The term ´strategy´ covers a broad field of subject matters within the academic literature. Strategic management as one branch is recognizing that in the world of business certain strategies suit different situations and environments better than others (Whittington, 2001). It is the intention of this research to develop the own reasoning by considering different approaches over the last decades in order to combine strategic approaches from different perspectives without neglecting related criticism, which motivated further research. Thus, this section starts with the early strategic management literature, because their basic concepts and assumptions can still be found on management shop floors. The results of recent research with
respect to academic and managerial impacts are considered at the end of the chapter, too.
Although there is no single definition, the literature describes often the existence of an overall long-term objective compared to a decision made in and for the advantage related to a single moment. Therefore, one of the main targets in the economy is to attain competitive advantage (Hinterhuber, 1992). Strategy as a topic in literature came up in the 19th century in the context of military strategy initiated by Clausewitz. In management research, strategy related to economics was developed at Harvard Business School in the 1950s. Strategy in management research is nowadays a well described and a commonly used term in management literature and practice
(Easterby-Smith, Thorpe and Jackson, 2008).
According to the comprehensive approach which is chosen in the context of this review, strategy can be understood as a seamless merger of all activities of a
company (Porter, 1986). Every organisation operates on a set of assumptions as to what is business, what the objectives are or what customers value and pay for. According to Drucker (1998) strategy converts this theory of the business into performance. The purpose is to enable the organisation to achieve its desired results.
Strategy is the pattern in a stream of decisions (Mintzberg, 1973), which means to execute specific actions based on a planning to achieve an objective. Strategy requires resource allocation decisions that are intended to fulfill an organization’s objectives. The strategy of an organization is broken down into the different levels of hierarchy for organizational purposes, objectives and goals.
According to Whittington (2001), different perspectives of strategy can be found in research with a different focus over the last decades.
Classical 1960s Processual 1970s
Evolutionary 1980s Systemic 1990s
strategy formal crafted efficient embedded
focus Internal internal external external
Key influence Military Economics psychology Economics biology sociology Key authors Chandler Ansoff Porter Minzberg Pettigrew Hannan&Freeman Williamsen Whittley
Table 6: Perspectives of Strategy (adopted from Whittington, 2001. P39)
Recent research introduces the concept of viewing strategy through separate lenses. Johnsons and Scholes (2002) distinguish different perspectives such as the
traditional design view of strategy, the aspect that strategy can arise from experience and culture and the notion that strategy can be a product of emergent ideas.
Also, Wheelen and Hunger (2012) refer to the dynamic nature of strategic
management and emphasize the monitoring and evaluating of external opportunities and threats in light of a corporation’s strengths and weaknesses. Therefore strategic management comprises strategic planning, but incorporates also topics such as environmental scanning, and industry analysis.
In a review of academic articles from the past decade, Narayanan et al. (2011) investigated the different strands in theory development. Most of the contributions can be allocated in the field of organizational identity, organizational routines,
strategy implementation, strategic change and organizational learning. According to this survey, the link to competitive advantage and the impact of competitive
dynamics is confirmed. But also the importance of coordination mechanisms is enumerated by strategy scholars.
Summarizing this development in strategic research, it can be recognized that certain ‘strategy schools’ suit different situations and environments better than others. It, however, appears that a systemic approach on strategy is indeed still persuasive. This means that in today’s world of global business finding the ‘school’ that best suits an organisation’s goals earns the greatest reward for all. But internal antecedents and capabilities have to be respected as well as cultural and societal needs, while still maintaining sufficient profit. This relationship between
organization, structure and strategy has early been illustrated by Chandler (1962) under the term ´Structure follows Strategy´. Murray et al. contrast this relationship by highlighting that to develop a level of strategy fit that is consistent with organizational resources determines firm´s success.
According to Porter (1980), there are different generic competitive strategies and cost leadership, differentiation or focus (niche) are often named as the basic paradigms. Along the internal value chain, each area contributes with its functional strategy, such as in production, HR or finance. Accordingly, they target for low unit cost, high employer branding or exchange rate hedging in order to support the overall strategy. Ansoff (1965) describes the patterns of market differentiation, market extension and diversification. A matrix spanning a strategic field from existing products to new product development and between existing markets to new market development is the base for developing strategic approaches. Other researches and management practitioners draw back on portfolio based approaches considering product market- related potentials illustrated as cash cows, stars etc.
The necessity of the development of a strategy and the tactics appropriate for the achievement of that strategy is widely agreed. The task on how to bridge strategy and tactics needs to be thought out during the process of strategic planning.
Consequently, a subset of strategy is strategic planning. According to Vignali et al. (2003), this process is wise to view as somewhat separate and related to the
strategic level of management. Looking through the lens of the resource-based view this construct of strategy development and strategy execution has brought special attention for SMEs. In the context of this research both are named under the umbrella of strategy approach.
Strategic planning is influenced within a company by a range of factors, e.g. its culture, leadership, size, ownership, perceived market share and industrial sector (Gabler, 2012).
There is no single definition to distinguish between strategic and operational
planning, mainly when considering budgeting, although the strategic aspect is often described as meaningful and long ranging. It is agreed that the result is not limited to the formulation of basic organizational missions, purposes, and objectives; also policies and programs to achieve them and the methods needed to assure that strategies are implemented to achieve organizational goals are expected as an outcome. Firm obtains its advantage by building strategies that exploit its internal strengths and avoids its internal weakness while responding to environmental neutralizing external threads (Leonidou et al., 2011).
According to the to the literature there seem to be significant differences in the development of a strategy and decision-making processes between global players and SMEs (Martin, 2005). It has already been addressed that there is still a
significant amount of SMEs that have not implemented a formal strategy planning and that this figure is decreasing in the recent years.
