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BUS3005 Strategic Management : Social and Environmental Accounting

Critically evaluate the main similarities and differences between the Evolutionary and Processual schools of strategy as described by Whittington. How convincing do you find each of these school’s challenges to what Whittington calls the Classical school of Strategy.

Answer:

Introduction: 

The article focuses on the evaluation of strategic management. The article is a critical evaluation of the main similarities, and differences between the evolutionary and processual approach of strategy put forward by Whittington. There is however a background behind the existence of all strategies. Most of the companies aim at making profit and growing bigger following a particular strategy. As the path towards growth is different for every company, so their strategies too vary. This led to the formulation of diverse strategies by the companies for serving their individual needs.

The formulation of these strategies takes place in different ways that includes emergent, deliberate, or deliberately emergent and viewed from a process-oriented perspective or outcome oriented perspective. Richard Whittington thus, took a western viewpoint, enabled in collating several theories on strategy, and segregated them in four groups following particular approaches. In this report, the evolutionary and processsual theory of Whittington finds a description along with a mention of the similarities and differences between both the approaches mentioned. The report also discusses about the classical approach of strategy. There is also discussion on how convincing each of the approaches is to the classical school of thought as described by Whittington.

Differences between the Evolutionary and Processual School of Strategy

Evolutionary School of Strategy

The Evolutionary Approach of Whittington depends on a belief that there is constant change in the economic environment. Similar to the theory of Darwin that focuses on the survival of the fittest this theory also focus on the role played by strategy in responding to the environment  for the matter of survival and maximizing profit. There is however, the prevalence of unpredictability in the market for making huge investments in the strategic plans but evolutionist holds a different value.  T


hey however believe high efficiency and profitability are necessary of a firm’s survival, which helps in cost reduction, efficiency increment can open to options (Whittington, 2002). Competition will however determine the survival of the fittest. On the other hand, companies that do not undergo change on an immediate basis in the face of competition are bound to face extinction. This gives rise to the emergence of successful strategies through the process of natural selection that enables an organization to fit better in their economic environment.  However, the proponent of evolutionary school put forward the idea that success of an organization depends more on its environment rather than on the managers. The differentiation argued by the evolutionist on grounds of the Porter’s theory. They mention that the key to success for a company lies in providing something  unique and valuable to the buyers at a lower price and is a key to  company’s success without which they would not be able to survive until they prove to be unique and is a position to outperform their competitors. In this approach, the one strategy that would not prove to be rational for the managers would be expensive investments since the new competitors would provide a push in the market with the launch of the new product or service that also leads to the emergence of small products that might prove to be more efficient. In this respect, Whittington put forward the example of Sony that launched different versions of Walkman in 1980 s where the market decided on the models that survived and the ones that succumbed to failure (Dopfer 2012). Thus, environment plays a vital role for deciding on a strategy which  might be appear questionable when considered alone leaving aside the organizational resources.

Processual School of Strategy

The processual approach helps in highlighting the context importance while examining the unfolding processes that leads to change. This theory does not believe in following concrete steps for bringing in change (Tansey, Spillane and Meng 2014). Change is a continuous thing without any finite end. In addition, change is also considered as a process that is messy as it is represented by the organizational culture, history and internal politics.  Thus to plan a strategy through this approach there is a necessity of taking in to account the political, psychological and behavioral relationships. This approach considers the organizations as messy or sticky phenomena that give rise to strategies that leads to more confusion (Tavakoli, Schlagwein and Schoder 2015). This approach influences cognitive limitations through bounded rationality.  This approach to strategy considers skill, dedication, perfection and sense of involvement through commitment and experience. The strategy for this approach discovered through action. This approach of strategy also shows that there exist persisting goals in an organization.

The emergence of the processual approach to strategy depends on day-to-day operations of market processes and the organizational strengths. The strategy under this approach designed following an incremental process that is similar to Lewin’s Leadership style. This approach followed here is a bit messy since strategies emerges taking into consideration the individuals present in an organization who seeks to include personal objectives as part of organizational goals (Baird 2014.).  In this approach, it becomes difficult for the top management for handling the micro strategies that arises due to everyone’s creation of personal strategy based on daily activities. The strategy initiated through this approach also lacks a direction since no one knows the strategy followed by the firm (Vaara and Whittington 2012.). Another limitation comes with the strategy that is the choice of strategy adopted and the insecurities with which the managers perform in case when the strategy formulation follows a bottom up approach.

The Processual school adopts pluralistic approach that focuses on the fact that a business possesses other goals in addition to making profit. This approach considers strategist as the individuals possessing interest in satisfying themselves rather than considering those fighting endlessly for reaching an optimal solution. Thus, Processualist does not overview firms as united in optimization of a single utility but as coalition of individuals who put forward their personal objectives towards the organization(da Silva Castelhano 2012). Thus, this approach believes that focusing solely on the profits might lead to the ignorance of the firm’s internal working. Moreover, there is also a persistent belief that firms build up organizational slack for buffering them against the need of any strategic change. This implies that a firm either sacrifices or delivers enough profits for ensuring everyone’s happiness rather than concentrating on maximization of profit.

