Strategy

824 Strategy capabilities as decision rules. Journal of Management Studies, 41, 1349–1377. Maor, M., Gilad, S., & Ben-Nun Bloom, P. (2013). Organizational reputation, regulatory talk and strategic silence. Journal of Public Administration Research and Theory, 23, 581–608. STRATEGY Strategy is a cognitive structure to simplify and explain the world and thereby facilitate action. Strategic management scholar Henry Mintzberg wrote that people need strategies because they have a need for consistency. Consistency provides people with a sense of control. Strategy provides relief from the anxiety created by complexity, unpredictability, and incomplete information. Furthermore, it helps overcome the paradox of competence. As Stuart Albert describes this paradox in his research on timing, the human brain has what is called the quantum capacity, or Q capacity, which allows people to think about the distant past and the future without analyzing all of the intermediate steps involved. He says that people would be paralyzed if it took an hour to think about any action that took an hour to accomplish. But the mind’s ability to jump from point to point makes it easy to miss sequences or other temporal matters that affect decision making. Relatedly, the brain faces what Albert calls Copland’s Constraint. Copland’s Constraint was named after the composer Aaron Copland, who pointed out that when people listen to music, it is often difficult to listen to more than four melodies at one time before the composition becomes a blur of sound and the internal organization of the music is lost. Thus, making sense of a large number of synchronic processes or events is not something most people can do in their heads. Instead, when planning, people must think sequentially in terms of what follows what. Mintzberg argued that organizations need strategy because strategy helps them to set a direction for themselves, to outmaneuver their competitors, to maneuver themselves through threatening environments, to focus their efforts and promote the coordination of efforts, to define the organization, and to provide consistency. Strategy in organizations settles the big matters so that people can get on with the little details. The CEO too must get on with managing the organization in a given context; he or she cannot continually put that context into question. Organizational definition is important for insiders and outsiders (outsiders need to feel that they know the business without being in the business). Strategies reduce uncertainty and provide consistency (however arbitrary), to aid cognition, to satisfy people’s intrinsic need for order, and to promote efficiency under conditions of stability by concentrating resources and exploiting past learning. Strategies can help reduce the need for learning in the broad sense, in the sense that having a strategy facilitates fast, almost automatic responses to known stimuli. Strategies enable people to “get on with things” without having to think them through each time. All these ideas help illustrate that strategy is a force that resists change and does not encourage it. This entry reviews various definitions of strategy, the problem with strategy development and implementation (including a discussion of strategic planning), and the relationship between strategies and tactics. The entry concludes with a discussion of the limits of reputational enhancements and the consequences of operating without strategies. What Is Strategy? History In 1980, Michael Porter highlighted the relevance of generic competitive strategies. Porter argued that there are two basic types of competitive advantage for companies: lower costs and differentiation. Lower costs relate to the ability of a firm to offer a standardized product or service more efficiently than its competitors; this entails reaping cost advantages from all sources. This strategy, however, does not neglect quality. The other strategy companies can undertake for competitive advantage is differentiation—the ability to provide unique and superior value to the buyer in terms of the product or service itself or of the service experience. Thus, differentiation as a strategy permits a firm to command a premium price. Provided the cost position is not too far above its competitors, the strategy should lead to superior profitability. Another strategy that scholars since Strategy Porter have identified is corporate reputation as a source of differentiation that provides value for a firm. Five Types of Strategy Mintzberg identified five different definitions of strategy: strategy as a (1) plan, (2) ploy, (3) pattern, (4) position, and (5) perspective. Strategy as a plan refers to a consciously intended course of action and a set of guidelines for how to deal with a situation. Here, strategy is a unified, comprehensive, and integrated plan designed to ensure that an organization’s objectives are achieved. By this definition, Mintzberg notes, strategies have two characteristics: (1) they are made in advance and (2) they are developed consciously and purposefully. This produces an intended strategy, one that is planned before action takes place. As plans, Mintzberg points out, strategies can also be ploys, designed to outmaneuver one’s competitors. In both cases, as plans or as ploys, if strategies can be planned, they can be