Furthermore, it has been noticed that those, who base their decision on formal processes and tend to more rationale and objective based decision modes come to different prioritizations regarding decision factors such as risk, transaction costs or know how prevention. But also entrepreneurial leadership and decisionmaking is often mentioned in the context of strategy and SMEs.
Entrepreneurial attitudes are often described as virtues are illustrated as visionary, assertive and flexible. The literature shows a heterogeneous picture, some
companies follow this stereotype of an owner dominated SME, but it is also agreed that this is not the majority of the companies and often decision making is a mixture of different behavioral attitudes. Based on the experience of the author this is also true within different MedTech companies according to the development of their business strategies and their organizational approach.
The strategic decision management in SMEs follows different stages (Wheelen and Hunger, 2006). Based on a product an environmental scan regards risk and
weakness of internal factors. Based on this result a firm-specific strategy can be formulated.
As far as SMEs are willing to follow such an iterative process they will need to meet specific antecedents such as knowledge and resources. Different factors have influence depending on the specific circumstances that a company faces in its situation, position and market. As soon as a strategy has been formulated as an outcome of this process, routines and procedures have to be applied in the daily business.
This means that internal factors of an organization such as capabilities also affect firm´s internationalisation strategy (Morgan et al., 2004). Following the knowledge- based theory firm´s capability to manage internal competencies enables the transformation of knowledge into value creating processes (Dosi and Marengo, 1994) and particularly organizational capabilities influence strategy development (Atuahene-Gima and Murray, 2004).
Resources provide the basis for designing and implementing strategies that subsequently help to achieve sustainable competitive advantage and improve effectiveness and efficienciy.
According to Katsikeas et al. (2006) strategy capabilities, meaning strategic fit of firm´s strategy according to resources both in development and execution is seen as an antecedent for competitive advantage and economic success.
But there are also findings from empirical research, which focus on the specifics of German SMEs in this context. Some of them highlight SMEs orientation towards stability or risk avoiding. Others focus on the orientation regarding leadership and change as dominant attitudes of management and identified accordingly three different types of behavioral paradigms, named conservators, innovators and
pragmatists (Scharrer, 2001). Other papers address the influence of the managerial team over the behavior and performance SMEs and provide a more complete understanding of how the characteristics of managerial teams shape decision- making processes and SMEs' strategic orientation.
Nevertheless, some scholars argue that behavior is not only determined by the managerial orientation, but also by the situation and the management structure of
the company, which is involved in the development of strategy and related decisions. This means that behavior is not uni-dimensional. Consequently, the behavior of firms cannot be reduced to simple patterns, such as that a risk-seeking oriented top-
management will neglect all thoughtfulness and will tend to give order towards hazardous ventures. In the decision making-process the orientation is influenced by correctives such as rational considerations and internal debates.
This is confirmed by the findings from Martin (2005), who did a survey on several hundreds of SMEs in Germany not only to investigate behavioral aspects how they decide on their strategy but also what where the specific outcome in terms of their implemented business strategy. According to his findings, nearly two-third of these SMEs had international business. Only 10% of the SMEs in Germany named cost leadership as a dominant factor regarding their business strategy, 73% claimed to realize their competitive advantage by customized products and therefore following a differentiation strategy. Also very few of the SMEs would describe themselves as pioneers, most of them consider themselves as well established. The majority has its focus on continuously improve existing and successful products, but one third pays high attention to fostering innovation.
According to Martin (2005), the ratio regarding those SMEs that follow strictly a growth strategy (41%) and those that concentrate on existing markets (46%) is more heterogeneous. According to the survey margins and financial key performance indicators are considered as one measure between other targets (46%). But only one-third of the companies build on close cooperations with other partners.
Summarized, this means that most of these investigated SMEs consider having a strategy as important and build on customized products, innovation is recognized by a significant number of them as important. Cooperations with other partners have not been in the focus.
This seems not in alignment with the literature where cooperation has been identified as an import measure to compensate the potential lack of resources of SMEs.
However, there is not mentioned what are the reasons for this. Although the German SMEs are well known for their export orientation the survey did not evaluate in detail whether those who followed the majority of firms were more successful than others.
In another research, based on a survey with 600 Australian SMEs in 2010, it became evident that SMEs' performance is likely to improve as they increase the degree to which they mirror large manufacturing firms with respect to formal strategy and structure. Particularly in the field of innovation it was revealed, that the more SMEs recognize that innovation culture and strategy are closely aligned throughout the innovation process the better they perform (Terziovski, 2010). On the other hand, it was reported that SMEs still face a lack in the utilization of formalized strategic planning and organizational structures as examples of differences based on firm size.
Bringing the findings of these different surveys in the context of strategy together, the role of influencing factors on strategy and firm´s performance like developing customized and innovative products (Martin, 2005; Terziovski, 2010) could be confirmed. The importance of a formal strategic planning and its operational implementation, which both have to fit to internal resources and external environment, has been highlighted (Katsikeas et al., 2006). The impact of organizational capabilities in the context of strategy could be demonstrated (Atuahene-Gima et al., 2004; Narayanan, 2011).
Hence, a strategic approach is crucial for planning and achieving targets and for the exploitation of processes and consequently for creating value for the company and its stakeholders. Consequently, a construct named strategic approach is introduced, which reflects formal strategy development and its operational execution. This construct is influenced by various factors as described before and has its firm- specific characteristic with respect to meaning, strategic elements or tactical implementation.
Furthermore it has been highlighted that firm´s strategic approach seems to be moderated by other variables (Dosi et Marengo, 1994; Atuahene-Gima, 2004) that are summarized under organizational capabilities and described next.