Business strategy is the direction and scope of a business organization over a long period of time. Business strategy focuses mainly on the direction of the organization, market scope, competitive advantage, resources, environment and the stakeholders (De Kluyveer, 2008). It is about where the business wants to get in the long term detection, which markets should the business organization compete in and what kind of activities involved in such markets scope, how can the business compete better than the competition in those markets, external environmental factors affecting the business environment, the values and the expectations for those with power within and without the organization stakeholders. The strategies are decisions that are made in order to achieve advantage for the organization through configuration of the resources of the organization within a challenging economic environment (Gerry, Whittington, 2005). This is meant to meet the needs of the market and to fulfill the stakeholders expectations. The decisions made by an organization can only be termed as strategic if they involve consciously doing something differently from the competitors and if the difference results in a sustainable economic advantage (Hughes, 2005).
The strategic decisions also involve the activities which will result in the increase in productivity of the organization by making the existing methods more efficient. This will enable the organization to develop a sustainable superior performance for the stakeholders (De Kluyveer, 2008). The business strategies of a particular organization should be hard to imitate and unique. Therefore, the operational efficiency of any organization is not strategic since they can be copied by other business organizations. The one factor that renders the business strategies hard to imitate is the fact that they will always result in a complex interaction between diverse activities, which are not reducible to the sum of the individual activities. Hence, it is this synergy between the activities that produces value of the organization but not the activities themselves (De Kluyveer, 2008).
Business strategy is therefore a statement of some selected business plans defining the organizations vision, the strategy and tactics that will enable the organization to meet the objectives, the resources needed, how they are going to be acquired and how they are going to be used effectively as well as efficiency for the betterment of the organization. Economists have argued that business strategy is the foundation of successful business. The business strategy must steer the course between the internal pressures of the business continuity and the demands and challenges of a rapidly changing world of business (Black, 2007).
Theories of business strategies and their differences
There are four theories that have been put forward by Whittington in order to explain the basic assumptions about some key relationships in business realms with regards to strategies of business. These theories seek to enlighten the business organizations on what to look for, steps to be taken and what to expect as the results of the actions and decisions made within the organization for the organization (Whittington, 2001). However, these theories are neither explicit nor formal but actual assumptions that have been studied for a period of time and have been found to be very relevant in every business organization. All these theories tend to have private assumptions about how business decisions work and how to get these things done in a relevant and systematic manner. It is therefore imperative that every business organization adopts the strategies in order to enable the business unit to survive and to maximize profits. There are four theories of strategy that have been adopted widely, these theories are the classical approach theory, evolutionary approach theory, processual and systematic approach on strategy. There are differences in all these theories. On the other hand, there are also similarities in some aspects.
The classical approach on strategy
This approach focuses more on the rational approach aspect (Cuizon, 2007). It involves planning as a significant part. This approach was prominent during the 1960s in the United States. In this approach, there is a top-down, rational and logical approach to the formulation of strategies (Whittington, 2001). With regards to this approach, implementation was the responsibility of the operational managers. According to Whittington, the highest goal of the business organization with regard to this approach is the rational planning as a means to attain the business profitability (Gerry, Whittington, 2005). Therefore, the strategic aim of the organization is to earn a return on capital. However, if in any case the return in capital is not satisfactory, the deficiency should be corrected or the entire activity of this strategy that was used abandoned for a more functional decision (Cuizon, 2007). This approach therefore requires that managers be ready and more flexible in adopting some profit maximizing strategies through rational long-term planning. This theory further assumes that the managers have near or total control over how to allocate both the internal and external resources of the business organization in order to meet the set objectives of the business organization.
Therefore, the managers can manipulate the internal organization by ensuring that the operational managers have the capacity to implement the functional decisions of the organization (Cuizon, 2007). As mentioned above, the strategic behavior is guided by the rationality, opportunism and self interest. This approach basically focuses on the rational profitability and relevance of the business organization. In this approach, the responsibility of control and consciousness rests upon the control of the managers. In most organizations in the world, this approach is explicitly applicable as the managers, especially the top managerial staff, have been allowed to make decisions that will influence the profitability of the entire organization. The organizations have confidence in the managerial staff and have allowed them to make major decisions that will influence the profitability of the organization with regards to planning and implementation of policies of the company (Whittington, 2001).
