Mintzbergs 10 school of thoughts for Strategy formulation School of thoughts in management

Many companies and marketing managers have dedicated staff for strategy formulation. It is a very
important process for the company, as it tells the future direction which the company has to take,
and the way that the company can succeed.

The 10 school of thoughts tell us how Strategy formulation can be done, and what are the various
ways that you can formulate a strategy.

Here are the 10 school of thoughts of Strategy formulation.

1) The design school

In this thought process of strategy formulation, the focus is on conception of ideas and to design
new ideas.

The company does an internal analysis with the help of SWOT analysis

The company then tries to match its internal strength with the market strength which is
required.
 This works well in a stable environment, where competitors might not disrupt the market
suddenly & it gives time to the firm to adapt.

However, we have to understand that conducting an internal analysis of the firm depends on the
firms own knowledge about itself.

Similarly, matching the firms internal abilities to the external market, requires external market
knowledge. Ultimately, knowledge is a limitation to the Design school of thought of strategy
formulation. If proper knowledge is not used, this school of thought will fail.

Contributions

Order

Reduces ambiguity

Usefully in relative stable environment

Support strong and visionary leadership

2) The planning school

The thought process runs towards planning the entire strategy in a rigorous manner, so that the firm
advances forward.

The complete process and the plan which the company will implement is documented from
the start to finish.

At all times the plan is referred to whenever the management wants to take new decisions.

With the plan in hand, the management gets a clear direction to move in, helping the
company to move forward unanimously.

Enable Resource allocations and control in the organization

The issue arises in the planning school of thoughts when anything happens out of plan. If you have
planned for years in advance, and any new competitor pops up/or comes in, or any external business
variable is changed, then the complete plan gets affected.

Hence, proper prediction is most essential when using the planning school of thought.
3) The positioning school

In this process of strategy formulation, the management decides that they want to position the
product at the top of the mind and makes decisions accordingly.

The management has to determine the competition already present in the market, and where
is their own company positioned

It can use tools like Five forces, Value chain, BCG matrix and others to position its products

Once the market has been analyzed, the right strategy is needed to improve the positioning
of the product.

In the positioning school of thought, the strategy assumes the market as it is, and does not take into
consideration future entrants or change in business environment. Like the planning strategy,

the positioning of school of thought can also fail if there are major changes in the business
environment.

4) The entrepreneurial school

This school of thought puts all the focus on the CEO of the company. Most observed in small
businesses which want to make it large, or even large corporations which trust their leaders (Steve
jobs, Mark zuckerberg), in this strategic process, the company follows whatever the CEO says.

In this case, the CEO needs to be visionary, needs strong leadership skill, and has to have the
right judgment and direction.

This strategy has been proven right in very few cases over the years where the leaders were
legendary by themselves. Steve jobs, Bill gates, Mark Zuckerberg are all examples of people
who have grown companies to astounding proportions due to their leadership skills.

The problem with this management school of thought is a single one How do you find such a
leader? If you want to design your marketing strategy based on the recommendations by the leader
of the company, then this leader can be wrong as well. And you need someone who is very strong
on the business front and is dynamic to make the necessary changes.
5) The cognitive school

In this thought process, peoples perception and information is studied. One of the best examples of
cognitive studies is the Johari window. Wherein, you can better your business by understanding
your customers.

It is a mental and psychological process to find out what is in the minds of the consumer and
how do we improve on that or use that information.

Once you know customers perception and thought process about you, you can change the
same with strategy. You can either improve or you can communicate better so that your
customers have more information about you.

The problem with the cognitive model is that it is not practical beyond a certain point. A top
company cannot rely on surveys alone to find new ideas or to make connections with their
customers, because it has become a mass company by that time. Cognitive reasoning cannot be
done at a mass stage.

Not very practical to conceive great ideas or collective strategy processes

6) The learning school

In this thought process, the management keeps a watch over what has already happened and then
forms the future strategy looking at the past. It might not necessarily look at its own past. But looks
at the way things worked for some other company, or how some other company failed. And then
decide on which strategy to implement and which one to ignore.

The company looks at things that worked and tries to implement the same thing over time
with the assumption that it will work again.

The company also looks at things that did not work in its favour (or in favour of a
competitor who tried the same thing), and discards such things / processes.

