Strategy is a direction and scope of an organization over the long term, which achieves advantage in changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations. Having strategy in an organization is very important because it helps on how to meet the goals in consideration with the organization’s situation. An organization strategy answers all questions about fundamental business whether to concentrate in single business or build a group of several businesses, either to go for a broad range of customers or to concentrate on a market niche, either to focus on a wide or narrow product line, whether to base on competitive advantage with low cost or product differentiation.
An organization has to know deeply everything concerned strategic management, strategic levels, and has to reach to the level of achievement of the strategic goals. Organizations also use strategy as the most important tool for planning different activities accordingly in order to meet their objectives. Strategic management plays different roles in the organization which include defined organization business, stating the organization mission and forming strategic vision, evaluate performance, reviewing new developments and initiating corrective adjustments.
Different organizations look the business strategy in different image; this is because each of those organizations has got its own formation and way to implement its own strategy. Some organizations take business strategy as a mixture of luck and judgement or opportunism and design but others say it more based on the arts than science, to know which way is perfect really depends on the way a certain organization use to implement and review its strategy.
Strategy can be formulated by three different levels which are named as corporate level, business unit level and functional or fundamental level. Corporate level strategy basically deals with the selection of business in which an organisation will compete and with the development of portfolio of that business. It is also concerned with searching and explaining the things that are responsible in corporate, these are like identifying overall goals of the corporation ,types of business in which the organization should be involved and the overall way in which the business should be integrated and managed. Coming down to the second level of strategy which is business unit level, this literally deals with developing and sustaining a competitive advantage for the goods that are produced by the company. According to Michael Porter, the three generic strategies which are identified in this level are cost leadership, differentiation and focus, these can be implemented so as to create a competitive advantage and defend against the adverse effects of the five forces. The last level on the levels of strategy is the functional level; this level includes the operation divisions and departments. The strategic issues at the functional level are related to business processes and the value chain. Functional level strategies in marketing, finance, operations and human resources involve the development and coordination of resources through which business unit level strategies can be executed efficiently and effectively.
Prescriptive and Descriptive Schools of Strategy
Henry Mintzberg divided strategy into two groups which are prescriptive schools which involves design school, planning school and position school. And the other group is descriptive schools which include entrepreneurial school, cognitive school, learning school, power school, cultural school, environmental school and configuration school.
- The design school is responsible for the development of the Strength Weaknesses Opportunities and Threats (SWOT) model. In this model the strengths and weaknesses of a company are mapped together with the opportunities and threats in the market place. The data can be used to analyse various strategic options which both exploit the internal opportunities and anticipate the market situation.
- The planning school mostly relates with the assumptions the design school and support techniques especially the objectives, budgets, programs and operating plans of an organization, which mean that staff planners replace senior managers and act as key players in the organization.
- The Positioning School, In this view strategy reduced to positions of generic which are chosen through formalized analysis of industry condition and therefore planners became analysts.
- The Cognitive School, on this descriptive school, there was interest in the origin of strategies and if strategies developed in people mind as models what could be understood about those mental processes? And even continuing today the research has grown steadily on cognitive biases in strategy making and on cognition as information processing. Also another new branch of cognitive school focus more on subjective interpretative view of the strategy process that cognition is used to construct strategies as creative interpretations rather than to map reality in objective way.
- The Learning School, among all schools which have been discussed learning school became a absolute wave and challenged the wide-reaching prescriptive schools moving back to early work on concept like emerging strategy or the growing of each person’s decisions rather than being perfectly formulated example act in order to think as much as think in order to act.
- The Power School, this absolutely small but a bit different school which focused on strategy making from the power which is in two senses that is micro power and macro power. The first power which is micro power looks on the development of strategies within the organization and it is the process involving bargaining, persuasion, and confrontation among inside actors. And the second one macro power this treats the organization as an entity which uses its authority over others organizations and among its partners in alliances, joint ventures, and so on to negotiate collective strategies for the organization interests.
- The Cultural School, this school goes opposite to the power school that based on individual interest and fragmentation. Also it explains the norms and attitudes that one carry while implementing the strategy the culture conditions have to be taken into consideration since organization culture differentiates one organisation consistency over a long period of time. There by to change the culture is an Art of challenge to the organisation to make its organisation adapt changes.