The evolutionary theory
The evolutionary approach focuses mainly on the market. It was developed during the market led 1980s which were all about survival in the market scenario (Whittington, 2001). It allowed the environment to determine the ultimate profitability and not the managers as in the case of classical approach. This approach assumes that market will determine the profit maximization of the entire business organization. On the other hand, it assumes that whatever methods the managers adopt, the best performance will survive. In this approach, unlike the classical approach, rational method is not the basis due to the fact that its evolution is natures cost benefit analysis (Cuizon, 2007). According to this approach, competition is not overcome by some detached calculations like the ones for the classical perspective but rather by constant struggle for survival in the business realms. The evolutionary theory focuses more on the biological principle of natural selection as its core theory (Gerry, Whittington, 2005).
Therefore, most apt strategies often lead to the best performance while allowing them to survive and progress further in the process of strategic planning and thinking. This theory adjusts the business by letting the market to do the thinking instead of the managers (Whittington, 2001). Therefore, the markets will choose the prevailing strategies within a particular environment. Thus, the survival in the market will appear and favor those business organizations that have adopted themselves in the environment.
This approach assumes that market competition is the most effective way of removing inefficiency in the organization. Unlike the classical approach, evolutionary approach to business strategy does not have confidence in the top management (Cuizon, 2007).
The business organizations maximize their chance of survival in the short term period by ensuring that they achieve a perfect fit against their current environment. Therefore, this approach differs greatly from the classical approach in the sense that the classical approach allows the managers to make decisions and enable the profitability of the organization while the evolutionary approach allows the market to make the decisions and survive in the market environment. On the other hand, while the classical approach favors the long term objectives of the business organizations, the evolutionary approach focuses on the short term period which is dictated by the market environment and survival (Whittington, 2001). Moreover, this approach lacks confidence in the top management. With this approach, the market has the core responsibility of determining the direction of the organization, while in the classical approach the market environment decides the direction of the organization. Competitive market advantage is more important in this approach than in classical one.
While the evolutionary approach does not involve much planning, the classical theory involves planning by the top management in order to attain the set objectives. Evolutionary approach is based on the market decision and the decisions might be made according to the trend of the market. Though this approach has been used by a number of organizations, it has not succeeded well as compared to the classical approach. Moreover, this theory does not require rational aspects of thinking and decision making unlike the classical approach where the rational thinking and decision making are the core aspects of the theory (Whittington, 2002).
The evolutionary approach on strategy does not rely on the top managements skills to plan and act rationally but rather depends on the market scenario to enable the organization achieve its objective. Moreover, the two approaches differ from each other greatly in the fact that classical approach is more costly because it involves planning, implementation and evaluation of the strategies and decisions used, while the evolutionary aspect leaves the entire decision making and thinking to the market (Gerry, Whittington, 2005).
Though the approaches to business strategy are four, they all differ along two dimensions. The difference arises because of the outcomes of the strategy used and the process by which it is made. The evolutionary approach also sides with processual approach in depicting strategy as emerging from the processes that are governed by chance, confusion and conservatism (Ketchen, 2008). This differs greatly from the classical approach with its assumptions that strategy can be deliberate. The evolution theory is evidently used in manufacturing industries where the market dictates the optimum position of the organization while the classical approach is evident in other business institutions and service providing business organizations where strategies are made by the managers in order to capture a diverse range customer base.
