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Concept Management Review 2006, 15-20 2006 CMR Sage

The Ten Commandments of Crafting Successful Business Strategy:

a Review
Kwaku Ahenkora *

Concept Consulting , Primrose Road, London, E10 5EE


Email: kwaku@conceptrmt.co.uk

The business strategy literature is replete with prescriptions and directives with regard to successful
performance. However, most theories and checklists are seldom tested or compared with competing
theories. This study used content analysis to examine the core construct of Thompson and
Stricklands 10 commandments for crafting successful business strategies. A review of the
management literature identified strategic positioning, adaptive strategic change, competitive
advantage, competitive rivalry and behaviour and generic strategies as the core themes of the 10
commandments. While the core constructs of the 10 commandments of crafting business strategy are
embedded in the literature stream of strategic management, they emphasise the economic perspective
more than the resource-based view of performance.

Keywords: Crafting strategy, Thompson and Strickland, strategy prescriptions, competitive advantage

Introduction
theories. This raises the question; are the core
Strategic management has become an expectation, constructs of the 10 commandments embedded in the
not only on the part of the company but also the literature stream of strategic management research?
individual manager (Grundy, 2002). Over the past 50 Most strategic management theories and checklists
years a considerable amount has been written about are seldom tested or compared with competing
strategy and from this a variety of definitions and theories (Camerer, 1985). However, it has been
strategic perspectives have emerged. Mintzberg suggested that the continual attunement of rivalling
(1998) identified ten views of the strategy process perspectives in strategic management should be
and how they developed while Whittington (1993) promoted (Mahoney, 1993).
suggested that there are four principal or generic This study, therefore, examined the soundness of
approaches to strategy formulation. Several writers Thompson and Stricklands 10 commandments for
have indicated that an organisation with a well- crafting strategy and the extent to which they are
articulated strategy can achieve sustained embedded in strategic management thought.
competitive advantage over those organisations that
lack strategic vision (Hamel and Prahalad, 1989; Approach
Prahalad and Bettis, 1986; Prahalad and Hamel,
1990; Westley and Mintzberg, 1989; Porter, 1980). In order to compile a research stream to establish the
Although there are a potentially unlimited variety of core constructs of Thompson and Stricklands ten
effective corporate strategies it has been suggested commandments of crafting strategy, content analysis
that if executives benchmarked their strategies of the management literature was made. Content
aggressively as they do their operations, most would analysis, while certainly a method of analysis, is
discover that their strategies are far from first class
more than that: it is a method of observation; instead
(Collis and Montgomery, 1998).
of observing peoples behaviour directly, or asking
Thompson and Strickland (2001), therefore,
based on experience proposed the ten them to respond to scales, or interviewing them, the
commandments to serve as useful guides for investigator takes the communications that people
developing successful business strategies. Vorberda have produced and asks questions of the
(2004) has observed that the popular business communications (Kerlinger, 1964). Key word
literature on strategic management is replete with searches were conducted by employing broad search
prescriptions and directives with regard to successful statements and names, e.g. crafting strategy,
strategic recipes and and yet, managers in todays
competitive environment are engaged in strategic competitive advantage, core competence, resource,
experiments without the guidance of appropriate Porter, Collis, Mintzberg. A digital repository was
created where full texts of articles were downloaded.

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*Author is also a lecturer, London Business College. The useful comments of Dr. Phil Goldfeder are acknowledged.
K. Ahenkora, Concept Management Review 2006, 15-20

Collateral descriptors surrounding various key words a fit among a companys activities and making
were examined for content and perspective. The trade-offs in competing-choosing what not to do
underlying constructs- theory and themes of the Ten (Porter 1996). Strategic fit sees managers trying to
develop strategy by identifying opportunities arising
Commandments were identified through the
from an understanding of the environmental forces
bibliography and citations. acting upon the organisation, and adapting resources
so as to take advantage of these (Johnson and
The Ten Commandments : theory and themes Scholes, 1999). Prahalad and Hamel (1990) think
that the essence of strategy lies in creating
The theoretical underpinnings of the 10 tomorrows competitive advantages faster than
commandments were analysed separately and the competitors mimic the ones you possess today.
emerging themes provided the framework for the Successful organisations accept the challenge and
core constructs of the commandments. seek to be environmentally vigilant, innovative and
flexible- organisations which are less aware and
1. Place top priority on crafting and executing
relatively inflexible will find they are reacting to
strategic moves that enhance the companys position
situations they do not fully understand (Thompson
for the long term
1995).