realized, Mintzberg says. A realized strategy is a strategy that is accomplished. This may be the result of a deliberate strategy or an emergent strategy. A deliberate strategy is one that is intended and is seen through to realization. An emergent strategy is one that is not intended or planned ahead of time but emerges step by step. Once it is discovered, however, an emergent strategy can become deliberate. Finally, an unrealized strategy is one that is planned ahead of time but abandoned before realization. The observation that realized strategies may not be intended strategies is what led Mintzberg to conclude that strategies can be observed as patterns—that is, as a pattern of actions in a stream of behavior. He gives the example of a situation where a successful approach that was not part of an intended strategy merges into a pattern of action and then becomes the strategy. Put more simply, one can have a pattern as a strategy without having a plan. Mintzberg notes that many journalists impute or infer strategies from a pattern of actions they observe and call them strategies. As Mintzberg suggests, strategies may be the result of human action (patterns) or human designs (plans). According to this definition, a strategy involves consistency in behavior, whether intended 825 or not. From this perspective, strategy can be inferred from patterned behavior and labeled so. In this sense, strategy is a realized strategy. Mintzberg also points out that labeling strategies as plans and strategies as patterns still begs the question of strategies about what. Labeling something as a strategy entails identifying its purpose, a strategy for what—strategy for the important things and tactics for the details. The problem is that, in retrospect, details can sometimes prove strategic. This observation led to Mintzberg’s fourth definition of strategy, strategy as a position, which focuses on location. Here, strategy is a means to locate and identify an organization in its environment. It describes the organization’s choice place in the market or environment where it concentrates resources and the decision rules for coping with that niche. This view of strategy is not focused on contending with one competitor but with all competitors and also on avoiding competition altogether. Likewise, this view allows for collaboration. The fifth view of strategy for Mintzberg is of strategy as a perspective. The location of the strategy is in the mind of the strategist. Here, strategy is not just a chosen position but also an ingrained way of perceiving the world. The earliest articulation of this view was that of Phillip Selznick, who wrote about the “character” of organizations— their distinct and integrated commitments to ways of acting and responding. A strategy’s content consists not just of a chosen position but also of the process of seeing and understanding the world in a particular way. In the terminology of psychology and organizational development, this definition is very similar to mental models, interpretive schemas, and scripts. Sociologists would see this view of strategy as similar to ideology. According to Mintzberg, this view of strategy suggests that strategy is a concept, an abstraction existing in the mind of interested parties—those who pursue it, those who are influenced by this pursuit, and those who wish to see others pursuing it. A strategy is a perspective shared by members of an organization, through their intentions and their actions, and involves the emergence of a collective mind in which individuals are united by common thinking and behavior. Mintzberg says that the function of a strategy is not to solve a problem but to structure situations 826 Strategy so that emergent problems are solvable. Strategies are not realities themselves, they are only abstractions of reality in the minds of people. But good strategies, like good theories, should minimize the amount of distortion. He also observes that strategy is rooted in the idea of stability. Strategy is not about adaptability in behavior but about regularity in behavior. It is not about discontinuity and change but about continuity. The Problem With Strategy Development and Implementation Organizations face a number of problems with strategy development and implementation. Andrew Campbell and Marcus Alexander give three reasons for such problems. First, many organizations are unclear about the difference between organizational purpose and organizational constraints— defining organizational purpose as what an organization exists to do and organizational constraints as what it must do to survive. Second, Campbell and Alexander suggest that organizational leaders are confounded by the process of developing strategy. Objectives are often intertwined with strategy development, making it difficult to decide where to start. Third, they suggest that organizational leaders assume that strategic planning processes will lead to new insights, but they seldom do, because such planning meetings are not the source of insights into value creation; such insights come instead from those involved in implementation. The solution, Campbell and Alexander suggest, lies in management understanding the benefit of having a well-defined purpose and the importance of discovering, understanding, documenting, and exploiting how to create more value than the