8/3/2019 K10 Strategic Mgmt II
1/383
610
Strategic Management iiKent Springda l
With Contributions by:
Patrick ThurbinSid LoweMartha Mador
8/3/2019 K10 Strategic Mgmt II
2/383
Strategic Management II
First Edition January 2003Second Edition June 2009 Kingston University 2010
Published by
Kingston Business School
Kingston University
Kingston Hill
Kingston upon Thames
Surrey KT2 7LB
All rights reserved. No part of this work may be reproduced, stored in a retrievalsystem or transmitted, in any form, or by any means, without permission from thepublisher.
8/3/2019 K10 Strategic Mgmt II
3/383
STRATEGIC MANAGEMENT IICONTENTS
Unit 1: Strategic Decision Making
1. Objectives 1.1
2. Constraints for managers 1.1
3. Influences on decision making 1.2
4. Decision making models 1.2
5. Exploring key themes 1.4
References and further reading 1.5
Essential Reading:
Mintzberg, H., and Waters, J., (1998) Of Strategies, Deliberate and Emergent
in Segal-Horn, (ed.) The Strategy Reader, OU/Blackwell
Eisenhardt, K.M. (1999) Strategy as Strategic Decision Making,
Sloan Management Review,Vol. 40, Issue 3
Hendry, J. (2000) Strategic Decision Making, Discourse, and Strategy as
SocialPractice,Journal of Management Studies,Vol. 37, No. 7.
Jarzabkowski, P. & Wilson, D.C. (2006) Actionable Strategy Knowledge:
A Practice Perspective, European Management Journal, Vol. 24, No. 5.
Unit 2: Organisational Learning and Entrepreneurship
1. Objectives 2.1
2. Introduction 2.1
3. Learning organisations 2.5
4. Competitiveness and innovation 2.6
5. Corporate entrepreneurship 2.8
6. Exploring key themes 2.9
References and further reading 2.10
Essential Reading:
March, J.G. (1989) Exploration and Exploitation in Organizational
Learning,Organization Science,Vol. 2, No. 1.
Crossman & Berdrow (2003), Orgnizational Learning and Strategic Renewal,
2Strategic Management Journal,Vol. 24, No. 11.
Teece, D.J., Pisano, G., and Shuen, A., 1997, Dynamic Capabilities and Strategic
Management, Strategic Management Journal,Vol.18, No. 7.
strategic management II contents 1
8/3/2019 K10 Strategic Mgmt II
4/383
Stopford, J M and Baden-Fuller, C (1994) Creating Corporate
Entrepreneurship, Strategic Management Journal,Vol. 15, No. 7.
Unit 3:Alliances
1. Objectives 3.1
2. The impetus for alliances 3.1
3. Development of strategic alliances 3.2
4. Purposes and types of alliances 3.2
5. Managing alliances 3.3
6. Relational quality and trust 3.5
7. Alliances and networks 3.5
8. Conclusions 3.6
9. Exploring key themes 3.6References and further reading 3.7
Essential Reading:
Grant, R.M. and Baden-Fuller, C. (2004) A Knowledge Accessing Theory
of Strategic Alliances,Journal of Management Studies,Vol. 41, No. 1.
Arino, A., de Ia Torre, J., Ring, P. (2001) Relational Quality: Managing Trust
in corporate Alliances, California Management Review,Vol. 44, No. 1.
Ferlie, E. and Pettigrew, A., (1996) Managing Through Networks: Someissues and Implications for the NHS, British Journal of Management,Vol. 7.
Unit 4: Organisational Culture and Image
1. Objectives 4.1
2. Organisational culture themes within management literature 4.1
3. Culture as something an organisation has 4.1
4. Culture as something an organisation is 4.3
5. Culture as socially constructed reality 4.4
6. Artefacts and characteristics of culture 4.57. The cultural dynamics of organisations 4.6
8. The case for organisational identity 4.7
9. Cultures consequences for management 4.8
10. Exploring key themes 4.8
References and further reading 4.9
strategic management II contents2
8/3/2019 K10 Strategic Mgmt II
5/383
Essential Reading:
Hatch, M. J. (1993) The Dynamics of Organisational Culture,
Academy of Management Review,Vol. 18, No. 4.
Hatch, M.J. & Schultz, M. (2002), The dynamics of organizational identity,
Human Relations,Vol. 55, No. 8.
Dunford, R. & Jones, D. (2000), Narrative in strategic change,
Human Relations,Vol 53, No. 9.
Unit 5: Corporations and Social Responsibility
1. Objectives 5.1
2. Arguments for-and-against Corporate Social Responsibility (CSR) 5.13. Operationalising the concept of social responsibility 5.1
4. How firms could manage their interactions with the society 5.4
5. Exploring key themes 5.5
References and further reading 5.6
Essential Reading:
Schwartz, M.S. and Caroll, A.B. (2003) Corporate Social Responsibility:
A Three-Domain Approach, Business Ethics Quarterly,Vol. 13, No. 4.
Matten, D. and Crane, A. (2005). Corporate citizenship: towards an extended
5.theoretical conceptualization, Academy of Management Review,
Vol. 30, No. 1.
Kaufman, A. and Englander, E. (2005). A team production model of
corporate governance, Academy of Management Executive,Vol. 19, No. 3.
strategic management II contents 3
8/3/2019 K10 Strategic Mgmt II
6/383
8/3/2019 K10 Strategic Mgmt II
7/383
UNIT 1STRATEGIC DECISION MAKING
1. Objectives
q to develop understanding of how decisions are made in organisations
q to develop an understanding of some of the constraints upon decision makers
q to consider some approaches to facilitating and improving decision making
processes
2. Constraints for managers
Managers make decisions, and these are influential in determining the futures of
organisations. They do this despite the constraints placed upon them by, inter alia,
factors in the external business environment, like government policies and trade
cycles, and specific local factors like the culture of their organisations. For example:
q decisions made by many UK and US bank executives in the years preceding the
current financial meltdown led to the collapse of their banks, while other financial
organisations operating more prudently and using more conventional strategies in
the same industry achieved more sustained success.
q decisions made by executives at Easyjet and Ryanair, two short-haul budget
airlines based in the UK, led to differential competitive postures from more
traditional airlines offering a comprehensive range of services, like British Airways.
These smaller airlines have shown greater resilience in weathering oil price
fluctuations and have managed to sustain their level of profitability in comparison
to the larger airlines.
q the decision made by Glaxo Wellcome and Smith Kline Beecham to merge was
initially taken in 1998. This decision was changed in the same year, apparently
because the two chief executives could not agree on who would run the newly
merged giant. The merger finally went ahead two years later, creating GSK.
These examples suggest that managers can, and do, make decisions. Who the people
are making the decisions - and how they make them - has been the subject of
considerable debate over many years.
Some researchers see managers as fundamentally constrained - by, for instance, their
mental processes and biases, the limitations of the information to which they have
access, or the political and social contexts in which they work. Some have seen
decisions as emerging from organisational processes and routines.
However, it remains the case that decisions are made one way or another, so the study
of decisions and decision makers has been an important strand in strategic research.
strategic management II 1.1
8/3/2019 K10 Strategic Mgmt II
8/383
3. Influences on decision making
There is now a growing and bulky literature on strategic decision making. The view
that decision making processes are guided by rationality has for long been central instrategic decision making theory and practice (Papadakis and Barwise, 1997). It has
also for long been recognised that strategic decision making is very much influenced
by the political behaviour of decision-makers (e.g. Child and Tsai, 2005; Wilson, 2003)
and has consequently been conceptually treated by many researchers (Schwenk,
1995).
More recently, the notion that intuition is also a viable source of decision making has
received attention in the strategic decision making literature, though little empirical
evidence has been furnished to support the extent that decision making is indeed
influenced by it (Miller and Ireland, 2005; Sadler- Smith and Shefy, 2004).
In an empirically rich piece of work, Eisenhardt & Zbaracki (1992) noted three
paradigms, explored over the preceding 15 years, which attempted to describe the
nature of strategic decision making:
q rationality or bounded rationality - rational actors gather information, analyse it
without bias, and make decisions aimed at known goals - like profitability
q politics & power - managers pursue their own interests, or the interests of
coalitions, in order to make decisions; rationality is subjugated to the individual
needs of powerful people
q garbage can- chance - for instance, who showed up at any given meeting - has asignificant impact on decisions.
These authors conclude that, while each of these was presented as a definitive model
for describing the nature of strategic decision making processes, the empirical
evidence suggests that all of these paradigms co-exist - often in the same organisation.
There are lessons to be learned about each one. Indeed, later developments in the
literature do show that some convergence has occurred and it has now been
recognised that the complexity of realistic strategic decision making processes could
be best unravelled if they are understood as the product of intuitive and political
processes, combined with rational methods of decision making (Butler, 2002).