3.Invest in creating a sustainable competitive


Thompson and Strickland make strategic positioning
advantage
a priority in crafting successful strategies. Porter
(1996) identifies three key principles underlying
strategic positioning: strategy is the creation of a Thompson and Strickland (2000) recommend that
unique and valuable position involving different set having a competitive edge over rivals is the single
of activities such as serving few needs of many most dependable contributor to above average
customers, serving broad needs of a few customers profitability. Therefore as a general rule, a company
and serving broad needs of many customers in a must play aggressive offense to build competitive
narrow market. A company not only needs to be advantage and aggressive defence to protect it. There
operationally effective it also needs to have a are as many competitive strategies as there are
superior positioning strategy (Porter, 1996). competitors. However, the biggest and most
Positioning also features prominently in Mintzbergs important differences among competitive strategies
(1987) framework of defining strategy. According to are whether a companys target market is broad or
Fahey and Randall (2001) whether an organisation narrow and whether it is pursuing a competitive
wins today and positions itself for tomorrow depends advantage linked to low costs or product
on how they continuously enhance the linkages or differentiation Strategic positioning attempts to
interface between strategy (what the organisation achieve sustainable competitive advantage by
does in the marketplace) and organisation (what preserving what is distinctive about a company: it
takes place within the organisation). Johnson and means performing different activities from rivals, or
Scholes (1999) highlighted the long-term perspective performing similar activities in different ways (Porter
in their definition of strategy: the direction and scope 1996). Porter (1985) argues that competitive
of an organisation over the long term which achieves advantage can accrue from cost leadership,
advantage for the organisation through its differentiation and focus. Real competitive advantage
configuration of resources within a changing also implies that companies are able to satisfy
environment to meet the needs of markets and to customer needs more effectively than their
fulfil stakeholder expectations. competitors (Thompson 1995).
2.Be prompt in adapting to changing market 4. Avoid strategies capable of succeeding only in the
conditions, unmet customer needs, buyer wishes for most optimistic circumstances
something better, emerging technological
alternatives, and new initiatives of competitors
This guideline seeks to alert companies to the
countermeasures of competitors and times of
Thompson and Strickland argues that while pursuing unfavourable market conditions. Thompson and
a consistent strategy has its advantages, adapting Strickland are of the opinion that a good strategy
strategy to changing circumstances is normal and works reasonably well and produces tolerable results
necessary. The concept of adaptive strategic change even in the worst of times. Competitive battles
is important in strategic management thought. Now, should be seen not as one-shot skirmishes but as a
more than in the early development of strategy as a dynamic multi-round game of moves and
field of study, changing environments are forcing countermoves- every business should strive for
companies in almost every sector to re-examine their multiple sources of competitive advantage and
strategy (Vorberda, 2004). Strategy involves creating

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K. Ahenkora, Concept Management Review 2006, 15-20

