Strategic

Management
Assignement
The historical development of
strategic management

Timothe Verschuere BABSH 3

 Assignment Cover Sheet

Student name: Timothe Verschuere

Student number: 2954635

Faculty: Griffith College Dublin

Course: BABSH Stage/year: 3

Subject: Strategic Management

Study Mode: Full time X Part-time

Lecturer Name: Mark Dowling

Assignment Title: Evolution of strategic Management

No. of pages: 22

Disk included? Yes No X

Additional Information: (ie. number of pieces submitted, size of assignment, A2, A3 etc)

Date due: Week 7

Date submitted: Week 7

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I understand that plagiarism is a serious offence and have read and understood the college policy on plagiarism. I also understand that
I may receive a mark of zero if I have not identified and properly attributed sources which have been used, referred to, or have in any
way influenced the preparation of this assignment, or if I have knowingly allowed others to plagiarise my work in this way.

I hereby certify that this assignment is my own work, based on my personal study and/or research, and that I have acknowledged all
material and sources used in its preparation. I also certify that the assignment has not previously been submitted for assessment and
that I have not copied in part or whole or otherwise plagiarised the work of anyone else, including other students.

Signed & dated: Timothe Verschuere 31/10/2017

Please note: Students MUST retain a hard / soft copy of ALL assignments as well as a receipt issued
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 SUMMARY

I Early management thinking and the impact of Frederick

Taylors theory

1) The pre-managerial era

2) The exactitude era: Taylors theory

II Introduction of the strategic management concept in

the 1960s

1) General guidelines from Alfred Chandler

2) The Ansoffs complementary work

III Contemporary Developments of the strategic

management

1) Contribution of Porter

2) Contribution of Mintzberg

3) The hypercompetition of Daveni

Introduction:
 In this essay we will try to describe the historical development of Strategic
Management.

First, we are going to look at early thinking and the impact of Frederick Taylors
theory in the field of management. Then, we will study the emergence of Strategic
management and the main contributors. Finally, we will talk about the contemporary
development of strategic management.

I Early management thinking and the impact of

Frederick Taylors theory
 1 The pre-managerial era
Origins of the management are unclear. First codes of management are
relatively old. Hammurabis code (1750 B.C.) were probably the first, and more recently,
Machiavels (1469-1527) and Adam Smiths (1723-1790) codes are often cited as a
background.

However, many management historians consider Max Weber (1864-1920),

Henry Fayol (1841-1925) and Frederick Taylor (1856-1915) as major protagonists in the
development of management sciences. (Fabien De Geuser, 2015)

Max Weber: The legitimacy of the order

Max Weber was a German sociologist known for two

books. The second one, published four years after his death,
The theory of social and economic organisation is the one
that bears the most on the theory of management. It was an
essay in which Weber examined why people obey orders. He
described three types of leadership:

The charismatic
The hereditary
The bureaucratic

Weber claimed every types of leader can generate obedience but each of them
will fit at different moment of the companys life.

According to Weber, the charismatic leader suits to a young organisation. He

will provide a vision to the company in order to reach its first goals. The hereditary
leader, who comes with authority that has been acquire from the dads or family, is
suitable for company with well-established rules and process. Finally, the bureaucratic
leader will run an organisation on the basis of knowledge. (The Economist, 2009)

Weber was sure the third type of leader was the most efficient.

Precision, speed, unambiguity, knowledge of files, continuity, discretion,

unity, strict subordination, reduction of friction and of material and personal
coststhese are raised to the optimum point in the strictly bureaucratic
administration, (Weber, 1924)

Nevertheless, Weber prevent against the possible dehumanizing effects of this

kind of organisation. He thought the only way to escape is that a charismatic leader
come along and reawaken the company.

Henry Fayol: The apparition of the manager

Henry Fayol was a French engineer. He focused his

research on the administrative director and on the structure
of companies. He was the leader of one of the most
profitable French company, a mining conglomerate. He
wrote General and Industrial administration and
published it in 1916. In this book, he showed the specificity
of the role of the manager/the administrator.

He proposed a 5 dimensions cut for this role, the

POCCC model, which mean:

Planning
Organising
Co-ordinating
Commanding
Controlling

The Fayols approach, as a

managing director, was top-down.
He looked at the organisation from
the point of view of senior managers.
 2 The exactitude era: Taylors theory
In contrast with the top-down approach of Weber and
Fayol, Frederick Taylor examined company from the bottom
up. He started with the main units of activity: the workers.