4. Decision making models
Elsewhere in the literature, researchers have attempted to develop models of decision
making. Importantly, McGrath (1964) identified that decision making is a process with
input and outcomes. His process model is shown in Figure 1.
strategic management II1.2
8/3/2019 K10 Strategic Mgmt II
9/383
Figure 1: Interaction process model
Source: McGrath (1964)
Inputs have been studied at all levels, for instance, at the:
q individual level- demographics and psychographics of the decision makers (e.g.
Hambrick and Mason, 1984)
q group level- the routines, relationships and heuristics employed by the group (e.g.
Eisenhardt, 1989)
q environmental level - the economic and social context of the organisation (e.g.
Mintzberg, 1979).
Researchers have examined the process itself, trying to understand whether and how the
nature of process is linked to performance (Elbana, 2006). Dean and Sharfman (1996)
collected data on 61 decisions, using interviews with senior managers to investigate the
effectiveness of strategic decision making processes. Their conclusion was that:
decision processes influence the strategic choices managers make, which
in turn influence the outcomes affecting a firm.
Dean and Sharfman, 1996, p389
They also note that:
managers who collected information and used analytical techniques
made decisions that were more effective than those who did not. Those
who engaged in the use of power or pushed hidden agendas were less
effective than those who did not
Dean and Sharfman, 1996, p389
Using a different methodology, Eisenhardt (1989) also examined decision cases, inwhat she termed High Velocity Environments, where changes in the business context
were rapid, frequent and discontinuous. Her findings also highlighted performance
strategic management II 1.3
Individual
level
Input Process Outcome
Group
level
Environmental
level
Interaction
process
Performance
outcomes
Other
outcomes
8/3/2019 K10 Strategic Mgmt II
10/383
problems associated with the use of power and political behaviour in decision making.
In addition, she identified how managers speed their cognition in these difficult
contexts and still maintain decision quality.
If decision process is linked to outcomes, then how to improve processes in order to
improve performance becomes a critical issue. The literature is full of suggestions,
ranging from team building interventions, through to the use of complex software to
enable the modelling of decision problems (Eden, 1992).
Scenario planning is a further approach to strategy development which is widely used.
It aims to improve performance by facilitating the development of a wider view of
possible strategic outcomes on the one hand, and an expanded and shared model of
strategy within teams on the other.
5. Exploring key themes
The four articles in this section have been chosen to explore certain recurring themes
in the literature.
q Mintzberg & Waters (1998) is a seminal article. It proposes a typology of strategy
making contexts, identifying the constraints and opportunities for strategy making
present in each one. These contexts articulate many of the environmental and
organisational level inputs to strategic decision making processes.
qEisenhardt (1999) represents many earlier findings on strategic decision makingprocesses. Her focus is the Top Management Team which actually makes the
decisions, how they operate and how they maintain decision quality.
q Hendry (2000) makes a case for seeing strategic decision making as social practice,
in which strategic discourse (including the discourse of strategic decisions)
provides the loose coupling that mediates between cognition and action in the
structuring of change process.
q Jarzabkowski & Wilson (2006) offer a pragmatic approach to how various strategic
management concepts and models should be used by practitioners of strategy. In
their view, it is an examination of practice rather than theorizing about practice
that might yield insight into how strategic theory and practice are inter-related.
strategic management II1.4
8/3/2019 K10 Strategic Mgmt II
11/383
References and further reading
Butler, R. (2002) Decision making. In Sorge, A.(ed.), Organisation. London, Thomson
Learning, pp. 224-251.
Child, J. and Tsai, T. (2005) The dynamic between firms environmental strategies and
institutional constraints in emerging economies: evidence from China and Taiwan,
Journal of Management Studies,Vol 42, 95-125.
Dean, J. & Sharfman, M. (1996) Does Decision Process Matter? A Study of Strategic
Decision-Making Effectiveness, Academy of Management Journal,Vol. 39, No 2, pp.
368-396.
Eden, C. (1992) Strategy Development as a Social Process, Journal of Management
Studies,Vol. 29, Issue 6, pp. 799-812.
Eden, C. and Ackermann, F. (2002) A Mapping Framework for Strategy Making. In
Huff, A.S. and Jenkins, M. (2002) Mapping Strategic Knowledge, London, Sage, pp.173-
195.
Eisenhardt, K.M. (1989) Making Fast Strategic Decisions in High Velocity
Environments, Academy of Management Journal,Vol. 32, No. 3, pp 543-576.
Eisenhardt, K.M. (1999) Strategy as Strategic Decision Making, Sloan Management
Review, Spring 99, Vol. 40, Issue 3.
Eisenhardt, K. & Zharacki, M. (1992) Strategic Decision Making, StrategicManagement Journal,Vol. 13 pp.17-37.
Elbana, S. (2006) Strategic Decision Making - Process Perspectives, International
Journal of Management Reviews,Vol 8, No.1 pp. 1-20.
Hambrick, D.C. & Mason, P. (1984) Upper Echelons: The Organization as a Reflection
of its Top Managers, Academy of Management Review,Vol. 9, pp.193-206.
Hendry, J. (2000) Strategic Decision Making, Discourse, and Strategy as Social
Practice,Journal of Management Studies,Vol. 37, No. 7, pp.955-977.
Jarzabkowski, P. & Wilson, D.C. (2006) Actionable Strategy Knowledge: A PracticePerspective, European Management Journal,Vol. 24, No. 5, pp. 348-367.
Miller, C.C. and Ireland, R.D. (2005) Intuition in strategic decision making: friend or
foe in the fast-paced 21st century, Academy of Management Executive,Vol 19, pp.19-
30.
Mintzberg, H. and Waters, J., (1998) Of Strategies, Deliberate and Emergent. In Segal-
Horn, S. (ed.), The Strategy Reader. Milton Keynes/Oxford, OU/Blackwell.
Mintzberg, H. (1979) The Structuring of Organisations. Englewood Cliffs, NJ, Prentice-
Hall.
McGrath (1964) Social Psychology - A Brief Introduction. New York, Holt.
strategic management II 1.5
8/3/2019 K10 Strategic Mgmt II
12/383
Papadakis, V.M. and Barwise, P. (1997) What can we tell managers about making
strategic decisions? In Papadakis, V.M. and Barwise, P. (eds), Strategic Decisions.
London, Kluwer: pp. 267-287.
Sadler-Smith, E. and Shefy, E. (2004) The intuitive executive: understanding and
applying gut feel in decision-making. Academy of Management Executive,Vol 18, 76-
91.
Schwenk, C.R. (1988) The Essence of Strategic Decision Making. Lexington, MA,
Lexington Books.
van der Heijden, K. and Eden, C. The Theory and Praxis of Reflective Learning in
Strategy Making in Eden, C. and Spender, J.C., Managerial Cognition &
Organizational Cognition, Sage, London, pp 58-75.
Wilson, D. (2003) Strategy as decision making. In Cummings, S. and Wilson, D. (eds),
Images of Strategy. Oxford, Blackwell, pp. 383-410.