should expect the terms of competition to shift over


time (Gupta, 2001). Gupta (2001) argues that the
terms of competition shift due to change in customer Thompson and Strickland maintain that tiny
priorities and buying behaviour- recession, differences between rivals product offerings may not
availability of substitutes, changes in customers be visible or important to buyers. From this
product or process technology, and achievement of perspective, it means that a company should be both
competitive parity- even if customer priorities operationally effective and in addition it should have
remain unchanged, competitive dynamics themselves a plan to perform different activities or perform
often result in changing the relevant bases for activities differently than its competitors (Porter,
competitive advantage. 1980, 1996). A company needs to minimise its
vulnerability on one hand and maximise its potential
5. Dont underestimate the reactions and the for competitive edge on the other (Quinn & Hilmer,
commitment of rival firms 1994; Porter, 1980). Differentiation can be costly if
the basis for differentiation that is chosen
subsequently proves to be inappropriate (Giligan and
Rivals tend to be most dangerous when they are Wilson, 2003).
pushed into a corner and their well-being is
threatened. Causes generate effects. On occasions 9. Avoid stuck in the middle strategies that
companies may attempt to seize the competitive represent compromise between lower costs and
initiative and introduce an innovatory change. An greater differentiation and between broad and
action by one competitor which affects the relative narrow market appeal
success of rivals provokes retaliation- one action can
therefore provoke several reactions depending on the
extent of the impact and the general nature of A company risks being stuck in the middle if it is not
competition (Thompson, 1995). able or willing to make choices on how it should be
competitive (Porter, 1997). Being stuck in the middle
6. Consider that attacking competitive weakness is almost a guarantee for poor performance, and
is usually more profitable and less risky than hence low profitability (Porter, 1980). Gupta (2001)
attacking competitive strength argues that for many years, strategy theory postulated
that businesses should strive to compete on the basis
of either low cost or differentiation- however, the
Thompson and Strickland propose that attacking notion that every business must choose between
capable, resourceful rivals is likely to fail unless the either differentiation or cost leadership simplifies
attacker has deep financial pockets and a solid basis the reality facing most companies too grossly to be
for competitive advantage. In considering the of much practical value. Focus is the third of the
positioning of the organisation in relation to others generic strategies identified by Porter and it involves
with which it competes for customers or resources, it the organisation concentrating its efforts upon one or
is necessary for an organisation to establish its more narrow market segments, rather than pursuing a
relative strengths in its market through competitor broader-based strategy. Although Porter presents
analysis (Johnson and Scholes, 1998). competitive strategies in this way- cost leadership,
focus and differentiation, many companies succeed
7. Be judicious in cutting prices without an not by a blind adherence to any approach, but rather
established cost advantage by a combination of ideas (Giligan and Wilson,
2003). It is apparent that some leading companies
have not succeeded by being exclusively cost
Thompson and Strickland are of the opinion that leaders, differentiators or focused- many companies
only a low-cost producer can win at price cutting are both cost leaders and differentiators (Sanders,
over the long term. By pursuing a strategy of cost 1987).
leadership, the organisation concentrates upon
achieving the lower costs of production and 10. Be aware that aggressive moves to wrest market
distribution so that it has the capability of setting its share away from rivals often provoke retaliation
prices at a lower level than its competitors (Porter, in the form of a marketing arms race or price
1980). The difficulties of maintaining the lowest cost war- to the detriment of everyones profits
position over time and the vulnerability to a price-led
attack have led many organisations to view cost
leadership with a degree of caution (Giligan and Porter (1980) suggests that firms that pursue a
Wilson, 2003). particular strategy aimed at the same market or
market segment make up a strategic group and
8. Strive to open up very meaningful gaps in quality competition in any industry is rooted in its
or service or performance features when pursuing underlying economic structure, and is therefore more
a differentiation strategy complex than moves and counter moves of

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K. Ahenkora, Concept Management Review 2006, 15-20

