Strategy theories

Whittington (2001) proposed that strategy theory is about what the company wants to achieve (the goals) and how it goes about it (the process).

From this approach, Whittington established four differing views on strategy – his ‘theories of action’ in business strategy – reflecting and building upon existing management theory as follows:

  • Classical planning perspective
  • Evolutionary or efficiency-driven perspective
  • Processual (or craft-like) approach
  • Systematic/internationally-sensitive approach

Classical perspective

Under this approach, quite simply the organisation’s sole reason to exist is to make a profit for its owners. If a profit is not made, the business activity should be amended or abandoned.

The role of managers is to accommodate profit-maximising strategies, achieved through extensive, rational and detailed long-term planning, a set of control mechanisms and an extensive feedback system.

This approach is typified by a well-defined mission statement, and a number of strategic, tactical and operational objectives.

Overall, an organisation would have an interdependent relationship between its planning process and meeting its objectives for maximum profitability by understanding market forces and through effective, perhaps even ruthless, use and management of resources at its disposal.

Evolutionary or efficiency-driven approach

This approach starts with the basis that market events happen too quickly for firms to effectively react, so strategy planning should be centred on the short term. Whatever strategies are selected, there is only one effective one – that of survival and continued operation in the market. Weaker companies will not survive and will go out of business – that is just business evolution.

Processual (or craft-like) approach

This approach also does not agree that survival can be planned or that survival should be left to market forces. The processual approach to strategy suggests that markets and companies are typified by confusion and mess, so organisations – to survive and prosper – need to plan and work within the reality of the market. Company objectives are the same as they are within the other theories – organisational survival and profit maximisation – but how that occurs is the sum of individual ideas and thoughts on how to deal with market forces and conditions.

Systematic/internationally-sensitive approach

This approach concurs with the classical planning approach insofar as forward planning and optimal working achieves higher profits, but then extends its theory by seeing the economic results linked to wider social influences, such as national characteristics and contributions made to the community. Company goals should be linked to their social responsibilities.

Your task

There has been little research undertaken as to which theory is most prevalent in companies. This absence makes this task slightly easier as you are asked to identify which strategy approach or theory is best suited to construction organisations.

Pick the one that you think is most suited to construction organisations and post your justification on the comments board.

References

Whittington, R. (2001) What is Strategy – and Does it Matter? 2nd edn. London: Thomson Learning

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This article is from the free online course:

Business Strategy: The Art of Looking into the Future

Coventry University