Similarities between Evolutionary and Processual School of Strategy

Here both the evolutionary and the processual approach of strategy are appropriate for industries that are in flux and in their early stage (Karami 2012). In addition, the evolutionary and processual approach criticizes the deliberate and formal long term planning which not only inadaptable and overtly rigid. Both the processes imply that futuristic forecast for 3 to 5 years is no longer possible. This finds an explanation by considering the case of iPhone that first sold in the year 2007. This smart phone induced a revolution that brought a change in the entire market that not only included the providers and retailers of cellphone but also affected many industries casually. The rise in popularity of smart phones implied rise in mobile web traffic and an enhanced demand for websites that provided information on iPhone (Contrafatto and Burns 2013). However, the business strategy put forward in the year 2006 did not have the concept about how the technological breakthrough will bring about a change and therefore did not include plans for developing a mobile site or application or involve employment of mobile developers. The smartphone gave way to flourishing businesses with a brand new many could not predict set of opportunities.  The new market allowed the emergence and survival of the stronger performers and filtering out the weak. In this respect, more adaptable and creative strategy considers logical reasoning as a hindrance than of help. Thus in the context of evaluation and processual approach, creation of long-term rigid plan for the firm under discussion will trap the firm within current orthodoxy.

Challenges of Each School to Whittington Classical School of Strategy

Most organizations guided towards maximizing the return on investment. Therefore, Whittington compiled the assumption of profit maximizing within the strategy through the process of rational planning. The person responsible for controlling and formulating the strategy is the CEO of the organization. Thus, (Reeves, Love and Tillmanns 2012) stated that responsibility of consciousness and control within the organization must depend on the chief executive officer also referred as the strategist. Thus, strategic formulation described as a formal process that deals with planning, analysis and commanding.

The classical school follows a straight down approach and makes an assumption that business environment is not only predictable but also attempts on designing the logical and rational methods and approaches for enabling the organization in achieving its objectives and goals. Strategy is something that is controlled, formulated and planned by top management and then communicated down organization’s hierarchical structure (Cimbala 2012). The implementation of strategy at different levels determined as per the pre defined parameters without questioning adequacy and suitability. The Classical approach appears to the ideal for mature and stable industries since the industry has an influence on individual organizational performance.

Thus, classicists help in developing strategy through analysis of the strengths and opportunities of the firm. This attempt of the classicist makes them oversee the dynamic environment that involves most firms (Teece 2016). The emergent approach however views strategy as incremental that reveals a pattern following a stream of decisions where implementation and formulation takes place on a simultaneous basis.

The classical and evolutionary approaches coincide since both focus on the maximization of profits. In contrast, the pluralistic approach of Processual school of strategy however helps in recognizing other outcomes than focusing on profit (Boddewyn 2015). Thus, Evolutionary and Processual approaches consider the strategy process as emergent while the strategy adopted following the classical approach is deliberate.

Both the classical and evolutionary schools identify profit maximization as its desired outcome. The classical school depends on the rationality factor in achieving it (Cressman 2013). Similar is the case of with evolutionary school that also moves along the similar path since it remains less confident about the management’s ability to plan. To follow the path of profit maximization the evolutionary perspective focuses on the Darwinian market.

Thus, for valuing profit as ubiquitous firms goal helps in demonstration of ignorance towards the organizational culture that is contemporary. Initially business meant only profit firms however; in modern society, there has been a rise of the nonprofit that contributed around forty percent of revenue increase (Markard, Raven and Truffer 2012). In such cases, it would be oxymoronic in suggesting a profit maximizing nonprofit firm. Thus, strategic management ensures consideration of criteria more than profit for driving the business that ensures consideration of the processual school of thought.

The Classical strategist follows rational analyses while Processual follows routines and rules that are already a part of the organization along with the cognitive biases and objectives of the individuals for deciding on the common goals. The Processual approach put emphasis on the internal development thereby building on the core competencies of the company. As Nixon and Burns (2012) explained it, this approach helped in explaining that using non-imitable and valuable resources considered the effective way in outperforming the competitors. However, the most effective resource that a firm can possess is knowledge since it is not only impossible to trade in the market but also manage. This is because knowledge is something gained through experience or learning thereby making harder to imitate by the competitors.

However, the Classicist approach began with strategy formulation and then considering their implementation. In contrast to this, however, the Processualists discover strategy by action. According to Vaara and Whittington (2012) a resource based view is vital for the approach because no matter the opportunities existent in the market organization that lacked the required resources and skills will inevitably fail. The processual approach thus emphasizes more on the insights of organization compared to the external foresight.

