Chapter 8:

HISTORY OF
STRATEGIC
MANAGEMENT

 1950s and 1960s- Strategic management

was originated.
Alfred Chandler- recognized the
importance of coordinating the various
aspects of management under one umbrella
strategy.
1962- He made Strategy and Structure
which is showed in long-term properly
coordinated strategy is important to give a
company the needed structure, direction,
and focus.

 1957- Philip Seiznick introduced the

matching
of
the
organizations
internal factors and the external
environmental circumstances
1965- Igor Ansoff came up with a
new
vocabulary
pertaining
to
strategic management, in his book
Corporate Strategy.

 Peter
Druckerauthor
of
several
management books in span of five decades.
- he emphasized the importance of
objectives. He also believed in clear-cut
objectives that would set the direction of the
particular organizations.
1954- Theory of Management by Objectives
(MBO) evolved.
1985- Ellen-Earle Chaffee, summarized her
thought on strategic management theory.

Growth and Portfolio Theory

The
Profit
Impact
of
Marketing
Strategies (PIMS) was a continuing study
on strategies that started in 1960s.
- started with General Electric then moved to
Harvard in the early 1970s.

 1980-there
were
also
paradoxical
conclusions that high market share and
low market share were often very
profitable but those in between were not.
Explained by Michael Porter.
Portfolio Theory- developed by Harry
Markowitz.

Portfolio Theory
- propagated the concept that a broad
portfolio of financial assets could reduce
risk exposure of companies.
Boston
Consulting
Group
(BCG)examines how business unit performs and
what it contributes to the organization in
terms of revenues.
General Electric Retail (GE)- expanded
the BCG

The Risk of Marketing Management

1970- saw the rise of marketing
orientation. The key requirement is a
product of high quality.
1950 and 1960- sales orientation was
conceptualized. The concentration as the
art of selling.
1970- Theodore Levitt theorized that
business should start with the customers
instead of producing first before selling it.

The Risk of Japanese-Oriented

Management Style
During the 70s they saw the rise of
Japanese industry.
The success of the Japanese was explained
in these practices:
a) there was a high employee morale,
dedication and loyalty
b) costs were lower including labor costs

c) government policies favor businesses

d) after the Second World War, japan
became a highly productive and capital
incentive organization
e) exports failed
f) there was superior quality control such
as
Total Quality Management
- these successful strategies were further
honed by the theory of W. Edward Deming.

 1981- Richard Pascale and Anthony Athos

proved that despite the success of the
Japanese, there was still something
missing.
The Art of Management- they claimed
that the reason for the success of the
Japanese was their superior management
techniques.
This theory is better known as the 7S:
-Strategy, Structure, Systems, Skills,
Staff, Style and Subordinate Goals od
Shared Values.

 Kenichi Ohmae- released the book The

Mind of the Strategist in America, which
was originally published in Japan, 1975.
-He reiterated that a strategy should not
be too analytical but should be more of a
creative art.
1982- Tom Peters and Robert Waterman
released in Search of Excellence, which was
a response to Ohmaes book.

Eight keys to success:

a) Customer focus.
b) Action-oriented.
c) Entrepreneurship.
d) Simplicity.
e) Stick to what the company knows best.
f)Value-oriented management.
g) People-oriented.

 J. Rehfeld (1994). Discussed the

importance of transformation of
knowledge from various cultures to a
management style to compare
globally.

The Competitive Edge

Gary Hamel and C.K. Prahaldintroduced the strategic architecture
concept.
Dave Packard and Bill Hewlettconceptualized
Management
by
Walking Around (MBWA)

 Japanese managers retaliated with a similar

concept which originated in Honda, is called
3Gs: Genba, Genbutsu, Genjitsu which is
translated to: actual place, actual thing, and
actual situation.
Michael Porter- introduced the Five Forces
Model, which introduced the company to
gain sustainable competitive advantage.

 1993- John Kay improved the value

chain concept by putting a financial
touch.
Positioning
Theorywas
popularized by Al Ries and Jack Trout
in the book, Positioning: The Battle
for your Mind in 1979. This means
crafting a strategy that would make
the brand/product in the minds of the
consumers.

 1992- Jay Barney discussed that a

strategy is a product of resources such as
human, technology and suppliers and
combined in unique ways.
Michael Hammer and James Champychampioned reengineering involves the
organization of a firms assets around
whole processes rather that task/.

 In 1989, Richard Lester identified

seven best practices that a company
needs to adapt:
Continuous improvements in cost,
quality, service and product innovation
done on a simultaneous basis;
Breaking down organizational barriers
between departments;
Eliminating layers of management to
make it leaner and simple;

 Closer relationships with customer and

supplier;
Intelligent use of new technology;
Global focus; and
Improving human resource skill

Theorists like W. Edwards Deming,

Joseph Juran, A. Kearney. Phillip
Corsby,
and
Armand
Feignbaum
develop
quality
improvement
techniques like TQM, Continuous
improvement, Lean Manufacturing, Six
sigma and Return on Quality.

Another set of theorists advocated customer

service as the key to an organizations
success, namely:
James Heskett (1988),
Earl Sasser (1995)
William Davidow, Len Schelesinger,
A. Paraugman (1998)
They provided fishbone diagramming, service
charting, Total Customer Service(TCS), service
profit chain, service gap analysis, service
encounter, strategic vision, service mapping, and
service teams.

Process Management
developed techniques like product
quality management
The sequence of steps enabled the
company to eliminate inefficiencies and
make the process more effective.

Carl Sewell, Frederick Reicheld, C.