More than a strategy, the learning school of thought looks like manouevuring or guiding the
company on the basis of the previous road that has gone by. We all know its not a good decision
because the road can change at any time. Hence this thought process is not at all useful at time of
crisis, nor does it help in creating something outstanding. This strategy can be used when the firm is
stable, and wants to work on auto mode while it develops something else in the meantime.
7) The power school In this school of thought, the people who are in power take the decisions.
These people can be your customers, they can be your stakeholders, they can also be certain people
from within the management. 4

Anyone who is known to have power over the company, can drive the company forward.

This ensures that there is lesser resistance for the strategy to be implemented

It is a very realistic thought process, because in corporates, there are so many people that
power should reside in few hands.

The problem with the power school happens when the powerful people stop listening to feedback or
stop implementing measures of improvement, and only focus on minor improvements. At such
times, the power needs to change hands so that the company keeps moving forward.

8) The cultural school The cultural school of thought says that the company has a fantastic
capital in terms of its human capital as well as its social capital. A positive culture in the firm can
give a proper direction to the firm.

The cultural school tries to involve many different departments within a company.

It is most useful during mergers and acquisitions.

It emphasizes the role of social values, beliefs and culture in decision making

There can be resistance to the cultural school as the same people whom we are trying to unite,
might not like the idea of change, due to which they become united and the company moves in the
opposite direction. Moreover, even if you have got the people united, and have built a strong
culture, your direction still remains unclear.

9) The environmental school More of a situational school of thought, the environmental school
gives most of the importance to the environment. For example In a paper industry, wood plays a
major role. And if the wood is scarce, the strategy formulation will have to be done on the basis of
wherever the wood is available.

Major emphasis is on the environment which can be a raw material or a major factor in the
strategy of the company.

Situational analysis is the most used tool in the environmental school.

Obviously, this thought process depends on the situation, and is used when there is total dependence
on environmental factors.
10) The Configuration school One of the most preferred amongst the 10 School of thoughts is
the configuration school. It basically says, that the strategy needs to be configured. The strategy
allows the firm to move from one position to another, hence a simple set of values will not help this
movement.

As per the configuration school, strategy needs to consider a lot of thing which can go
wrong, and cannot be derived from simple set of values.

Over a period of time, an organization forms various sets of values which have to be
transformed so that the organization reaches the point that it desires.

To do this, the organizations stable business might need to be disrupted, and the organization
has to be configured so that it reaches the success it was looking for.

Hence, the name configuration school, so that the organization is configured over and over
again unless it reaches the desired result.

This school of though tries to attain stability via various ways, and keeps transforming as long as
needed.

Overall, the Mintzbergs 10 school of thoughts for strategy formulation are applicable even
today. However, one firm can follow a single strategy only. And hence, deciding where your firm
stands, the influencers in the firm, its dependency on environment and culture, and in general
looking at your own firm, you can decide which of the 10 school of thoughts of management are
suitable for you.

Industry Life Cycle

Life cycle models are not just a phenomenon of the life sciences. Industries experience a similar
cycle of life. Just as a person is born, grows, matures, and eventually experiences decline and
ultimately death, so too do industries and product lines. The stages are the same for all industries,
yet every industry will experience these stages differently, they will last longer for some and pass
quickly for others. Even within the same industry, various firms may be at different life cycle
stages. A firms strategic plan is likely to be greatly influenced by the stage in the life cycle at which
the firm finds itself. Some companies or even industries find new uses for declining products, thus
extending their life cycle.

The growth of an industry's sales over time is used to chart the life cycle. The distinct stages of an
industry life cycle are: introduction, growth, maturity, and decline. Sales typically begin slowly at
the introduction phase, then take off rapidly during the growth phase. After leveling out at maturity,
sales then begin a gradual decline. In contrast, profits generally continue to increase throughout the
life cycle, as companies in an industry take advantage of expertise and economies of scale and
scope to reduce unit costs over time.

STAGES OF THE LIFE CYCLE

Introduction

In the introduction stage of the life cycle, an industry is in its infancy. Perhaps a new, unique
product offering has been developed and patented, thus beginning a new industry. Some analysts
even add an embryonic stage before introduction. At the introduction stage, the firm may be alone
in the industry. It may be a small entrepreneurial company or a proven company which used
research and development funds and expertise to develop something new. Marketing refers to new
product offerings in a new industry as "question marks" because the success of the product and the
life of the industry is unproven and unknown.

