STRATEGIC MANAGEMENT

DIPLOMA

Module 2

– Schools

of

Strategy

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List of Figures

2.1 Schools of Strategy

2.1.1 The ‘Planning’ School

2.1.2 The ‘Positional’ School

2.1.3 The ‘Resource Based’ School

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2.1 Schools of strategy

There are three ‘schools’ of strategy

Through the debate three ‘schools’ of strategy were born:

• The ‘planning’ school

• The ‘positioning’ school

• The ‘resource based’ school

2.1.1 The ‘planning’ school

Andrews, 1971, Ansoff, 1965

• Achieves a ‘fit’ between the organisational strategy and the environment in which it

operates.

• Requires detailed and inflexible planning not suitable in turbulent markets.

• Uses ‘Product Life Cycle’ and other marketing theories

• Based on past trends, forecasts and stable structures and environments e.g. mature

industries, public sector

• Uses a very bureaucratic and rational process

Existing product New product

Expansion i.e., Product

Present increase in development

market market or innovation

penetration

Market

New development Diversification

market (sometimes called

‘exploration’)

Fig 4.1 The Ansoff Matrix

Example: used in mature, stable markets and industries, public sector.

2.1.2 The ‘positional’ school

• Focuses on a rational, analytical approach of making strategy

• Attempts to place the organisation and its products in a favourable market or environment.

• Based on performance measurement and decision making tools.

• Emphasises competitive advantage

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Examples include:

Porter’s (1980) work: ‘Five forces’ model of industries Internal ‘value chain’ ‘Generic’ strategies

Boston Consulting Group Matrix – BCG – of four cells – cash cows, stars dogs and problem

children, based on income from market share and on potential market growth

High

Cash Star

cow

Market share Problem

Dog child

Low

Low High

Market growth

Fig 4.2 The BCG Matrix

2.1.3 The ‘resource based’ school

Robert Grant 1998, Jay Barney 1991

• Looks to the internal environment instead of the market

• Incorporates the ‘core competence’ approach of Prahalad and Hamel, 1994

• Based on an ‘inside-out’ approach suggesting that the competitive advantage of an

organisation is based on its own distinctive resources, capabilities and competences.

However

• Danger of ignoring the external environment.

• Grant and others do not consider culture and HRM.

Key points:

These schools are not important in individual analysis but in theoretical essays

and assignments