strategic management II1.6
8/3/2019 K10 Strategic Mgmt II
13/383
strategic management II 1.7
8/3/2019 K10 Strategic Mgmt II
14/383
strategic management II1.8
8/3/2019 K10 Strategic Mgmt II
15/383
strategic management II 1.9
8/3/2019 K10 Strategic Mgmt II
16/383
strategic management II1.10
8/3/2019 K10 Strategic Mgmt II
17/383
strategic management II 1.11
8/3/2019 K10 Strategic Mgmt II
18/383
strategic management II1.12
8/3/2019 K10 Strategic Mgmt II
19/383
strategic management II 1.13
8/3/2019 K10 Strategic Mgmt II
20/383
strategic management II1.14
8/3/2019 K10 Strategic Mgmt II
21/383
strategic management II 1.15
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Of Strategies, Deliberate and EmergentHENRY MINTZBERG; JAMES A WATERSStrategic Management Journal (pre-1986); Jul-Sep 1985; 6, 3; ABI/INFORM Global
pg. 257
8/3/2019 K10 Strategic Mgmt II
22/383
strategic management II1.16
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
23/383
strategic management II 1.17
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
24/383
strategic management II1.18
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
25/383
strategic management II 1.19
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
26/383
strategic management II1.20
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
27/383
strategic management II 1.21
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
28/383
strategic management II1.22
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
29/383
strategic management II 1.23
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
30/383
strategic management II1.24
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
31/383
strategic management II 1.25
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
32/383
strategic management II1.26
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
33/383
strategic management II 1.27
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
34/383
strategic management II1.28
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
35/383
strategic management II 1.29
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
36/383
strategic management II1.30
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
8/3/2019 K10 Strategic Mgmt II
37/383
strategic management II 1.31
8/3/2019 K10 Strategic Mgmt II
38/383
strategic management II1.32
8/3/2019 K10 Strategic Mgmt II
39/383
strategic management II 1.33
8/3/2019 K10 Strategic Mgmt II
40/383
strategic management II1.34
8/3/2019 K10 Strategic Mgmt II
41/383
strategic management II 1.35
8/3/2019 K10 Strategic Mgmt II
42/383
strategic management II1.36
8/3/2019 K10 Strategic Mgmt II
43/383
strategic management II 1.37
8/3/2019 K10 Strategic Mgmt II
44/383
strategic management II1.38
8/3/2019 K10 Strategic Mgmt II
45/383
strategic management II 1.39
8/3/2019 K10 Strategic Mgmt II
46/383
strategic management II1.40
8/3/2019 K10 Strategic Mgmt II
47/383
strategic management II 1.41
8/3/2019 K10 Strategic Mgmt II
48/383
strategic management II1.42
8/3/2019 K10 Strategic Mgmt II
49/383
strategic management II 1.43
8/3/2019 K10 Strategic Mgmt II
50/383
strategic management II1.44
8/3/2019 K10 Strategic Mgmt II
51/383
strategic management II 1.45
8/3/2019 K10 Strategic Mgmt II
52/383
strategic management II1.46
8/3/2019 K10 Strategic Mgmt II
53/383
strategic management II 1.47
8/3/2019 K10 Strategic Mgmt II
54/383
strategic management II1.48
8/3/2019 K10 Strategic Mgmt II
55/383
strategic management II 1.49
8/3/2019 K10 Strategic Mgmt II
56/383
strategic management II1.50
8/3/2019 K10 Strategic Mgmt II
57/383
strategic management II 1.51
8/3/2019 K10 Strategic Mgmt II
58/383
strategic management II1.52
8/3/2019 K10 Strategic Mgmt II
59/383
strategic management II 1.53
8/3/2019 K10 Strategic Mgmt II
60/383
strategic management II1.54
8/3/2019 K10 Strategic Mgmt II
61/383
strategic management II 1.55
8/3/2019 K10 Strategic Mgmt II
62/383
strategic management II1.56
8/3/2019 K10 Strategic Mgmt II
63/383
strategic management II 1.57
8/3/2019 K10 Strategic Mgmt II
64/383
strategic management II1.58
8/3/2019 K10 Strategic Mgmt II
65/383
strategic management II 1.59
8/3/2019 K10 Strategic Mgmt II
66/383
strategic management II1.60
8/3/2019 K10 Strategic Mgmt II
67/383
strategic management II 1.61
8/3/2019 K10 Strategic Mgmt II
68/383
strategic management II1.62
8/3/2019 K10 Strategic Mgmt II
69/383
strategic management II 1.63
8/3/2019 K10 Strategic Mgmt II
70/383
strategic management II1.64
8/3/2019 K10 Strategic Mgmt II
71/383
strategic management II 1.65
8/3/2019 K10 Strategic Mgmt II
72/383
strategic management II1.66
8/3/2019 K10 Strategic Mgmt II
73/383
strategic management II 1.67
8/3/2019 K10 Strategic Mgmt II
74/383
strategic management II1.68
8/3/2019 K10 Strategic Mgmt II
75/383
strategic management II 1.69
8/3/2019 K10 Strategic Mgmt II
76/383
strategic management II1.70
8/3/2019 K10 Strategic Mgmt II
77/383
strategic management II 1.71
8/3/2019 K10 Strategic Mgmt II
78/383
strategic management II1.72
8/3/2019 K10 Strategic Mgmt II
79/383
strategic management II 1.73
8/3/2019 K10 Strategic Mgmt II
80/383
8/3/2019 K10 Strategic Mgmt II
81/383
UNIT 2ORGANISATIONAL LEARNING AND
ENTREPRENEURSHIP
1. Objectives
q to understand how organisational learning is taking place and having an impact
on strategic management performance at all levels
q to develop an understanding of how organisations and individuals leverage their
learning in the pursuit of competitive advantage
q to grasp the notion of corporate entrepreneurship as a strategic management
approach to creating an enhanced competitive position in the marketplace.
2. Introduction
Many authors and academics have written about how organisations learn and how
small to medium-sized companies are the places where entrepreneurs can be found at
work. It all seems familiar enough, but once you start to think a little more about these
terms then they appear rather broad and vague. They mean different things to different
people.
In conventional strategic management thinking and theorising (e.g. Porters five forcesanalysis, the product portfolio matrix and investment appraisal techniques), factors
such as the individuals values, meanings and experiences are essentially excluded
from analytical and decision making processes. Furthermore, even in-depth studies of
organisational culture tend to minimise the importance of the individual and groups of
individuals as sources of knowledge creation and the ability of organisations to use
new knowledge to shape and influence markets, products and service provision.
Hence, the notion of an organisation having the ability to learn does require a leap of
the mind. But it becomes more manageable if we ask ourselves what it is that the
organisation needs to be able to do well. Some initial suggestions as to these abilities
might include:
q interfacing to the external environment in a way that satisfies the stakeholders
q being efficient and effective in conducting its internal operations using structures
and processes that deliver outputs which meet performance requirements
q creating a work environment in which people can be effective in pursuing the
purpose of the organisation.
These abilities are an outcome of the combined effort of all those within the
organisation and can be seen to manifest organisational learning. Some manage this
learning very well, others less so.
strategic management II 2.1
8/3/2019 K10 Strategic Mgmt II
82/383
There is a second level of learning - that of groups and teams. What does the group
have to learn to do well? Here are some suggestions:
q managing its interface to other internal groups while discharging its responsibilityto the organisation
q contributing to the satisfaction of customers and stakeholders
q turning tacit knowledge into explicit knowledge and making this available to other
groups.
Up to this point, it is likely that you would agree that these are abilities that are
recognised and, although perhaps not often spelt out in this way, are the very nature
of organisational life.
The final level of organisational learning is the individual. Everyone is quite happy
with this, but many find it easier to provide descriptions rather than definitions. For
example:
q learning to understand oneself and set about mastering the local environment
(politics, decision making, communicating and networking etc.)
q being able to contribute to the team, either from a knowledge base or using a
personal style approach
q being able to recognise and create opportunities for personal development and
growth.
The drivers that stimulate individual behaviour and the determination to seek new
knowledge - and hence learning - stem from a variety of sources. These would
typically include:
q directives from senior management
q the individuals perception of where the pressure for performance is coming from
and what is expected in terms of behaviour
q experiences gained from tackling work problems
q formal training events provided by the organisation.
This mixture of drivers and the resulting learning that is manifested in behaviour at
these three levels all contribute to what some call the organisations climate. This
climate is recognisable by the competences and the behaviour norms displayed,
creating in effect an ever-changing culture or set of subcultures. Figure 1 provides a
model for interpreting these sources of organisational learning.
strategic management II2.2
8/3/2019 K10 Strategic Mgmt II
83/383
Figure 1: Model for interpreting sources of organisational learning
Source: Adapted from P.J. Thurbin (1994) Leveraging Knowledge, London,
Pitman/Financial Times
To be of value to the organisation, this learning needs to be leveraged for competitive
advantage. Organisational processes that demonstrate this leverage rely heavily on
what is known as entrepreneurial behaviour.
In the early stages of forming an organisation, the founder or partners strive to create
an enterprise which, if successful, becomes labelled as a dynamic entrepreneurial
company. These are value-laden descriptors, but most of us would envisage such a
company growing at a rate that was far above the average and demonstrating a high
level of creativity and follow-through innovations by the partners.
The standards of behaviour and performance are clearly set by the founders but, as
the enterprise matures, its environment changes and the founders often become
remote from the daily action. The organisational culture then becomes separated outfrom the organisational forms and personal systems that the founders created. The
original culture will continue until it clashes with the demands of the way in which
strategic management II 2.3
Directivesfrom
Corporate andsenior levels
Drivers of Individual Learning
Explicit and Tacit Learning
Organisational Climate and Culture
Explicit and Tacit Learning
Planned Organisational Drivers of Learning
Perceptions ofsources of
pressure andperformancerequirements
Actionssurrounding
workitself
Ambitionsand
personality
ChangeProgrammes
Trainingand
DevelopmentActivities
Appraisaland
RewardSystems
ControlSystems
Managementand
LeadershipStyles
8/3/2019 K10 Strategic Mgmt II
84/383
the new structures have to operate. At this point, the founders either break the
enterprise up into smaller parts and start again, or seek new managers who can drive
the growing enterprise while they take a back seat.