Gronoss and Earl Sasser believed in
the loyalty effect among customers.
Loyalty Effect includes:
Employee loyalty
Supplier loyalty
Distributor loyalty
Shareholder loyalty

Customer lifetime value made customer

service a long-term endeavor, a long-term
relationship with customers. This is now
better known as relationship marketing and
customer relationship management.

James Gilmore and Joseph Pine

had a mass customization concept.
They explained it further in the book.
The Experience Economy which
allowed a company to individualize a
product for each customer without
losing economies of scale. Bernd
Schmitt expanded it to further to
customer experience management.

James Collins and Jerry Porras believed in

core values that would make the company
last.
Arie de Geus(1997) identified four key
traits of companies that have survived for
the last 50 years:
Sensitivity to the business environment.
It is the ability to be attuned with the
factors in the environment.

 Cohesion and identity

It is the ability to build a company
with shared vision and purpose
Tolerance and decentralization
It is the ability to build relationship
among the employess and strategic
business units.
Conservative Financing
It is the ability to handle financial
matters well.

Jordan Lewis used the term alliance

strategies. He considered distributors,
suppliers and firm in related industries
and
even
competitions
strategic
partners. The relationship should
endure and be characterized by
mutual respect and trust.

Military Theorist

Sun Tzu - The Art of War

Von Clausewitz - On War
Mao Tse Tung - The Little Red Book
Barrie James (1984) Business War Games
Al Ries and Jack Trout (1986) Marketing
Warfare
Wess Roberts (1987) - Leadership Secrets
of Attila the Hun

Military Theorist
From the book of Mao Tse Tung, came the
principles of guerrilla warfare.
Philip Kotler, a marketing guru is wellknown proponent of marketing warfare
strategy with his books in marketing
management. The theories are divided
into:

Offensive marketing
Warfare strategies
Defensive marketing warfare strategies
Flanking marketing warfare strategies
Guerilla marketing warfare strategies

In 1993, Moore developed an ecological model of

competition,
a
Darwinian-inspired
strategy
wherein strategies coincide with ecological
stability.

Strategic Change
Alvin Toffler
1970, set a trend in strategic management
with his book Future Stock
1980, Third Wave
Watts Wacker and Jim Taylor
1997, Age of Access
Jeremy Rifkin
2000, popularized this Age of Access

Strategic Change
Peter Ducker
1968, Age of Discontinuity
Gary Hamel
2000, discussed strategic decay, which
believed that changes are needed no
matter how powerful existing strategies
are.

 Dereck Abell
1978, described strategic windows, stressing the
importance of time in both the start and end of a
particular strategy.
Charles Handy
1989, strategic drift which is a gradual and
transformational change, a sudden shift caused
by unforeseen changes in environment.

Strategic Change
Andy Grove
Conceptualized the strategic inflection point,
where a new trend is indicated.
Malcolm Gladwell
2000, discussed the tipping point, where a
trend takes off.
Noel Tichy (1983) and Richard Pacale (1990)
Propagated the importance of a company to
reinvent itself.

 Art Kleimer
1996, claimed that a company needs to
foster a corporate culture to initiate the
change.
Adam Slywotsky
1996, theorized strategic anticipation, to
spot emerging patterns of changes in
the industry and in the environment.

Strategic Change
Clayton Christensen and Kees van de
Heijden
1997, developed their own strategies on
change.
Constantinos Markides
1999, discussed strategy formation and
implementation as continuos.

Strategic Change
Henry Mintzberg
1998, developed strategic planning with five
types of strategies:
Strategy as plan. Direction, guide, course of action.
Strategy as ploy. A maneuver intended to outdo a
competitor.
Strategy as pattern. A consistent pattern of past
behavior.
Strategy as position. Location of brands, products or
companies within the boundaries of consumers.
Strategy as perspective. Determined by a master
strategist

Strategic Change
J. Moncrieff
1999, stressed strategy dynamics, a
combination of planned and unplanned
strategies.
Chaos Theory deals with turbulent
systems. Axelrod, R., Holland J., and Kelly
S. and Allison M.A. calls these systems of
multiple actions complex adaptive
systems.

Information TechnologyOriented Strategy

Daniel Bell
1985,
examined
the
sociological
consequences of information technology.

Gloria Shuck and Shoshana Zuboff

1985, identified the psychological facets
of information technology.

Information TechnologyOriented Strategy

Peter Senge
1990, collaborated with Arie de Geus and
theorized the importance of the use of
information in the success of the organization.
Senge identified five components of a learning
organization:
Personal responsibility, self reliance and
mastery. It is always crucial to face problems
and make decisions, or take advantage of
opportunities based on the organizations
capabilities.

 Mental Models. There is a need to explore

the individual mental capacities of each one
in organization.
Shared Vision. The visions are cascaded and
communicated to all the employees in the
organization.
Team Learning. Employees learn through
teams.
Systems Thinking. It is also called synergy. It
is looking at the organization as a whole
rather than per individual employee.

Information TechnologyOriented Strategy

Thomas Stewart uses the term intellectual capital
to describe the investment of the organization in
knowledge. This comprises of human capital
(knowledge of employees), customer capital
(knowledge of customers), and structural capital
(knowledge that resides in the capital itself).
Evans and Wurslet described how industries with
a high information component are transformed.

Psychology of Strategic
Management
Henry Mintzberg
1973, senior
situations

managers

deal

with

unpredictable

Daniel Isenberg
In his study of senior managers, he found that their
decisions are mostly based on intuition.

Abraham Zaleznik
1977, identified the difference between managers and
leaders. Leaders are considered as visionaries, those
who inspire. Managers are concerned with processes,
plans, and forms.