International
Business Strategy

Criticism

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Fall, 2017

H.
Mintzberg and J.A. Waters (1985) ‘Of strategies, deliberate and emergent’
Strategic Management Journal, vol. 6. No 3. pp. 257-72

 

Dr
Gabor Lukacs                    Sevinj Ahmadova

 

Overview
and criticism

In 1994, H. Mintzberg questioned the role of
strategic planning. According to Mintzberg, the strategy development process is
a model emerging from a series of decisions and activities. Without any formal
planning, strategy can develop. This strategy comes out of the past without any
prior intention. Mintzberg argues that the intended strategy cannot be fully
realized. The dimension of the strategy should be considered and planned accordingly.
This is called a deliberate strategy. At the same time, however, a strategic
direction determined by the organization’s current activities and behaviors may
emerge. This is called the current situation or the emergency strategy. As a
result, the strategies to be implemented by the business are made up of the
models by designed strategy and the existing organizational behaviors. With
this perception, Mintzberg defines strategic thinking as an adventure coming
from within the practice and considered together with practice. According to my
previous readings written by Mintzberg, I can state that core concepts that I
understood while reading are the five basic characteristics of strategy which,
Mintzberg argues, are:

1. The strategy is a blend of future plans and
experience from the past.

2. Strategies arise not only from the plans but also
from the emergent developments.

3. Effective strategies can be developed in a
variety of ways.

4. Strategic directions take place with small jumps.

5. Strategy evolves as an obsession of thinking and
action, learning with control, treating stagnation and change together.

Alternative models are based on the idea that the
company’s strategic management is built not only on the basis of carefully
worked out strategic plans. Thus, H. Mintzberg and J. Waters in their article
point to the existence of two types of strategies:

The first type includes well-considered strategies –
strategies based on the results of strategic analysis and planning, so that the
results of applying a rational model. Keeping this in mind, prospective
strategies are formed, but later some of them are implemented in practice,
while others for various reasons remain unrealized.

The second type includes immediate strategies –
unplanned strategies that arise as a result of responding to changes and
unforeseen circumstances. Often such strategies do not result from the
directives of the top management, but from the behavior patterns that emerged
at the lower levels of management, in some or other elements of the
organizational structure of the company. As a result, those are called emergent
strategies, because intended strategies that are really being implemented are
shaped by thoughtful and urgent strategies. At the same time, the implemented
strategy is almost never completely considered or completely urgent. Each
implemented strategy contains “thoughtful” and “urgent”
elements, the ratio of which is determined by both external circumstances and
internal factors, including the structure of the company and corporate culture.

Mintzberg and Waters presented 5 types of different
strategy models that come up as one realized strategy in the end. Those are
emergent strategy, intended strategy, deliberate strategy, realized strategy,
unrealized strategy1.
Those strategies are differing from each other by their place of occurring and
implementation levels. Emergent strategies are implemented by headquarters,
because they are business level strategies that are playing role of response to
incidents. Realized strategies are the response to the environment, so that, to
external issues. Intended strategy is the main strategy that is implemented
directly by high-management level in order to define main purpose and pattern
of the firm. It is formalizing by the result of negotiations between members,
but still is limited only by opinion of defined number of people. Deliberate
and emergent strategies are very rare, because they are pretty straightforward
and are based on pure intentions without detailed attention. They are static
and not changing according to situations.

Mintzberg and Waters introduce 8 types of strategies
that are adopted by firms. The first one is planned strategy. According to them, planned strategy is more about
autocracy and formality. In this type, leaders or high-level management are in
the middle of company and they are people who decide in which pattern company
will move.  In this form of strategy,
there is no way for distortion, so that company moves directly by pattern
without changing its core values.2

According to Jay Barney3 ,
strategy and plans are no longer related unless they are based on the competent
resources that firm has. Author argues that, firm should have such goods and
services that are valuable, rare, non-imitable and non-substitutable. Those
goods and services can adapt to any condition until they are meeting above
mentioned criteria. Firm should plan their strategy on the view that those
goods are still meeting these criteria. For example, we can see the Coca Cola
Company and the most famous good-Cola drink which is non-imitable and non
substitutable, only accessible via company itself and valuable because there
are specific group of people who are “cola lovers”.  That is the reason why the Coca Cola Company
can still survive among its competitors. If we compare it with Porter’s view4,
we can see that Porter stands for some payoffs in order to keep main strategy,
while Barney stands for payoffs in order to keeping goods relevant to VRIO
criteria.

The second one is also planned, but less than
strategic planning. It is called entrepreneurial
strategy. The owner of the firm controls it and can make changes anytime.
The success of that kind of strategy depends on the how much the employees of
this company agree with this type of strategy and ruler’s ideas. If they agree,
then company will succeed. It is more coordinated to small firms and it is
harder to find their core ideas and the way that the firm want to be
competitive. Nevertheless, in this type of strategy, there can be immediate
changes supported by the ruler. This type of strategy is quite changeable, so that
it is more deliberate than strategically planned one, however, the decisions
are only taken by one brain, which constraints the ratio of chooses and vision.5
From my point of view, it is not a reliable strategy in the world of technology
and financial advancement, in which range of goods and preferences can change
immediately. But in terms of decision making it is quite flexible and
negotiable, so that it the con of this type.

