Differences in Michael Porter’s and Mintzberg and Waters view of Strategy Development

Differences in Michael Porter’s and Mintzberg and Waters view of Strategy Development

A strategy can be defined in several different ways.  In general terms, a strategy can be described as a plan or method chosen to realize the desired future like problem solution or goal achievement. It is all about how an entity chooses activities to engage in (Lundvall, 2007).   It is also about where and how the company management decides to engage the activities. When the chosen strategy generates above average or sustainable profit for the industry, then that forms the right strategy to employ. Every individual, company, business or industry device different strategies to achieve specific goals or objectives. The overall aim of developing a strategy is to get an outcome that strengthens the company’s position in the market and to help improve or maintain their competitiveness in the market. Companies are always pressurized externally or internally to carefully check their strategic position within a given market, industry or business to make sure that the strategy they have chosen is the right one. Thus strategies matter a lot to firms as they give precise decisions and directions to a firm.  The paper provides a detailed description of the differences in Michael Porter’s concept and Mintzberg and Water’s view of strategy development.

Michael Porter suggests that not all the decisions made by the business are strategic. He defines a strategy as decisions made by business involving consciously performing an activity differently as compared to the competitors, and that the difference must result in sustainable merit (Foss, 1996). If a business carries out something that is different from the competitors but is not sustainable, then it is not also be called a strategy because it can be different but not viable to the business.  Sustainability in this context means that the consciously initiated difference must be very hard to be imitated by the competitors in the market. He claims that activities which surge the productivity of a company by improving or making efficient the existing methods known as operational efficiency are not in any circumstance strategic. This is because the existing activities that are made efficiently operational can be easily imitated or copied by the competitors thereby making no substantial difference with the competitors. Porter says, even though firms should not ignore the operational efficiency activities completely but companies must use both of them.  Although it is only the strategic activities that will make the company develop and experience sustainable and superior performance.  Operational efficiency activities might give a negligible outcome, but strategic activities are a sure bet that a substantial result must be realized at the short or long run of the business.

One of the characteristics that make strategies very difficult to copy, thus unique in nature is that they are formed from a complex combination of different activities. The sum of single actions can not crack the complex interaction between the several different activities forming the strategies. It is the perfect synergy between the strategic activities that yield value and not the individual activities themselves. Porter gave an example with the continued failure of the Japanese farms owing from the high dependence in the use of operational strategies. Mr. Porter stresses that strategic decisions are those that mainly aims at differentiating a firm or business entity from its competitors in a manner that is sustainable in the future (Foss, 1996).  He also adds that some of the operational strategies can turn to strategic with time for instance when an existing technology changes slowly over time through a unique change of the components.  Therefore, strategy pertains doing new things in a different unique way. Through the concept of strategic decisions that differentiates a company form the competitors, Mr. Porter developed five strategic competitive forces that would make a company to outcompete others in the market.  These five forces strategies that were designed by Michael Porter to differentiate and sustain the companies consciously are popularly known as Porter’s Five Forcers abbreviated as (P5F) model (Narayanan & Fahey, 2005). These strategies filled and are still filling the voids in the business management field with regard to market competition.  Porters developed the P5F Competition strategy during the times when re-engineering, down-sizing among other management elements were components of strategic choice. Michael intended to give an overall strategy that would help companies discern the external scenarios (that he termed Forces) on their entire performance. The approach was developed to help companies concurrently assess the industry in which it was operating in hence understanding the competitors and consequently chose the competitive strategy of choice. Porters five forces model to help the firms to differentiate their strategies to keep off the competitors are as follows.

Threats of New entrants as the first force. This involves the ease of the industry entry by new companies which can impact negatively the profitability of the firms operating in that sector.  A new entry may also create increase the competition of the in the industry.  This model or strategy was developed to ideally, quantitatively and qualitatively evaluate barriers that would make entry into the market costly enough to keep off the new entrants.  Some of the barriers advocated for by the model include switching costs like reducing the costs of the goods to make the new entrants to make huge losses hence quitting. Seeking for tight government regulations to control entry, enjoying economies of scale, absolute cost advantages, and improving or modifying product brands.

Rivalry among established companies makes force two. This force was developed to investigates on the competitiveness of the market. It evaluates factors such as the size of the market player, the status and the methods that the competitors use to discourage competition creation or foster characteristics of the market  (Narayanan & Fahey, 2005). Force two drivers include the following, high strategic stakes, the diversity of the of the competitors, concentration, the level of exit barriers. The other drivers are the evaluation of the market demand and growth, fixed cost variables to variable costs and product differentiation. The bargaining power of the buyers is the third force devised by Porters. This was developed to make companies devise to ways that would attract all the clients and buyers who are the end consumers to them. The drivers that make a company have the highest bargaining power than the competitors are the price of goods and future products expectations.