A firm will use a focused strategy at this stage to stress the uniqueness of the new product or service
to a small group of customers. These customers are typically referred to in the marketing literature
as the "innovators" and "early adopters." Marketing tactics during this stage are intended to explain
the product and its uses to consumers and thus create awareness for the product and the industry.
According to research by Hitt, Ireland, and Hoskisson, firms establish a niche for dominance within
an industry during this phase. For example, they often attempt to establish early perceptions of
product quality, technological superiority, or advantageous relationships with vendors within the
supply chain to develop a competitive advantage.

Because it costs money to create a new product offering, develop and test prototypes, and market
the product, the firm's and the industry's profits are usually negative at this stage. Any profits
generated are typically reinvested into the company to solidify its position and help fund continued
growth. Introduction requires a significant cash outlay to continue to promote and differentiate the
offering and expand the production flow from a job shop to possibly a batch flow. Market demand
will grow from the introduction, and as the life cycle curve experiences growth at an increasing rate,
the industry is said to be entering the growth stage. Firms may also cluster together in close
proximity during the early stages of the industry life cycle to have access to key materials or
technological expertise, as in the case of the U.S. Silicon Valley computer chip manufacturers.

Growth

Like the introduction stage, the growth stage also requires a significant amount of capital. The goal
of marketing efforts at this stage is to differentiate a firm's offerings from other competitors within
the industry. Thus the growth stage requires funds to launch a newly focused marketing campaign
as well as funds for continued investment in property, plant, and equipment to facilitate the growth
required by the market demands. However, the industry is experiencing more product
standardization at this stage, which may encourage economies of scale and facilitate development of
a line-flow layout for production efficiency.

Research and development funds will be needed to make changes to the product or services to better
reflect customers' needs and suggestions. In this stage, if the firm is successful in the market,
growing demand will create sales growth. Earnings and accompanying assets will also grow and
profits will be positive for the firms. Marketing often refers to products at the growth stage as
"stars." These products have high growth and market share. The key issue in this stage is market
rivalry. Because there is industry-wide acceptance of the product, more new entrants join the
industry and more intense competition results.

The duration of the growth stage, as all the other stages, depends on the particular industry or
product line under study. Some itemslike fad clothing, for examplemay experience a very short
growth stage and move almost immediately into the next stages of maturity and decline. A hot toy
this holiday season may be nonexistent or relegated to the back shelves of a deep-discounter the
following year. Because many new product introductions fail, the growth stage may be short or
nonexistent for some products. However, for other products the growth stage may be longer due to
frequent product upgrades and enhancements that forestall movement into maturity. The computer
industry today is an example of an industry with a long growth stage due to upgrades in hardware,
services, and add-on products and features.

During the growth stage, the life cycle curve is very steep, indicating fast growth. Firms tend to
spread out geographically during this stage of the life cycle and continue to disperse during the
maturity and decline stages. As an example, the automobile industry in the United States was
initially concentrated in the Detroit area and surrounding cities. Today, as the industry has matured,
automobile manufacturers are spread throughout the country and internationally.

Maturity
As the industry approaches maturity, the industry life cycle curve becomes noticeably flatter,
indicating slowing growth. Some experts have labeled an additional stage, called expansion,
between growth and maturity. While sales are expanding and earnings are growing from these "cash
cow" products, the rate has slowed from the growth stage. In fact, the rate of sales expansion is
typically equal to the growth rate of the economy.

Some competition from late entrants will be apparent, and these new entrants will try to steal
market share from existing products. Thus, the marketing effort must remain strong and must stress
the unique features of the product or the firm to continue to differentiate a firm's offerings from
industry competitors. Firms may compete on quality to separate their product from other lower-cost
offerings, or conversely the firm may try a low-cost/low-price strategy to increase the volume of
sales and make profits from inventory turnover. A firm at this stage may have excess cash to pay
dividends to shareholders. But in mature industries, there are usually fewer firms, and those that
survive will be larger and more dominant. While innovations continue they are not as radical as
before and may be only a change in color or formulation to stress "new" or "improved" to
consumers. Laundry detergents are examples of mature products.

