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STRATEGIC MANAGEMENT (SIM336)

“A business enterprise guided by a clear sense of purpose rationally arrived at and emotionally ratified by commitment is more likely to have a successful outcome, in terms of profit and social good, than a company whose future is left to guesswork and chance.”

Andrews K., (1987) The concept of corporate strategy; cited in De Wit & Meyer,(2010) Strategy Process, Content, Context, an international perspective 4th Edition

MODULE GUIDE

2012/2013

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MODULE LEADER - Derek Harwood / John Dixon-Dawson

Table of Contents

Important Notes 2

Introduction 4

Lecture and Seminar Programme 4

Sunspace – Module information 4

University Documentation 5

Module Feedback 5

Assessment 6

MODULE DESCRIPTION 7

Introductory Lecture 10

Introductory Seminar : Review module guide and assessment! 11

Lecture One: ‘The Strategy Labyrinth.’ 12

The Essential Reading For Lecture One 12

Seminar One 13

Part 1. The Sale of Burmah Castrol to BP Amoco 13

Part 2. Strategy Past; Strategy Futures 13

Lecture Two: Models, Concepts, Theories 14

The Essential Reading For Lecture Two 14

: The Brewery Group Denmark : Faxe, Ceres and Thor 15

Lecture Three : Organizational Purpose 16

The Essential Reading For Lecture Three 16

Seminar Three : Blackberry & The Mobile Phone Industry 17

Lecture Four: Chaos and Strategy 18

The Essential Reading For Lecture Four 18

Seminar Four: Blackberry & The Mobile Phone Industry (case study provided in the module pack) 18

Lecture Five: Influences On Action 19

The Essential Reading For Lecture Five 19

Seminar Five: Ryanair 21

Lecture Six: Public Sector Strategy 22

The Essential Reading For Lecture Six 22

Seminar Six: Strategy development at Castle Press & New Town Council 23

Lecture Six A: Assignment Preparation 24

Seminar 6A Databases 24

Lecture Seven: Risk Management 25

The Essential Reading For Lecture Seven 25

Seminar Seven: Case Study: Ericsson’s Supply Chain 26

Lecture Eight: Strategy - Does it Matter? 27

The Essential Reading For Lecture Eight 27

Seminar Eight : International Joint Ventures (IJV’s) The Rover/Honda Alliance 28

Lecture Nine: Assignment Preparation 29

Seminar 9: Assignment Preparation & Module feedback 29

Important Notes

The lecture and seminar programme will be delivered during Term 1.

Lectures and seminars for this module will be delivered every week.

Lecture 1 relates to seminar 1, and so on…

Table I Lecture & Seminar delivery

|Wk |Date W/C |Lecture |Topic |Seminar |Academic paper / case study |Page |

| | |Module Outline|Introductory Lecture |Seminar |Review module guide and assessment. | |

| | | |Outline of the Module & | |Using Case studies – The rationale. | |

| | | |Assessment | | | |

| | |Lecture 1 |The Strategy Labyrinth. |Seminar 1 |1.Case Study – BP Amoco | |

| | | | | |2.Academic paper – Strategy Past; | |

| | | | | |Strategy Futures | |

| | |Lecture 2 |Models, concepts and theories|Seminar 2 |Case Study - The Brewery Group Denmark | |

| | |Lecture 3 |Organisational Purpose |Seminar 3 |Case Study – Blackberry & The Mobile | |

| | | | | |Phone Industry | |

| | |Lecture 4 |Strategy and Chaos |Seminar 4 |Case Study – Blackberry & The Mobile | |

| | | | | |Phone Industry | |

| | |Lecture 5 |Influences on action. |Seminar 5 |Case Study – Ryanair | |

| | |Lecture 6 |Public Sector Strategy |Seminar 6 |Case Studies - Strategy development at | |

| | | | | |Castle Press & New Town Council | |

| | |Lecture 6A |Assignment Preparation |Seminar 6A |Assignment preparation and | |

| | | | | |Electronic Databases; KeynoteEuromonitor | |

| | |Lecture 7 |Risk Management |Seminar 7 |Case Study - Ericsson’s risk management | |

| | | | | |approach after a serious sub-supplier | |

| | | | | |accident | |

| | |Lecture 8 |Finally – Does it matter? |Seminar 8 |Case Study - International Joint Ventures| |

| | | | | |Rover / Honda | |

| | |Lecture 9 |Part 2 Assignment Preparation|Seminar 9 |Assignment Preparation & module feedback | |

| | | |Submit Part 2 of your | | | |

| | | |assignment on - to be | | | |

| | | |advised | | | |

| | | | | | | |

Please note that the workshops are designed to follow the lectures. It is important that you arrive at the seminar having considered the lecture and read any case study material or academic papers given.

The lectures will be available on Sunspace prior to being delivered so please ensure you print the lecture content prior to attendanceat the lecture theatre then you can add notes during the lecture delivery.

Failure to arrive at lectures or seminars prepared may detract from your learning and the learning of your seminar group - as well as wasting valuable time.

Take advantage of the seminar process, complain (constructively) if you don’t agree or give complements. Whatever you do please try to avoid being passive in the seminar process.

SIM336 STRATEGIC MANAGEMENT

“Personally I'm always ready to learn, although I do not always like being taught”.

Sir Winston Churchill, British politician (1874 - 1965)

Introduction

Traditionally, ‘Strategic Management’ is presented as a final year core module in most Business Studies Degrees. The module aims are usually integrative and cumulative, in that it draws together the purposes and methodologies of the functional areas which are usually studied separately to show how they contribute to the overall purposes and aims of the organization as a whole. This synthesis and integration of the functional business areas into a real business entity is usually considered in relation to the environment in which the organization exists and with reference to a time scale from the past and more importantly projected into the future. Theoretical models are generally supplemented with case study material and students on sandwich courses returning from placement are encouraged to reflect upon their own recent experiences.

The challenge for the student and teacher is to:

• analyse a complex organization;

• analyse a complex environment;

• analyse the complexity of relationships between the two;

• synthesise earlier diverse and possibly functional studies of the organization;

• assimilate new theoretical models;

• evaluate all models and methodologies against observations of the practices of organizations in the real world.

The degree classification reflects the student’s ability to do this.

‘Strategic Management’ will have elements of all of the above although its primary aim is the study of the methodologies and models by which one might seek to grasp the extraordinary complexity of, ‘understanding the organization in its environment as it moves through time’. The application of these ideas to the analysis of real organizations is something that will be accomplished by you in the module assessment in which you will have plenty of opportunity to pursue your own ideas and to demonstrate your own abilities.

Lecture and Seminar Programme

There is one lecture session each week followed by the seminar. The lectures will consist of information, explanation and exploration as detailed in this guide. You will get a lot more from the lectures if you do some directed reading from the list accompanying each lecture.

The preparation will consist of reading and thinking about the issues it evokes. You may be asked to carry out some research or to undertake an exercise. Whilst most of the seminar work will relate directly to lectures and readings sometimes they will take detours and include contemporary topics.

Due to the nature of the assignment there will always be an opportunity in the seminars to discuss any particular issues that might arise during assignment preparation.

Sunspace – Module information

You will find additional material on the portal.

University Documentation

The relevant links to the under mentioned documentation can be found in Appendix 1

1. University Generic Assessment Criteria

2. University Academic Regulations (including the Student Guide)

3. University Student Handbook

4. University Policy on Plagiarism

5. University Policy on Extenuating Circumstances

6. Guide for Students on the Supervision of Dissertations and Projects

7. University Policies on Complaints, Appeals and Student Discipline

Module Feedback

Module feedback is collated informally during the delivery of the module and formally during the last lecture.

Feedback from last year and incorporated this year was –would the seminar tutors review the strategic models in the seminar prior to application to the seminar case study.

Reading Information….