Promoting entrepreneurship in large companies is a much more complex issue. Large
organisations often implement flat organisational structures to encourage the freedom
of local decision making that the entrepreneurial approach is assumed to require. By
adopting this approach new businesses are created within the existing corporation.
This is sometimes described as corporate venturing or intrapreneurship.
An alternative and much loved approach is to attempt to transform the climate of the
whole organisation into one that supports creativity and idea generation, rewarding
those who are able to drive the process of innovation. Companies such as 3M, Kodak,
Canon and Matsushita are promoted as exemplars of this quest to encourage
entrepreneurial activity that results in a form of continuous innovation and competitiveperformance.
In trying to understand past and present organisational strategies and outcomes, as a
step in being able to suggest future actions, we need to grasp the mental models used
by those who have tried to shape the present organisational capabilities and
performance. An obvious mental model to explore is that used by the founder or
entrepreneur in setting up the business enterprise. Kees van der Heijden (1996) has
described this mental model as representing the business idea - an idea that aimed
to discover a new way of creating value for customers by bringing together a
combination of competences that creates this value.
The business idea can be captured in the form of a statement or business proposition.
Such a statement describes the value of the offering to the customer or market, how
it is supported by the sellers distinctive competencies and can be integrated into the
buyers value system. In developing understanding of the mental models or learning
that enabled the business idea to he implemented, the elements of a business model
then evolve. (Osterwalder et al, 2005)
Over time, the business model used by an organisation and interpretations of the daily
operations and changes in the external environment create what Spender (1989)
describes as the industry recipe. This recipe or business logic is then used by
decision makers and managers as the lingua franca that drives all actions and
evaluations of investment, operational and strategic decisions. It also determines the
language and framework within which evaluations of past and predictions of future
performance are made.
3. Learning organisations
Previous studies will have made you familiar with the classical divisions of
management literature - the scientific line from Taylor (1911) to Simon (1945), with a
focus on the objectivity or science approach to management, and the humanistic line
from Weick (1979) to Mayo (1993), with the growing focus on culture and the use of
metaphors and language as a way of interpreting how organisations really work.
strategic management II2.4
8/3/2019 K10 Strategic Mgmt II
85/383
Most pragmatists are happy to take both of these lines of thought on board when
attempting to make sense of a complex set of realities. But the problem with that
approach is that neither of these schools of thought faces the problem of how to
convert organisational members knowledge into organisational knowledge - and thenhow to leverage this knowledge to achieve superior performance.
March (1989) points out that there is a difference between the processes involved in
acquiring and utilising existing knowledge (exploitation of old certainties) and those
involved in creating new knowledge (exploration of new possibilities).
It is the continuous development of this new knowledge that creates the organisational
dynamism necessary for organisations to compete in environments that are becoming
increasingly chaotic and unpredictable.
Creating a balance between exploitation and exploration of knowledge is essential tothe success of an organisation.
The context in which this learning is taking place is never static - it is in a constant state
of change as competitors, pressure groups, society, national and global economies alter
and interact. In a similar way, organisations are not static - as strategies aimed at matching
the organisation to that environment and positioning it relative to the competitors and
building competences that will drive capabilities are pursued. Like a sports player, the
moves may be preplanned but when the game is in progress the reactions to an
opponents moves are spontaneous and represent the dynamic of the players.
Organisations attempt to manage the dynamic that has been created by setting up
corporate, business and operational management processes within which decisions
can be made and the resulting problems and outcomes evaluated.
The first observation to make is that organisational learning is taking place and having
an impact on strategic management performance at all levels. Organisations use a
range of measures and metrics to measure performance. Both formal and informal
measures of organisational performance can trigger opportunities for organisational
learning. By formal, we mean those measures that are made explicit and used for control
purposes - whereas informal suggests more tacit or culture-based measures.
Some of this learning may be restricting management performance. For example, where
managers have learned that risk taking followed by lack of success leads to punishment,then there will be a tendency to regress to a more bureaucratic set of responses. Also,
where managers are primarily rewarded if short-term business performance targets are
met, then the tendency will be to hedge against making decisions that may be vital for
the longer term.
Many writers on organisational learning have attempted to define the progressive stages
through which organisations may be moving in order to reach the final accolade of being
a learning organisation.
Swieringa and Wierdsma (1992) suggest that organisations can be identified as either
demonstrating early entrepreneurial characteristics of learning, those reflectingprescriptions and those that are truly learning organisations. They use the criteria of
strategy, structure, culture and systems to illustrate the differences. You may see some
strategic management II 2.5
8/3/2019 K10 Strategic Mgmt II
86/383
parallels here to the McKinsey 7S approach to strategy implementation covered in
Strategic Management I, i.e. the so-called hard aspects, such as strategy and structure and
the softer aspects of skills, staff, systems, style and shared values. Remember that the
McKinsey model states that all these aspects are important for successful implementation,but that in some contexts the weightings and emphasis between them may need to be
varied.
There is plenty of formal learning going on, but one wonders how responsive these
organisations can be to changes in their environment. They are usually plagued with
constant change programmes as managers attempt to influence both the knowledge
being used and the explicit behaviours.
The learning organisation is obviously problem focused. Learning takes place as problems
are tackled and explicit knowledge captured and tested. Once again, we are faced with
the problem that no one organisation exhibits these characteristics in a clear way, but atleast now we have some guides as to the extremes.
4. Competitiveness and innovation
Creativity and innovation are not the same thing. Creativity is about generating novel
ideas and innovation is the total process that converts these ideas into tangible benefits
for customers and users. Moving an idea through the innovation process requires
coordination and cooperation from a host of players who have access to the resources
and support essential to success.
At one level, it would seem obvious that all organisations are in some way or other
permanently engaged in innovating as a fundamental strategic activity. What we are
looking at here is the extent to which continuous innovation needs to be made into a
formal and, thus explicit, organisational activity.
One of the questions that large - and, increasingly, medium-sized - organisations have
to address concerns their ability to continue to produce domestically in an
environment where capital, labour, safety and environmental costs are many times
higher than the costs of major foreign competitors. Such concerns point to the need
to focus on innovation as a source of competitiveness.
For many organisations, the notion of competing through innovation is often seen assomething to do with capitalising on breakthroughs - whereas for others, it is about
improving on what is already working, but finding cheaper or more efficient ways of
obtaining the outcomes.
The notion of breakpoints existing in the competitive cycle that then stimulate a rush
for innovation has gained popularity in the literature. First there are divergent points
where organisations attempt to compete by innovating to give customers variety and
value and exploring the boundaries of the opportunity. The other breakpoint is
labelled convergent and occurs when the divergence is spent - here processes are
utilised that focus on cost reduction and delivery.
Anticipating these breakpoints obviously requires a deep understanding of the industry
and an organisation that pursues and leverages knowledge as a strategic activity. For
strategic management II2.6
8/3/2019 K10 Strategic Mgmt II
87/383
some organisations the sources of innovation are seen as being internal, and hence a
great deal of emphasis is given to the capture and development of local knowledge as
a way of competing.
For large, particularly multinational, corporations the innovation process becomes both
crucial and complex. The need emerges for an organisation that values diverse
perspectives and capabilities, while being able to link and leverage the learning that
takes place. For most organisations this creates a paradox, where legitimising local
diversity may well clash with the need for control and the reward of performance.
An organisation that has achieved a position of competitive advantage is under
constant threat. Having the largest market share is no longer a guarantee of continuing
success for the firm. Existing competitors will be seeking ways of either copying or
finding alternatives to the way you do business.
Imitation is not always a case of the small copying the large. British Airways attempt
to imitate the start-ups, Easyjet and Ryanair, was a clear example of imitation - and in
BAs case, it was one that failed.
Maintaining secrecy about a new product, service, capability or technological
breakthrough is becoming increasingly difficult. Relying on patents to deter imitation
has always been a high-risk approach, as imitation is less expensive than a research
and development based strategy and usually a lot quicker.
Dysons investment in the bag-less vacuum cleaner shows how patents can be
attacked and, although high prices were charged for the initial models, competitors
have now closed the gap with equivalent devices. Gillette provides another example
of how the process used to manufacture their Mach 3 blade has been kept a secret.
Coca Cola have never patented their formula and can therefore argue that it has never
been replicated.
5. Corporate entrepreneurship
The individual entrepreneur is often portrayed as the champion and leader, engaging
in what might be seen as self-centred or isolated behaviour. Alternatively, the
entrepreneur is seen as promoting the entrepreneurial team or an entrepreneurial
network. Entrepreneurial firms, on the other hand, are those in which the top
managers have entrepreneurial management styles, as evidenced by strategic decisions
and operating philosophies.
Companies in the early stages of growth have been categorised as entrepreneurial,
then growing into vertically integrated and diversified organisations. As the
organisation grows, the role of the entrepreneur needs to change - as the requirement
is now for a product champion or change manager. A growing focus in both research
and the literature has been on the need for organisations to build entrepreneurial
networks that lead to radical change being identified, then authorised and supported
by the chief executive.