Third one is ideological
strategy6
which includes all the members of the company. Those members share their ideas
about future plans and vision about which strategy company should acquire in
order to be competitive. Because of the fact that all members are included,
decision turns into an ideology, which is accepted by everyone and not
changeable. In this case, if market modifications happen, all members of
company should have been convinced in order to change the strategy which is
hardly happening and time consuming. Despite the fact that it is decentralized,
this leads to monotonous actions and less entrepreneurial spirit of employees.

Fourth one is umbrella
strategy7
in which top management defines a comprehensive plan of actions to implement
the developed strategies in the form of boundaries, within which managers from
lower levels of the hierarchy of management have the freedom of action. Control
is carried out by comparing achievements with the plan and the capabilities of
managers within the boundaries.

From my point of view, although bureaucratic
features of such structures are important, there is important shortcoming of
such structures as they are subject to decentralization. The method how
international businesses solve the issue is centering of responsibilities
according to some basic distinctions (based on product and region) due to size
of the organization. That is the positive side that every responsibility center
can be formalized. It turns to be the reason why international businesses
generally prefer this type of configuration. Unit sizes in the centers of responsibility
are at the bottom wide and narrow at other places.

Fifth one is process
strategy.8
The main approach in this case is the emphasis on procedural aspects of the
strategy development and implementation: staffing, job descriptions, planned
schedule, job descriptions of management. The process strategy can be
beneficial for investors who are intended to enter market with lower initial
cost. They can focus on wide range of products as there many opportunities. But
still, in this type of strategy more skilled labour and production control are
needed.

Sixth one is unconnected
strategy9.
This style of management is the opposite of any form of organization of the
process. There is no single global development goal, a group of people who
develop a certain strategy or principles for its formation. The basic strategy
is thus created as a set of strategic alternatives not connected among it and
developed by different managers.

Seventh is consensus
strategy10.
In this case, the principle strategy is being built in absolute, stating that
only the strategy that is approved by all performers is implemented in
practice. Managers define a common strategy through agreements among themselves
without the administrative pressure of higher management. From my point of
view, this type should be the most widespread 
one today, because all workers can participate in consensus and all
profit and looses are divided among everybody. It divides the voting power of
everybody equally and shows the voices of all community members. The only
problem here can be a lot of different standpoints that can make decision
making process slower and complicated.

Eighth strategy is imposed strategy11.
This means that the external environment dictates the principles of formation
of the enterprise development strategy. Thus, the firm is not in a position to
provide directed offensive actions.

Comparison

Mintzberg and Waters article differ from Porter’s
view of strategy in different terms. Authors argue that leaders who are
planning to take the responsibility of strategic management should plan
effectively company’s strategy, taking into consideration the interruptions and
changing circumstances in market, which can lead to pressures. Those leaders
should have the skills of problem solving, which they will imply in such
circumstances to manage company further. They should have instincts to feel which
side company should go in order to save its competitiveness. Meanwhile, Michael
Porter, in his article called “What is Strategy?” argues that managers should
have a clear overview of a company’s perspective and they should plan all
actions of company towards the future market. They should the clear idea of
position and competitive advantage and sustainability goals. Company leaders
should be engaged in differentiating goals from issues and changes in market.
However, in Mintzberg and Waters article called “Of Strategies, Deliberate and
Emergent”, authors argue that leaders should have a set of strategies where
they can harmonize according to the position that market takes. Those
strategies have to be either changed or mixed depending on situation. Against
it, Porter argues that, firm should have strategic position and competitive
advantage in which firm is forced to go with and be so strong that its competitors
cannot have same advantages. Competitors should not be able to imitate firm’s
activities, so that firm can be sustainable in market. In this occasion,
managers are responsible in negotiating about unique position which is firm
main advantage.

Mintzberg’s strategy definition is differing from
Porter’s by their way of thinking. For Mintzberg, strategy is about learning
and observing, while for Porter it is just an analytical process. From my point
of view, Mintzberg’s definition is more profound as he describes the whole
strategy, including Porter’s view. Mintzberg analyses strategy as observing,
planning and developing, depicting it as a harmony of successful business
strategy. Mintzberg emphasizes that if company only plans its actions, it will
never take an action forward and it will make company be back of its
competitors. In order to push company to take actions, company should observe
its profit and losses of taking urgent and late action. Taking slow action
instead of immediate one can end up with ultimate losses.

Meanwhile, Porter’s main argument is that the
strategy is formulating from three different sources. The first one is the
range of goods and services presented by firms. This position makes firm
competitive by its range of chooses. Second one is covering the needs of one
particular group which is big. It is called need based positioning. Third one
is accesses that firm can reach its consumers. It can be different methods of
access; in this case range of products does not make sense.

