1. Strategy in historic perspective: A systematic literature review
1.5 Strategy research in the 1970s
From the 1960s and 1970s on, an increasing number of practitioners and researchers recognized the importance of strategic planning in management and contemplated on a general framework to define a firm’s strategy. Due to this development, research on strategy as an overarching business tool was initiated. This research was empirically based in general but did provide some theory-based insights (Abell, 1980; Galbraith, & Schendel, 1983). The growing instability of the business
management decision-making (Rumelt, Schendel, & Teece, 1991). With the growing social unrest, the exploding resource costs, the mounting inflation, the increased unionization, and the on-going redefinition of political agendas, the uncertainty amplified to an extent that required businesses to introduce a general plan of action for any possible state of the world. Such a general plan of action implied a strategy that reduces the exposure to risk and takes advantage of unexpected events, whenever possible. Consequently, long-term planning became the main theme of strategic concepts that increasingly focused the creation of value (Hayes, & Abernathy, 1980; Coyne, & Subramaniam, 1996). This might be the reason why business strategy research in general, but also in particular, grew over the years. Whereas we can identify one study in the 1960s and one in the 1970s, four works were published on business strategy in the 1980s, three in the 1990s, and three in the 21st century. We will come to a clear definition of the term business strategy in part 1.6.2.
Based on these fundamental ideas of the 1960s, from the 1970s on, more practical research arose (Rumelt, Schendel, & Teece, 1991). Chandler (1977) declared the end of Smith’s era and explained professional managers to have a visible hand.
Consequently, strategy became increasingly important in practice and research, which was reflected in the increase of studies on strategy in those days. Hambrick (1980) noted that the methodological approaches of the 1970s were still piecemeal works, as they mainly centered a particular functional area, such as in marketing, or a single key variable. We chose 20 works for further analysis and can confirm Rumelt, Schendel, and Teece’s (1991) viewed that empirical work grew in the 1970s. We thus chose seven empirical works to be important. However, empirical research was often not consistent in measurement and/or results though relationships between strategy and different moderating variables have been steadily focused on since the 1950s (Schendel, & Patton, 1978; Hambrick, 1980; Ginsberg, 1984).
Table 1.4: Strategy research in the 1970s.
Year Author Content Method,
measurement
Classifi-cation
Published in
Frequency of quotes 1971 Michael Life cycle theory,
product petrification, case
histories
Theoretical treatise
Product strategy
CMR 37
1972 Thanheiser Historical development of German Industrial
companies, comparative analysis of the 100
largest German industrial companies
1950-1970, follows Chandler’s (1962)
work
Empirical work
Strategy and structure
book 64
1973 Channon Historical development of British companies,
comparative analysis of the largest British companies
1950-1970; manager interviews, follows
Chandler’s (1962) work
Empirical work
Strategy and structure
book 611
1973 Mintzberg Three modes of strategy making (entrepreneurial mode, adaptive mode, planning
mode)
Theoretical treatise
Strategic planning
CMR 1.348
1974 Abernathy,
& Wayne
Case studies on the limits of the learning curve
Empirical work
Learning curve
HBR 518
1974 McCaskey Planning with/without goals; planning
processes determined by
environment, people, organisational
conditions
Theoretical treatise
Strategic planning
AMJ 83
1974 Schoeffler, Buzzell,
& Heany
Impact of strategic planning on profit performance (ROI,
market share, product/service quality, marketing
expenditures, R&D expenditures,
investment intensity, corporate diversity), PIMS study in 2 phases
Empirical work
Strategic planning
HBR/book 618
1975 Abernathy,
&
Townsend
Descriptive model for relationships
between technological innovation and
productivity improvement;
process change
Model development
Innovation TFSC 186
1975 Abernathy,
&
Utterback
Innovation with the help of a
function of development of
production technology, organizational structure, market
relationships, competitive
strategy
Model development
Innovation book 2,634
1975 Hofer Contingency theory of business
strategy (product life cycle, product differentiation and following strategic steps), classifying
variables in a conceptual framework
Theoretical treatise
Business strategy
AMJ 783
1976 Pavan Historical development of Italian companies’
strategy and structure, comparative analysis of the
largest Italian manufacturing companies
1950-1970; manager interviews, follows
Chandler’s (1962) work
Empirical work
Strategy and structure
JEB 38
1977 Pitts Strategies and structures for diversification, analysis of public sources of 21 large
companies in the US; field research:
interviews of executives
Empirical work
Growth AMJ 133
1978 Hatten, Schendel,
& Cooper
Purpose, strategy (manufacturing strategy [plants], financial strategy,
market strategy [brands, price,
distribution, marketing, market
share, size] and
Model development
Holistic model
AMJ 329
1978 Hofer,
& Schendel
Definition and explanation of strategy and its central role, description of
analytical concepts, models,
techniques; how strategies should be formulated, short case studies
Model development
Strategy formulation
book 3,312
1978 Miles, &
Snow (in AMR:
Miles, Snow, Meyer,
&
Coleman)
Implementation of new strategy concept with culture types categorisation
(defenders, prospectors, analysers, reactors), each
defining one strategy with a set
of technology, structure, process
and environment reaction
Model development
Holistic model
book, AMR
8,580
1978 Mintzberg Patterns in strategy formation, strategy formation (1) as interplay between
dynamic environment and
bureaucratic momentum, leadership mediating, (2) over
time follows patterns in organizations (e.g.
