Neil Ritson’s Strategic Management discusses three schools of strategy: the planning school, the positioning school, and the resource-based school (Ritson, 2013, p.11). Each strategic method has its strengths. While larger corporations may use variations of the planning school, smaller companies tend to use the resource-based school, and most of the rest of the market uses the positioning school of strategy. There is no steadfast rule forbidding the use of a combination of these methods to develop the strategy for a company.
The Planning School of Strategy
The planning school of strategy is based off of the SWOT model and stems from H. Igor Ansoff’s book, Corporate Strategy (Strategicthgr3, 2010). The planning school of strategy uses a bureaucratic planning process which creates alignment between the organizational strategy and the environment it operates in, requires detailed planning which may be inflexible, and is based on trends and forecasts (Ritson, 2013, p.11). The steps to the planning school’s process includes phases for objective setting, external audit, internal audit, evaluation, operationalization, and scheduling (Strategicthgr3, 2010).
The planning school of strategy, being highly bureaucratic, is very inflexible. Since there are a lot of checklists and documentation made in this planning school, it is not suited to changes to market conditions. The planning is based on forecasting from trends, but it is dependent upon those predictions being correct. If the environment and market do not support these forecasts, it is hard to change a strategy made with the planning school of strategy. This method of strategy is used with larger, established corporations and planning for government (Ritson, 2013, p.11).
Examples of planning school strategies include product lifecycles and scenario planning. Balanced scorecards or similar managerial controls are used to execute strategy in the planned school of strategy.
The Positioning School of Strategy
The positioning school of strategy came out of Michael Porter’s 1979 Harvard Business Review article How Competitive Forces Shape Strategy (Porter, 1979) and his 1980 book Competitive Strategy: Techniques for Analyzing Industries and Competitors. The positional school focuses on a rational approach while positioning the company in a favorable market. It is based on decision making tools and performance management, while working toward competitive advantage (Ritson, 2015, p.11).
Michael Porter’s five forces are: threat of substitute, bargaining power of suppliers, rivalry among competitors, threats of new entrants, and bargaining power of buyers (Institute for Strategy & Competitiveness, n.d.). These five forces compete to determine how profitable the industry or market is, which is important in strategy formulation, but there are also barriers to entry in a new industry and changing conditions (Porter, 1979). This means that the positioning school is anticipating and expecting change.
Examples of the positioning school of strategy include competitive strategies and frameworks, the value chain, and the growth-share matrix.
The Resource Based School of Strategy
The resource-based school of strategy was developed by Berger Wernerfelt in 1984 and Jay Barney in 1986 and 1991 (Martin, 2015). Resource based strategy looks to the internal environment and the core competencies, resources, and capabilities within the company, while ignoring the external environment (Ritson, 2013, p.12). The resource-based view looks at tangible and intangible assets as resources, considering everything from capital to skills and brand reputation. An example of resource-based strategy is when the strategist evaluates the resources based on Rothaermel’s VRIO framework to determine resource value, rarity, imitability, and organization to determine strategy around exploiting those resources as their competitive advantage (Jurevicius, 2013).
It is interesting to note that in the real world, much strategy is a combination of the positioning school and the resource based school and that finding strategy that is purely resource based is rare, although resourced based strategies are favored in academic settings (Martin, 2015). This makes sense, as companies may focus on positioning and the five forces, they will also want to consider their resources and the competitive advantage that their resources give them. Taking both into account in an in-depth planning process for larger organizations is reality, as well.
Institute for Strategy & Competitiveness. (n.d.). The Five Forces. Retrieved from https://www.isc.hbs.edu/strategy/business-strategy/Pages/the-five-forces.aspx
Jurevicius, O. (2013). Resource Based View. Retrieved from https://strategicmanagementinsight.com/topics/resource-based-view.html
Martin, R. (2015). Strategy Is About Both Resources and Positioning. Retrieved from https://hbr.org/2015/04/strategy-is-about-both-resources-and-positioning
Porter, M. (1979). How Competitive Forces Shape Strategy. Retrieved from https://hbr.org/1979/03/how-competitive-forces-shape-strategy
Ritson, N. (2013). Strategic Management, 2nd Edition. Book Boon. Retrieved from http://bookboon.com/en/strategicmanagement-ebook
Strategicthgr3. (2010). Summary of the Planning School Model. Retrieved from https://strategicthgr3.wordpress.com/2010/01/21/summary-of-the-planning-school-model/