Please note the reading is detailed week by week and the texts can generally be found in the Library (probably in limited quantity with respect to your numbers). Other texts may well be equally acceptable. Throughout the module guide I have identified at least 3 text books for reference, including page numbers, to the lectures and seminars. You could purchase these texts:

1. De Wit, B. and Meyer, R. (2010), Strategy Process, Content, Context, An International Perspective (Fourth Edition), Cengage Learning EMEA.

2. Johnson, G., Scholes, K., Whittington R., (2011), Exploring Strategy: Text and Cases (Ninth Edition), Pearson Education Ltd. - Note. There is an electronic version ofthis text available within the SunCat library catalogue.

3. Lynch, R. (2006), Corporate Strategy, (Fourth Edition), Financial Times, Prentice Hall, Harlow. - Note there is an electronic version of this text available within the SunCat library catalogue.

Ideally if you purchase a text I suggest you purchase 1 and/or 2 before 3.

This module is a valid reason for getting into the habit of reading a good newspaper on a daily basis such as the Financial Times (FT). Note the FT is available online via the library and then the Discover icon. The FT will bring you up to date with many aspects of business topics.

As you start work on your assignment you may find it very rewarding to browse amongst the journals on the electronic databases.This is of particular importance to your individual assignment as you choose the topic yourself so you need to choose it from some background knowledge.

Assessment

The individual assignment takes the form of one3,000 wordassessment. It is designed to allow you to investigate an arena in which your own chosen particular aspect of Strategy may be developed, researched, analysed or synthesised in relation to your own thinking and creativity.

Culture and Structure

Lectures are used to sign post ideas and thinking or develop single issues. Seminars will be used to reflect on ideas and look at examples of strategy in practice.

The early part of the course might be of concern to you in that some of your favourite strategic models of business may be questioned.

Is hierarchy a good structure for an organization?

What are the strengths and weaknesses of a SWOT analysis?

Is strategy something you do or something you are?

Is there such a thing as strategy and if there is who does it and where?

There is no one view on strategy and whilst you may align yourself with a guru or a school of thought or develop your own individual view; it is important that you understand why you believe what you do and more importantly the strengths and weaknesses of your view.

We may agree, we may agree to differ; we may create something new. Where ever the course leads us it is important to remember that this is not just a course in Strategy; it is an opportunity to discover new things, question old things, create new things all of which require thinking and interaction – in lectures – in seminars – so agree, disagree, ask questions, read and especially think…….

Good luck!

Regards

Derek Harwood

MODULE DESCRIPTION

TITLE: STRATEGIC MANAGEMENT

CODE: SIM336

CREDITS: 20

LEVEL: 3

FACULTY: BUSINESS & LAW

MODULE BOARD: UNDERGRADUATE BUSINESS AND MANAGEMENTAND TOPUP

PRE-REQUISITES: NONE

LEARNING HOURS: 200 hours, the exact nature of which is specified in the module guide

LEARNING OUTCOMES

Upon successful completion of this module, students will have demonstrated:

Knowledge

K1. Understanding of the origins and various approaches to strategy

K2. Understanding of the complexity of the relationships between the organisation and its environment

K3. Understanding of international/global strategic thinking

K4. Understanding of the application of strategy ideas in practice

Skill

S1. The ability to analyse the complexity of organisations and their environments

S2. The ability to synthesise earlier, diverse and possible piecemeal studies of the organisation and assimilate new theoretical models and offer solutions relative to strategic issues

S3. The ability to evaluate existing models and methodologies against observations of the practices of real organisations

CONTENT SYNOPSIS

The module aims to be integrative and cumulative in that it draws together the purposes and methodologies of the functional areas of business policy and strategy which are usually studied separately and to show how they contribute to the overall purposes and aims of the organisation.

This synthesis is usually considered in relation to the environment in which the organisation exists and with reference to a timescale projected into the future. The challenge for the student is to analyse complex organisations and their environments as well as the relationships between the two and evaluate models and methodologies against observations of the practices of real organisations. The module reflects the process of strategic management and the key schools of strategy in the context of stable or shifting, national and global environments.

TEACHING AND LEARNING METHODS

This is taught on campus and off campus as a distance learning module delivered at Tutor supported centres requiring the students to work through a study guide that introduces the subject material and takes the student through a range of activities and case studies. Students will be encouraged to reflect on their own work and organisational experiences. Students will be expected to read the module guide and supported text reading and complete a range of self study activities to underpin their knowledge and develop analytical skills in respect to meeting the learning outcomes. All activities have feedback included. Off campus students will have access to a local academic Tutor who will offer workshop or online support. Students will be able to work with other students either on line or in workshops depending on the nature of the Centre approval. The following outline is indicative and will vary on and off campus and between Centres.

Breakdown of 200 Learning Hours

Breakdown of 200 Learning Hours

Weekly lectures and seminars

12 weeks @ 3 hours 36

Self directed study and individual assignment 164

12 weeks @ 13.67hours per week

Total 200 hrs

ASSESSMENT METHODS

The assessment will be by one individual assignment. All learning outcomes will be assessed.

The standard University Regulations relating to the Infringement of Assessment Regulations apply. All work must be referenced using the Harvard Referencing System.

|Sequence |Assessment Type |Marking Scheme |Weighting |Qualifying Mark |Pass Mark |

| | | |% | | |

|001 |Assignment |UCMS |

|Turnovernetofduties: | | | | | |

|Continuingoperations(includingacquisitions) |2,907.8 |2,761.9 |2,778.6 |2,853.5 |2,751.3 |

|Discontinuedoperations(note(i)) |35.9 |75.2 |157.4 |206.0 |297.2 |

| |2,943.7 |2,837.1 |2,936.0 |3,059.5 |3,048.5 |

|Operatingprofitbeforeexceptionalitems: | | | | | |

|Continuingoperations(includingacquisitions) | | | | | |

|Castrolsubsidiaries |211.4 |185.8 |209.6 |201.4 |194.7 |

|Shareofoperatingprofitinassociates |1.6 |1.6 |1.6 |3.0 |4.5 |

|Castrol |213.0 |187.4 |211.2 |204.4 |199.2 |

|Chemicals |78.6 |71.7 |72.8 |64.1 |60.3 |

|Fuels |1.9 |1.7 |(0.8) |(0.7) |3.4 |

|Energyinvestments |4.0 |4.0 |5.9 |5.1 |0.7 |

|Centralmanagement |(13.6) |(13.3) |(13.6) |(12.5) |(12.6) |

| |283.9 |251.5 |275.5 |260.4 |251.0 |

|Discontinuedoperations |0.7 |7.3 |18.4 |21.9 |29.7 |

| |284.6 |258.8 |293.9 |282.3 |280.7 |

|Interest |(25.0) |(9.5) |(14.2) |(20.9) |(27.7) |

|Profitbeforeexceptionalitemsandtaxation |259.6 |249.3 |279.7 |261.4 |253.0 |

|Exceptionalitems: | | | | | |

|Continuingoperations |(76.7) |(49.0) |(24.1) |(7.5) | |

|Discontinuedoperations |(7.3) |34.7 |(17.9) |18.5 | |

|Profitbeforetaxation |175.6 |235.0 |237.7 |272.4 |253.0 |

|Taxation |(79.9) |(86.8) |(92.2) |(97.6) |(97.8) |

|Profitaftertaxation |95.7 |148.2 |145.5 |174.8 |155.2 |

|Minorityinterests |(22.7) |(19.6) |(22.2) |(19.7) |(20.2) |

|Profitforthefinancialyearattributabletoshareholders |73.0 |128.6 |123.3 |155.1 |135.0 |

|Balancesheet | | | | | |

|Fixedassets |883.1 |864.6 |839.1 |914.0 |974.5 |

|Netcurrentassets |309.4 |381.8 |376.9 |424.7 |445.7 |

|Totalassetslesscurrentliabilities |1,192.5 |1,246.4 |1,216.0 |1,338.7 |1,420.2 |

|Long-termcreditorsandprovisions |(603.1) |(395.6) |(391.9) |(491.6) |(631.4) |

|Minorityinterests |(68.7) |(62.6) |(61.1) |(80.5) |(80.7) |

|Shareholders’funds |520.7 |788.2 |763.0 |766.6 |708.1 |

| |pence |pence |pence |pence |pence |

|Statisticsperordinaryshare: | | | | | |

|Ordinarydividends(note(ii)) |47.3 |43.0 |40.5 |36.8 |33.45 |

|Earningsperordinarysharebeforeexceptionalitems |77.0 |66.1 |75.5 |71.1 |66.9 |

|Earningsperordinaryshareafterexceptionalitems |39.0 |60.7 |58.0 |74.2 |66.9 |

|Shareholders’funds |291.5 |369.4 |329.6 |332.6 |320.8 |

(i) Discontinuedoperationsrelatetotheresultsofsubsidiaryandassociatedundertakingsdiscontinuedatanytimeduringthefiveyearperiod underreview.