Corporate entrepreneurship, by its very name, implies an organisation-wide set of
strategic management II 2.7
8/3/2019 K10 Strategic Mgmt II
88/383
behaviours that are normally attributed to individuals who exhibit an entrepreneurial
style as described above. The argument being promoted here is that an organisation
is able to make a conscious decision to behave in an entrepreneurial manner.
Corporate entrepreneurship is a strategic management approach to creating anenhanced competitive position in the marketplace. The three forms of this approach
are:
q where organisations create a new business within the existing organisation
(Burgelman, 1983; Block and MacMillan, 1993)
q where organisations attempt to transform or renew their very nature (Moss Kanter,
1983)
q where organisations attempt to change the rules of the industry in which they
compete (Stevenson and Gumpert, 1985).
Competition between firms in dynamic industries is based on capabilities. These are
sets of business processes that are used strategically to deliver customer value and
grow the business.
Transforming a set of business processes into a capability depends on being able to
work back from an identified set of customer needs. This can involve new product
development and how to get that product to the customer consistently and at the
required quality and price. Having an effective set of processes that result in a
capability creates a situation that competitors find difficult to imitate.
Competing on capabilities relies on understanding the industry value chain andmaking certain that the firms business processes take every advantage of the links in
that chain. For example, although Ford Motor Company now outsource much of their
manufacture and assembly, they have business processes that ensure that design is
controlled by Ford and suppliers work to tight specifications and delivery
requirements. The penalties attached to failing to capture and defend a capability are
enormous.
6. Exploring key themes
The five articles in this section have been chosen to explore some recurring themes in
the literature.
q March (1989) is a seminal paper. It examines the explicit and implicit choices that
organisations face in refining forms, routines, or practices that are essential to their
survival (exploitation) and in generating new alternative practices (exploration)
particularly in a changing environment. How organisations learn to find an
appropriate balance between the two is key to their survival and competitive
advantage.
q Crossan & Berdrow (2003) offer a way to link organisational learning and strategic
renewal. They have developed a framework to address the tension betweenexploration and exploitation. In this framework, four associated micro processes -
intuiting, interpreting, integrating and institutionalising - serve to link individual,
strategic management II2.8
8/3/2019 K10 Strategic Mgmt II
89/383
group and organisational levels of learning within organisations. They argue that
management needs to be cognisant that strategic renewal encompasses a
multilevel process that spans from individual intuitive insights through to major
resource allocation that institutionalise learning.
q The article by Teece, Pisano and Shuen (1997) provides an appropriate link
between all four topics that have been covered in this Unit. It highlights the ways
in which strategic thinking has been pursued and researched over the past 40
years - a pursuit focused on providing explanations for outcomes of the actions of
actors in organisations aimed at adding shareholder value and wealth generation.
The reading focuses on the issue of developing and using organisational
capabilities in a dynamic business environment as a means of creating added value
and sustainable competitive advantage.
q The material presented by Stopford and Baden-Fuller (1994) presents detailedarguments suggesting that the three stages of corporate entrepreneurship -
individual sensing, organisational renewal and industry rule or frame breaking -
are sequential and dependent on five organisational attributes. These attributes are
identified as team orientation, aspirations beyond current resources, proactiveness,
learning capability and capability to resolve dilemmas. The extent to which these
are fully developed in an organisation appears to have a significant influence on
the implementation of these strategies. Two interesting findings from these
authors work are that the changes in organisational behaviour required to move
between the stages took many years to acquire - and that the five attributes were
noticeable in each of the stages.
q Finally, the article by Koch (2008) is an interesting and detailed case study that
illustrates the concept of strategic path and how the interplay of different
components of strategic processes condition the dynamic capabilities of a firm to
act and to react to changing environment. The evolution of media organisations in
the market of national daily produced high quality newspapers in Germany is
examined in this regard.
There is also a wealth of interesting case studies on The UK Work Organisation
Network (UKWON) website - http://www.ukwon.net/. UKWON is a network of
institutions, practitioners and individuals researching and developing new ways of
organising work that meet the competitive challenges of contemporary economic,
technological and cultural change. You are encouraged to read through some of the
materials on its website.
References and further reading
Block, Z. and MacMillan, J.C. (1993) Corporate Venturing, Boston, Harvard Business
School Press.
Burgelman, R.A. (1983) Corporate Entrepreneurship and Strategic Management,
Management Science,Vol. 29, No. 12, pp. 1349-64.
Crossman & Berdrow (2003), Organizational Learning and Strategic Renewal,
Strategic Management Journal,Vol. 24, No. 11, pp. 1087-1105.
strategic management II 2.9
8/3/2019 K10 Strategic Mgmt II
90/383
van der Weijden, K. (1996), Scenarios, The Art of Strategic Conversation, John Wiley
and Sons Ltd.
Koch, J. (2008), Strategic Paths and Media Management - A Path Dependency Analysisof German Newspaper Branch of Quality Journalism, Schmalenbach Business Review
(SBR), Vol. 60, pp. 50-73.
March, J.G. (1989) Exploration and Exploitation in Organizational Learning,
Organization Science,Vol. 2, No. 1, pp. 71-87.
Mayo, E. (1933) The Human Problems of an Industrial Civilization, New York, Simon
and Schuster.
Moss Kanter, R. (1983) The Change Masters, New York, Simon and Schuster.
Osterwalder, A., Pigneur, Y. and Tucci, C. (2005) Clarifying Business Models: Origins,
Present, and Future of the Concept, Communications of the Associations for
Information Systems, 16: 1-25.
Simon, H.A. (1945) Administrative Behaviour, New York, Macmillan.
Stevenson, H.H. and Gumpert, D.D. (1985) The Heart of Entrepreneurship, Harvard
Business Review, March-April.
Stopford, J. M. and Baden-Fuller, C. (1994) Creating Corporate Entrepreneurship,
Strategic Management Journal,Vol. 15, pp. 521-36.
Sweiringa, J. and Wierdsma, A. (1992) Becoming a Learning Organisation, Reading,
Addison Wesley.
Taylor, F.W. (1911) The Principles of Scientific Management, New York, Harper.
Teece, D.J., Pisano, G. and Shuen, A. (1997) Dynamic Capabilities and Strategic
Management, Strategic Management Journal,Vol.18 No. 7, pp.509-533.
Thurbin, P.J. (1994) Leveraging Knowledge, London, Pitman/Financial Times.
Weick, K.E. (1979) The Social Psychology of Organizing, 2nd Edition, New York,
Random House.
