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FACULTY OF BUSINESS STUDIES

(MBA) B 820_STRATEGY

(TMA One)_Fall, 2014


By: Ahmed Mohammed Hamad Alaremi

Table of Contents
Of Strategies, Deliberate and Emergent, (Mintzberg & Waters, 1985) .............................. 3
Introduction ..................................................................................................................... 3
Deliberate & Emergent Strategy ..................................................................................... 3
Strategic Management Thinking ..................................................................................... 5
Conclusion ...................................................................................................................... 6
References ....................................................................................................................... 7
Affordable Sky Airline ....................................................................................................... 8
Introduction ..................................................................................................................... 8
Michael Porters Generic Strategies ............................................................................... 8
Entry Strategy for Affordable Sky ................................................................................ 10
Diversification and Alternative Strategies .................................................................... 11
Conclusion .................................................................................................................... 12
References ..................................................................................................................... 13

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Of Strategies, Deliberate and Emergent, (Mintzberg & Waters, 1985)


Introduction
This paper is a review of Mintzberg & Waters article on strategic management, titled Of
Strategies, Deliberate and Emergent. The review will critically analyse the article by
determining how the distinction between deliberate and emergent strategy is significant
or necessary to an effective strategy and then it will determine how the theories fit into
the development of strategic management thinking.

Deliberate & Emergent Strategy


In the article, Mintzberg & Waters had examined the processes that lead to how strategies
develop in organizations. The article compared strategies that come from planning,
referred to as intended strategies, against realized strategies, which essentially is the
result of what was actually done in the organization. In order to understand the difference
between intended and realized strategies, Mintzberg & Waters theorized a framework
through a continuous spectrum with purely deliberate and purely emergent strategy on
each end. At the end of the purely deliberate strategy, actions are implemented exactly as
intended by the plan. At the other end of the purely emergent strategy, actions become
consistent over time although there are no clear intentions about them from the
beginning. Between the two ends, Mintzberg & Waters identified 8 types of strategy, as
illustrated below:

In the planned strategy, the intentions are clearly defined and communicated, usually
from a centralized leadership, in an environment that can be tightly controlled, for
example, in industries such as oil & gas, aviation and mining. The entrepreneurial
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strategy is common in small and medium sized companies where a leader imposes his
vision and the others follow accordingly. This strategy may also be used in large
companies in times of crisis, to effectively manage the crisis centrally. In the ideological
strategy, the employees share a common vision with the leadership and this vision is
usually rooted in the culture, the past or the tradition. Examples of groups with this
strategy includes Ferrari, Lamborghini, Lotus, charitable organizations or terrorist cells.
The Umbrella strategy is considered as the most realistic and happens more frequently
than the other types of strategy. In this strategy, the leaders have partial control, they
establish guidelines, strategic boundaries or targets under which the organizational
actions are expected to fall. An example given under this strategy is the target by NASA
to put a man on the moon in the 1960s. In the process strategy, leadership only controls
the process of developing the strategy, but the content is left to others to determine. This
strategy is usually implemented organizations of a conglomerate nature with different
divisions. In the unconnected strategy, the approach is to do your own thing. Each
person or a group within organizations realize their own strategy and this usually happens
in environments where the people are experts or highly specialized such as universities
dealing with researchers or hospitals dealing with doctors of different specializations. In
the consensus strategy, the actors automatically converge on a pattern by learning from
each other and reacting to the environmental influences. In this strategy, a manufacturing
plant for example, may end up focusing on a particular brand of its product after realizing
that the market demand is higher and it gives better returns. Finally, the imposed strategy
is the one that is imposed from outside. An example could be a state-owned company
whose strategies have to align with an authority of the state.

The distinction between deliberate and emergent strategy helps organizations to


determine whether it is suitable for them to adopt a directed and controlled strategy or
give more attention to the external influences and subsequently adapt the strategy to suit
the demands of the environment. Mintzberg and Waters contends that deliberate
strategies focus on direction and control whereas emergent strategies introduces the
element of strategic learning. The distinction is necessary for an effective strategy
because otherwise, adapting a strategy that does not suit the organization or the market
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may lead to the failure of the business. It is also necessary to cope with the
unpredictability of the external environment given the challenges posed in todays world
via technological changes, force majeure, etc.

Strategic Management Thinking


In the development of strategic management thinking, the Mintzberg & Waters theory
diverged from the classical planning school and instead, concentrate on the strategic
management process (Sminia, 2009). The strategic management process indicates that the
strategic formation an organization often do not conform to the planned strategy or the
decisions made but rather is influenced by the process of change driven by environmental
pressures. This is to say that leaders may interpret trends from internal and external
environment and subsequently, adapt their strategies to suit their interpretation of the
trends. In this way, the formulation of the strategy becomes a continuous process
adapting to changes as it goes along and the implementation of the strategy reacts
accordingly, interacting closely with the formulated strategy.

