Is Strategy in Crisis?

by: Matthias Axthelm
 

This paper discusses the assertion that strategy is in crisis as Wilson and Jarzabkowski (2004) suggest. To come to this discussion, it is necessary to define the terms strategy and crisis. However, defining strategy is not straightforward. In fact, there is hardly any one who knows what strategy is (Markides, 2004). Even Porter (1987) recognises that there is not really an agreement about the definition of strategy. As a result, several, even opposing definitions shape the field of strategy (Whittington, 1996) as well as an accumulation of terms connected to strategy which are more confusing than claryfying (Markides, 2004). Mintzberg and Lampel (1999) for example, try to divide these different views into ten schools, whereas Johnson, Scholes and Whittington (2005) suggest that these approaches can be assembled with three lenses. Apart from the existing fields, there are also new ones emerging like the view of strategy as practice which focuses roughly speaking on the individuals in a company (Whittington, 2002). Nickols (2003) goes one step further. He claims that every definition and hence every approach has its right to exist, because strategy involves any of those definitions. Finally, Franklin (1998a) even questions the assumption whether strategy is an established paradigm, though it has been researched for many years.

Nonetheless, a definition is essential, but it seems that it depends on the point of view what strategy is. Thus, this paper takes one of these view points. According to Johnson, Scholes and Whittington (2005, p.9), strategy in the context of this paper is defined as: “the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations” (italics in the original)

In addition to that, defining crisis is the other essential point. Crisis in the context of this essay is defined as “a time when a problem, a bad situation or an illness is at its worst point” (Oxford Advanced Learner’s Dictionary, 2000, p. 298). In the following, this assignment shows different approaches towards strategy, compares them with the above definition and assumes whether they are an indicator that strategy is in crisis or not.

According to the definition of strategy, advantage is achieved by the configuration of resources and competences. And as Barney (2001) notes, a firm’s strategy depends on their resources which are the reason for a sustainable competitive advantage and once the firm is aware of their valuable resources the actions the firm should take to exploit these resources are self-evident. He adds that there could be more than one strategy which are derived from the company’s resources. The responsibility to identify these resources is left to the managers (Barney, 1991).

Grant (1991) clarifies this view: If the environment changes continously, the firm′s resources provide a stable ground to build a strategy. He declares that the resources and the ability of the firm to use them is the cornerstone to formulate a strategy. These resources have to be sustainable and hard to imitate, if they should contribute to competitive advantage. Otherwise these things must be developed to be ahead of the competition (Grant, 2001). If we take the example of the Czech Republic from Makhija (2003), the environment changed radically, because of the collapse of the communist systems. Makhija (2003) discovered that most of the firms with valuable resources managed the radical change of the environment in a better way. Another example for valuable resources is Coca Cola with its very old and secret recipe which is still in use (Crolly, 2005). According to the above definition, strategy may not be in crisis, because this paragraph shows that it is possible to achieve advantage over competitors even in a changing environment through resources.

On the other hand, Porter (1987) focuses more on the environment which should be assessed by a company before it takes any decisions. Sustainable competitive advantage is the key to success in Barney′s (1991) and in Porter′s (1987 and 1996) view. However, Porter′s (1996) approach is slightly different: In his opinion a company should gain a certain position within the market. This could be done by creating or focusing on activities which are hard to imitate. As a result, strategy should focus on either activities that are different to competitors or on activities that are performed differently compared to those of competitors. This means that strategy is about finding or developing these activities. In addition, knowing what to do is one point and being aware which activities should be left behind is the other one. Lastly, a strategy should be out to configure these activities in order that they work together very well (Porter, 1996).

[...]