(ii)ExcludinganyForeignIncomeDividendenhancement.

of how their product applications could meet customer need. Similar to the earlier exercise on the Chemicals businesses, the conclusion was that success was not so much based on the technical aspect of product as on industrial marketing and service on a local basis. An important exception to this pat- tern was that part of the passenger car lubricants business which involved sale of product through retail channels. This relied a great deal more on brand and marketing push. The results of the exercise did, however, support the decision to reorganise the Group into market-facing business units. Further, it helpedidentifyappropriate,andinappropriate,rolesforthecentre.TheGroupcentreofBurmahCastrol should concentrate on developing people with the skills to work internationally but with local sensitiv- ity; but it should avoid heavy-handed central co-ordination. The Corporate Centre was reorganised as a resultofthisexercise,splittingthe‘corporate’-levelactivityofffromthe‘servicing’activitywhichwas

Exhibit3RelativeperformanceofFTSEAll-Sharevs.BurmahCastrol,from

January1995toJuly2000

setuptobemarketresponsive.Soifoperatingcompaniesdidnotwanttobuytheservicesthecentre wasofferingtheycouldgoelsewhere.

Therewere,then,argumentsthatmanagementcoulduseinsupportofthepropositionthatBurmah

Castrolbusinesseswerelinkedbya‘goldenthread’:

Webelievedwehadastrongstorytoexplaintotheinstitutionswhatitwasweweretryingto do,andhowweweregoingtoreleasevalue.

However,aswegotintothestreamingofCastrolintofourseparatebusinessstreams,this increasinglyhadaninfluenceonourownthinkingabouttheshapeoftheportfolioasawhole. Havingsplitouttheindustrialbusinessfromthepassengercarengineoilbusiness,itfurther highlighted,forexample,thattheremightbemoresimilaritiesbetweentheindustriallubricants businessandthefoundrychemicalsbusinessthantherewerebetween,say,theindustrial lubricantbusinessandthepassengercarengineoilbusiness.SobybreakingupCastrolinto businessunits,wehadaneffectonourowninternalthinking.

Atthesametimeasthischangewithinthecompany,aprocessofmajorconsolidationin

theoilindustrywasunderway.Webelievedthistobeaonce-offprocess.Itseemedtousthat Castrol–itsbrandandmarketingculture–wouldrepresentagreatprizetoanumberofthe majoroilcompaniesbecauseofeconomiesofscaleandthebroadercoverageofthelubricants marketthatitwouldprovide.Thisledustobelievethattherecouldbelatentpotentialfor releasingsubstantialvaluetoourshareholdersbyinsomewayputtingourlubricantsbusiness togetherwithanothermajorlubricantsbusiness.

Thusatthispointtherewerevariousdistinctstrandsofthinking.Atonelevelwewere explainingtotheCitythatmanagementhadaclearvisionfordevelopingourCastroland Chemicalsportfolioasrestructured.Atanother,webelievedwehadtoexplorewhatroutes mightbeopentoustoreleasethevaluethatwebelievedwasinherentinourbusinessesbut whichwasnotreflectedinourshareprice.

THEPRESSUREFORRELEASINGSHAREHOLDERVALUE

The pressure on management to demonstrate how Burmah Castrol could release more value for shareholders remained; and there was growing concern internally about a need for greater clarity of corporatestrategy:

Theactivismfromsomeshareholderscontinued.Whenoursharepricewentdownto£7.50there wasparticularlystrongpressurefromsomeshareholdersalongthelinesof‘Wedon’twantto strong-armyoubutyoumustdosomethingaboutthis.Youaresittingonastrongglobalassetin Castrol,thevalueofwhichisbeingdraggeddownbythefactthatasmanagementyoucontinue tomanagespecialitychemicalsbusinesseswhicharenotsohighlyrated’.Andby1999,

internallytherewassomefeedbackaboutthelackofvisioninthecorporation.Wehadaseries ofseniorexecutivebriefingsinEurope,AsiaPacificandinNorthAmerica;openandfrank debatesuggestedthatseniorteamssoughtaclearbannerforthefutureofthecorporation

thattheycouldrallyround.Withhalfoftheprofitcomingfromthepassengercarengineoil business,however,itwasdifficulttoprovideareallystrongargumentthatwouldprovidean overallcohesiveumbrellathatpeoplecouldbuyinto.Itwasnotpossibleforseniormanagement toarguethattherewassomethingoverandabovethegoldenthread–whichsomewere questioning.Soatthispointwehadacombinationofsomelackofbeliefinternally,lackof beliefexternallyandapossiblytime-limitedopportunityasaresultofoilindustryconsolidation. Inaddition,oneofournon-executivesarguedconsistentlyatboardmeetingsthattherewas indeedatime-limitedopportunitytoreleasevaluetoshareholders.‘Ifyouleaveityouwill discoverthatit’spassedyoubyandtheopportunityforreleasingvaluewilldisappear,and, worse,insomescenariosyouwillfind,asanindependentplayerwhohasnotplayedapart

inconsolidation,youareincreasinglysqueezedbythebigplayers.’Asanexecutiveteamwe cametoaviewthatwehadtoexplorewhatopportunitiestherewereforustoplayapartin theprocessofconsolidation.

Jointventurediscussions

Theearliestconversationswehadwithamajorplayerintheoilindustrywereinlate’97and thesummerof’98.Theargumentwasthatatatimeofconsolidationyouneedtobeaware howthebigplayersmayoperateinthelubricantsmarket.Theyhavesubstantialeconomiesof scale.Iftheyshouldchoosetousetheadvantagesofthoseeconomiesofscaletobuymarket

sharethroughcuttingmarginsinthedevelopedmarkets,thatcouldseriouslyaffectourbusiness. Theycanmakesuchcutsandstillmakegoodreturnsbecausetheyenjoyeconomiesofscalethat wedon’thave.Ifwecouldestablishajointventure,wewouldhavethepossibilityofreleasing valuebylockingourbrandalongsideanothermajorbrand,andreapingthebenefitsofscale.

Atthesametimeitcouldheadofftheperceivedthreattoourbusinessfromtheprocessofoil industryconsolidation.

Wewentintothesediscussionsonthebasisthatwhatwehadtoofferwasthepremier independentpremiumlubricantsbrandintheconsumermarketandastronglyembedded marketingculture.Ourworkingassumptionwasthatwecouldachievevalueandlong-term growthsecurity,byallyingourselvesinsomewaywithamajoroilcompany.

Discussionaboutpossiblestructures,however,raisedissuesabouthowBurmahCastrol couldstructureajointventureforitsCastrolbusinesswithanothermajorinternationaloil companyinawaythatwouldunequivocallyputvalueintoourshareholders’hands.Inajoint venturewithamajoroilcompanywheretheywouldown50percentofCastrolandour shareholderswouldown50percentofCastrol,whatwouldthatthenmakeofBurmah

Castrol as a whole? An independent investor in Burmah Castrol would have a 100 per cent investment in a £800m turnover series of speciality chemicals businesses and a 50 per cent shareinamajorgloballubricantsbusiness,theotherhalfofwhichwouldbeownedbya

majoroilcompany.Ouradviserscounselledthatthiswouldnotbeacceptabletothemarket. Anybidpremiuminoursharepricewouldgo,andwewouldbetiedintermsofflexibility forwhatwecoulddowithCastrol.Thisledtotheinevitableconclusionthatreleaseof

valuetoshareholdersthroughallyingCastrolwithanotherlubricantsbusinesseffectively meantselling.