strategic management II2.10
8/3/2019 K10 Strategic Mgmt II
91/383
strategic management II 2.11
8/3/2019 K10 Strategic Mgmt II
92/383
strategic management II2.12
8/3/2019 K10 Strategic Mgmt II
93/383
strategic management II 2.13
8/3/2019 K10 Strategic Mgmt II
94/383
strategic management II2.14
8/3/2019 K10 Strategic Mgmt II
95/383
strategic management II 2.15
8/3/2019 K10 Strategic Mgmt II
96/383
strategic management II2.16
8/3/2019 K10 Strategic Mgmt II
97/383
strategic management II 2.17
8/3/2019 K10 Strategic Mgmt II
98/383
strategic management II2.18
8/3/2019 K10 Strategic Mgmt II
99/383
strategic management II 2.19
8/3/2019 K10 Strategic Mgmt II
100/383
strategic management II2.20
8/3/2019 K10 Strategic Mgmt II
101/383
strategic management II 2.21
8/3/2019 K10 Strategic Mgmt II
102/383
strategic management II2.22
8/3/2019 K10 Strategic Mgmt II
103/383
strategic management II 2.23
8/3/2019 K10 Strategic Mgmt II
104/383
strategic management II2.24
8/3/2019 K10 Strategic Mgmt II
105/383
strategic management II 2.25
8/3/2019 K10 Strategic Mgmt II
106/383
strategic management II2.26
8/3/2019 K10 Strategic Mgmt II
107/383
strategic management II 2.27
8/3/2019 K10 Strategic Mgmt II
108/383
strategic management II2.28
8/3/2019 K10 Strategic Mgmt II
109/383
strategic management II 2.29
8/3/2019 K10 Strategic Mgmt II
110/383
strategic management II2.30
8/3/2019 K10 Strategic Mgmt II
111/383
strategic management II 2.31
8/3/2019 K10 Strategic Mgmt II
112/383
strategic management II2.32
8/3/2019 K10 Strategic Mgmt II
113/383
strategic management II 2.33
8/3/2019 K10 Strategic Mgmt II
114/383
strategic management II2.34
8/3/2019 K10 Strategic Mgmt II
115/383
strategic management II 2.35
8/3/2019 K10 Strategic Mgmt II
116/383
strategic management II2.36
8/3/2019 K10 Strategic Mgmt II
117/383
strategic management II 2.37
8/3/2019 K10 Strategic Mgmt II
118/383
strategic management II2.38
8/3/2019 K10 Strategic Mgmt II
119/383
strategic management II 2.39
8/3/2019 K10 Strategic Mgmt II
120/383
strategic management II2.40
8/3/2019 K10 Strategic Mgmt II
121/383
strategic management II 2.41
8/3/2019 K10 Strategic Mgmt II
122/383
strategic management II2.42
8/3/2019 K10 Strategic Mgmt II
123/383
strategic management II 2.43
8/3/2019 K10 Strategic Mgmt II
124/383
strategic management II2.44
8/3/2019 K10 Strategic Mgmt II
125/383
strategic management II 2.45
8/3/2019 K10 Strategic Mgmt II
126/383
strategic management II2.46
8/3/2019 K10 Strategic Mgmt II
127/383
strategic management II 2.47
8/3/2019 K10 Strategic Mgmt II
128/383
strategic management II2.48
8/3/2019 K10 Strategic Mgmt II
129/383
strategic management II 2.49
8/3/2019 K10 Strategic Mgmt II
130/383
strategic management II2.50
8/3/2019 K10 Strategic Mgmt II
131/383
strategic management II 2.51
8/3/2019 K10 Strategic Mgmt II
132/383
strategic management II2.52
8/3/2019 K10 Strategic Mgmt II
133/383
strategic management II 2.53
8/3/2019 K10 Strategic Mgmt II
134/383
strategic management II2.54
8/3/2019 K10 Strategic Mgmt II
135/383
strategic management II 2.55
8/3/2019 K10 Strategic Mgmt II
136/383
strategic management II2.56
8/3/2019 K10 Strategic Mgmt II
137/383
strategic management II 2.57
8/3/2019 K10 Strategic Mgmt II
138/383
strategic management II2.58
8/3/2019 K10 Strategic Mgmt II
139/383
strategic management II 2.59
8/3/2019 K10 Strategic Mgmt II
140/383
strategic management II2.60
8/3/2019 K10 Strategic Mgmt II
141/383
strategic management II 2.61
8/3/2019 K10 Strategic Mgmt II
142/383
strategic management II2.62
8/3/2019 K10 Strategic Mgmt II
143/383
strategic management II 2.63
8/3/2019 K10 Strategic Mgmt II
144/383
strategic management II2.64
8/3/2019 K10 Strategic Mgmt II
145/383
strategic management II 2.65
8/3/2019 K10 Strategic Mgmt II
146/383
strategic management II2.66
8/3/2019 K10 Strategic Mgmt II
147/383
strategic management II 2.67
8/3/2019 K10 Strategic Mgmt II
148/383
strategic management II2.68
8/3/2019 K10 Strategic Mgmt II
149/383
strategic management II 2.69
8/3/2019 K10 Strategic Mgmt II
150/383
strategic management II2.70
8/3/2019 K10 Strategic Mgmt II
151/383
strategic management II 2.71
8/3/2019 K10 Strategic Mgmt II
152/383
strategic management II2.72
8/3/2019 K10 Strategic Mgmt II
153/383
strategic management II 2.73
8/3/2019 K10 Strategic Mgmt II
154/383
strategic management II2.74
8/3/2019 K10 Strategic Mgmt II
155/383
strategic management II 2.75
8/3/2019 K10 Strategic Mgmt II
156/383
strategic management II2.76
8/3/2019 K10 Strategic Mgmt II
157/383
strategic management II 2.77
8/3/2019 K10 Strategic Mgmt II
158/383
strategic management II2.78
8/3/2019 K10 Strategic Mgmt II
159/383
strategic management II 2.79
8/3/2019 K10 Strategic Mgmt II
160/383
strategic management II2.80
8/3/2019 K10 Strategic Mgmt II
161/383
strategic management II 2.81
8/3/2019 K10 Strategic Mgmt II
162/383
strategic management II2.82
8/3/2019 K10 Strategic Mgmt II
163/383
strategic management II 2.83
8/3/2019 K10 Strategic Mgmt II
164/383
strategic management II2.84
8/3/2019 K10 Strategic Mgmt II
165/383
strategic management II 2.85
8/3/2019 K10 Strategic Mgmt II
166/383
strategic management II2.86
8/3/2019 K10 Strategic Mgmt II
167/383
strategic management II 2.87
8/3/2019 K10 Strategic Mgmt II
168/383
8/3/2019 K10 Strategic Mgmt II
169/383
UNIT 3STRATEGIC ALLIANCES
1. Objectives
q to introduce some of the main concepts and concerns in the field of strategic
alliances
q to enable students to conceptualise better the nature of the inter-firm relationships
with which they may engage.
While the study of Mergers & Acquisitions has a long history - and is well articulated
in economic, finance and organisational theory - that of Alliances is less so. However,
alliances are an extremely common strategic choice made by organisations acrosssectors. This section explores some of the issues of importance to managers engaged
in strategic alliances.
2.The impetus for alliances
The business environment provides numerous reasons for increasing frequency of
alliance behaviour. Industry regulation and deregulation, the internationalisation of
business, and the speed at which change may occur internationally are all major
factors with significant impact.
In order to move into different sectors and industries, or into new markets,
organisations need to be able to act quickly and manage risk. This may mean, for
instance:
q testing the water - rather than committing to major production or distribution
investments
q working with local knowledge - rather than trying to purchase it outright or develop
it from scratch
q developing relationships - which are flexible and can respond to change.
Alliances seem to offer managers the means of working in this way.
In addition, mergers and acquisitions are expensive, require extensive regulatory
approval, due diligence and expose the organisation to intensive scrutiny from
shareholders and markets. Not all of these factors are likely to be present in the case
of alliances.
Finally, alliances and other business relationships are often imposed by government or
other key stakeholders. For instance in the UK, the relationships between medical
providers (hospitals, general practitioners and social service organisations) are to a
great extent determined and controlled by government or governmental agencies.Similarly, the requirement to outsource production capacity in some industries (for
instance, in the tax-funded UK state broadcaster, the BBC) is a statutory one.
strategic maangement II 3.1
8/3/2019 K10 Strategic Mgmt II
170/383
3. Development of strategic alliances
There have been a number of detailed and interesting researches on the development
of strategic alliances. Of more recent works, one could mention the paper by Butler,Kenny and Anchor (2000) who provide an overview of the strategic reasons for
alliances and contextualise these into the European defence industry. This industry is
of course dominated by national governments, the key customers. Internationally,
competition between defence contractors is intense. The European industry is moving
toward closer cooperation, to reduce costs, increase competitiveness and mirror
increasing cooperation between nations on defence.
In a rather extensive work, Oum, Park and Zhang (2000) have comprehensively
treated strategic alliances in the airline industry. They examine how globalisation has
contributed to the development of strategic alliances in this industry and what the
effects of these alliances have been on productivity, pricing, branding and profitabilityof airlines. In the past decades, the global airline industry has clearly moved in the
direction of capacity rationalisation, improved productivity and the maintenance of
existing service levels.
4. Purposes and types of alliances
Within the wider context of increasing interfirm cooperation, individual organisations
cite a wide range of specific strategic objectives for alliances. For instance:
q Sharing - costs, knowledge, expertise, or risk in parts of the value chain
q Cost Savings - through economies of scale or scope; improved stock positions;
moving parts of the value chain to lower cost locations
q Time - shorter investment returns time horizons; speed for new market entry or
new product development.
These can also be linked to the depth of alliance chosen, for instance Kaplan and Hurd
(2002) provide this broad typology of alliances:
q Promotional - joining brands or products for joint promotion on a campaign basis,
for convenience
q Operational- in supply chain management, production, distribution or sales, often
for reasons of efficiency
q Relationship - sharing knowledge, infrastructure, or some other asset, perhaps
through licensing or joint ventures, in order to leverage value from existing assets
q Strategic - joint ventures and more large scale objectives, similar to mergers and
acquisitions, creating new organisations and new value as a result.
strategic maangement II3.2
8/3/2019 K10 Strategic Mgmt II
171/383
5. Managing alliances
There are at least three different approaches to understanding the process dynamics
and evolution of alliances based on numerous empirical researches that have beencarried out in the past decade or so. Here is a brief summary of each of these
approaches:
5.1 Life-cycle approach
Attempts to rationalise the dynamics of alliances have tended to conceptualise them as
a predictable, linear sequence of life-cycle stages. The underlying assumption in such
understanding is that effective strategic alliances move smoothly from one phase to the
next, as a function of rational planning and execution by those in charge. The key
premise of the life-cycle model is the attribution of the central role in the developmentof alliances to management, a factor that certainly explains why this approach is so
popular in consulting and managerial circles.