Similarities between the classical approach and evolutionary theory
There are limited similarities between the two theories however, the similarities seek to explain the ultimate objective of the two approaches which is to maximize the profits. Classical and evolutionary approaches both see profit maximization as a natural outcome of the strategy making. The systematic and processual approaches are more pluralistic and envisioning other possible outcomes as well as profit (Gerry, Whittington, 2005). Moreover, both evolutionary and classical approaches believe that those businesses that are powerless to change themselves quickly in order to ward off extinction will not survive the competitive process. Therefore, both classical approach and evolutionary one are inclined towards market advantage in order to maximize profits and to survive the economic challenges (Gerry, Whittington, 2005). Moreover, both theories to strategy depend largely on the social context and therefore both of them should be taken with sociological sensitivity. It is also imperative to note that even though all the four approaches of strategy are different, there are similarities that are evident in all. This is because all the four strategies are geared towards fulfilling the stake holders expectations.
Evolutionists and classicists, on the other hand, insist that the judgment of the market place vindicates the basic efficiency of diversification. With regards to movements of foreign markets and direct investments, both classical and evolutionary approaches countermove as an elaborate game that is designed to protect the business organizations power (Black, 2007). Both classical and evolutionary approaches to strategy are inclined to the long-term aspect of the product life cycle. The organizations life and success is based on how well these strategies have been structured (Whittington, 2002). Therefore, it is imperative for every organization to structure their strategies in an explicit manner for the purpose of meeting the organizations objectives and fulfilling the stake holders expectations.
Classical and evolutionary approaches to strategy are similar in the fact that both are inclined towards attaining a competitive advantage as a means of deliberately choosing a different set of activities in order to deliver a unique mix of value in the business organization. Both strategic approaches are inclined to having as strategic continuity which does not imply a static view of competition (Whittington, 2002). Therefore, all organizations must continually improve their operation effectiveness in order to shift the productivity frontier.
Business strategies are choosing to perform activities that are far much different than the ones performed by other rivals. All the four approaches to business strategy are diversely different. However, there are similarities that are evident in both the process and the outcome of the strategy used. Every business organization should have a clear strategic positioning that it should follow until it reaches such targets as profit margins, customer satisfaction and competitive market advantage (Cuizon, 2007). The four approaches to business strategy enable the organization to achieve these objectives. It is also imperative for every business organization to perform these strategies in a unique manner that will be difficult for other rivals to imitate or copy. Therefore, operational efficiency is not strategic though they are activities that improve the productivity of the business organization by making the existing methods more efficient, they can be easily copied by other business organization (Ketchen, 2008). The one factor that makes the business strategies hard to imitate is as a result of the complex interaction between different activities (Hughes, 2005). Therefore, any business organization that concentrates only on the operational efficiency will end up losing their competitive advantage and, on the other hand, might not meet the objectives of the organization.
The strategic decisions also involve the activities which will result in the increase in productivity of the organization by making the existing methods more efficient. This will enable the organization to develop a sustainable superior performance for the stakeholders (De Kluyveer, 2008). The business strategies of a particular organization should be hard to imitate and unique. Therefore, the operational efficiency of any organization is not strategic since they can be copied by other business organizations. The one factor that renders the business strategies hard to imitate is the fact that they will always result in a complex interaction between diverse activities, which are not reducible to the sum of the individual activities. Hence, it is this synergy between the activities that produces value of the organization but not the activities themselves (De Kluyveer, 2008).
Business strategy is therefore a statement of some selected business plans defining the organizations vision, the strategy and tactics that will enable the organization to meet the objectives, the resources needed, how they are going to be acquired and how they are going to be used effectively as well as efficiency for the betterment of the organization. Economists have argued that business strategy is the foundation of successful business. The business strategy must steer the course between the internal pressures of the business continuity and the demands and challenges of a rapidly changing world of business (Black, 2007).
Theories of business strategies and their differences
There are four theories that have been put forward by Whittington in order to explain the basic assumptions about some key relationships in business realms with regards to strategies of business. These theories seek to enlighten the business organizations on what to look for, steps to be taken and what to expect as the results of the actions and decisions made within the organization for the organization (Whittington, 2001). However, these theories are neither explicit nor formal but actual assumptions that have been studied for a period of time and have been found to be very relevant in every business organization. All these theories tend to have private assumptions about how business decisions work and how to get these things done in a relevant and systematic manner. It is therefore imperative that every business organization adopts the strategies in order to enable the business unit to survive and to maximize profits. There are four theories of strategy that have been adopted widely, these theories are the classical approach theory, evolutionary approach theory, processual and systematic approach on strategy. There are differences in all these theories. On the other hand, there are also similarities in some aspects.