companies and their competitors. Knowing this, a interactions and competitive advantage in crafting
company should strive for sustained superior successful business strategy. The research stream of
performance in adding value in order to obtain strategic management emphasises the importance of
competitive advantage and therefore be profitable the relationships among the basic elements of
(Porter, 1980; 1996). Competitive rivalry is known organisational and competitive interactions such as
to be an external value driver, and it has direct competition and market structure, organisational
impact on margins (Johnson and Scholes, 1999). capabilities and strategies and performance in
modelling competitive advantage (Caves and Porter,
Core Themes 1977; Porter, 1985; Fiegenbaum and Thomas 2004).
Historically, the Structure-Conduct-Performance
The content analysis of the 10 commandments (SCP) paradigm in industrial organisation economics
enabled the identification of the core themes is used as the basic competitive model (Porter, 1980).
underpinning the guidelines (Table 1). The core The paradigm suggested that market structure
themes seem to suggest that the guidelines propose elements determine the level of firm performance.
the development of a generic strategy The paradigm was later modified to include
(commandments 7,8,9) that delivers sustainable strategy (firm conduct) as a key element that can
competitive advantage ( commandment 3). The make a difference in explaining firm performance in
strategy should position (commandment 1) the industries, since firms tend to have different skill sets
business in the industry for the long-term and at the and distinctive competencies (Fiegenbaum and
same time enable it to make rapid response to Thomas 2004). A selective review of strategy studies
changes and opportunities in the environment- shows that Porter (1980, 1985) and Caves and Porter
adaptive strategic change (commandment 2). (1977) used the basic paradigm to focus on how to
Underpinning the strategy should be an maximise firm profit. Firms in an industry are no
understanding of the competition-competitive longer homogenous and have been clustered into sets
dynamics, competitive rivalry, competitor analysis of firms that follow similar strategies- strategic
(commandments 4,5,6) and competitor behaviour groups . Strategic management researchers have
(commandment 10) in the industry. described this clustering strategy in terms of strategic
typologies (Miller and Friesen,1978) as well as
While the content analysis refers to the thoughts of generic strategies (Porter, 1980). Generic strategies
several contributors, the core themes suggest that underpin the 10 commandments.
Thompson and Stricklands guidelines lean heavily More recent research in strategic management
towards the works of Porter (1980, 1985,1995) on has shifted toward understanding the strategic
strategy and competitive advantage. mechanisms that can create competitive advantage
(Porter, 1980, 1985) and to explain the firm-level
The themes are summarised as follows:
mechanisms for achieving sustainable competitive
Commandment1, Strategic Positioning/ vision advantage based on the framework of core
competitive capabilities (Hamel and Prahalad, 1994;
Commandment2, Adaptive Strategic Change Collis and Montgomery, 2005). The research stream
of strategic management on firm performance has
Commandment3, Competitive advantage categorised determinants as either organisational or
economic in nature (Andrews, 1971; Montgomery,
Commandment4, Competitive dynamics 1994). An economic perspective emphasises the
importance of the external market factors such as
Commandment 5, Competitive rivalry firms competitive position, market power and
industry structure (Caves and Porter, 1977; Chandler,
Commandment 6, Competitor analysis 1990; Porter, 1985). The resource-based view posits
that competitive advantage can be sustained only if
Commandment 7, Generic strategy- cost leadership
the capabilities creating the advantage are supported
Commandment 8, Generic strategy-differentiation by resources that are not easily duplicated by
competitors.
Commandment 9, Generic strategy- focus The market-based and the resource-based views
of the firm provide alternative views of how to
Commandment10, Competitive rivalry and achieve strategic fit. In one particular study, Hansen
behaviour and Wernerfelt (1989) showed that economic factors
(industry variables, market share and firm size)
Theoretical construct represented 18.5% of variance in business returns
while organisational factors (goal emphasis and
A synthesis of the core themes of the 10 human resources) contributed 38% of performance
commandments suggests that Thompson and variance. Fiengenbaum and Thomas (2004) have
Strickland stress the importance of competitive indicated that competitive environments will

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K. Ahenkora, Concept Management Review 2006, 15-20

K. Ahenkora, Concept Management Review 2006, 15-20

influence how capabilities develop over time and Fiegenbaum, A. and Thomas, H.2004. Strategic risk
that, in turn, these capabilities will affect and competititve advantage: an integrative
performance and competition. It has been proposed perspective. European Management Review.
that all determinants of firm performance should
1:84-95
work in harmony with each other to create total
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Conclusion
Gupta, A.K. 2001. Business unit strategy: the quest
for competitive advantage. In the Portable
This review highlights the strategic management
MBA in Strategy, Fahey, L. and Randall, R.M
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Hamel, G. and Prahalad, C.K. 1989. Strategic intent.
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Harvard Business Review, May-June, 63-76
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