Otherstrategicoptions

Whatwasthealternativetosuchasale,bearinginmindthevaluewhichitcouldpotentially release?Thealternativewhichmanagementdeveloped,inconsiderabledetail,involvedbreaking theGroupup.Thisacknowledgedmarketscepticismaboutthecoherenceoftheportfolio. Althoughtheneedforradicalrestructuringwasaccepted,anissuewhichmanagementdidnot fullyresolveatthispointintheprocessconcernedhowtheslicingshouldbecarriedout.There weretwoviews.

OneoptionwouldbetosellChemicals,significantlyrundowntheBurmahCastrolhead officetothosefunctionsneededtosupporttheCastrolbusiness,andbeevenmoreradicalthan wewerebeingintermsofthewaytheCastrolbusinesswasrunbytakingoutsubstantialcost. Thiswouldhaveinvolvedmajorrationalisationofthewholesupplychain;ofthebackoffice infrastructurethroughouttheworld;ofthewaytheportfolioofbrandswasrun.Inotherwords, turningthebusinessintoonefocusedonsalesandmarketingorganisationwithmostother activitybeingoutsourced.

Thealternativewasavariantonthetheme.ItwastosellpartsoftheChemicalsbusinesses buttokeepthosethatwereautomotivebased.Underthismodelwemighthaveretainedour foundrychemicalsbusiness,theChem-Trendreleasantsbusiness,theinvestmentcasting businessandsoldconstructionchemicals,mining,printinginks,cables,wax–allofthethings thatdidn’tobviouslyfitintoan‘automotiveproductsandservices’model.Thatwouldhaveleft uswithabusinessoftwoparts:apassengercarengineoilbusinessandanindustrial-facing business–andwiththeresidualpossibilityofinduecoursebreakingitintotwo.Somework

wasdoneontheviabilityofthisoption.

THEDECISIONTOSELL

On 11 August 1998, BP announced its merger with Amoco and in so doing initiated a wave of con- solidation amongst the major oils. This was followed on 1 December 1998 by Exxon’s announcement of a merger with Mobil, which put into play the lubricants business within the BP-Mobil joint venture inEurope.

During its early conversations with Amoco, BP had come to the realisation that there remained a strategic gap in its downstream portfolio. The small lubricants business that it would potentially inherit from Amoco in combination with BP’s existing lubricants business simply would not have the critical mass to compete effectively on the world stage. After the Amoco merger, BP either had to consider maintaining a niche tactical presence or perhaps even a total withdrawal from the lubricants business, or seek other opportunities to grow the business into a material globally branded business. The think- ingwithinBPhadidentifiedBurmahCastrolamongstothersaspossibleopportunitiestohelpachieve thisobjective.

As this thinking crystallised in mid-1999, the decision was taken within BP to take a significant strategicstepinthelubricantssectorfirstbyextractingataminimumitsshareofthelubricantsbusi- ness from the Mobil joint venture in Europe, and secondly by pursuing exploratory discussions with Burmah Castrol. BP management saw Burmah Castrol as a vehicle for growth, delivering a global brand,world-classmarketingtalentandsignificantsynergysavingsaswellas,importantly,growth throughbrandextension,cross-selling,andaccesstoadditionalemergingmarkets.Itsawnoadvantage

in retaining the ancillary Chemicals portfolio within Burmah and resolved, if an arrangement were reachedtoacquireBurmah,todivestthemassoonaspracticallypossible.

InBurmahCastroltootheimplicationsofthelikelyconsolidationintheindustrywerebeing considered.TimStevensonexplained:

Itwasclearthataknock-oneffectwouldbeamajorchangeinthestatusoftheEuropean-wide pre-existingjointventurebetweenBPandMobil.Itseemedtous,aspartofourapproachto examiningoptionsforcombiningourlubricantsbusinesswiththatofoneofthemajors,thatthis openedanopportunity.WeapproachedBPwiththisproposition,andtheyrespondedfavourably. Ateamwasputtogethertoexaminethepossibilities.

WithinBurmahCastroltherewas,quiterightly,considerableexecutivedebateaboutthe appropriatenessofsellingthebusiness.Theargumentthatsomethinghadtobedonetorelease valuetoourshareholderslockedupinourbusinessbutnotreflectedinoursharepricewas clearlypowerful.Yettherewerealsoconsiderationsofcorporatetradition:thefactthatBurmah hadexistedforover100years;thefactthatwewerebeginningtodevelopanaggressive alternativetooutrightsaletoathirdparty.

Allacknowledgedthattherewasapointatwhichwewouldhavetosell.Itcamedownto adiscussionconcerningthenetpresentvalueofwhatmanagement’salternative‘goitalone’ optionwoulddeliveragainstthepriceBPwouldbepreparedtopay.IntheeventBP’soffer of£16.75persharehadtobesetagainstthatvaluethatmanagement’s‘planB’coulddeliver overtime.

AttheboardmeetingthatdecidedtorecommendtheBPbidtheboardacceptedthatthe companywasatacrossroads;somethingsignificanthadtohappen.IftheBPbidwerenotto berecommendedthentherewouldneedtobearadicalchangetotheshapeofthecorporation,

involvingtheabandonmentofthe‘goldenthread’argumentThealternativeoptiononthetable

atthemeetinginvolvedtheplanoutlinedearlier:radicalreshapingoftheportfolio,togetherwith substantialcost-savingmeasuresandsomeaggressivenewbusinessinitiatives.Wehadmodelled thisintermsofitsimpactonthesharepriceoverthemediumterm,assumingsuccessful implementation.Theboard’sdebateconcernedmanagement’sabilitytocarrythrougharadical newagenda;howquicklysuccesswouldbereflectedintheshareprice;andhowthiswould

stackupagainstBP’s£16.75offer.

Theresponsefromthefinancialinstitutionsandthepresstotheboard’sdecisiontoaccept

£16.75wasthatitwastherightthingtodo.Internally,responsewasinevitablymixed.The initialresponseinCastrolwasbroadlyenthusiastic.‘It’stherightthingtodo;takingafive-year viewasanindependentcompanywe’regoingtocomeunderincreasingpressure.Puttingthe CastrolbusinesstogetherwiththeBPbusinessgivesusamuchgreaterfootprintglobally aroundtheworld,particularlyinEuropebutalsointheFarEast.BParetougher,harder managersthanBurmahCastrol;veryrigorousintermsofcosts.Castrolneedsthat.They’ll

bringtheirrigourtosortingouttheexpensebase’.IntheChemicalsbusinessestherewas inevitablysomesenseofbetrayal;certainlydisappointmentandanxietyaboutwhothenew ownersweregoingtobe.ButtheChemicalsexecutivescontinuedtomanagethebusinesses veryprofessionally.Resultsforthefirstsixmonthsof2000wereexcellent.Perhapshardest hitwerethosepeopleinBurmahCastrolheadoffice:theendingofthePLCmeanttheendof requirementformanyheadofficefunctions.Theywereperhapsthepeoplewhomostfeltwe shouldhavestayedindependentandgoourownway;althoughofcoursetherealitywasthat

hadwenotsoldtoBP,ourownrestructuringplanwouldlikelyhaveputmanyjobsinjeopardy inanyevent.

In July 2000 Burmah Castrol formally became part of BP Amoco. Most of the corporate board of BurmahCastrolleft,includingTimStevenson,andBPstartedtheprocessoffinding buyersforthe Chemicalsbusinesses.