Frederick Taylor was a famous American engineer. He

published in 1911 The Principles of Scientific Management.
He is considered as the Father of scientific management.

The goal of Taylor was to find and enforce the one

best way to work through a scientific approach. His greater
purpose was to prove the best management is a true
science. Taylor and his disciples worked on the optimization
of the employees tasks. They first try to divide every parts of
the task and then improve the execution and the work
condition of each. (The Economist, 2009)

The theory of scientific management relies on four principles:

1) The management has to scientifically develop a new technique for

each aspect of the employees task, in order to replace the empiric
method traditionally used.

2) The management has to choose, train, teach and develop each

employee, who used to define by his own the way to execute the task,
without any training.

3) The management has to cooperate with enthusiasm with workers

to ensure each task is executed following the principles and
techniques learned.

4) An equal division of work and responsibilities has to be established

between management and employees. The management has to take
care of tasks it can handle better than the employees. Before, most of
the tasks and responsibilities were taken by the employees. (AGORA,
2012)
 The impact of Taylors theory

According to Peter Drucker, professor at Claremont Graduate University,

applying the scientific management method of Taylor in manufacturing process
resulted in an important decrease of production costs which is very positive for the
buyers. Indeed, it enabled more people to buy goods they cant before by skyrocketing
their purchasing power. Wages increased and unskilled workers moved into better jobs.
Internally, it gave the opportunity to company to reach higher strategic goals and
therefore, increase profitability.

However, the wellness of employees was totally neglected. Even if employees

have more free hours and higher wages, the repetition of the task may cause mental
and physical problems, by repeating the task many times a day. Working condition are
bad and many employees lost their motivation because they only know a little part of
the manufacturing process. They could only have a part-view of their work, losing every
landmark about the final product. (Tara Duggan, 2017)

After all, Taylors theory brought a new definition of the management who has
created opportunity for the companies. Many of them greatly increased their profits,
so the theory improved economics of most of the company, although forgetting
workers and their wellness. Finally, Taylors theory has been positive for economics but
totally failed about the social aspect.
 II Introduction of the strategic management
concept in the 1960s

1) General guidelines from Alfred Chandler

Earlier, the term strategy was for military uses. Strategy was seen by
businessman as a high-skill function, reserved for smart people. The planning of
corporate strategy was usually a secretive operation that took place at irregular
intervals. (The Economist, 2009)

The strategic planning attracted more and more people and most agreed with
the general guidelines of Alfred Chandler.

Alfred Chandler (1918-2007) was an historian and

completed is PhD at Harvard University in 1952. In 1962,
he published his main work on management Strategy
and Structure. He influenced a generation of consultants
with his main idea: structure must follow strategy. He
believed a strategy reorientation can be successful only
if the management accept and engage the company
restructuration whether it is big or not.

He has been inspired while he was serving in the

US navy during the second war where he saw how act a
big organisation.

Alfred Chandler recognized taking a long-term coordinated strategy was

necessary to give a company structure, direction and focus through long-term goals.

Strategy is the determination of the basic long-term goals of an

enterprise, and the adoption of courses of action and the allocation of resources
necessary for carrying out these goals. (Chandler, 1962)
 Thanks to the ideas he brought in management, Chandler has become a modern
figure of the management. He was the first to talk about Strategy and come along
with a real long-term view. He understood the first steps in the contemporary
management development: the capacity for a company to adapt itself against the
environment, by optimizing internal organisation with a defined strategy.

You can't do today's job with yesterday's methods and still be in business
tomorrow. (Chandler,1962)

However, strategic management was still something new, without any rules yet.
Chandler only gave us a vision, a way to manage for being sustainable. Igor Ansoff
came along to complete what is strategic management by distinguishing different part
of the strategic management and adding a new tool.