Mintzberg emphasizes that strategic planning is
dangerous for firms, because the world of business is changing a lot and
companies should accompany with this changes. However, Porter argues that firms
should stick to strategic planning and when changes are coming companies should
decide to move on or not. Companies will have some trade offs during the
changed situations. But sticking to strategic planning prevents the rival
homogeneity by putting productivity frontier. In order to keep this frontier
companies should consider the tradeoff between rival homogeneity and changing
situations. The process how this trade off happens is simply by putting loss
and profit options on certain area and making decisions. For example, if the
company’s strategy is being innovative then this company makes the trade off of
being low cost. Or if a company decided to be low cost, then quality will be
relative to its cost and better quality will be the trade off of particular
company. However, Mintzberg argues that by making trade off, companies are
going into risk of being non-competitive in long term, which is true. Because
if a company has great market shares and playing major role in market for long
term, then this company will face more updates in the market and should make
more tradeoffs. If this company does not make correct trade off, it can simply
lose all its market power. According to Mintzberg, companies don’t have to be
conservative in terms of updates and should take more risks. For example, the
new technological advancements in financial markets made it necessary to
develop financial technology of banking industry. The banks which could not
acquire those financial technologies have been less competitive than the banks
which were up to date. Customers were open to changes in financial industry
because it was easy for them to control their banks accounts or make banking
activities from their devices.

Another key issue that Mintzberg argues against
Porter is that planning is “killing” the employees’ innovation motivation. According
to him, if a company makes a path of development then high level managements
has more control over company and the strategic planning has been done only by
those people, so that it is limited by the arguments of the high management. In
this case, employees thoughts are not taken into consideration, which makes way
to dictating over employees regarding the job which they are doing and not
introducing them opportunity to develop something that they are good at. In
longer term, company loses all its good employees and motivation, losing
competitiveness simultaneously.

My
standpoint

I think, Porter’s view is outdated and Mintzberg
wins this “competition” because of flexibility reason. Flexibility is in need
in globalized world. Company with the same competitive advantages and payoffs
cannot survive. Especially, in the world of Big Data where everything will be
shared and transparent, companies should be innovative. We can see this
innovation s in the biggest companies like Google, Apple, Samsung, etc. For
example, nowadays, one of the major attractive companies is Tesla which tests
electric cars. Even though Tesla cars’ prices are much higher than average car,
Tesla will be the biggest winner after 2030, especially when European countries
such as Germany12
and Norway13
will restrict all petroleum cars. I like the approach of Toyota to this trend,
as Toyota has some hybrid models where it combines petrol and electricity cars
in one model. Toyota aims directly today’s and tomorrow’s trend not losing competition
against innovation.  The Toyota Prius,
developed in 199714,
is a serial production of Toyota that has succeeded in selling over 9 million
hybrid cars in the last 19 years. Although Toyota hybrid cars were introduced
to the world automobile industry with the Prius model, they began to use hybrid
technology in vehicles of similar segments. The hybrid version of the Yaris
model, which hit the market in 2012, reached a sales figure of over 50,000
across in Europe, indicating a significant success. In addition to Toyota,
Honda is also achieving significant sales figures in the hybrid car market,
especially with the Civic model, while other major car brands are expected to
make significant leaps in the coming years.

 

References

1)      H.
Mintzberg and J.A. Waters (1985) ‘Of strategies, deliberate and emergent’
Strategic Management Journal, vol. 6. No. 3. pp. 257-72

2)      Porter,
M.E. (1996), What is Strategy? Harvard Business Review 74(6). 61-78

3)      Jay
Barney (1991) Firm Resources and Sustained Competitive Advantage, Journal of
Management, Vol. 17., No. 1., 99-120

4)      http://www.independent.co.uk/news/world/europe/germany-petrol-car-ban-no-combustion-diesel-vehicles-2030-a7354281.html

5)      http://www.independent.co.uk/news/world/europe/germany-petrol-car-ban-no-combustion-diesel-vehicles-2030-a7354281.html

6)      http://www.hybridcars.com/history-of-hybrid-vehicles/

 

1
Mintzberg & Waters, 1985, p 253

2
Mintzberg & Waters, 1985, p 259

3
Jay Barney  Firm Resources and Sustained
Competitive Advantage, Journal of Management, Vol. 17., No. 1., 99-120

4
Porter, M.E. What is Strategy? Harvard Business Review 74(6). 61-78

5
Mintzberg & Waters , 1985, p 260

6
Mintzberg & Waters, 1985, p 262

7
Mintzberg & Waters, 1985, p 263

 

8
Mintzberg & Waters, 1985, p 264

9
Mintzberg & Waters, 1985, p 265

10
Mintzberg & Waters, 1985, p 267

11
Mintzberg & Waters, 1985, p 268

 

12
http://www.independent.co.uk/news/world/europe/germany-petrol-car-ban-no-combustion-diesel-vehicles-2030-a7354281.html

13
http://www.independent.co.uk/environment/climate-change/norway-to-ban-the-sale-of-all-fossil-fuel-based-cars-by-2025-and-replace-with-electric-vehicles-a7065616.html

14

History of Hybrid Vehicles