The above strategic management process depends on learning. The management need to
identify what works and what does not work in their organization and later on, use what
they have learned to incorporate into the strategy and translate the strategy to actions.
This approach is particularly useful under the umbrella approach, and it offers a way to
manage organizations that are complex in the nature of its operations and may have to
deal with change consistently. Think big organizations like Nestle, Adidas, Nike, P&G,
etc. However, where conditions are stable and clear directions are needed, this approach
will not work. It is especially not suitable in times of crisis. There is also the danger of
the small steps arising from the lessons learned not adding up to a useful total strategy.

In the book The Strategy Reader, edited by Susan Segal-Horn, she identified three
schools of Strategic Management Thought, which are the classical school of thought, the
Michael Porters competitive environment and competitive advantage and the resourcebased view of strategy. Considering the fact that Mintzberg & Waters theory places
emphasis on a strategic management process influenced by environmental pressures, the
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theory would fit closest to Michael Poters competitive environment and competitive
advantage school of strategic management thinking.

Conclusion
The above analysis of the article by Mintzberg & Waters have discussed the deliberate
and emergent strategy and identified the significance of the distinction for an effective
strategy. The analysis has also included the theorys fit into the development of strategic
management thinking. The key take-aways from the article is that strategy formation may
be deliberate or emergent, the former more in tightly controlled organizations and the
latter in decentralized ones; that environment plays a big role in strategy formation and it
is becoming more and more unpredictable and that both deliberate and emergent
strategies are important.

It is also important to note that emergent strategies may not necessarily mean chaos, but it
should be perceived as an order that came about unintentionally and it leads to learning
about what actually works. It also implies that the management does not limit itself to
only what is already known, that they have created an environment that is open, flexible,
responsive and where mistakes are tolerated for the purpose of learning. The emergent
strategy however, may not work in all conditions. There are situations where the
deliberate strategy is favoured, especially in times of crisis where clear intentions from a
centralized control figure is required. As such, it makes more sense to choose either a
more deliberate strategy or a more emergent strategy depending on the nature of the
organization as well as the needs of the business.

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References
Alagirisamy, G. 2014. Henry Mintzberg on Strategic Management. Academia [online]
available

at:

<

http://www.academia.edu/4913544/Henry_Mintzberg_on_Strategic_Management>
[accessed: 1st November 2014].
Boyd, S. 2013. Moving toward emergent strategy: slowly, if at all. Gigaom Research
[online] available at: <http://research.gigaom.com/2013/10/moving-toward-emergentstrategy-slowly-if-at-all/> [accessed: 2nd November 2014].
Mintzberg, H., & Waters, J.A. 1985. Of Strategies, Deliberate and Emergent. Strategic
Management Journal, 6(3), p.p. 257-272.
Moore, K. 2011. Porter or Mintzberg: Whose View of Strategy Is the Most Relevant
Today?

Forbes

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http://www.forbes.com/sites/karlmoore/2014/10/02/millennials-work-for-purpose-notpaycheck/> [accessed: 1st November 2014].


Roger, J. N., 1996. An Analysis of Deliberate and Emergent Strategies Relative to
Porters Generic Differentiator and Cost Leader: A Bias and Variance Modeling
Approach. Developments In Business Simulation & Experiential Exercises, 23, p.p. 6873.
Segal-Horn, S. 2004. The Strategy Reader. 2nd edn. New Jersey: Wiley-Blackwell.
Sminia, H. 2009. Process research in strategy formation: Theory, methodology and
relevance. International Journal of Management Reviews, 11(1), p.p. 97-125.

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Affordable Sky Airline


Introduction
This paper provides an analysis for the entrance of Affordable Sky Airline to the US
Aviation Market. The analysis will be done by first discussing and applying Michael
Porters generic strategies to determine the suitable strategy for Affordable Sky.
Following that, the analysis will try to determine the right entry strategy for Affordable
Sky. Further, diversification, alternative strategies and joint venture will be explored to
predict the feasibility and success of Affordable Sky entering the market.

Michael Porters Generic Strategies


Michael Porters generic strategies are strategies that any company or organization can
adopt to pursue its competitive advantage in its target market. The three generic strategies
are low cost, differentiation or focus. The diagram below illustrates:

Figure 1: Porter's Generic Strategies

From the above generic strategies, Affordable Sky may choose across two competitive
advantage, either by providing low cost services as a competitive advantage, or adopting
a differentiation strategy, which could command them to charge a slightly higher price by
selling based on quality for example. On the target scope, Affordable Sky may also
choose to either provide to a broad based customer, or only to selected segments of the
market. The following list explains each strategy in detail:

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1. Cost Leadership
By aiming to be the overall cost leader, an organization has to ensure that their costs are
kept to the minimum and set out to be the lowest cost producer in the industry. It has to
try its best to reduce the overall production and distributions costs and subsequently, gain
the market share by appealing to customers who want to go for the cheapest in the
industry. It has to set the lowest price and the way that this can be achieved is by
economies of scale, low direct and indirect operational costs and adequate control over
the supply chain. At the same time, it has to make sure that it can sustain the overall cost
leadership in the long run after achieving it.

2. Differentiation
In the differentiation strategy, the business aims to provide a unique selling point to its
customers in the industry. This usually involves successful branding of the uniqueness
and appealing to what the buyers may perceive as important, making them willing to pay
a premium price for the product. The differentiation strategy would be appropriate in
situations where there are needs of customers not met and which the business can provide
without competitors easily copying the products or services to provide as substitutes.