2) The Ansoffs complementary work

Igor Ansoff (1918-2002) was an engineer. He is
considered as the father of modern strategic thinking.
(The Economist, 2009)

In 1965, he published a book Corporate Strategy

where he divided strategic management in three part and
claimed the difference between strategic planning and
strategic management.
 Igor Ansoff contribution to strategy

According to Igor Ansoff, the strategic management has three parts:

- The strategic planning

- The skill of a firm converting its plans into reality
- The skill of a firm in managing its own resistance to change

Until the publication of Corporate Strategy, companies had only little guidance
on how to take decision for the future. Methods used were only looking at the budget
and the expected revenues. The strategy was non-existent, there was no vision, no
direction, no future, only calculations and expected revenues. (The Economist, 2009)

This is why, in his book, Ansoff developed a new classification of decision-

making based on Chandlers research. We can count 3 types of decision:

- The strategic decision (products and markets)

- The administrative decision (organisational and structure allocating)
- The operating decision (budgeting and managing)

It became known as the 3S model: Strategy-Structure-System.

Now we can easily understand how Ansoff has completed the Chandlers theory,
adding complementary concepts to his theory.

One of the major problem for a lot of companies, and Ansoff recognized it, it
has too often resulted in a paralysis by analysis, due to a too much rigid approach.
He improved his approach by adding more flexibility into the planning process. (Easy
strategy, 2014)
 The Ansoff matrix: a new tool

Igor Ansoff created a tool in order to understand the risk component of various
growth strategies. This include product versus market development and diversification.

This matrix was published in 1957 and remains a popular tool for organisations.

As an example, we can read the matrix as follows, Market Development requires

to identify new customers for an existing product/service or Product Development
requires to develop new products for existing customers.

III Contemporary Developments of the

strategic management
 1) Contribution of Porter
Michael Porter was born in 1947 and he is an
American corporate strategy teacher. In 1980, he
wrote his most famous book Competitive Strategy
in which he described the way companies can
obtain a competitive advantage by understanding
better than its competitor the forces structuring
their environment.

Porter redefined the way that businessman

think about the competition by introducing the
language and concepts of economics. He first
simplified the notion of competitive advantage and
then created a framework for companies to help
them to differentiate thanks to a better external analysis.

The five forces model of Porter is one of its main intake and contribution to
Strategic Management. It is a modelling of the competitive environment of the
company.

Five force model (from lecture):

- Current rivalry
- Potential entrants
- Bargaining power of buyers
- Bargaining power of suppliers
- Threat of substitute product

Each force has to be analysed in order to have a better comprehension of the

specific environment. Nevertheless, to complete this analysis, we have to understand
the general environment. The general environment includes 5 sectors: economics,
demographics, sociocultural, political-legal and technological. It is necessary to
manage and analyse this framework for a profitable future. (Jan J. Jorgensen, 2008)
 Representation of the five force model:

Michael Porters five force model is not its only contribution. He invented a lot
of analytical tools still used today. He also created: generic strategies, the value chain,
activity systems, the national diamond and industry innovation clusters. His
contribution was major for strategic management development. (Jan J. Jorgensen,
2008)
 2) Contribution of Mintzberg
Henry Mintzberg was born in 1939, he is a Canadian academic. He studied
individual managers. After that, he looked at individual organisations and find out 5
organisational structure:

- The simple structure, coordinated by the hierarchy

and well-adapt to little company
- The machine bureaucracy, coordinate by procedures
and well-adapt to big standardise company
- The professional bureaucracy, coordinated by skills
and qualification for organisation with daily hard tasks
- The divisionalised form, coordinated by the budget
for big company who has heterogeneous activity
- The adhocracy, coordinated by collaboration for
innovative companies with numerous projects.

Mintzberg has also described coordination mechanisms of the work and tasks.
He thought any human activity gives birth to two basic needs: the division of labor
between different tasks and the coordination of these tasks to accomplish an activity.

He distinguished six coordination mechanisms:

- Mutual adjustment, work by communicating

- Direct supervision, coordination of work by an individual who has the
power to decide and give orders
- Standardisation of work processes, coordination by specifying work
processes
- Standardisation of outputs, coordination by giving objectives
- Standardisation of skills and knowledge, coordination by different
types of work and capabilities
- Standardisation of norms, standardisation where norms globally lead
the work

(Henry Mintzberg, 1983)

 Later, in 1987, he looked at strategy and developed a tool called The 5 Ps. Each
of the 5 Ps is a different approach to strategy.

