The concept of corporate strategy battles with the perennial issue of determining the overall purpose and scope of an organisation. From a contemporary perspective, it involves the specification of long-term goals and objectives that will add value to the business and cope with the uncertainty of modern times. As a practice, it consists of adopting courses of action and allocating resources in ways necessary for carrying out the overall objectives.
Widely recognized as the most principal theories for strategy development, the prescriptive and emergent approaches must be examined within the context of an increasingly dynamic, highly competitive and global business environment. Powerful external forces are driving organisations to reduce costs, enhance processes and identify new opportunities for growth.
Many businesses are compelled to make dramatic improvements not only to compete and prosper but also merely to survive. This brings to the fore the importance of determining how effectively the prescriptive and emergent approaches can meet the needs of today’s businesses when formulating strategy.
The Prescriptive Approach
“A prescriptive strategy is one whose objective is defined in progress and whose main elements have been developed before the strategy commences.”
The prescriptive approach regards strategy development as a systematized and deterministic process where analysis of the organisation, its performance and external environment leads to the formation of a rational, long-term plan. Senior management is in charge of defining the final objectives and the plan is then put into action through the successive layers of the organisation.
Techniques which feed this process include Porter’s heavily structured Five Forces model for analyzing industry and Value Chain Analysis which highlights existing capabilities as a solid basis for competitive advantage.
It is pointed out by Ansoff that firms in fast-paced, competitive environments who use a systematic process for strategic planning very often go on to dominate their marketplace. Their logical, analytical approach allows them to devise predictive and pre-emptive strategies from which they can meet new opportunities head on. For instance, in 1995 EasyJet used incredible foresight to introduce low cost flights allowing it to take advantage of a more cost-conscious European Market.
What’s more, this approach makes it possible to organise complex activities and exercise a greater degree of control over different business units. For example, Tesco’s planning process resulted in well defined long-term goals and clear boundaries for its UK core business, retail service, non-food and international sectors. It has succeeded in achieving consistent growth and profit in all of these areas over recent years.
Strategy formation which places a lot of weight on existing capability strengths is thought to be a secure basis on which a firm should define itself and optimize its position, particularly in times of rapid and turbulent change. For example, Motorola has successfully met the needs of emerging markets by using its fundamental technological strengths in electronic components to progress from supplying TVs and car radios to offering telecommunications services.
From a contrary perspective, the prescriptive model contains many assumptions that are unsustainable in today’s business world. The logical approach implies that strategy development is always deliberate and that strategies are realized according to plan. However, empirical research by Mintzberg discounts this, highlighting that realized strategy tends to be only 10 to 30 percent of the intended strategy. This is mainly because unpredictable events, such as the introduction of new regulations or technologies, will regularly act to force the original strategy off its course.
Additionally, the prescriptive approach to planning falls short in allowing for any learned elements to be absorbed into the strategy and so can limit an organisations ability to respond flexibly in today’s rapidly changing environment. The narrow-minded manner in which it focuses on established areas of business and capabilities can hinder serious transformational change where reinvention is required.
A further criticism is that the prescriptive model fails to complement modern organisational cultures where employees at lower levels are included in the decision making process. This type of involvement is frequently found in small or medium sized businesses. As a result, organisational creativity can be stifled and employee dissonance may occur as it is at these levels that work processes are most fully understood.
The Emergent Approach
“An emergent strategy is one whose final objective is undecided and whose elements are developed during the course of its life, as the strategy proceeds.”
Mintzberg put the idea forward that strategies can be unplanned, developing incrementally over time as a businesses actions adapt to a changing reality. Instead of meeting a premeditated plan, he argued that strategy evolves through a process of learning, adjustment and experimentation.
Formulation of strategy runs parallel to implementation and managers at multiple organisational levels have a key input into the actual strategies pursued by the organisation. This model’s emphasis on learning underlies more recent theories which focus on the value of knowledge as a core organisational competence for gaining competitive advantage. An emergent approach leads to more creative and responsive strategy making which is well suited to the hyper-competitive and unpredictable environments of today.
In contrast with the prescriptive approach which focuses on creating a fit between established strengths and emerging opportunities, the emergent approach challenges the status quo by intentionally creating a misfit between these factors. Hence, it is more suited to instigating positive, transformational organisational change such as diversification or restructuring. It also has the added benefit of helping to reduce resistance to change as it allows time to build employee support while the strategy is taking shape.
On a negative note, when formulation and implementation occur simultaneously there is a risk that strategy development becomes too slow and jumbled a process. This means that valuable opportunities may be missed along the way. Also, conflicting objectives from different groups can hinder strategy development, particularly when there are power shifts taking place during a major strategic change such as a merger.
Without strict analysis and identifiable targets, objectives can lack clarity and there may be no real basis for evaluating performance. An over-reliance on emergent strategy formation could result in underperformance.