Decline

Declines are almost inevitable in an industry. If product innovation has not kept pace with other
competing products and/or service, or if new innovations or technological changes have caused the
industry to become obsolete, sales suffer and the life cycle experiences a decline. In this phase, sales
are decreasing at an accelerating rate. This is often accompanied by another, larger shake-out in the
industry as competitors who did not leave during the maturity stage now exit the industry. Yet some
firms will remain to compete in the smaller market. Mergers and consolidations will also be the
norm as firms try other strategies to continue to be competitive or grow through acquisition and/or
diversification.

PROLONGING THE LIFE CYCLE

Management efficiency can help to prolong the maturity stage of the life cycle. Production
improvements, like just-in-time methods and lean manufacturing, can result in extra profits.
Technology, automation, and linking suppliers and customers in a tight supply chain are also
methods to improve efficiency.

New uses of a product can also revitalize an old brand. A prime example is Arm & Hammer baking
soda. In 1969, sales were dropping due to the introduction of packaged foods with baking soda as
an added ingredient and an overall decline in home baking. New uses for the product as a
deodorizer for refrigerators and later as a laundry additive, toothpaste additive, and carpet freshener
extended the life cycle of the baking soda industry. Promoting new uses for old brands can increase
sales by increasing usage frequency. In some cases, this strategy is cheaper than trying to convert
new users in a mature market.

To extend the growth phase as well as industry profits, firms approaching maturity can pursue
expansion into other countries and new markets. Expansion into another geographic region is an
effective response to declining demand. Because organizations have control over internal factors
and can often influence external factors, the life cycle does not have to end.

An example is feminine hygiene products. Sales in the United States have reached maturity due to a
number of external reasons, like the stable to declining population growth rate and the aging of the
baby boomers, who may no longer be consumers for these products. But when makers of these
products concentrated on foreign markets, sales grew and the maturity of the product was
prolonged. Often so-called "dog" products can find new life in other parts of the world. However,
once world saturation is reached, the eventual maturity and decline of the industry or product line
will result.

LIFE CYCLES ARE EVERYWHERE

Just as industries experience life cycles, studies have documented life cycles in many other areas.
Countries have life cycles, for example, and we traditionally classify them as ranging from the First
World countries to Third World or developing countries, depending on their levels of capital,
technological change, infrastructure, or stability. Products also experience life cycles. Even within
an industry, various individual companies may be at different life cycle stages depending upon
when they entered the industry. The life cycle phenomenon is an important and universally accepted
concept to help managers better understand sales growth and change over time.

BIBLIOGRAPHY

Hitt, Michael A., R. Duane Ireland, and Robert E. Hoskisson. Strategic Management:
Competitiveness and Globalization Fourth Edition. South-Western College Publishing, 2001.

Porter, M. Competitive Strategy. Free Press, 1980.

Porter, M. E. "Towards a Dynamic Theory of Strategy." Strategic Management Journal. 1991.

Wang, Zhu. "Learning, Diffusion, and Industry Life Cycle." Federal Reserve Bank of Kansas City,
Working Paper 04-01 Available from www.kansascityfed.org/PUBLICAT/PSR/RWP/NBER-
WangPaper.pdf 15 January 2006.

Wansink, Brian, and Jennifer Marie Gilmore. "New Uses that Revitalize Old Brands." Journal of
Advertising Research. March 1999.

To develop an understanding about the strategy and its formulation we need to understand the "10
schools of strategic thought" and there clustering.
1. Design school (Strategy as a designed set of decisions)Deliberate Strategy
2. Planning school (Strategy as the process of planning) Deliberate Strategy
3. Positioning school (Strategy as a position in the market)Deliberate Strategy
4. Learning School (Strategy as a result of organizational learning) Emergent Strategy
5. Cultural school (Strategy as a result of culture and capabilities) Emergent Strategy
6. Power School (Strategy as a result of power play) Emergent Strategy
7. Cognitive School (Strategy as a result of strategic interpretation) Individual Focus Strategy
8. Entre-preneurial School (Strategy as the vision of the leader)Individual Focus Strategy
9. Environmental School (Strategy as a reaction to the market) External Focus
10. Configuration School (Mintzbergs attempt to create a synthesis between the deliberate and
emergent schools)