logical and rational analysis" and the company is keen to adopt a pro-active approach to the market's forces. Even more so, the classical approach turns to a symbiotic relationship between the planning process, the company's objectives and the resources that the company has available.

Evolutionary

The evolutionary approach states that "environmental changes are too fast to be predicted in advance." In this sense, the long-term strategic planning, the main element in the classical case, is futile, because the market factors are constantly changing and decisions need to be adapted to the new conditions set by the market.

On the scheme, the evolutionary school is situated in the right-hand quadrant, with the same goal of profit maximization, but with a different approach from the classical one. Instead, the evolutionists propose day-to-day planning and a short-term perspective on things. In this sense, as I have mentioned, there are no long-term decisions and the management process is characterized by issues like "discretionary production, replication, and optimization of strategic fit with the environment in the short-term."

The current global business environment seems to fit the main characteristics of evolutionism, in the sense that economic changes and other factors occur so fast that it is hard to make a long-term plan. Additionally, a long-term strategy can easily be copied and adapted by different other competitors in the industry.

Processual

The processual school refuses both a rational strategic approach and the profit maximization objective. In this sense, authors from this school sustain the fact that "strategies and change are greatly influenced by, and are the result of wide ranging political activities within the organization."

In term of the means used to achieve the company's objectives, the processual theoreticians characterize the company's strategy as the sum of individual ideas, thoughts or individual efforts. Putting together all these different reactions to the market factors or to the generic conditions means creating the company's strategy.

In terms of the objective to be reached, processual theoreticians believe that the company's objective is not always the same (profit maximization), but that it is influenced itself by the specific situation the company finds itself in at a certain period of time. As such, the goal may simply be improving quality or extending the company's market share, goals which do not necessarily lead, at least in the short run, to an increase in profits.

Systemic

The systemic school identifies with the classical approach in terms of the processes by which a company can reach its strategic goals. As such, "forward planning and working efficiently to achieve results" is at the core of their ideas. On the other hand, the systemic theorists see "economic action as imbedded in social relations."

Systemic strategy is closely related to the concept of the nation state and to the role that the mother nation plays in every company's existence. Daimler will always be a German company, despite globalization and global economic thinking, just as much as Toshiba will remain Japan's largest electronics producer.

In this sense, we may gain a larger grasp of why systemic theoreticians link the strategic goals to social responsibilities for the company and why social relations play their part here.

Paradoxes

The first observation that we can make when referring to the statements described by De Wit and Meyer is that they tend to become less of a paradox if we consider large companies. I have again, in mind the General Electric example. Breaking with the past meant closing down some factories, while restructuring others and making acquisitions from fields that would prove very profitable in the future. On the other hand, Breaking with the past did not mean breaking with traditions, especially those on which the hundred years business was build on.

So, in the case of large businesses that own billions in assets and where each different part can be considered a business in itself, paradoxes such as strategic change seem easier to be understood, given the sheer size of the business and the understanding that business evolves on different levels, with different decisions that need to be taken in each case (restructuring on one side, keeping the necessary elements, on the other).

Some of the paradoxes are quite complex and can lead to any kind of discussions, including game theory. I am referring, for example, to the network level strategy, with companies in a constant competition with one another, but needing to cooperate in order to maximize their profits. The prisoners' dilemma comes to mind in this sense, applied to the business environment: if you choose to increase your price, for example, your competitor will increase his as well and it is most likely none will win. On the other hand, if your competitor decreases the price in order to attract more customers, you need to be able to take the right decision keeping in mind that of your opponent.

Globalization vs. localization, national vs., global or control vs. chaos are all paradoxes which companies operating in today's business environment find themselves are facing. If we look at the paradoxes presented by De Wit and Meyer and compare them to Whittington's synthesis, we may indeed arrive at the conclusion that there are two ways in which a strategy-related issue can be seen and analyzed. This goes hand in hand with the example I have previously mentioned in relation to General Electrics.

The decisions that are taken globally, for example, are complementary to those taken at a national level. We may compare this with a pyramid of decisions or with a set of circles with the same center.

A final observation that needs to be made is that Whittington attempts a synthesis of strategy theories and business schools, while De Wit and Meyer's paradoxes seem more connected and related to the actual business practice.