DAunno and Zuckerman (1987) proposed four developmental stages in such
collaborations - emergence, transition, maturity and critical crossroads. Likewise,
Achrol et al (1990) also presented four stages - entrepreneurship, collectivity,
formalization and domain elaboration. Forrest and Martin (1992) too named four -
courtship, negotiation, implementation, and operation. However, Murray and Mahon
(1993) prescribed that all alliances proceed through FIVE stages - courtship,
negotiation, start-up, maintenance and ending. Finally, Kanter (1994) compared an
alliance to a marriage, identifying different stages of development:
1. Courtship - discovering compatibility
2. Engagement - closing the deal, going public, meeting the family of stakeholders
3. Setting up house together - discovering differences
4. Devising mechanisms for bridging those differences - getting along
5. As old-marrieds - discovering internal changes as a result of accommodation &
collaboration
While this romantic metaphor is helpful for conceptualising stages of development, it
should of course be challenged and explored. For instance, many alliances are
polygamous - as in the complex network arrangements that exist in many industries.
Similarly, the notion of choice may need to be challenged, as many alliances are the
result of imposed strategies - as in public sector risk management meetings in the UK.
5.2 Process approach
The works of Ring and Van de Ven (1994) and Doz (1996) are good examples of this
process approach to alliance building - the core idea is to view alliance building as aprocess of collaborations which can neither be fully specified in advance nor
strategic maangement II 3.3
8/3/2019 K10 Strategic Mgmt II
172/383
controlled by the partners prior to their execution. Thus in this model, the formation
of an alliance is viewed as a recurring sequence of negotiation, commitment and
execution (Rond & Bouchikhi, 2004). Each phase is in turn governed by a series of
formal, legal and informal social and psychological processes which aim to arrive atefficient and equitable outcomes.
So, alliances are perceived to develop as a consequence of a repetitive series of three
identifiable stages - negotiation, commitment and execution which are also mediated
by a fourth stage - namely, achievement of fairness and efficiency. In contrast to life-
cycle approach then, the process model does not consider alliance building as a series
of uniform and predictable sequences of events or stages. However, like the life-cycle
approach, it retains a sense of purpose for alliance building - namely, fairness and
efficiency which would allow for the progress of the alliance to be assessed and re-
evaluated.
The process view of alliances thus recognises that they are prone to unplanned events,
unexpected results and conflicting interpretations and interests can and do happen.
Consequently, the management can neither plan nor control the sequence of events,
but it is supposed to develop the ability to learn and adapt as the process of alliance
building progresses. This requires that the managers involved in alliance building
should constantly monitor events, use their leverage to adapt their design and
governance, ensure that they are constantly moving towards greater fairness and
efficiency for partners and eventually terminate them should it fail to meet its
objectives.
5.3 Evolutionary Approach
This perspective on alliance building is Darwinian in the sense that it views
organisations as entities which must continuously compete for survival due to the
availability of scarce resources and the occurrence of a series of chance variations.
So, in contrast to the life-cycle or process models, the evolutionary approach lays
emphasis on the environments as the principal motor of change which would only
allow those entities to remain that are best fit to survive (Van de Ven & Poole, 1995;
Koza & Lewin, 1998; Reuer et al., 2002).
Implicit in this approach is the notion that alliance evolution - even at the level of
individual alliances - is driven predominantly by the forces that operate at the
population level of an industry or sector. Consequently, the evolutionary approach of
alliances does not seek to offer managerial prescriptions - for it assumes that the
diffusion of alliances across sectors, driven by the quest of organisations to compete
for scarce resources, would ultimately lead to collective learning by organisations from
their own and others experiences and this would bring about ever more sophisticated
and fitter alliances over time.
So, whilst individual managers cannot shape evolutionary processes at the population
level, they should try to align their alliances with the prevailing trend and not attempt
to swim against the evolutionary current in their sectors.
strategic maangement II3.4
8/3/2019 K10 Strategic Mgmt II
173/383
6. Relational quality and trust
The notion that organisations change over time - and are changed by the relationships
into which they enter - is nevertheless important. It implies that management needs tobe aware of change as a continuing factor in alliances. How to develop an alliance,
what skills and competences are needed, what systems and protocols and what
particular issues are important at any given point in time, all become significant.
As the relationship develops, the development of trust is a significant issue. Trust is a
multi-faceted concept and its development depends on - and is a result of - effective
management. Alliances are often specifically entered into to gain new knowledge - for
instance, of technology or markets - and an area in which trust becomes significant is
that of sharing and preserving assets and knowledge.
Arino, de la Torre and Ring (2001) offer some suggestions about how to develop whatthey call relational quality and provide a list of normative suggestions for how best
to manage inter-firm relationships. They contend that trust is like a reservoir that the
partners must manage. Their proposals address the various stages of relationship
building.
7.Alliances and networks
While strategic alliances are often perceived as being single relationships with external
organisations - as in the marriage metaphor - in practice, organisations frequently are
part of industry networks.
Ferlie and Pettigrew (1996) investigate the case of a large organisation with around a
million employees - the UK NHS (National Health Service) which is really a dense
network of organisations rather than a single large one. At the time of the study,
managers within the NHS were engaged in intensive development of relationships
between organisations. The study highlights several key managerial problems
associated with managing such a network:
q performance assessment and management
q sustaining the network
q dealing with change
q dealing with uncertainty
q developing staff competence in managing alliances.
strategic maangement II 3.5
8/3/2019 K10 Strategic Mgmt II
174/383
8. Conclusions
As a major strategic choice being pursued by firms and as an imposed strategy in many
contexts, strategic alliances and networks deserve extensive study.
The motivations for alliances, the processes through which they are managed and
developed and the managerial competences required to ensure their success are all
critical issues.
9. Exploring key themes
The three articles in this section have been chosen as they explore most of the key
themes in the literature.
q Grant and Baden-Fuller (2004) is a knowledge-based view of the firm which offers
new insight into the causes and management of interfirm alliances. They argue that
the primary advantage of alliances over both firms and markets is in accessing
rather than acquiring knowledge. Building upon the distinction that March (1991)
has made between the knowledge generation (exploration) and knowledge
application (exploitation) - see Unit 2 - they show that alliances contribute to the
efficiency in the application of knowledge. They do this, firstly, by improving the
efficiency with which knowledge is integrated into the production of complex
goods and services, and secondly, by increasing the efficiency with which
knowledge is utilised.
q Arino, de la Torre and Ring (2001) fill a gap in the alliance literature. Whilst the
bulk of the research on this subject appears to have converged on alliance design,
regulation and performance, they have examined the process dynamics and
evolution of alliance building. For them, an important factor that accounts for the
differences in the success of alliances is trust. This article explains that reliance
on trust is a complex probabilistic decision, and management must focus on a
broader concept - the quality of inter-partner relationship - as a critical determinant
of alliance success.
q Ferlie & Pettigrew (1996) deal with the important issue of forging alliances through
networks and they highlight some of the key managerial issues for dealing with
these complex organisational settings.
strategic maangement II3.6
8/3/2019 K10 Strategic Mgmt II
175/383
References and further reading
Achrol, R.S., Scheer, L.K. and Stern, L.W. (1990) Designing Successful
Transorganizational Marketing Alliances. Marketing Science Institute, Cambridge, MA.
Arino, A., de la Torre, J., Ring, P. (2001) Relational Quality: Managing Trust in
Corporate Alliances, California Management Review,Vol. 44, No. 1 pp 109-131.
Butler, C., Kenny, B., Anchor, J. (2000) Strategic Alliances in the European Defence
Industry, European Business Review, Vol 12, No. 6 pp. 308-321.
DAunno, T.A. and Zuckerman, H.S. (1987). A life cycle model of organizational
federations: The case of hospitals. Academy Management Review,Vol. 12, pp. 534-545.
Das, T.K., & Teng, B-S. (2000) A Resource-Based Theory of Strategic AlliancesJournal
of ManagementVol. 26, No. 1, pp. 31-61.
de Rond, M. and Bouchikhi, H. (2004). On the Dialectics of Strategic Alliances,
Organization Science,Vol. 15, No. 1, pp. 56-69.
Doz, Y.L. (1996) The evolution of cooperation in strategic alliances: Initial Conditions
or Learning Processes? Strategic Management JournalVol. 17 Supplement pp. 55-79.
Ferlie, E. and Pettigrew, A., (1996) Managing Through Networks: Some issues and
Implications for the NHS, British Journal of Management,Vol. 7, March, pp. S81-S99.