The classical approach on strategy
This approach focuses more on the rational approach aspect (Cuizon, 2007). It involves planning as a significant part. This approach was prominent during the 1960s in the United States. In this approach, there is a top-down, rational and logical approach to the formulation of strategies (Whittington, 2001). With regards to this approach, implementation was the responsibility of the operational managers. According to Whittington, the highest goal of the business organization with regard to this approach is the rational planning as a means to attain the business profitability (Gerry, Whittington, 2005). Therefore, the strategic aim of the organization is to earn a return on capital. However, if in any case the return in capital is not satisfactory, the deficiency should be corrected or the entire activity of this strategy that was used abandoned for a more functional decision (Cuizon, 2007). This approach therefore requires that managers be ready and more flexible in adopting some profit maximizing strategies through rational long-term planning. This theory further assumes that the managers have near or total control over how to allocate both the internal and external resources of the business organization in order to meet the set objectives of the business organization.
Therefore, the managers can manipulate the internal organization by ensuring that the operational managers have the capacity to implement the functional decisions of the organization (Cuizon, 2007). As mentioned above, the strategic behavior is guided by the rationality, opportunism and self interest. This approach basically focuses on the rational profitability and relevance of the business organization. In this approach, the responsibility of control and consciousness rests upon the control of the managers. In most organizations in the world, this approach is explicitly applicable as the managers, especially the top managerial staff, have been allowed to make decisions that will influence the profitability of the entire organization. The organizations have confidence in the managerial staff and have allowed them to make major decisions that will influence the profitability of the organization with regards to planning and implementation of policies of the company (Whittington, 2001).
The evolutionary theory
The evolutionary approach focuses mainly on the market. It was developed during the market led 1980s which were all about survival in the market scenario (Whittington, 2001). It allowed the environment to determine the ultimate profitability and not the managers as in the case of classical approach. This approach assumes that market will determine the profit maximization of the entire business organization. On the other hand, it assumes that whatever methods the managers adopt, the best performance will survive. In this approach, unlike the classical approach, rational method is not the basis due to the fact that its evolution is natures cost benefit analysis (Cuizon, 2007). According to this approach, competition is not overcome by some detached calculations like the ones for the classical perspective but rather by constant struggle for survival in the business realms. The evolutionary theory focuses more on the biological principle of natural selection as its core theory (Gerry, Whittington, 2005).
Therefore, most apt strategies often lead to the best performance while allowing them to survive and progress further in the process of strategic planning and thinking. This theory adjusts the business by letting the market to do the thinking instead of the managers (Whittington, 2001). Therefore, the markets will choose the prevailing strategies within a particular environment. Thus, the survival in the market will appear and favor those business organizations that have adopted themselves in the environment.
This approach assumes that market competition is the most effective way of removing inefficiency in the organization. Unlike the classical approach, evolutionary approach to business strategy does not have confidence in the top management (Cuizon, 2007).
The business organizations maximize their chance of survival in the short term period by ensuring that they achieve a perfect fit against their current environment. Therefore, this approach differs greatly from the classical approach in the sense that the classical approach allows the managers to make decisions and enable the profitability of the organization while the evolutionary approach allows the market to make the decisions and survive in the market environment. On the other hand, while the classical approach favors the long term objectives of the business organizations, the evolutionary approach focuses on the short term period which is dictated by the market environment and survival (Whittington, 2001). Moreover, this approach lacks confidence in the top management. With this approach, the market has the core responsibility of determining the direction of the organization, while in the classical approach the market environment decides the direction of the organization. Competitive market advantage is more important in this approach than in classical one.