STRATEGYAT THELEADING EDGE

NEWRESEARCH & CONFERENCEREPORTS

Strategy Past; Strategy Futures

PeterMcKiernan

AsSTRATEGYSCRAMBLESFROMadolescencetoadult­ hood itis beginningto ask questionsaboutits new identity.Like manyyoungadults,itis concerned aboutits roots and about whereit is heading.The choiceofafuturedirectionisinfluenced bythose originsandtheviewpointtheyhaveformed.This canbecolouredbyhistory,discipline,cultureor,simply, theprevailing'dominantparadigm'.Thelatter,when transferred intoan organizational 'recipe',* can inducestrongcases ofcognitivecalcification,solim­itinginterpretationand creativity.This isastrue for academics as it is for practitioners. In a recentsurvey,tstrategyscholarswere asked for their per­ ceptionofseminal contributionstothe development ofthought inthearea.Anumber ofpatternswere discerniblein theiranswers.First, consensuson a

Editedby

MartinWhitehill

*AftertheworkofGrinyer,P.H.andSpender,J.C.,seereferences. tConductedbytheauthorinpreparation forthe'HistoricalEvol­ utionofStrategicManagement;VolumesIand II',Dartmouth,1996.

Strategyisayouthful disciplinewithmuchof itsresearchmaterial derived fromstudies inthelast30 years. Itsroots,however, goback

muchfurther. Modernstudiescanbepartitioned

intofourschools--PlanningandPractice, Learning, PositioningandResourceBased ,each withlongscholasticandpracticaltraditions.

Theschoolsarenotmutuallyexclusivenordo

theycoverallthecontributionstothefield.But theyareauseful wayofidentifyingthepathways tothepresentso thataclearerviewcanbe formedofpotentialstrategyfutures. This articlepaintsfoursuchfutures; somebaseduponan extension of thepastandother, alternative, trajectories.Theaimofthepaper is tostimulate

thinkingto the progress of theyouthfrom adolescence to adulthood. © 1997 Elsevier

Science Ltd

commonpathwaywaslimitedduetothemany disci­ plinaryavenues downwhichthe developmentof strategyhas had to travel.So theirselectionswere many and varied.Second,there wasadistinctdif­ ferencein the choicesbyscholarsfrom the strategy

StrategyattheLeading Edgefeaturesshortreportson.conferences, newresearchand

experimentsby academics, organizationsand consultancies for all those involved in strategy

andstrategicmanagement.Contributions(two

hardcopiesandadisk.Shouldbe sent toMartin

Whitehill,CityUniversityBusinessSchool,

FrobisherCrescent, BarbicanCentre, London

EC2Y8HB[Email:m;whitehill@city.ac.uk].

Pergamon

PII:S0024-6301(97)00080-0

LongRangePlanning,Vol.30, No.5,pp.790to798,1997

©1997PublishedbyElsevier ScienceLtd.Allrights reserved

PrintedinGreatBritain

0024-6301/97$17.00+0.00

content, and by those from the strategy process, schools.Thedanger hereinisthedevelopmentofan

thewritingsofthegreatFrench andGerman military strategists, Foch and van Clausewitz, in the 191

intellectualschism thatcould impedetheintegrative evolutionofthefield.Third,allquotedcontributions came from thelast 30years, with over80% ofthem in the last decade.This probablyreflects the reality

ofanemergentsubject; with fewspecialistjournals, andschoolsdominatedbyahandfulofauthorseach decadesince the1960s.

Ifwearetosearch forastrategy future, itisalways helpfulto have exploredthe past. Cummings1sug­ gests thatmost recent convertstocorporatestrategy

havelittle knowledgeofwhere the pathwaystothe present began.Twogeneric sourceshavemomentum. One isthe biologicalroute that recognizesthe per­ ennialpresence ofnaturalcompetition,acknowl­ edges the partial roleofDarwinianselection,builds toencapsulateGause's principleofcompetitive exclusionand adds the central gifts ofimagination and logictodifferentiatethestrategistfromtherest. Henderson2 argues thatDarwin is probably abetter guide tobusinesscompetitionthan economistsare.

The othersource isamore traditionalheritage by way ofmilitaryanalogy. Inthe East, China'soldest militaryclassic,'The Art ofWar' (c500 BC),with

itsclaimthatthehighest formofleadership isto overcometheenemy bystrategy,providedasuccinct expositionofplanning,organization,tactics and the seizureofopportunities.IntheWest, theparallelis with theancientAthenianposition of'strategos', coined duringthedemocraticreforms ofKleisthenes(508 BC)in referenceto the militaryand political sub-units thatformed theAthenianwarcouncil. Certainly,contemporaryterminology instrategic managementhasamilitaryflavour.Further,itcanbe argued thatincertain areasofthesubject e.g.pro­ curement,empowerment,intelligence, control and communications,the militaryare decadesahead of theacademics.Hence,thispathwaycannot bedenied easily.

Fourth,the picturepaintedhad adistinct North

American hue, even among a samplewith a pre­

dominanceofEuropeanauthors.Clearly, importantinputstothesubject'sdevelopmenthaveenjoyed that heritage.Butitwouldbeerroneoustoaccept,unques­ tioningly,thatanysinglegeographicsource hasmon­opolizedthedevelopmentofthesubject.Forinstance, the twomajor historicstrandsoutlinedabove have differentcultural origins. Moreover, muchof the Greek inspired military pathway can be traced throughmediaeval Europe where itispivotal in Machiavelli's'Prince'.Drawingoncasematerialfrom the'strategoi',hewarnedthat;

'forintellectualtraining,the Prince must read history,studying the actionsofeminentmen tosee how they conductedthem­ selvesduringwarand todiscoverthe reasonsfortheirvictories ortheirdefeats,sohecanavoidthelatterand imitatetheformer'.

From here, similarprinciplescan beidentifiedin

century.

Wewitnessthat thehistoryofstrategy is global and notentirelyAmerican;ancientand notmodern. However, wecan dividethe moderncontributions

intofourschoolsofthought;Planningand Practice, Learning, PositioningandResource-Based.Theseare notmutuallyexclusive.There hasbeen active inter­ play betweenthem. Agood wayto visualizethem isasstrandswoven together toform astrong rope. Authorse.g.Andrews,Rumelt, whoappear in one havealsobeeninfluentialinothers. Noraretheycom­ plete; otherresearchstreamse.g.gametheory, have nudged thefieldalong.Yeteachcapturesapartofa broad andrich strategy heritage.From aknowledge ofeach, wecanattempttoidentifypatternsofevol­ utionthatmayguide ustosomestrategy futures.

ThePlanningandPracticeSchool

The IndustrialRevolutionproducedseveral British pioneers inthedevelopmentofmodernmanagement thought(e.g.Steuart,Smith,Watt,Owen,Arkwright). The principlesofauthority,specialization,control, standard operatingprocedures, personnel policies, costaccounting,scientificmanagementandplanning were laid down largely as mechanistic procedures (thoughsuchconceptswerewellknowntotheSumer­ ians, Egyptians,Hebrews and Chineseinaprevious era).LaterAmericancontributions(e.g.Towne, Met­calfe,Halsey,Taylor, theGilbreths)consolidatedthis scienceofmanagementinexplaininginternalorgan­ izationalactivities. By theearly part of the 201 century,thismechanisticapproachhadembracedthe integrationoftheseactivities.But,asSpender3points out:

'priortothe1930s,there seemedtobelittledifferencebetween theoriesoforganizations,theirmanagementandtheirstrategies'.

Aswith themilitaryanalogy, strategy wasessen­tiallyaboutlargeandlongtermdecisions;aviewthat still pervades theliterature.Barnard4providedthe necessary insights.First, heseparatedorganization theory fromboth managementand strategy, leaving the latter as a 'function of executiveleadership'. Second,heshiftedthedebate awayfromitsfocuson efficiency toafocus on effectiveness.This necessi­tatedacouplingofthe organizationtoits environ­ ment.Suchenvironmental 'fit'formedthebedrock ofmodernanalyticalapproachestostrategyformulation and,inconjunction withtheefficiencyapproaches, openedthewayfortheintroduction oftheSWOT techniquetothestrategists'armoury.