Forrest, J.E. and Martin, M.J.C. (1992) Strategic alliances between large and smallresearch intensive organizations: Experiences in the biotechnology industry. R&D
Management,Vol. 22, No.1, pp. 41-54.
Grant, R.M. and Baden-Fuller, C. (2004) A Knowledge Accessing Theory of Strategic
Alliances,Journal of Management Studies.Vol. 41, No. 1, pp. 61-84.
Kaplan, N.J. and Hurd, J. (2002) Realizing the Promise of Partnerships, Journal of
Business Strategy, May/June.
Koza, M.P. and Lewin, A.Y. (1998). The co-evolution of strategic alliances,
Organization Science,Vol. 9, pp. 255-264.
Lorange, P. and Roos, J. (1993) Strategic Alliances: Formation, Implementation and
Evolution. Basil Blackwell, Oxford.
Moss Kanter, R. (1994) Collaborative Advantage: The Art of Alliances, Harvard Business
Review, July/August, pp. 96-108.
Murray, E.A., Jr. and Mahon, J.F. (1993). Strategic alliances: Gateway to the new
Europe? Long Range Planning.Vol 26, pp. 102-111.
Oum, T., Park, J-H., Zhang, A. (2000) Globalization and Strategic Alliances: The Case
of the Airline Industry. New York, Elsevier-Science.
strategic maangement II 3.7
8/3/2019 K10 Strategic Mgmt II
176/383
Reuer, J.J., Zollo, M. and Singh, H. (2002) Post-formation dynamics in strategic
alliances, Strategic Management Journal,Vol. 23, No. 2, pp. 135-152.
Ring, P.S. and Van de Ven, A.H.(1994). Developmental processes of cooperativeinterorganisational relationships, Academy Management Review,Vol. 19, pp. 90-118.
Saxton, T. (1997) The Effects of Partner and Relationship Characteristics on Alliance
Outcomes Academy of Management JournalVol. 40, No. 2 pp. 443-461.
Spekman, R.E., Isabella L.A., MacAvoy T.C. & Forbes III, T. (1996) Creating Strategic
Alliances which Endure Long Range PlanningVol. 20, No. 3 pp. 346-357.
Van de Ven, A.H. and Poole, M.S. (1995). Explaining development and change in
organizations, Academy Management Review,Vol. 19, pp.510-540.
Varadarajan, P.R. and Cunningham M.H. (1995) Strategic Alliances: A Synthesis of
Conceptual Foundations Academy of Marketing Science Journal, Vol 23, No. 4, pp.
282-297.
strategic maangement II3.8
8/3/2019 K10 Strategic Mgmt II
177/383
strategic maangement II 3.9
8/3/2019 K10 Strategic Mgmt II
178/383
strategic maangement II3.10
8/3/2019 K10 Strategic Mgmt II
179/383
strategic maangement II 3.11
8/3/2019 K10 Strategic Mgmt II
180/383
strategic maangement II3.12
8/3/2019 K10 Strategic Mgmt II
181/383
strategic maangement II 3.13
8/3/2019 K10 Strategic Mgmt II
182/383
strategic maangement II3.14
8/3/2019 K10 Strategic Mgmt II
183/383
strategic maangement II 3.15
8/3/2019 K10 Strategic Mgmt II
184/383
strategic maangement II3.16
8/3/2019 K10 Strategic Mgmt II
185/383
strategic maangement II 3.17
8/3/2019 K10 Strategic Mgmt II
186/383
strategic maangement II3.18
8/3/2019 K10 Strategic Mgmt II
187/383
strategic maangement II 3.19
8/3/2019 K10 Strategic Mgmt II
188/383
strategic maangement II3.20
8/3/2019 K10 Strategic Mgmt II
189/383
strategic maangement II 3.21
8/3/2019 K10 Strategic Mgmt II
190/383
strategic maangement II3.22
8/3/2019 K10 Strategic Mgmt II
191/383
strategic maangement II 3.23
8/3/2019 K10 Strategic Mgmt II
192/383
strategic maangement II3.24
8/3/2019 K10 Strategic Mgmt II
193/383
strategic maangement II 3.25
8/3/2019 K10 Strategic Mgmt II
194/383
strategic maangement II3.26
8/3/2019 K10 Strategic Mgmt II
195/383
strategic maangement II 3.27
8/3/2019 K10 Strategic Mgmt II
196/383
strategic maangement II3.28
8/3/2019 K10 Strategic Mgmt II
197/383
strategic maangement II 3.29
8/3/2019 K10 Strategic Mgmt II
198/383
strategic maangement II3.30
8/3/2019 K10 Strategic Mgmt II
199/383
strategic maangement II 3.31
8/3/2019 K10 Strategic Mgmt II
200/383
strategic maangement II3.32
8/3/2019 K10 Strategic Mgmt II
201/383
strategic maangement II 3.33
8/3/2019 K10 Strategic Mgmt II
202/383
strategic maangement II3.34
8/3/2019 K10 Strategic Mgmt II
203/383
strategic maangement II 3.35
8/3/2019 K10 Strategic Mgmt II
204/383
strategic maangement II3.36
8/3/2019 K10 Strategic Mgmt II
205/383
strategic maangement II 3.37
8/3/2019 K10 Strategic Mgmt II
206/383
strategic maangement II3.38
8/3/2019 K10 Strategic Mgmt II
207/383
strategic maangement II 3.39
8/3/2019 K10 Strategic Mgmt II
208/383
strategic maangement II3.40
8/3/2019 K10 Strategic Mgmt II
209/383
strategic maangement II 3.41
8/3/2019 K10 Strategic Mgmt II
210/383
strategic maangement II3.42
8/3/2019 K10 Strategic Mgmt II
211/383
strategic maangement II 3.43
8/3/2019 K10 Strategic Mgmt II
212/383
strategic maangement II3.44
8/3/2019 K10 Strategic Mgmt II
213/383
strategic maangement II 3.45
8/3/2019 K10 Strategic Mgmt II
214/383
strategic maangement II3.46
8/3/2019 K10 Strategic Mgmt II
215/383
strategic maangement II 3.47
8/3/2019 K10 Strategic Mgmt II
216/383
strategic maangement II3.48
8/3/2019 K10 Strategic Mgmt II
217/383
strategic maangement II 3.49
8/3/2019 K10 Strategic Mgmt II
218/383
strategic maangement II3.50
8/3/2019 K10 Strategic Mgmt II
219/383
strategic maangement II 3.51
8/3/2019 K10 Strategic Mgmt II
220/383
strategic maangement II3.52
8/3/2019 K10 Strategic Mgmt II
221/383
strategic maangement II 3.53
8/3/2019 K10 Strategic Mgmt II
222/383
strategic maangement II3.54
8/3/2019 K10 Strategic Mgmt II
223/383
strategic maangement II 3.55
8/3/2019 K10 Strategic Mgmt II
224/383
8/3/2019 K10 Strategic Mgmt II
225/383
UNIT 4ORGANISATIONAL CULTURE & IMAGE
1. Objectives
q to understand the variety of conceptualisations of culture and image
q to understand the different applications and operationalisational consequences of
these different approaches
q to understand the basic implications of different approaches for strategy
q to use different approaches in the context of your own and other organisations.
2. Organisational culture themes within managementliterature
Management theorists approach the problem of organisational culture in numerous
ways, the underlying reason is that culture - whether in an organisational context or
not - is an ill-defined term and so many interpretations of it exist.
The assumptions about culture and reality that any management theorist adopts
dominate and transcend through their whole theory (Smircich, 1983). One core
problem related to organisational culture is ascertaining whether culture is somethingan organisation has or something it is (Hofstede, 1991; Smircich, 1983). Each of these
two assumptions produces different ways to approach the problem of organisational
culture.
This Unit presents the main arguments and problems relating to each of these views.
The accompanying articles explore these arguments in greater depth.
3. Culture as something an organisation has
The primary assumption, surrounding culture as something an organisation has, is thenotion that culture is a critical variable that can be manipulated and measured
(Smircich, 1983). Smircichs (1983) review of management approaches to
organisational culture details two frequently used approaches that treat culture as
something an organisation has.
3.1 Mechanistic approach
The first approach views culture under a machine metaphor - therefore the
organisation is a vehicle for accomplishing a task. It has multiple parts that are
designed, coordinated and fine tuned with each other with the quest of becoming anefficient organisation (Smircich, 1983). This type of metaphor can be seen in classical
strategic maangement II 4.1
8/3/2019 K10 Strategic Mgmt II
226/383
management literature such as Crozier (1964) who describes bureaucracies under the
machine metaphor, it is also a foundation for Taylors (1911) task-centred approach of
Scientific Management.
This mechanistic approach has the underlying assumption that culture is a real and
functional instrument that serves the biological and psychological needs of humans
Recommended