competition. Campbell and Alexander argue that the more focused and detailed a company’s purpose is, the better it will be able to come up with successful strategies, as a company’s purpose limits the range of choices that need evaluation and thus helps the strategy development process. In addition, they argue that the company’s competitive advantage is not tied to its purpose but to its constraints. If companies do not satisfy the demands of their stakeholders, they will go out of business. But recognizing this requirement itself, Campbell and Alexander note, provides no guidance on how best to fulfill it. Strategic Planning A common strategic planning framework that organizations use is the MOST (mission, objectives, strategy, and tactics) framework, which suggests a structure and order from which to proceed. First, an organization must choose a mission, a long-term purpose for the organization. Second, it must develop the objectives, both short-term and midterm, that will further the organization in the accomplishment of its mission. Third, it must develop a strategy to achieve the objectives, using a number of short-range tactics to implement the strategy. Campbell and Alexander argue that most organizations face a sequencing problem in the relationship between strategy and tactics. First, they suggest that separating strategy from tactics (which are tied to implementation) is a bad idea. Managers must be able to envision the tactic, and tactics must be worked out before a strategy can truly be determined. Managers who begin with objectives without considering the necessary strategies often meet resistance from those setting the strategies because they cannot find a way to meet them and sufficiently satisfy all their stakeholders’ demands. Formulating a strategy without clear objectives can be overwhelming. Without an agreed-on strategy, it is difficult to work out the details of the tactics. Tactics are not just about implementing today’s strategy, they are also important for discovering tomorrow’s strategy. On the other hand, managers who select strategies, goals, and objectives may find that others do not follow them easily because they cannot work out the tactics for implementation. Campbell and Alexander further suggest that it is only by understanding the details of the tactics that management will be able to develop a winnable strategy that encourages managers to set challenging but still achievable objectives. Thus, they argue, strategy development is not a sequential series of steps but a simultaneous coming together of elements. This still leaves open the question of where an organization should begin the process. The answer to this dilemma they offer is in understanding one Strategy primary building block of good strategy: the role of insight into how to create more value than one’s competitors do. Campbell and Alexander suggest that insights do not come as a result of a strategy development exercise and that attempting to develop strategy without insights is dangerous because it can lead to unrealistic plans. They further suggest that if companies can come up with true insights, then developing strategies to exploit tactics becomes viable. Insights are what give meaning to tactics. In turn, these insights make strategies more doable. They argue that experience from today’s operating tactics is what provides the necessary feedback for tomorrow’s insights. Thus, unless implementation is part of the strategy development process, tomorrow’s insights will be limited. Strategies and Tactics Tactics are short-term operating decisions, but as Richard Rumelt observed, one person’s strategies are another person’s tactics. Alfred Chandler said that strategies were about the deployment of resources. Mintzberg’s response was “Which resources and for what purpose?”—concluding that strategies can potentially be about anything. Strategies and tactics can best be differentiated by the establishment of a pattern. Tactics appear strategic when a pattern emerges between or among them over time. The most common tactics include a combination of organizational actions together with interpersonal communication, organizational media, news media, advertising and promotional media, and social media. Tactics have continuity when their scheduling presents a message or an inference to observers at a consistent level throughout a particular period of time. However, it is often expensive to establish sufficient levels of continuity with enough frequency and intensity to be recognized as such by the desired observers. Thus, organizations may use flighting, which is the presentation of a message in waves, with periods of intense communication interspersed with periods of silence or inactivity. Organizations use this approach when organizational activity may fall into predictable or discrete periods. Pulsing is a combination of continuity and flighting, whereas massing is the concentration of various presentations of a message into a very short period of time. 827 Strategy and the Limits of Reputation Enhancements The ability of reputation to create value for organizations is firmly established, but the relevance of reputation enhancement to an organization varies according to the strategies it employs more generally. Put more simply, reputation enhancement is more important for the pursuit of some