Andrews, Kenneth J., “The Concept of Corporate Strategy”, Irwin, 1971 (Ch. 1-5)
Kenneth R Andrews (1916 – 2005) was an academic who wrote and thought on business policy or corporate strategy at the Harvard Business School. He is regarded as one of the ‘fathers’ of modern business strategy and has been credited with giving corporate strategy its dominant strategy. Originally, a schloar of American literature (his PhD was on Mark Twain)in 1946 he was persuaded by Edmund Learned to join Harvard Business School where he taught for forty years. His books are a popular source of SWOT analysis in business strategy. [Source: Wikipedia]
Topic: Formulation and implementation of corporate strategy.
Summary and citations:
• General Management tasks: “…assignable to three roles – organization leader, personal leader, and architect of organization purpose” p3
• “The complexity of the general manager’s job and the desirebility of raising intuititve competence to the tlevel of verifiable, conscious, and systematic analysis suggest the need,… for a unitary concept” p10
• “The basic determinants of company character, if purposefully institutinoalized, are likely to persist through and shape the nature of sbstancial changes in product-market choices and allocation of resources.”p14
• “Incrementalism might have… the appearence of consciously formulated strategy, but may be the result… of skillful improvisatory adaptation”. P17
• “In a dynamic company, moreoever, where strategy is continually evolving….”p17
• “Corporate strategy is an organizarion process, in many ways inseparable from the structure, behavior, and culture…”p18
• “The ability to identify the four components of strategy –(1) market opportunity, (2) corporate competence, (3) personal values and aspirations, and (4) acknowledgede obligations to segments of society other than stockholders- is easier to exercise than the art of reconciling their implications in a final pattern of purpose”. P19
• Uniqueness: “The most important characteristic of a corporate pattern of decision that may properly be called strategic is its uniqueness” p22
• Forced-growth Strategies : 1) Acquisition of competitors; 2) Vertical integration; 3) Geographical expansion; 4) Diversification (p24)
• Brice Scott’s stages: 1) Single product (single business) ; 2) single-product with functional specialization; (dominant business) 3) multiple product lines organization based on product-market (related business) –the most successful strategic pattern; 4) unrelated business p25
• Criteria for ealuation: “A strategy must be explicit to be effective and specific enough to require some actinos and exclude others. Clarity should not imply rigidity” p27 “Uniqueness is morethe produc tof imagination than experience” p28; “Vulnerability to competition is increased by lack of interest in market share” p28; “….consistency becomes a viatl rather than merely an esthetic problem” p29 “the riskiness of any plan should be compatible with the economic resources of the organization and the temperament of the managers concerned” p29
• “… a high risk srategy that failed was not necessarily a mistake” p32
• Company environment: technology, ecology, economics, industry, society, politics (p38)
• “to conceive of a new development in response to market information and prediction of the future is a creative art” p45 –more than economic analysis-
• Consideration of all combinations of 1) Environmental conditions and trends; 2) opportunities and risks; 3) Dinstinctive competence; 4) Corporate resources
• Importance of personal values: “what they personally want to do” p53
• “… actions taken can be rationalized so as not to seem quite so personal as I have suggested they are” p55
• “Finally, at a higher level of sophistication, the strategy should have some appeal for all employees” p55
• “A change in corporate directino and the energy and innovation required to make it successful usually call for a cultural adaptation that is better encouraged than forced” p59
• “Strategic innovation is a practical alternative to violent restructuring” p60
• “The effort to formulate personal purpose might well acompany each individual’s contributions to organizational purpose” p62
• “As much as a leader wishes to trust others, he has to judge the soundness and validity of his subordinates’ positions” p63
• “Strategy is a human construction; it must in the long run be responsive to human needs. It must ultimately inspire commitment. It must stir an organization to successful striving against competition. People have to have their hearts in it.” P63
• Ethical values: “strategists might and can do to what they want to do. We now move to what they ought to do” p65
• “The decentralization of authority that makes large organizations possible requires trust rather than suspicion in the granting of appropiate autonomy to subordinates” p67
• Concern about the world: “The willingness to undertake joint ventures…share management,…cooperate…to train nationals… oppportunity for combining entrepreneurship with responsibility…” p71
• “Governments everywhere are active claimants to a voice in individual corporate strategy” p72
• “Business cannot remain healthy in a sick society” p73
• “Overregulation of the individual by corporate policy is no more appropriate than overregulation of the corporation by government” p75
• “…a company should not venture into good works that are not strategically related to its present and prospective economic functions” p76
• The determination of strategy: “1) appraisal of present and foreseeable opportunity and risk in the company’s environment, 2) assessment fo the firm’s unique combination of present and potential corporate resourcess or competence; 3) determination of the noneconomic personal and organizational preferences to be satisfied, and 4) identification and acceptance of the social responsabilities of the firm” p78
Personal comments, interesting issues and findings:
• The book distinguishes very clearly the formulation and the implementation of corporate strategy. The formulation is progressively explained, in a very clear way, the concepts are clearly explained and Andrews gives a lot of examples. I think it is a book written for practitioners, managers and CEO’s.
• Importance of the Personal Values: I have found a strong will of rationalizing causes (i.e. reasons for internationalization). This might be because normally, the facts are analyzed after the phenomenon happened (ie the company is already international) and not when the decision was taking place. I think there is a strong component on strategic decisions (and any decision) consisting on the influence of personal values. For instance, in class, Guillaume explained to us the way he discarted a supplier, mainly by personal reasons. But these reasons would never be reported as personal, he said. The importance of personal values is showed in the case of strong-personnality leaders and founders: the character of Richard Branson is in the base of its risky and broad diversification.
• I like the balance that Andrews shows between the separation of the economic analysis and calculation of ROI and the personal interests of managers.
• As Chandler “structure should follow strategy” p20
• Mimetism (effects of instittionalisation?) : “Sometimes the companies of an industry run like sheep all in one direction” (p32) instead of uniqueness. Personal interest of the manager – problem of agency.