However, failing to undertake periodic access to present environmental fit will cause strategic drift as strategies have become irrelevant and dated. Thus, a firm that undergoes a drift strategically is quite similar to metaphorical frog in the hot water. The frog will jump off the container if the tossed in the boiling water (Cressman 2013). However in this case of there when there is an incremental increase in heat then the frog will die slowly. In this regard, therefore a firm that imposes a resistance to change represents a naive swimming in hot water with denial and apathy of their own.

The point of disagreement of the strategic process

Classical strategist views the emergent process as unconfident and wary while the Processual and Evolutionary strategists’ views deliberate process as naïve. Long term deliberate has been relevant in the mid 20th century however with recent technological, social and environmental shift the traditional ways for deliberate planning has become obsolete. Thus, today’s competitive and overpopulated markets cannot act as ideal homes for undertaking long term strategy. In aviation industry however, there is great prudence in exercising strategic decision making and resource allocation thereby implying the need for an appropriate deliberate planning approach. Thus, Reeves, Love, and Tillmanns (2012) discusses that there are existence of certain  industries that will favor particular strategies forever among which the most effective ones are a combination of the emergent and deliberate processes. This is however observed in the case of formation of the strategic groups there are certain groups of organizations that are believed to possess similar strategies.

There are however numerous ideas that helps in understanding the real definition of strategy. Thus, strategy defined as a long term direction followed by an organization for achieving its success. The long term planning necessary for reaching the desired goals of the firm and the ways of using the available resources determines the best ways in achieving the goals.  In this respect, Whittington four approaches put forward the different styles and ways considered. Thus, anyone can relate to any of the perspectives since they are broad and there remains no clear line relationship existing between them.

Conclusion: 

The article ends with a discussion on the point of disagreement of the strategic process. In the article there are discussions about three of Whittimgton’s four classifications. The article thus discusses about the Evolutionary, Processual and classical approach to strategy. One can find a discussion on Evolutionary and Processual approaches and the differences that exist between them. The article also points out the differences between both the approaches. The article also discusses how convincing is the challenges of each of the approach to the convincing approach. Thus by going through the article one can find that Whittington’s classification has led to simpler ways for contrasting and comparing different views. However, the important aspect to be learnt from the article is that the elements from each of the approaches considered important for producing and describing a strategy. Thus, the important, practical and conceptual issues focus on the interdependence and interaction of differing schools. Based on the critical evaluation of the article one can understand how a strategy is decided upon. Therefore, the managers can capitalize on such knowledge for ensuring the ideal decision for the organization.

References:

Baird, C., 2014. Why is there so much disagreement about what strategy Is.

Boddewyn, J.J., 2015. Political aspects of MNE theory. In The Eclectic Paradigm (pp. 85-110). Palgrave Macmillan UK.

Cimbala, S.J., 2012. Clausewitz and escalation: Classical perspective on nuclear strategy. Routledge.

Contrafatto, M. and Burns, J., 2013. Social and environmental accounting, organisational change and management accounting: A processual view. Management Accounting Research, 24(4), pp.349-365.

Cressman, R., 2013. The stability concept of evolutionary game theory: a dynamic approach (Vol. 94). Springer Science & Business Media.

da Silva Castelhano, J.I.P., 2012. Bring people back into the heart of the company: a sensemaking refletion on organizational change at France Telecom-Orange.

Dopfer, K. ed., 2012. Evolutionary economics: program and scope (Vol. 74). Springer Science & Business Media.

Karami, A., 2012. Strategy formulation in entrepreneurial firms. Ashgate Publishing, Ltd.

Markard, J., Raven, R. and Truffer, B., 2012. Sustainability transitions: An emerging field of research and its prospects. Research policy, 41(6), pp.955-967.

Nixon, B. and Burns, J., 2012. The paradox of strategic management accounting. Management Accounting Research, 23(4), pp.229-244.

Reeves, M., Love, C. and Tillmanns, P., 2012. Your strategy needs a strategy. Harvard Business Review, 90(9), pp.76-83.

Tansey, P., Spillane, J.P. and Meng, X., 2014. Linking response strategies adopted by construction firms during the 2007 economic recession to Porter’s generic strategies. Construction Management and Economics, 32(7-8), pp.705-724.

Tavakoli, A., Schlagwein, D. and Schoder, D., 2015. Open strategy: Consolidated definition and processual conceptualization.

Teece, D.J., 2016. Dynamic capabilities and entrepreneurial management in large organizations: Toward a theory of the (entrepreneurial) firm. European Economic Review, 86, pp.202-216.

Vaara, E. and Whittington, R., 2012. Strategy-as-practice: taking social practices seriously. Academy of Management Annals, 6(1), pp.285-336.

Whittington, R (2002) ‘ Theories of Strategy (2nd ed), Sage, London

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