competitive strategies than others. Building on Porter’s description of generic competitive strategies, David Faulkner and Cliff Bowman developed the customer matrix for the consideration of hybrid competitive positions. This matrix was later augmented by Ysanne Carlisle and Faulkner, who overlaid the value of reputational enhancement on the perceived added value. For companies pursuing corporate strategies of differentiation, focused differentiation, or a hybrid (differentiation but with a lower price), reputational enhancements matter. On the other hand, for firms pursuing a low-cost strategy, it can be argued that reputation enhancement does not matter. The risks of reputational damage, however, matter to all firms, regardless of which strategy positions they employ. What the augmented model suggests is that, in the absence of a viable threat to reputational damage, legislation may be required to change some firms’ social and environmental practices. Without Strategies Without strategies, organizations face cognitive overload, and members have no way of dealing with experiences consistently. Thus, a strategy is a categorizing scheme by which incoming stimuli can be ordered and dispatched; it can help an organization move in a relatively straight line, but it reduces peripheral vision. The very role of encouraging people to “get on with it” impedes an organization’s ability to respond to environmental change. Strategies can be vital to organizations, not only through their presence but also through their absence. Sometimes a lack of strategy is necessary and may represent a stage of transition from an outdated strategy to a more viable one, or the environment may have turned so dynamic that it would be unwise to be consistent. We function best 828 Strategy when we can take some things for granted, at least for a period of time, but the problem is that eventually situations change, the environment destabilizes, and niches disappear. Since the very role of strategy is to protect the organization from distraction, a strategy can blind an organization to its own outdatedness. The question remains as to how long an organization can survive with outdated strategies or no strategies at all. Mintzberg suggests that an organization without a strategy is like a person without a personality and that an organization without a name cannot be discussed. Craig E. Carroll See also Accountability; Action and Performance; Activist Campaigns; Advertising; Alignment Between Identity and Reputation; Anonymity and Privacy; Apologia Theory; Audiences; Authenticity; Benchmarking; Best Practices; Brand Bully; Brand Co-Creation Model; Brandjacking; Capability Reputation; Cause-Related Marketing; Co-Creation Theory; Channels; Cognitive Dissonance; Coherence; Collective Intentionality; Communication Management; Communication Strategy; Corporate Diplomacy; Corporate Governance; Corporate Social Performance; Crisis Response Strategies; Disclosure; Engagement; Ethics of Reputation Management; Executive Leadership; Expectation Management; Facework; Feedback; Impression Management Theory; Information Processing; Innovation; Issue Ownership Theory; Key Messages; Leadership’s Role in Reputation; Legacy Organizational Identity; Legitimacy; Management, Corporate Reputation; Media Relations; Message Design; Mindful Learning; Naming and Shaming; Nonmarket Strategy; Objectives; Organization Development; Organizational and Corporate Image; Organizational Character; Organizational Culture; Organizational DNA; Organizational Effectiveness; Organizational Health; Organizational Identity; Organizational Learning; Organizational Listening; Organizational Renewal; Organizational Trust; Partnerships and Alliances; Political Positioning; Product Performance; Product Recalls and Public Safety; Public Relations; Public Sector Reputation; Publicity; Paradox of; Publics; Ratings; Rebranding; Reputation, Dimensions of; Reputation Capital; Reputation Continuity; Reputation Council; Reputation Crisis; Reputation Formation; Reputation Gaps; Reputation Management Problems; Reputation Monitoring; Reputation Renting; Reputation Repair; Reputation Risk; Reputational Criteria; Reputational Spillovers; Reputational Stickiness; Resilience; Return on Investment; Sensemaking Theory; Signal Theory; Spokesperson; Storytelling; Strategic Alignment; Strategic Aspirations; Strategic Inaction; Strategic Silence; Theory of Planned Behavior; Thought Leadership; Timing; Transparency; Valorization; Value Further Readings Albert, S. (2013). When: The art of perfect timing. San Francisco, CA: Jossey-Bass. Audia, P. G., Locke, E. A., & Smith, K. G. (2000). The paradox of success: An archival and a laboratory study of strategic persistence following radical environmental change. Academy of Management Journal, 43(5), 837. Basdeo, D. K., Smith, K. G., Grimm, C. M., Rindova, V. P., & Derfus, P. J. (2006). The impact of market actions on firm reputation. Strategic Management Journal, 27(12), 1205–1219. Carlisle, Y. M., & Faulkner, D. O. (2005). The strategy of reputation. Strategic Change, 14(8), 413–422. Carroll, C. E. (Ed.). (2013). The handbook of communication and corporate reputation. Oxford: Wiley-Blackwell. Chen, M.-J., & MacMillan, I. C. (1992). Nonresponse and delayed response to competitive moves: The roles of competitor dependence and action irreversibility. Academy of Management Journal, 35(3), 539–570. Chen, M.