Many companies and marketing managers have dedicated staff for strategy formulation. It is a very important process for the company, as it tells the future direction which the company has to take, and the way that the company can succeed.
The 10 school of thoughts tell us how Strategy formulation can be done, and what are the various ways that you can formulate a strategy.
Here are the 10 school of thoughts of Strategy formulation.
1) The design school
In this thought process of strategy formulation, the focus is on conception of ideas and to design new ideas.
- The company does an internal analysis with the help of SWOT analysis
- The company then tries to match its internal strength with the market strength which is required.
- This works well in a stable environment, where competitors might not disrupt the market suddenly & it gives time to the firm to adapt.
However, we have to understand that conducting an internal analysis of the firm depends on the firms own knowledge about itself. Similarly, matching the firms internal abilities to the external market, requires external market knowlege. Ultimately, knowledge is a limitation to the Design school of thought of strategy formulation. If proper knowledge is not used, this school of thought will fail.
2) The planning school
In this case, the thought process runs towards planning the entire strategy in a rigorous manner, so that the firm advances forward.
- The complete process and the plan which the company will implement is documented from the start to finish.
- At all times the plan is referred to whenever the management wants to take new decisions.
- With the plan in hand, the management gets a clear direction to move in, helping the company to move forward unanimously.
The issue arises in the planning school of thoughts when anything happens out of plan. If you have planned for years in advance, and any new competitor pops up, or any external business variable is changed, then the complete plan gets affected. Hence, proper prediction is most essential when using the planning school of thought.
3) The positioning school
In this process of strategy formulation, the management decides that they want to position the product at the top of the mind and makes decisions accordingly.
- The management has to determine the competition already present in the market, and where is their own company positioned
- It can use tools like Five forces, Value chain, BCG matrix and others to position its products
- Once the market has been analysed, the right strategy is needed to improve the positioning of the product.
Again, in the positioning school of thought, the strategy assumes the market as it is, and does not take into consideration future entrants or change in business environment. Like the planning strategy, the positioning of school of thought can also fail if there are major changes in the business environment.
4) The entrepreneurial school
This school of thought puts all the focus on the CEO of the company. Most observed in small businesses which want to make it large, or even large corporations which trust their leaders (Steve jobs, Mark zuckerberg), in this strategic process, the company follows whatever the CEO says.
- In this case, the CEO needs to be visionary, needs strong leadership skill, and has to have the right judgement and direction.
- This strategy has been proven right in very few cases over the years where the leaders were legendary by themselves. Steve jobs, Bill gates, Mark Zuckerberg are all examples of people who have grown companies to astounding proportions due to their leadership skills.
The problem with this management school of thought is a single one – How do you find such a leader? If you want to design your marketing strategy based on the recommendations by the leader of the company, then this leader can be wrong as well. And you need someone who is very very strong on the business front and is dynamic to make the necessary changes.
5) The cognitive school
In this thought process, people’s perception and information is studied. One of the best examples of cognitive studies is the Johari window. Wherein, you can better your business by understanding your customers.
- It is a mental and psychological process to find out what is in the minds of the consumer and how do we improve on that or use that information.
- Once you know customers perception and thought process about you, you can change the same with strategy. You can either improve or you can communicate better so that your customers have more information about you.
The problem with the cognitive model is that it is not practical beyond a certain point. A top company cannot rely on surveys alone to find new ideas or to make connections with their customers, because it has become a mass company by that time. Cognitive reasoning cannot be done at a mass stage.
Moreover, innovations are brought when you think of products which the customers have not thought of – which is not possible in the cognitive school of thought. Because you are only improving on the things which your customers perceive.
6) The learning school
In this thought process, the management keeps a watch over what has already happened and then forms the future strategy looking at the past. It might not necessarily look at its own past. It might look at the way things worked for some other company, or how some other company failed. And then decide on which strategy to implement and which one to ignore.
- The company looks at things that worked and tries to implement the same thing over time with the assumption that it will work again.
- The company also looks at things that did not work in its favour (or in favour of a competitor who tried the same thing), and discards such things / processes.
More than a strategy, the learning school of thought looks like manouevuring or guiding the company on the basis of the previous road that has gone by. We all know its not a good decision because the road can change at any time. Hence this thought process is not at all useful at time of crisis, nor does it help in creating something outstanding. This strategy can be used when the firm is stable, and wants to work on auto mode while it develops something else in the meantime.
7) The power school
In this school of thought, the people who are in power take the decisions. These people can be your customers, they can be your stakeholders, they can also be certain people from within the management. 4
- Anyone who is known to have power over the company, can drive the company forward.
- This ensures that there is lesser resistance for the strategy to be implemented
- It is a very realistic thought process, because in corporates, there are so many people that power should reside in few hands.
The problem with the power school happens when the powerful people stop listening to feedback or stop implementing measures of improvement, and only focus on minor improvements. At such times, the power needs to change hands so that the company keeps moving forward.
8) The cultural school
The cultural school of thought says that the company has a fantastic capital in terms of its human capital as well as its social capital. A positive culture in the firm can give a proper direction to the firm.
- The cultural school tries to involve many different departments within a company.
- It is most useful during mergers and acquisitions.
- It emphasizes the role of social values, beliefs and culture in decision making
There can be resistance to the cultural school as the same people whom we are trying to unite, might not like the idea of change, due to which they become united and the company moves in the opposite direction. Moreover, even if you have got the people united, and have built a strong culture, your direction still remains unclear.
9) The environmental school
More of a situational school of thought, the environmental school gives most of the importance to the environment. For example – In a paper industry, wood plays a major role. And if the wood is scarce, the strategy formulation will have to be done on the basis of wherever the wood is available.
- Major emphasis is on the environment – which can be a raw material or a major factor in the strategy of the company.
- Situational analysis is the most used tool in the environmental school.
Obviously, this thought process depends on the situation, and is used when there is total dependence on environmental factors.
10) The Configuration school
One of the most preferred amongst the 10 School of thoughts is the configuration school. It basically says, that the strategy needs to be configured. The strategy allows the firm to move from one position to another, hence a simple set of values will not help this movement.
- As per the configuration school, strategy needs to consider a lot of thing which can go wrong, and cannot be derived from simple set of values.
- Over a period of time, an organization forms various sets of values which have to be transformed so that the organization reaches the point that it desires.
- To do this, the organizations stable business might need to be disrupted, and the organization has to be configured so that it reaches the success it was looking for.
- Hence, the name configuration school, so that the organization is configured over and over again unless it reaches the desired result.
This school of though tries to attain stability via various ways, and keeps transforming as long as needed.
Overall, the Mintzberg’s 10 school of thoughts for strategy formulation are applicable even today. However, one firm can follow a single strategy only. And hence, deciding where your firm stands, the influencers in the firm, its dependency on environment and culture, and in general looking at your own firm, you can decide which of the 10 school of thoughts of management are suitable for you.