Miles and Snow's Typology of Defender, Prospector, Analyzer, and Reactor
The Miles-Snow typology is one of the most popular classifications of business-level strategies.36 Beginning in the early 1970s and continuing through the mid-1980s, Miles and Snow explored the strategies of hundreds of companies in numerous industries.37 They almost always found impressive and bold strategies and tactics. Over time, however, they realized that all of these strategies and tactics were related to a few underlying business strategies. They identified four basic types of strategic behavior and supporting organizational characteristics that they referred to as defender, prospector, analyzer, and reactor.
Defenders have narrow and relatively stable product-market domains. Top managers are highly expert in their organization's limited area of operation. As a result, these organizations seldom need to make major adjustments in their technology, structure, or methods of operation. Instead, they focus on improving the efficiency of existing operations. Defender characteristics include a limited product line, a single, capital-intensive technology, a functional structure, and skills in production efficiency, process engineering, and cost control. Defenders take a conservative view of new product development, seeking to maintain the same, limited product line with an emphasis on high volume and low cost. Since defenders aim to maximize the efficiency of internal procedures, Miles and Snow argued that they addressed administrative problems by providing management with the ability to centrally control all organizational operations. A defender thus resembles a classic bureaucracy in which only top-level executives have the necessary information and the proper vantage point to control operations that span several organizational subunits.
We believe that this strategy is consistent with the agency/transactions cost perspective in our framework. As a result, corporate and functional HR strategies derived from the "bureaucratic" HR strategy would thus be consistent with a "defender" business strategy.
Prospectors continually search for product and market opportunities, and regularly experiment with potential responses to emerging environmental trends. They often pioneer the development of new products and are the creators of change and uncertainty to which competitors must respond. However, given their focus on product and market innovation, they are not typically efficient. Prospector characteristics include a diverse product line, multiple technologies, a product or geographically based divisional structure, and skills in product research and development, market research, and development engineering. A prospector distributes power across different parts of the organization in order to encourage flexible and innovative behavior that will allow it to locate and exploit opportunities for new ventures. Its administrative system must be able to deploy and coordinate resources among many decentralized units and projects rather than to plan and control the operations of the entire organization centrally.
We believe that this business strategy is consistent with the dynamic capabilities perspective in our framework. Corporate and functional HR strategies derived from the "flexibility" HR strategy would thus align with the "prospector" business strategy.
Analyzers work in stable and changing product-market domains. In a stable domain, analyzers operate routinely and efficiently through the use of a formal structure and processes. In more dynamic domains, although they are not usually "first movers," competitors are closely watched for new ideas. Analyzers then quickly adopt those ideas that appear to hold promise. Analyzers tend to have a limited basic product line, a small number of related product and/or market opportunities, and technology for stable and new products that is cost efficient. They also tend to have a mixed (frequently a matrix) structure and are very skilled in production efficiency, process engineering, and marketing. In essence, analyzers share elements of both prospectors and defenders.
We believe this business strategy is consistent with the IO economics perspective in our framework. HR and functional HR strategies derived from the "external fit" HR strategy would appear to fit with the "analyzer" business strategy.
Reactors are organizations in which top managers perceive high levels of environmental uncertainty but lack any consistent strategy for responding to this. Miles and Snow describe reactors as seldom making adjustments of any sort until forced to do so by environmental pressures. Unlike defenders or prospectors, reactors have no predictable organizational structure; some may be centralized, whereas others are decentralized. They do not possess a set of mechanisms that would allow them to respond consistently to their environment. The reluctance to centralize or decentralize decision making could be more prevalent in public organizations because they are subject to a wider range of competing external pressures than private firms.
We believe this business strategy is consistent with the strategic group process perspective in our framework. As a result, HR and functional HR strategies derived from the "alliance" HR strategy would appear to be consistent with the "reactor" business strategy.
Porter's Typology of Cost Leadership, Differentiation, and Focus
Porter's framework for competitive strategy is one of the most widely accepted business planning models.38 Porter identifies three generic strategies that firms in an industry may adopt to gain a competitive advantage over their rivals. He also characterizes firms that don't clearly follow one of the strategies as being "stuck in the middle."39
A firm can gain a cost advantage by exploiting economies of scale or superior manufacturing processes.40 In general, large firms with significant access to resources are more likely to take advantage of cost-based strategies than small firms that are often forced to compete with highly differentiated products and services in niche markets. We believe this business strategy is consistent with the agency/transactions cost perspective in our framework, and thus with HR and functional HR strategies based on a "bureaucratic" HR strategy.
Some firms seek to be unique in the way they offer products and services to customers since they believe customers view this as being valuable. Extending Porter's competitive strategy framework, Miller distinguished differentiation strategies based on innovation from those based on operational and marketing efficiency.41 Differentiation strategies based on innovation can create a dynamic market environment in which it is hard for competitors and customers to predict and react.32 This unpredictability could give the innovator a substantial advantage over its competitors. We believe this aligns with the dynamic capabilities perspective in our framework. This would suggest HR and functional HR strategies based on the "flexibility" HR strategy.
A firm that adopts a market focus strategy concentrates its efforts on a specific market segment. This is generally considered to be appropriate for small firms with few resources since it allows them to compete with larger firms and position themselves based on other strategic strengths. Firms adopting a market focus typically use quality enhancement strategies. In the retail book market, for example, traditional booksellers such as Barnes & Noble attempt to take advantage of existing resources such as national networks of bookstores, an experienced sales force, and established brand appeal. In contrast, online sellers such as amazon.com compete by offering a wider availability of books, innovative customer services, and competitive pricing. We believe this business strategy is consistent with the IO economics perspective in our framework. As a result, HR and functional HR strategies derived from the "external fit" HR strategy would appear to be appropriate.
Stuck in the Middle
We believe this business strategy aligns with the strategic group process perspective in our framework. HR and functional HR strategies based on the "alliance" HR strategy would be most suited to this business strategy.