Inthe modernera, Barnard'scontributionis reflectedintheseminalHarvard casebookofLearned, Christensen, Andrews and Guth5• Andrews, who

LongRangePlanningVol.30

October1997

wrotethetext,split strategy into formulation and implementationand, aftertheinfluence ofChandler, highlightedfourcomponents:

1.what thefirmmightdo(market opportunity);

2. whatthefirmcould do(corporatecompetence);

3. what thefirmwants todo(ambition);

4. whatthefirmshoulddo(socialresponsibility).

Sostrategy decisionsdealt with the'fit'betweenthe external(1&4)andtheinternal(2&3)environments. This contributionalso borrowedthe notion of'dis­

tinctive competence'fromSelznick6,soemphasizing

competitiveadvantage fromthefertilizationofthe resourcebase (seelater). Porter7 recognisesthis cre­

ationofcompetitiveadvantage, fromaclever uti­ lizationofaheterogeneousresourceset,tobeasalient stepintheevolutionofthesubject. Spender8tracesit totheevolutionarysystemsmodels utilizedbyHend­ ersonand Follett. Whateveritsorigin, theresource­ based view developed,subsequently,into aseparate field of endeavour in the subject'sevolution (see later).

Thesequentialnature ofactivitiesandtheinherent logicofthe Harvard schemasuggestedthat strategy

formationcould be'designed'9fromfirst principles

inasimple, yetinformal,way.Inaparalleldevel­ opment,Ansoff0 providedamoresystematicmodel ofthestrategicdecisions,characterizedbydetail and

definitioninits'planning'process. Theplannerwas moresignificantthanthechiefexecutive;strategyout­ putwasgeneric ratherthan uniquelydefined andthe terminologyofcorporate,rather than business,strat­ egywasgermane.

Bothapproachesstressedenvironmentalappraisal,

marketpositioning andresourcecapabilityinana­lysing thewhole organization.Theseingredientsfor­ med thebasis ofmany ofthe 'planning'texts ofthe

1960s and 1970s.11 13 Such models suggested that

well-developedplanningsystemswereindispensable

toexecutivemanagementaswellasanecessary,but not sufficient,condition for performanceenhance­ ment. They weremechanical,prescriptiveandabout corporate,rather than strategic,planning.However, thechiefstrategy architects(Chandler,Andrews and Ansoff)hadestablishedthemodernconceptofstrat­ egyand, asSchendeP4 acknowledges:

'Thereislittlewrittentodaythat cannotbetracedback totheir work'.

Thiswasquicklyspread anddevelopedbythecon­ sultancyprofessionalsand organizationalplanning teams who providednew techniqueswith which to facilitate its practical implementation (e.g. BCG, PIMS,Shell'sscenarios).

TheLearningSchool

The theoreticaleasewith which objectivescould be set, markets appraisedand resourcesdeployedina

logicalengineeringmannerhadastrongattractionto executivesand academics. Hence, theplanning approachbecame deeply embeddedin the strategic psyche. Bythe1990s, itwasstillthedominantmodel in many strategic management texts and course designs intheAnglo-Americanworld. However, observationsofboththeprocess andeffectivenessof strategyinpracticeclashedwiththisrational-analytic view. Inreality, some'planned' strategiesfailed to realize their intendedoutputsand other, successful, anizationalstudies scholarsbegantochallengethe planners'notions of intentionalchoiceandoutcome.Theyspokeofboun­ dedrationalityandtheroleofpower,internalpolitics andchanceinstrategy decisionmaking. They emphasizedorganizational adaptability,since the rationalplanningprocesswasconstrained byboth externalandinternalvariableswhose behaviourwas unpredictable orsimplyunknown.

The'learning'schoolwaseclecticinmembership.It

sympathizedwiththenaturalselectionmodel, which

assumedthat theenvironmentwassounpredictable andcomplexthatsynopticmodelsdidnotpresentany protectionfromtheconstantbuffeting organizations hadtoface.Eachwasforcedtoadapt tosurvive.Lind­ blom15had already noted that companiesshould adapt to, or 'muddlethrough',this complexity.So

Wildavsky16suggested that, inattemptingtoinclude

thetotality oforganizationalactivity,planninghad

dissipatedinto nothing. The unfortunate plannercould no longer discern its shape; it was beyond control,'locatedeverywhereingeneral andnowhere inparticular'.

Empiricalinvestigations17showedthat companies

progressusingaformof 'logical incrementalism', navigatingthefuture byevolutionaryadjustmentsto thecorebusinessandcontrolledventuringelsewhere. Rather than'muddling',such incrementalismispur­

posefuland proactive,integratingtheanalyticaland behaviouralaspects ofstrategyformation.Planningis notrejected butseenasoneofmanyenablersofstra­

tegicchange.Johnson18takesissuewiththenotion of

'logical'withintheincrementalistapproach,arguing that itsuggests adegree ofrationalitywhich iscon­ strainedinorganizationsbypoliticsand paradigms. Theresultant strategy isfrequentlytheresult ofa symbolic,programmaticandcognitivecocktailwhich canoftenappear illogical.

As anexecutive process, strategy formation is cloaked inorganizationalpolitics;ofindividualsand

groupswithconflictingdemands,oflegitimacy,sym­ bolism, rituals,beliefs, myths and heritage that can expandintoanetwork beyond theboundsofasingle company, through interlocking directorships. Cre­

ditably,strategyscholars19-21havetriedtomakesense

ofthis complexitybysearchingforexplanationsand

patterns.Sostrategy canbeanidentifiablepatternin aseries ofdecisions;acombinationofthedeliberate

Strategy Past;StrategyFutures

(planning)andtheemergene2depending onthe organizations'cultureand context.Inaparallel,but unrelated,development,adetailed analysisof the latterwasbeingundertakenbyindustrialeconomists. Theresearchpropelledmarket structuretothefore­ frontofconceptual activityandpavedthewayforthe positioningschool.

The Positioning School

Arguably, thegreatest impact onthemodernstrategic managementfield from the areaofindustrialorgan­

izationeconomics(10)camefromPorter.23'24Theori­

ginsofhisworkfollow arich veinofUSempiricism asresearchersstruggledwiththeapplicabilityofmic­roeconomictheory initspure form.Initially,Cham­ berlin25,aHarvard doctoralstudent,articulatedthe

theoryofmonopolisticcompetition.Herejected therestrictiveassumptionsofprevailingeconomicthe­ oryas'remoteandunreal'. Hesuggestedthatthe determinationofmost priceswas the result ofboth monopolisticand competitiveforces rather than to beexplainedbyoneortheother, aswas previously assumed.The linkingmechanismwastobeafirms' ability toattractcustomers throughproductdif­ ferentiation,thus earningquasi monopolyrents in

aquasi competitivearena. Mason26developedthis

themebyanalysingfirmpoliciesandconcludedthat thisrequired aconsiderationofhowfirmsreactto market situationsand oftheconstituentelementsof market structure,of which product differentiation wasonly one.Itwasdifferencesinmarket structurethat governedany differencesin their policy decisions,e.g.onprice. There followedasystematic

investigationofkey US industries(aluminum, tobacco, lead, petroleum)byHarvard economistsin

whichBain27challengedtraditionalprice theory by

introducingthethreatof potentialentrantstoasector. He definedand classifiedentry barriersand intro­

ducedmuch ofthelanguagenowfamiliar tomodern strategists. By establishing astrong positivecor­ relationbetween industryconcentrationand pro­ fitability,thenotionthatmarketStructuredetermined firmConductand soPerformance(theS-C-Pmodel)

thechallengestoconventional10thinkingcamefrom oneofCaves'sdoctoralstudents,Michael Porter.