Bargaining power of the suppliers is the fourth P5F.  This was developed to find ways of putting strategic agreements with the suppliers to maintain and allow continuous flow of commodities.  Nowadays suppliers come in the form of multinational and corporations which can be very difficult to negotiate terms of business with (Lundvall, 2007).  For instance, the suppliers that provide fundamental parts and raw materials form a very significant portion of the industry. If the company or the business does not win their trust, they can condition the performance of the company through very unhealthy measures. Therefore formulation of good bargaining power can sustain a company and even make it outdo the competitors with ease. The threat of Substitutes makes the last P5F.  This force was developed to seek strategies used in the production of quality substitutes and flood them in the market. When low priced and quality substitutes flood the whole market, it can be a significant threat to the competitors in the market to the point of liquidation. This forms a complicated but well-calculated way that can make a company to dominate the whole market.

On the other hand, Mintzberg H. and Waters J. define strategy as a pattern that is made up of streams of decisions (Mintzberg, Ahlstrand & Lampel, 2005). The duo argued exhaustively on two robust strategies encompassing intended strategies which are the strategies that originated from the process of planning. The second is realized strategies which encompass what the organization did. They gave out a framework to elaborate the differences between these two concepts by use of a continuum with planning strategy at one end and emergent strategy at the other end. In the planned or intended strategy the intentions of the company are clear therefore translated directly into actions. While in the Emergent or realized strategy the decisions in the company originate from bargaining and positive feedback from members thus termed as the consensus-based strategy. Between these two important strategies lies umbrella, ideological and entrepreneurial strategy.  , but the choice of the best strategy to employ depends on the organization’s nature.

The duo elaborates that, for realized strategies to develop precisely as intended then the following three conditions must be satisfied. First, precise intentions must have presented in the organization, expressed in a concrete level to eliminate doubt about the desired action before they occur. They must be common to all the participants, through sharing their ideas or accepted by their leaders in response to given controls (Mintzberg, Ahlstrand & Lampel, 2005). And lastly, the collective intentions must have been precisely realized as intended and devoid of external force including market, market political or technological interference. The two argues that for a strategy to be entirely emergent then there should exist order, action consistency over a given period and with no intentions about it. Therefore, no consistency depicts that there is no strategy or no intentions met. The following types of strategies brought out by Mintzberg and Waters fall under the continuum of intended or emergent strategy.

Planned strategy; this strategy was developed to show a clear distinction between formulation and implementation of a strategy. Here the leaders who form the center of authority make their precise intentions, strive to implement them and translate them into collective actions with minimal distortions (Mintzberg, 1990). To realize this strategy, the leader expresses their intentions to the company in plan form to avoid any confusion, then present the budget and schedules after which pre-empt any judgment that might strain the realization of the strategy. In this strategy, those who are out of the planning are allowed to act on the intentions brought but not to decide. This strategy is very involving and should only apply in organizations whose environments are stable because it might take a longer time. The strategy falls under the ideal strategy.

The entrepreneurial Strategy; in this strategy, the intentions and articulations are relaxed. Here the one individual who has personal control of the organization provides his vision directions to be followed. He/ she then give orders to the cooperative operational personnel to work to the realization of the imposed vision. This kind of strategy is mostly applied in small businesses with one entrepreneur’s control or large organizations where the employees are willing to follow the will or vision of a single leader in control (Dess, Lumpkin & Covin, 1997). It falls under the ideal strategy. Ideological strategy; in this strategy members of an organization bring forward or share their vision and support them strongly as good ideas to be implemented. The group inspirationally gives their views of the intentions to convince the other members of their credo of the success of the company if the idea is implemented. The intentions are tried within the company, and if realized to be a good strategy then they can be changed partially or adapted entirely. The type of strategy is mostly used in charitable organizations. This type of strategy falls under the realized strategy.

The Umbrella Strategy; in this strategy the conditions are much relaxed. It is mostly used where leaders have partial control over other actors in the organization. The partial leaders formulate the intended guidelines of behavior; give definitions of the likely boundaries then present it to the other actors to evaluate the set standards (Mintzberg, 1990).  All the actors, therefore, are expected to react towards the idea presented. This operates more like an entrepreneurial strategy with one leader with vision presenting it to others. The only difference is that he/she has no control because he has to convince the other actors for the intention to be implemented. The umbrella strategy is mostly used in research organizations where everyone is a partial leader. This strategy can yield to more inventions hence making a research company is on the lead. This type of strategy falls under the realized strategy.

In conclusion, there exist differences in Michael Porter’s concept of strategy development with Mintzberg and Waters view of strategy development as elaborated in the sections above.  Michael Porters’ concept on strategy development focuses majorly on decisions made by business involving consciously performing an activity differently as compared to the competitors. Not only that but also the differences must result in sustainable merit. His strategy development extrapolates to P5F that may help companies to compete favorably in the market. On the other hand, Mintzberg and Waters view of strategy development revolves around the proper planning process.  And secondly realized strategy development where intentions are presented,  clearly shared by the actors, realized as intended without any external alterations to be implemented. The duo also expounds on the concept of strategy development by use of a continuum framework. In a nutshell, Porter’s concept of strategy development focuses on differentiation and uniqueness of strategies while Mintzberg and Waters revolve around operational strategy development where only the existing strategies are made efficient.

 

 
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