While the evolutionary approach does not involve much planning, the classical theory involves planning by the top management in order to attain the set objectives. Evolutionary approach is based on the market decision and the decisions might be made according to the trend of the market. Though this approach has been used by a number of organizations, it has not succeeded well as compared to the classical approach. Moreover, this theory does not require rational aspects of thinking and decision making unlike the classical approach where the rational thinking and decision making are the core aspects of the theory (Whittington, 2002).
The evolutionary approach on strategy does not rely on the top managements skills to plan and act rationally but rather depends on the market scenario to enable the organization achieve its objective. Moreover, the two approaches differ from each other greatly in the fact that classical approach is more costly because it involves planning, implementation and evaluation of the strategies and decisions used, while the evolutionary aspect leaves the entire decision making and thinking to the market (Gerry, Whittington, 2005).
Though the approaches to business strategy are four, they all differ along two dimensions. The difference arises because of the outcomes of the strategy used and the process by which it is made. The evolutionary approach also sides with processual approach in depicting strategy as emerging from the processes that are governed by chance, confusion and conservatism (Ketchen, 2008). This differs greatly from the classical approach with its assumptions that strategy can be deliberate. The evolution theory is evidently used in manufacturing industries where the market dictates the optimum position of the organization while the classical approach is evident in other business institutions and service providing business organizations where strategies are made by the managers in order to capture a diverse range customer base.
Similarities between the classical approach and evolutionary theory
There are limited similarities between the two theories however, the similarities seek to explain the ultimate objective of the two approaches which is to maximize the profits. Classical and evolutionary approaches both see profit maximization as a natural outcome of the strategy making. The systematic and processual approaches are more pluralistic and envisioning other possible outcomes as well as profit (Gerry, Whittington, 2005). Moreover, both evolutionary and classical approaches believe that those businesses that are powerless to change themselves quickly in order to ward off extinction will not survive the competitive process. Therefore, both classical approach and evolutionary one are inclined towards market advantage in order to maximize profits and to survive the economic challenges (Gerry, Whittington, 2005). Moreover, both theories to strategy depend largely on the social context and therefore both of them should be taken with sociological sensitivity. It is also imperative to note that even though all the four approaches of strategy are different, there are similarities that are evident in all. This is because all the four strategies are geared towards fulfilling the stake holders expectations.
Evolutionists and classicists, on the other hand, insist that the judgment of the market place vindicates the basic efficiency of diversification. With regards to movements of foreign markets and direct investments, both classical and evolutionary approaches countermove as an elaborate game that is designed to protect the business organizations power (Black, 2007). Both classical and evolutionary approaches to strategy are inclined to the long-term aspect of the product life cycle. The organizations life and success is based on how well these strategies have been structured (Whittington, 2002). Therefore, it is imperative for every organization to structure their strategies in an explicit manner for the purpose of meeting the organizations objectives and fulfilling the stake holders expectations.
Classical and evolutionary approaches to strategy are similar in the fact that both are inclined towards attaining a competitive advantage as a means of deliberately choosing a different set of activities in order to deliver a unique mix of value in the business organization. Both strategic approaches are inclined to having as strategic continuity which does not imply a static view of competition (Whittington, 2002). Therefore, all organizations must continually improve their operation effectiveness in order to shift the productivity frontier.
Business strategies are choosing to perform activities that are far much different than the ones performed by other rivals. All the four approaches to business strategy are diversely different. However, there are similarities that are evident in both the process and the outcome of the strategy used. Every business organization should have a clear strategic positioning that it should follow until it reaches such targets as profit margins, customer satisfaction and competitive market advantage (Cuizon, 2007). The four approaches to business strategy enable the organization to achieve these objectives. It is also imperative for every business organization to perform these strategies in a unique manner that will be difficult for other rivals to imitate or copy. Therefore, operational efficiency is not strategic though they are activities that improve the productivity of the business organization by making the existing methods more efficient, they can be easily copied by other business organization (Ketchen, 2008). The one factor that makes the business strategies hard to imitate is as a result of the complex interaction between different activities (Hughes, 2005). Therefore, any business organization that concentrates only on the operational efficiency will end up losing their competitive advantage and, on the other hand, might not meet the objectives of the organization.
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