Porter23sawtherootofcompetitivestrategyaslink­

ingthefirmtoitsenvironment.Industrystructure,to beanalysedbythefamousfiveforces,determinedthe

extentofcompetitionand sothe profit potential. A firmpositioneditselfwithinthesectorwhereitcould best defendagainst or influence these forces, e.g. behindstrongentry barriers.Thiswasan'outsidein' approach;thoughPorterpaidhomagetoacapabilities analysis withinthefirm.Hisapproachstrongly reflected itsAmerican SCPheritage yetitstillrep­ resentedadramaticshiftinthinking.TheSCPschool had madeenvironmentthe keydeterminantofper­ formance.AsSchendelemphasized:

'bymakingmanagerialchoicein an explicitlyenvironmental contextthe focal pointofanalysis,Portersucceededinturning

10Economicsonitshead'.

The Resource Based View of the

Firm

The positioningapproachprovidedprescriptions to executivesinterms ofthefiveforceanalysisandthe generic strategies of low cost, differentiation and focus. Ittookastrong holdinboardrooms andbusi­ ness schools.Still, itinvokedsteady criticism from theacademicfraternity,notleast forthelackofany stable definitionofindustry ormarket fromwhichto perform theanalysisortherestrictivemutualexclu­ sivityof its generic strategies. Moreover, strategyresearchers throughout the 1980s confirmed firm specific factors as the major determinantsof per­ formancedifferences between firms in the same

sector.28Foranexplanation,attentionswitchedtothe

analysisofthefirms' resourcebaseinthehope of identifying the unique blend and balance which would deliveracompetitiveadvantage. Commonly referred to as the'inside-out' view, this school

emphasizedtheaccumulationof scarceresources throughskill acquisitionand learning,thus placing thefirmatcentre stage.

The resourcebased view has along history.The

rich vein can betraced from Marshali,Z9 31

wasindeliblywrittenintothe10folklore.

This Mason-Bainparadigmwasrefined and tested

Coase32andAndrews33toPenrose34:

- through

overthe nexttwo decades.Harvard economists(e.g. Caves,Hunt)begantofocusonthechangingenviron­ mental contexts asfirmsshiftedfromunsuccessful diversificationsinthe1960s and1970s toleveraged buy-outsanddivestmentsinthelater1970sandearly

1980s. They incorporatedfirm behavioursand mobilityinto their analyses,breaking with con­ ventionaloligopolisticthinkingbydropping the assumptionoffirmhomogeneity.Thisledtotheintro­ ductionofstrategicgroupswithinsectors andtothe analysisof strategicdecisionmaking patterns.Oneof

'Itis theheterogeneity, not the homogeneity, of productive

resourcesavailable....that gives thefirmitsuniquecharacter'.

Conventionaleconomics focused onatraditional resourcebase ofland, labour and capital,which all behavedwellaccording totheassumptionofdim­ inishingreturnstoscale and so could bemodelled easily.Penroses'sbundleofresources includedman­ agement'sincreasingexperienceand knowledgeof theexternalworld which could not.Itwastheinter­ action ofresourceswith eachother and with this humanexperiencethat providedfirms with unique

LongRangePlanningVol.30 October1997

advantages.Transferringand monitoring resources betweenfirmswasthusmadedifficult,denyingrivals the chanceof replicationand so securingsuperior returns.Suchcomplexityneededanew articulation

40

thatour studiesbroadentheirnotionofrationalityto includethe proceduraland intuitive forms.More­ over, careisrequiredinour normativeprescriptions whichrestonourtraditionaltechniquesand models.

andmodernscholarswere quickto oblige.35-

This

Inessence,weneed toknowwhere they work,where

academicdiscoursewas disseminatedtothe waiting executiveaudiencebyPrahaladandHamel41whosaw realsourcesofcompetitiveadvantageaslying in:

'Management'sability toconsolidatecorporate-widetech­ nologiesand productionskillsinto competenciesthat empower individualbusinessestoadaptquicklytochanging oppor­ tunities'.

Thisdevelopmentofcore competencieshad been witnessed in some of the world's leading organ­ izations(e.g. Honda, Canon, Sony, Yamaha, Komatsu).Hence,therewas someurgencyattached toitswidespreadadoptionamongWesternfirms.

Futures 1:Planning andLearningSchools

As environmentsbecomemore complex,the limi­

tationsofthe linear,stage-basedmodelofstrategic managementanditsassociatedrational-analytic tech­ niques,developedwithinthe Planningand Practice school,become pronounced.Thereisashift fromtraditionalforecastingofthe futurebyextrapolation of the past to the painting of alternative futures throughscenariocreation. The aimistoimprovethe

'fit'betweenthe organizationand its environment.

Thisprocessreliesonavarietyofinternalcorporate perceptionsofthe futureand,throughconversation ratherthanquantification,exploresthe role oflan­guagein organizationallearning.Languageand cul­tureare inextricablyboundand,asmore attentionis now being givenbylanguagescholarstothe placeof languagein the nationstateand the individual,we expecttowitnessincreasedactivity atthe organ­ izationallevel in the hope of understanding the

'emotionalintelligence' deployed. For instance,

governmentinwardinvestmentprogrammes have broughtforeignnationalstogetherwithindigenous labourforces.Flexiblelanguagecan confrontinflex­ iblelanguage,interpretationscan becomefuzzy and disputessoarise.

Further,the currentconversationsin, and popu­

larityof,organizationallearningshouldenhancetwo otherfutures.First,modernstrategic management assumesanotionof'rationality'atthe individualor collectivelevel.Itis notalwaysclear exactlywhat notionofrationalityisemployed;thoughthereis a sensein whichthis is dominatedbyWesternphilo­sophicalbases and has an emphasison the instru­ mental. There aresome partsofourglobalarena(e.g. Africa,Asia) where'reasonmay be the slave ofthe passions'*ratherthanof'morallaw'.t Thisrequires

*David Hume. tlmmanuelKant.

theydonot, what adjustmentsarerequired,and what new modelsareneeded.

Perhapsa furtherconsequenceof the ubiquitous

presenceofwesternmanagement literatureisthe dangerofacceptingarestrictivesetof'values'inthe strategyprocessand,especially,incorporategovern­ ance.Thereislittlementionofethicsinrecentstrat­ egywriting42 and sothis field isripe forexploration and expansionbeyond the guidanceofAristotle, Benthamand Kant. Strategydecisions haveglobal and local characteristics.They dependon bothan ultimatevalue,whichmay bedeterminedby organ­ izationalexecutiveownership,and onwhatis'right' inthe context,whichisprobablydeterminedbyfea­ turesoftheindigenouslocalculture.Globalexposure, interlockingdirectorships,strategic alliancesand environmentalismprovideastrong incentivefora change ofemphasis and for new research programmes.

Second,in buildingscenarios,organizationsfilter

environmentalsignals and,in asharedway, cog­ nitivelyde-codeinformation.43 Cognitivemapping hasasolidresearchbase inacademeyet,becausefew scholarshave been fully conversantwiththe tech­ nicalaspectsofits methodology,it has not been as widespreadasitscontentdeserves.Hence,itsresults havenotbeen fullyarticulatedtoexecutiveaudiences in a readilyuseableformat.We shouldsee greater developmentsin this area withthe continuedadop­ tionofpsychoanalytictechniquesintheresearchpro­ cess. The exploration ofdecision-making and its

'boundedrationality',ofexecutivepolitics,ofman­

agementstyles,ofmanagerialelites,ofambitionsand aspirations shouldallbemuchimproved.Inparticu­ lar, thisfuturecouldbe considerably enhanced by closer liaisonwiththe knowledgebase and meth­ odologieswithinsocialanthropology(see Ref. 44), especiallywheregroupbehaviours,pathwaystodif­ ferentdecisions, selfreflexivityand cognitive pat­ ternsareconcerned.

Futures 2:Positioning,Resource-basedand

LearningSchools

Despitethe partialdemiseofthe 'positioning' view andtherelativedominanceoftheresourcebasedview

inthe early1990s,each schoolhas dealtwiththe same thing,i.petitiveadvantage.Theemphasis in eachhas merelybeen different,thougheach has recognisedthe other'sterritory.For instance,Porter presentsathoroughcapabilitiesanalysisin the con­ text ofcompetitorreaction,23 acknowledgesdis­ tinctivecompetenciesas acornerstoneofstrategy45 and relatesactivitiesanalysisto strategicposition-

StrategyPast; StrategyFutures

ing.46 Ironically,healso developedone ofthe most usefultoolsforinternalresourceanalysisinthevalue chain.24 Aprogressive strategy futurewould see adherentsof the two schoolsseeking greater inte­ grationto lever their relativestrengths.First, theyneedacommonlanguage.

