The history of strategic management reveals that for much of the 20th century the dominant approach to strategy was the "design approach," as articulated by Alfred Chandler, where the emphasis was on the relationship between strategy and structure. Chandler argued that strategy determines the structure and the environment within which a firm operates. Big corporations such as General Motors, Du Pont, and Standard Oil followed the design approach in the sense that changes in strategy necessitated changes in the structure. A slight departure from the design approach was the "levels approach" of strategic management. Igor Ansoff, in 1965, argued that it is important to think of strategy at various levels, such as the corporate level, business level, functional level, and operational level. Corporate-level strategies deal with "what industry" a firm should choose to operate and which product/service it decides to manufacture or render. The business-level strategies deal with how to use that product/service effectively to sustain competitive advantage. At the functional level, managers need to set their departmental objectives and conduct operations.

During the 1970s, strategic management scholars focused on a new approach called the "positioning approach." Porter and his colleagues, Lamb and Caves, argued that a firm's profitability depends on the position it occupies in the industry. Positioning is dependent on five forces: intensity of rivalry of firms in the industry, buyer power, supplier power, new entrants, and substitute products. A firm can place itself in the industry in a comfortable position if the industry is characterized by high entry barriers, weak bargaining power of buyers and suppliers, and weak substitute products. Firms may pursue low-cost leadership, differentiation, and focus on strategies to gain sustained competitive advantage.

As a radical departure from the positioning approach during the 1990s, RBV has come into vogue, and it emphasizes the importance of resources and capabilities and core competencies of a firm in maintaining competitive advantage. The firm's internal strengths are seen in terms of resources and capabilities, which are the true sources of sustained competitive advantage.

Although some strategic management scholars focused on industry analysis (e.g., Porter), some others stress the importance of resources and capabilities (e.g., Barney, Teece) as the means of securing competitive advantage; many companies have emphasized team-based restructuring and have focused on outsourcing to cut down unnecessary overheads. By the beginning of the 2000s and through 2010, the main focus of organizations shifted to cooperative behavior between firms and the related organizational implications—alliances and networking. The Internet revolution has brought a new type of competition through e-commerce, virtual organizations, and reconciliation of size with flexibility and agility to deal with competition.


1. Conner, K. R. (1991). A historical comparison of resource-based theory and five schools of thought within industrial organization economics: Do we have a new theory of the firm? Journal of Management, 17 (1), pp. 121-154; Bain, J. S. (1954). Economies of scale, concentration, and the condition of entry in twenty manufacturing industries, American Economic Review, 44, pp. 15-39; Chandler, A. D. Jr. (1962). Strategy and Structure, Cambridge: The MIT Press; Klien, B., & Leffler, K. (1981). The role of market forces in assuring contractual performance, Journal of Political Economy, 89, pp. 615-641; Williamson, O. E. (1975). Markets and Hierarchies: Analysis and Antitrust Implications. New York: Free Press; Coase, R. H. (1952). The nature of the firm. In G. J. Stigler & K. E. Boulding (Eds.), Readings in Price Theory, Chicago: Irwin, pp. 331-351 (Reprinted from Econometrica, 1937, 4: 386—405); Schumpeter, J. A. (1950). Capitalism, Socialism and Democracy (3rd ed.). New York: Harper & Row.

2. Lenz, R.T (1980). Environment, strategy, organization structure and performance: Patterns in one industry, Strategic Management Journal, 1, pp. 209-226; Barnett, W. P., & Burgelman, R. A. (1996). Evolutionary perspectives on strategy, Strategic Management Journal, 17, pp. 5-19; Porter, M. E. (1980). Competitive Strategy. New York: Free Press; Barney, J. B. (1991). Firm resources and sustained competitive advantage, Journal of Management, 17, pp. 99-120; Wernerfelt, B. (1984). A resource-based view of the firm, Strategic Management Journal, 5 (2), pp. 171-180.

3. Pfeffer, J., & Salancik, G. R. (1978). The External Control of Organizations. New York: Harper & Row; Burt, R. S. (1992). Structural Holes. Cambridge, MA: Harvard University Press; Scott, W. R. (1975). Organizational structure, Annual Review of Sociology, 1, pp. 1-20; Venkatraman, N., & Prescott. J. E. (1990). Environment-strategy co-alignment: An empirical test of its performance implications, Strategic Management Journal, 11 (1), pp. 1-23; Williamson, O. E. (1991). Strategizing, economizing, and economic organization, Strategic Management Journal, Winter Special Issue, 12, pp. 75-94; Saloner, G. (1991). Modeling, game theory, and strategic management, Strategic Management Journal, Winter Special Issue, 12, pp. 119-136; Dixit, A. K., & Nalebuff (1991). Thinking Strategically. New York: Norton; Jensen, Michael C., & Meckling, William H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure, Journal of Financial Economics, 3 (4), pp. 305-360.

4. Williamson, O. E. (1999) Strategy research: Governance and competence perspectives, Strategic Management Journal, 20, pp. 1087-1108.

5. Montgomery, C. A. (1988). Guest editor's introduction to the special issue on research in the content on strategy, Strategic Management Journal, 9, pp. 3-8.

< Prev   CONTENTS   Next >