-J., & Miller, D. (1994). Competitive attack, retaliation and performance: An expectancy-valence framework. Strategic Management Journal, 15(2), 85–102. D’Aveni, R. (1994). Hypercompetition: Managing the dynamics of strategic maneuvering. New York: Free Press. Deliège, I. (2001). Prototype effects in music listening: An empirical approach to the notion of imprint. Music Perception: An Interdisciplinary Journal, 18(3), 371–407. Faulkner, D. O., & Bowman, C. (1995). The essence of competitive strategy. London: Prentice Hall. Fombrun, C. J. (1996). Reputation: Realizing value from the corporate image. Boston: Harvard Business School Press. Fombrun, C. J., & Ginsberg, A. (1990). Shifting gears: Enabling change in corporate aggressiveness. Strategic Management Journal, 11(4), 297–308. Fombrun, C. J., & Shanley, M. (1990). What’s in a name? Reputation building and corporate strategy. Academy of Management Journal, 33(2), 233–258. Symbiotic Sustainability Model Jarmon, R. (2009). Reputation’s effect on pricing power: The importance of strategy. Corporate Reputation Review, 12(3), 281–296. Kelly, A. (2007). The elements of influence: The new essential system for managing competition, reputation, brand, and buzz. New York: Penguin Books. King, B. G., & Walker, E. T. (2014). Winning hearts and minds: Field theory and the three dimensions of strategy. Strategic Organization, 12(2), 134–141. Levitt, B., & March, J. G. (1988). Organizational learning. Annual Review of Sociology 14(26), 319–340. Mahon, J. F. (2002). Corporate reputation: A research agenda using strategy and stakeholder literature. Business & Society, 14(4), 415–445. Mintzberg, H. (1987). The strategy concept I: Five Ps for strategy. California Management Review, 30(1), 11–24. Mintzberg, H. (1987). The strategy concept II: Another look at why organizations need strategies. California Management Review, 30(1), 2532. Mintzberg, H., & Waters, J. A. (1985). Of strategies, deliberate and emergent. Strategic Management Journal, 6(3), 257–272. Nelson, R. R. (1991). Why do firms differ, and how does it matter? Strategic Management Journal, 12(S2), 61–74. Peretz, I. (2001). Music perception and recognition. In B. Rapp (Ed.) The handbook of cognitive neuropsychology: What deficits reveal about the human mind (pp. 519–540). New York: Psychology Press. Petkova, A. P. (2012). From the ground up: Building young firms’ reputations. In M. L. Barnett & T. G. Pollock (Eds.), The Oxford handbook of corporate reputation (pp. 383–401). Oxford: Oxford University Press. Porter, M. E. (1980). Competitive strategy. New York: Free Press. Rayner, J. (2003). Managing reputational risk. Sussex, UK: John Wiley & Sons. Rhee, M., & Kim, T. (2015). The role of experience in a governmental regulatory investigation in the US automobile industry: Organizational learning versus reputational dynamics. Socio-Economic Review, 13(2), 285–308. Rindova, V. P., Ferrier, W. J., & Wiltbank, R. (2010). Value from gestalt: How sequences of competitive actions create advantage for firms in nascent markets. Strategic Management Journal, 31(13), 1474–1497. Rindova, V. P., & Fombrun, C. J. (1999). Constructing competitive advantage: The role of firm-constituent 829 interactions. Strategic Management Journal, 20, 691–710. Rindova, V. P., Petkova, A. P., & Kotha, S. (2007). Standing out: How new firms in emerging markets build reputation. Strategic Organization, 5(1), 31–70. doi:10.1177/1476127006074389 Schultz, M., Hatch, M. J., & Adams, N. (2012). Managing corporate reputation through corporate branding. In M. L. Barnett & T. G. Pollock (Eds.), The Oxford handbook of corporate reputation (pp. 420–445). Oxford: Oxford University Press. Smith, R. D. (2013). Strategic planning for public relations (4th ed.). New York: Routledge. Van Riel, C. B. M., & Fombrun, C. J. (2007). Essentials of corporate communication: Implementing practices for effective reputation management. Abingdon, UK: Taylor & Francis. Weigelt, K., & Camerer, C. (1988). Reputation and corporate strategy: A review of recent theory and applications. Strategic Management Journal, 9(5), 443–454. doi:10.1002/smj.4250090505 Whittington, R., & Yakis-Douglas, B. (2012). Strategic disclosure: Strategy as a form of reputation management. In M. L. Barnett & T. G. Pollock (Eds.), The Oxford handbook of corporate reputation (pp. 402–419). Oxford: Oxford University Press. Williams, R. J., Schnake, M. E., & Fredenberger, W. (2005). The impact of corporate strategy on a firm’s reputation. Corporate Reputation Review, 8(3), 187–197. SYMBIOTIC SUSTAINABILITY MODEL The symbiotic sustainability model is a theory focusing on the pattern and outcomes of partnerships between nonprofit, nongovernmental organizations (NGOs) and for-profit corporations. The model is important for the study of corporate reputation, because corporations often form relationships with NGOs to enhance aspects of their reputation. The theory assumes that communicating the existence and character of the cross-sector relationship to the stakeholder is more important than the resources exchanged within the relationship. Through communication, corporations and NGOs try to convince stakeholders of the legitimacy and character of the relationship in order to reap rewards. Stakeholders include consumers, activists,