- The last one is environmental school. This school takes strategic formation as a reactive process. This school has got the origin in contingency theory, which developed to go against the confident assertions of classical management that there is only one best way to run the organization.
Prescriptive school of strategy is a special course of action design to achieve objectives, this school deals with strategy formulation than with how they necessarily do form.
In prescriptive approach the strategy development is a systematic way and deterministic process whereby it helps to analyze the organization internal and external environment which can help them to formulate strategy based on their organization environment. The organization plans in this school can take long period to come up with final decisions before implement strategy. In this school senior manager is in charge of decide the final objectives and plans before put into action in different levels of the organization.
Prescriptive school also is giving guidelines or framework process that should be followed to design a strategy, in this case he refer this process as the architect who is building a house based on the design which hes formulated before.
In prescriptive model the strategic formation in this school has taken different approaches and process that rational and fact based analysis of the options will deliver the strategy that is most like to be successful, it explain different approaches which strategic process has to follow in order to come up with the good strategies, example the model has use different techniques to come up with the write strategies, one of the technique has being explain by Michael porter five forces, this can be used in this school in order to analyze its existing competitors.
The strategy formation in prescriptive school is a logical approach which allows the organization to devise predictive and pre-emptive strategies from which they can meet new opportunities in future. For example easy jet in 1995 has introduced low cost flights which has allow the company to take advantage of more cost conscious in the market.
Therefore this approach has made possible for the company to organize activities and exercise a greater degree of control over different businesses. Also the prescriptive strategy model contain many assumptions that are unsustainable in today’s business world, based on its approach that strategy development is always deliberate and that strategy are implemented according to the organization plans. Prescriptive strategy model can therefore be described as a more detached and systematic process of formal top down rational planning process for development and implementation of strategies which related to the mission and objectives of the organization, and the process of strategic making is supported by techniques with consideration of objectives, programs, budgets and operating plans. This process help the organization realizing organization problems, establishing and evaluating the planning criteria and create alternative.
In comparison with the prescriptive strategy, the second group referring to Mintzberg is known as descriptive schools of strategy. This can well be defined as the strategic formation which deals with the broad influence of strategic direction of the firm. Strategic formation in descriptive based on the mental process. Also it analyse how people perceive patterns and process of formation.
According to Mintzberg the descriptive strategy may be different from prescriptive strategy in a way that they have different approaches and applications in the real life. In the descriptive strategy approach, the strategy formation can be done using the past experience; therefore the strategy which can be formed using this school can be through the process of learning, adjustments and experimentation. In additional to that Mintzberg insisted that in this school strategy can be unplanned, developing incrementally over time as business actions adapt to changing reality, the strategic formation process did not identify a final objective with a specific strategy to achieve this which means it relies on the developing strategies whose final outcome may not be known.
On the other hand descriptive strategy is basically focused on the past evidence. Unlike the descriptive, the prescriptive takes other factors in account while analyzing multiple criteria and conflicting objections. then select exactly what strategy can do realistically based on the objectives listed. A descriptive approach makes decisions on different topics based on past experience. If it was positive, and then the decision is made. If it is negative then a different decisions made. Prescriptive strategy go passing all options and analyse them before deciding based on all factors which one is the best option to use.
Also by adopting Mintzberg analogy, prescriptive strategy is said to biblical in its approach, it appears at a point in time and is governed by a set of rule s, fully formulated and ready to implement .While the descriptive strategy is Darwinian in approach, an emerging and changing strategy that survives by adapting as the environment itself changes. Given the need for an organisation to have a corporate strategy, much has really been about the process of achieving these strategies. No common way agreement on the way this can be done.
In additional to that, the descriptive schools of thought are more realistic side of strategy. As they are not bound by any law. They are capable of changing the environment in their own favor as a great entrepreneur is capable of doing it. It is very much clearly and easily visible in the making of McDonald’s and Benetton who are led by great entrepreneurs. While, keeping in mind the factor of environment, it is sometimes considered to be as in-comprehensive, which is dealt by Cognitive and Learning schools. These thoughts bring ahead the relevance of emerging with time and regards learning as an ongoing process. These schools emphasizes on making a broad policy and leaving some space for change in the middle due to the belief that a change might arise from any sub-system within any department in the organisation. These thoughts are clearly visible in case of the entrance of HONDA motors in the USA market which became successful with time and emerged as leaders in the market.