72 – Corporate Strategy (Ansoff, 1965)

Reference:

Ansoff, H. Igor, “Corporate Strategy”, McGraw Hill, New York, 1965 (Ch.1-6)

H. Igor Ansoff (December 12, 1918 – July 14, 2002) was a Russian American, applied mathematician and business manager. He is known as the father of Strategic management.
Professionally, Ansoff is known worldwide for his research in three specific areas: 1) The concept of environmental turbulence; 2) The contingent strategic success paradigm, a concept that has been validated by numerous doctoral dissertations; 3) Real-time strategic management.
Marketing and MBA students are usually familiar with his Product-Market Growth Matrix, a tool he created to plot generic strategies for growing a business via existing or new products, in existing or new markets. [Source: Wikipedia]

Topic: Analytical approach to the definition of a corporate strategy.

Summary and citations:
• “The purpose of this book is to synthesize and unify these into an overall analytic approach to solving the total strategic problem of the firm” (preface)
• Classes of decisions: strategic, administrative and operating
• A new method for modelling for strategic decisions because the Capital Investment Theory (CIT) is not applicable to strategic management decisions (chap 2)
• “..decision rules for search and evaluatino of products and markets are not the same for all firms.” P22
• “Our concern must be not only with evaluation of projects for given rules, which is the main concern of CIT, but also with formulation of the rules for each individual firm” p23
• Adaptative search method: “1) a “cascade” procedure of successive narrowing and refining the decision rules, 2) feedback between stages in the cascade, 3) a gap-reduction process within each stage, and 4) adaptation of both objectives and starting-point evaluation” p28
• System of objectives: “both economic (exert primary influence) and social objectives (secondary)”; “The central purpose of the firm is to maximize long-term return on resources employed within the form” p38 “influences: responsibilites and constraints”
• “Contrary to Cyert and March, we assume that the business form dies have objectives which are different and distinct from the individual objectives of the participants” p39
• “…significant aspect of the adaptative search method… is the circular dependence of the goals on the environment and of the choice of environment on the goals” p49
• External (defensive, aggressive) flexibility or internal flexibility (liquidity of firm’s resources)
• Types of synergies: 1) Sales synery; 2) Operating synergy; 3) Investment synergy; 4) Management Synergy. P80
• “The problem of strngths and weaknesses and the problem of synergy are seen to be related” p91
• Grid of competences: 1) R&D; 2) Operations; 3) Marketing; 4) General Management (p100)
• “The major ise of the competence profile is in assessment of this balance in four different parts of the strategic problem: 1) Internal Appraisal; 2) external Appraisal; 3) Synergy Component of Strategy; 4) Evaluation of individual opportunities” p102
• Growth vector components – table 6.1 p109

Personal comments, interesting issues and findings:
• This is a book for managers, with concepts and procedures to be used. I think though that it is quite dense to be applied.
• The corporate strategy is too ROI-centered
• Ansoff was mathematician and it can be viewed in his approach: First defines the problem, then gives definitions of the tools, then solves the problem with the defined tools. Very deterministic and carthesian.
• Agrees with Andrews about the influence of the environment. Also sees strategy as a always-adapting process with feed-back.
• Bases strategy on decisions made on quantitative values (rates, ratios, ROSales, networth, inventory, assets, etc), based on finance.
• As personal objectives of individuals, the author also considers goals as: 1) maximum current earnings; 2) Capital gains 3) Liquidity of estate; 4) social responsibility – Enlightened self-interest; 5) social resposibility – Philanthropy; 6) attitude toward risk (p62). No consideration of more ‘soft’ values (!). Even 4 and 5 are considered for profit (but not economical) !!
• “Is strategy necessary?” p112 might be a question that many authors might take for garanted but I think that is good to be asked.
• Last diagram p202 makes me think (and smile) if this is a book really for managers to be used in a practical way. It is more an informatic algorithm than an ‘enlightning’ vision.

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