3. Focus
The focus strategy lets the firm decide on a narrow segment within the industry. The
business may select a particular segment of the industry and customize its strategy to
serve this segment exclusively. The focus strategy may be based on a cost focus, where a
business tries to have a cost advantage in its targeted segment or the focus strategy may
be based on differentiation focus, where the firm strive to differentiate for the targeted
segment.

The best strategy for Affordable Sky, considering the fact that it will be a no frills ariline,
would be to target cost leadership as its competitive advantage. With the rise in fuel
prices and high labour costs due to pilots and flight attendance unions, in order to keep
the costs low, instead of flying all over the U.S., Affordable Sky could target a segment
of the geographical region.
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Entry Strategy for Affordable Sky


In order to analyse the suitable entry strategy into the market for Affordable Sky, Michael
Porters five-forces model will be used. The model is illustrated below:

Supplier Power
The supplier power in the industry is high due to the fact that fuel, aircraft and labour are
all resources that any particular airline do not have control over. The increasing fuel
prices and the high costs of labour cannot be ignored. For aircraft needs, there are only
two major supplier, which are Boeing and Airbus.

Buyer Power
Airline customers nowadays use online ticketing system to choose their airline tickets.
There are many websites for airline tickets that allow customers to compare prices for
different airlines, thus for a low cost airline service provider, it is imperative that the

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airline offers the lowest price in order to gain the market share. Thus, the buyer power is
somewhere between moderate and high in the five forces model.

Entry and Exit Barriers


The entry and exit barriers is high for the airline industry, considering the huge capital
investment required and the high cost of losses when exiting the sector.

Threat of Substitutes and Complementarities


Due to the geographical nature of the United States, there arent many threats to
substitutes as the consumers who choose to travel via buses or trains will be subjected to
much longer travel time with only slight differences in the cost of travelling. The only
viable substitute is using cars for long travel, but again, in terms of time saved, the
airlines provide a much more convenient alternative.

Intensity of Competitive Rivalry


In terms of competition, the airline industry in the United States is highly competitive.
For Affordable Sky, the fact that there are already other low cost providers such as
Southwest Airlines, Virgin America, JetBlue and a few others.

Diversification and Alternative Strategies


Based on the above analysis, Affordable Sky need to enter the market with careful
consideration of how they will keep the supplier costs low, how they can capture the
market and entice customers to choose their airlines and how they can compete with the
other existing airlines. One way is to fly on routes that are not extensively flown by the
other budget airline providers. Other strategies may include getting a good reputation for
customer service and punctuality, because being a low cost provider does not mean that
those aspects of the service cannot be met without incurring higher costs of operation.

In order to ensure sustainability of the business, Affordable Sky may include


diversification strategies to their business. Diversification can be done by offering related
services to the customers, for example, Affordable Sky could look into acquiring or
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partnering with a travel agency, with an insurance company, with a car rental company,
with hotels or hostels for traveller and providing other travel and tourism services.
Affordable Sky should also offer loyalty programmes to ensure repeat customers.

Due to the current situation of the industry, it is best that Affordable Sky do not enter into
any joint venture, as there is a risk that any particular airline has been affected by the rise
in fuel prices as well as the threats from the environmental factors. Considering four
major players have filed for bankruptcy, it is highly risky to assume that any of the other
players are financially stable. Since the strategy of Affordable Sky is to provide low cost
airline services to new segments of the market that are less utilised by others, it is best
that they go on their own. Affordable Sky could however, form strategic alliances with
other providers.

Conclusion
The paper have covered the analysis for the entrance of Affordable Sky into the U.S.
market as a low cost provider. The key take-aways of the analysis is that Affordable Sky
should strive to become a low cost leader, try to capture a segment of the market that is
not yet saturated and diversify the business in order to reduce their risks.

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References
Borenstein, S. 1989. Hub and High Fares: Dominance and Market Power in the U.S.
Airline Industry. RAND Journal of Economics, 20(3), p.p. 344-365.
Borenstein, S. & Rose, N. L. 1995. Competition and Price Dispersion in the U.S. Airline
Industry. Journal of Political Economy, 102 (4), p.p. 653-683.

Cento, A. 2008. The Airline Industry: Challenges in the 21st Century. Heidelberg:
Springer Science & Business Media.
Evans W. N. & Kessides, I. N. 1993. Localized Market Power in the U.S. Airline
Industry. The Review of Economics & Statistics, 75(1), p.p. 66-75.
Miller, D. & Chen M. 1994. Sources and Consequences of Competitive Inertia: A Study
of the U.S. Airline Industry. 39(1), p.p. 1-23.
Pfeffer, J. 1995. Producing sustainable competitive advantage through the effective
management of people. Academy of Management Perspectives, 9(1), p.p. 55-69.

Porter, M. E. 1985. Competitive Advantage. New York: The Free Press.

Poter, M. E. 2008. The Five Competitive Forces that Shape Strategy. Harvard Business
Review.

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