life cycles), (3) interplay between
intended and realised strategies,
case studies
Empirical Work
Strategy formation
MNSC 3,178
1978 Schendel,
& Patton
Simultaneous equation model of corporate strategy, combination of the qualitative nature
of corporate strategy and mathematical model building with the help of management
science
Model development
Corporate strategy
MNSC 204
1978 Wasson Dynamic competitive strategy and the product life cycle
Theoretical treatise
Product strategy
book 178
1979 Rumelt Examination of analytical approaches, conclusion that
objectives and policies restructure
to find solvable subproblems, evaluating strategy
Theoretical treatise
Strategy evaluation
Chapter in book
148
1979 Yelle Comprehensive survey on the learning curve
Theoretical treatise
Learning curve
DS 1,162
1.5.0 First studies on strategy and planning
Whereas Mintzberg’s (1973) study of 1973 belongs to the classification of strategic planning, his work of 1978 pertains strategy formation. He simplified the definition of strategy and stated that a strategy is not more than a plan. In this context, strategy pursues an intention and should thus be consciously formulated for guiding a business or gradually be integrated (Mintzberg, 1978). In general, planning defines a company’s future actions. In regards to strategy, it is the manager’s task to select objectives and to relate them to the company for evaluating alternative options. A planner has to take into account the company’s strengths and weaknesses, but also potential environmental influences. Especially external effects complicate planning processes: Forecasting changes outside a company is often difficult, and planners need an enormous amount of information. With respect to the process of planning, some managers thus perceive the formulation of hypotheses concerning the different
Directional planning depends more on the decision maker’s personality. Depending on the business surroundings, such as the environment, organizational conditions, and the people that are involved, strengths and weaknesses for each type of planning can be named. The processes are not exclusive, because they involve similar basic steps of diagnosis and determination of action, prioritizing, and finally the development of an evaluation method (McCaskey, 1974).
Abell (1980) explained that especially when changes occur, as with respect to existing, new or deleted product lines or structural changes of processes, business definitions are put into question. Arnoff (1976) suggested mathematical model usage for developing plans. Furthermore, Chakraborty and David (1979) proposed to use management science techniques, as computerized systems and quantitative models, to structure an adequate plan. We neglect these models in our study, and conclude that planning is an essential and central management function for guiding a company efficiently. In fact, strategy defined as planning is a manager-oriented concept and thus relatively subjective. Managers have to make sure that their plans are flexible enough to react to possible changes. In this respect, Hofer (1975) criticized that only few studies focus on behavioral dimensions. Researchers more centered informational and analytical aspects of planning processes. Expectations of future events have to be anticipated for running a business, whereas concrete suggestions are hardly available in literature. Although a number of well-accepted books in the field of planning exists, these works often concentrate on too abstract and too simple models. These models only focus on the planning process and are rarely used in practice. Consequently, managers tend to avoid planning, as it is a complex task whose results are seen in far future. Mintzberg (1973) added critically that planning is sometimes seen as a panacea for problems occurring in the field of strategy formulation (Mintzberg, 1973; McCaskey, 1974; Hofer, 1975; Arnoff, 1976; Naylor, 1976; Chakraborty, & David, 1979; Garvin, 1979; Sawyer, 1979; Abell, 1980;
Kastens, 1980). Schoeffler, Buzzell, and Heany (1974) revealed the impact of
Heany (1974) further added marketing, R&D and financial conditions, product and service quality, and corporate diversity to a strategy model.