Thetraditional emphasisonaccountingtechniques to measureinternalassets has made it difficult to carry out afull resourceaudit.Such techniquesare essentiallyhistoricand soareincongruentwith the building offuture competencies andcapabilities. Moreover, thelatter includecontentthat istacit e.g. knowledge,which isnotmeasurable bysuch con­ ventionalmeans.Adifferentlanguageisrequiredthat can dealwith 'soft' rather than 'hard'resourcesand acomprehensive setofnewmeasuresneeds tobe developed.Thisrequiresamultidisciplinary effort.

Second,they needanewtheory ofthefirm.Atthe

heartoftheresource based viewistheconceptof imitability. Competitive advantageis built on a uniquebundleofassets thatisdifficult toimitate.Its sustainability dependsonthecontinuousdevel­ opmentofkeyresources.One iscultureand one is knowledge.Cultureshouldbetheone resourcethat isimpossibletocopy.Research intoculturebyorgan­ izationaltheorists(intheLearning school) isreason­ ablywelldeveloped.However,therehasnotyetbeen sufficientintellectualtrafficbetweenthetwoschools forcross-fertilitytooccur.Perhapsdisciplinary'silos' havepreventedtheory developmenthere.

Organizationallyembeddedknowledge,influenced bytheworkofPolanyi47 ontacitknowledgeand Nel­

sonand Winter48onorganizationalroutines,became thefocus ofmuch resource-basedresearch.But,our knowledgeoftheanatomyandcreationofthisknowl­ edgeisembryonicanditsexplorationhasbeenham­ peredbymeasurementproblems(seeabove).Though fresh researchin this area has broken new ground49 towardsaknowledge-basedtheory ofthefirm,much workstillremainstobedone toprogress thisstrategy future.

Any evolutionary strategyfuture would foster

closerintegrationofalltheschools.Linking theout­ side-in(Positioning) with theinside-out(Resource Based)isoneobvious route. Academicinitiatives50•51 havealreadybegunandmustbesustainedastheylag behindglobalbusinesspractice,which hasfollowed thispathforageneration.

Future 3:ChaosandComplexity

Theabovefuturesbuildontherelevanthistorictracks

andarepartofatraditionalevolution.They involvethedevelopment ofthesubject asacapstonedisci­ pline, borrowingpartialanalysesfromadjacentsocial andmainstreamsciences.Thisbroadeningshouldbe

accompaniedbyadeepeningofalready established knowledge.Analternativefuture wouldbreak with this linear traditionand embracearadical route for

strategicmanagement.Ifweaccept thatorganisations arefamiliesofnon-linearfeed-back loops linkedto other families(organizations)bysimilarloops, they shouldbeabletooperatealongwayfromequilibrium, attheborder betweenstabilityand instability.They will operatein boundedinstability,at the edge of chaos. Thisstate isdifficult tomanage. Theneed forcontrol and integrationpulls them towardsstability and eventualossification. Theneed fordecent­ ralizationand innovationpulls them toward insta­ bilityand eventualdisintegration.The leftand the rightneedtoremaininbalance. AsStacey52 states:

'Thedynamicsofsuccessfulorganizationsarethereforethoseof irregularcyclesand discontinuoustrends,fallingwithinquali­ tativepatterns,fuzzy butrecognizablecategoriestakingtheform ofarchetypesand templates'.

For strategic management, this means that, althoughsomeshort termcontrolispossible through traditionaltechniques,longterm developmentmust eschewthetype oflinear,analyticreasoning that underpins many of these techniques. Waldrop53 warns ofthedanger of'locking in'tosub-optimal schema; generations ofstrategistscould unques­ tionablyoperate stage-based,linear models,becom­ inghooked onthese textbook paradigms. Without continuededucation,thelockinwillbe reinforcedfor yearstocome.Pascale54talkedoftheLawofRequisite Variety, demandingthatanyorganism must develop anability tomanage conflict and paradox internally ifitwantstostand anychanceofcopingwithexternal shocks withsimilarcharacteristics.Inthisfuture, wemayneedtothrow offthebaggageofapreviousecon­ omic-strategy generationand embraceself-organ­ ization,transformationand renewal.This futurewould linkstrongly tothenext.Itremainsonitsownasitrequiresachangeinthemindsetofmanymodern strategists.Changeornot,thenextfuture willhaveto befaced.

Futures 4:External PullandComplexity Strategistswill have toreact tothe phenomenonof change incontemporarysociety. Themarch towardsliberal democracy,thegrowth ofthenation stateand tribalism,the de-militarizationofthe international community,theemergenceoftradingblocsandmega­ markets (e.g. China and India), the fight against poverty, the fight for sustainabledevelopment,the drift from nationalto regional governmentand the proliferationofprivatizationand de-regulationpro­ vide anengaging complexityatthegeneral environ­ mental level. At theoperating level, the digital telecommunicationsrevolutionwill continuetolib­ erateindividuals from their corporate parents throughefficient personalcommunication systems bringing with itnew work patterns.Consequentde­ centralizationcould stimulateincreasedactivityin small cells linked together by networks, so trans-

LongRangePlanningVol.30 October1997

formingintra andinter companyrelationships.Stra­ tegistswillhavetograpplewithvirtualorganizations, outsourcing,increasedmobilityoflabour andaneed forcontinuouseducationandtrainingastherapidity oftechnologyand knowledge flowsquicklyerodes contemporaryskills and abilities. Thestructureof industries aswellascompanieswillchange dra­matically.

The challengeforstrategistswill betosearch for

patternsin this complexity;53 to start with uncer­

tainty; toembraceconversationandstories; tobetter

understandintuitionandtoprevent itfrompotential contaminationfromthe'engineering'toolbox.

Conclusion

Many toolsand techniquesare concernedwith the provisionofoperationalefficiency. They comeand go.Trainersand consultantsassure that the latest versionsaredispersedwidely toorganizations,who, inturn,appeartohavevoraciousappetitesforthem. Organizationsend updoing things inthesame way, especiallywhen financialobserversforceupon them similaroutputmeasures.Yet,thesesortsofefficiency gainsareameans toanend.Strategyisnotaboutthis inwardimitation.Thereisaparadox ofprogresshere.

Theworld presentsacomplexagenda where generic treatmentscanlead toinappropriatesolutions.Stra­ tegistsshouldensure thatorganizationsdothingsdif­ ferentlytoremain competitiveandresponsible.

Thesestrategyfuturesareacombinationoftheevol­

utionaryand the revolutionary.The formerpredict that we will do more ofthe same ourselves;inte­ gratingschoolsanddisciplines,accepting partial analyses fromfurther cognate areasandgenerally tweaking things at the margin. This maybe good enough ifwegettheodd breakthrough.Thelatter isacalltodropthebaggage,toacceptthatlinearitycan't copewithcomplexity,toadjourn ourdeepeningof generic strategies,tobecome analytically'softer',to experimentand toendanypretensionthat ourwork instrategy isnovel. That wouldbeanacceptanceof thelessons ofhistory oftheChinese,oftheEgyptians, of theGreeks.Ourstrategy ropehasacircularand repetitivepattern.Ifwe continueto do the same things with it,letushope it'sstrongenough.

Iamgratefulforthecommentsofmy colleaguesPeterGrinyer,Joe

LampelandJamesUrquartonpreviousdrafts ofthis paper.

PETERMcKIERNANisProfessor ofManagementatthe UniversityofSt.Andrews,ScotlandandVisitingPro­ fessorofStrategic Managementatthe Universityof Warwick, England.

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StrategyPast; StrategyFutures

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