- Plan, strategy needs to be developed in advance and with purpose

- Ploy, strategy is a means of outsmarting the competition
- Pattern, look at the past and reproduce what was successful
- Position, strategy is about how the organisation relates to its
environment and how to differentiate
- Perspective, strategy based on culture and behaviours

Mintzberg believed by understanding each P, you can develop a robust business

strategy that takes full advantage of your organizations strengths and capabilities
(MindTools, 2017)

3) The hypercompetiton of Daveni

Richard Daveni is a strategy professor at the
Tuck Business School, he wrote a ground-breaking
book named Hypercompetition. His vision is
modern, according to him you cant keep a
sustainable competitive advantage for a long time. He
said Hypercompetition is an environment in which
advantages are rapidly created or eroded.

He means if you are a leader you can become

has-been in just few years. He thinks strategy is about
destroying the opponents advantage.

In his book, Daveni rework the 7S model of McKinsey and create the new 7S
model. He argues that in hypercompetiton, the opposition can use the old 7S model
against you because it makes your business predictable.
 The new 7S model:

- Superior stakeholder satisfaction

- Strategic soothsaying

- Positioning for speed

- Positioning for surprise

- Shifting the rules of competition

- Signalling strategic intent

- Simultaneous and sequential strategic thrusts

The first two create a vision for market disruption, the third and fourth are key
capabilities to use across markets and the final three are disruptive tactics in a
hypercompetitive environment. (Paul Sismester, 2011)
 Conclusions:

In this essay, we discussed about the historical development of Strategic

Management.

First, Max Weber and Henry Fayol described with a top-down approach the
authority and the role of the manager. Weber thought there was 3 types of leadership:
the charismatic, the hereditary and the bureaucratic. Henry Fayol defined, within its
POCCC model, the role of the director/manager of a company. He distinguished five
responsibilities of the manager: planning, organising, co-ordinating, commanding and
controlling. In my opinion, the Weber approach regarding the types of leadership is
true. However, it needed to be completed, he didnt give any tools or precision on how
to do, only a description. Regarding Fayol, his description of the role of the manager is
fair but impossible for a unique person. I think that it is too much responsibility for
someone. Tasks and role should be splited and not concentrated.

With a bottom-up vision, Frederick Taylor came along, saying the management
should be think through a scientific approach. He wanted to increase productivity by
optimizing tasks and process of the employees. Wages and productivity increased but
working condition was really bad. Many employees lost their motivation due to the
boredom of doing the same thing every day. Taylors theory has been positive for
economics but totally failed about the social aspect.

Then, for the first time, someone has talked about strategy in management,
only used in military organisations before. Alfred Chandler recognized taking a long-
term coordinated strategy was necessary to give a company structure, direction and
focus through long-term goals. But, Chandler only gave us a vision, a way to manage
for being sustainable, not tools. This why we can only say he gave us General
guidelines. Therefore, he inspired a lot of managers and still inspiring a lot. Later, Igor
Ansoff completed the Chandlers work by adding concepts and tools. He was the first
to claimed the difference between strategic management and strategic planning. He is
one of my favourite. He brought one of the first tool in management in order to
understand the risk component of various growth strategies. This is, for me, the real
emergence of strategic management even if the concept and terms were already used.
 The contemporary development of strategic management appears in a context
of competition. Before, every companies were trying to avoid competition. Michael
Porter described the way companies could obtain a competitive advantage by
understanding better than its competitors the forces structuring their environment. The
Porters 5 forces model was ground-breaking. It permitted a lot of companies to look
at their specific environment more rigorously. Today, Porters model is essential for
organisations. In my opinion, Porters contribution is huge. He laid the bases of the
modern strategic management approach.

Henry Mintzberg is responsible for many concepts every management schools

teach. He described every types of organisational structures, the coordination
mechanisms of the work and tasks, and provide five different approaches to strategy.
Mintzbergs contribution is really important for the strategic management but it is
mostly a description of facts or rules about strategy, structure and coordination rather
than tools for managers.

Richard Daveni has a recent contribution in the field of strategic management.

His vision is totally different than Ansoff who thought that management should be
focus on long term goals. Daveni says you cant keep a sustainable competitive
advantage for a long time and therefore you have to adapt every time or you are going
to be has-been. He also brought a new 7S model because he thinks that using the old
one makes you predictable and will make you lose the race. In my opinion, although
he is in opposition with Ansoff, Daveni understood that today you have to constantly
adapt yourself.

Each of these contributors built what is management today. At the beginning,

the approach was global and focus on basic issues, regardless analysis. After decades,
managers started to look at analysis because the environment was evolving. Nowadays,
environment is hard to understand because of a recent phenomenon: the
hypercompetition.
 Bibliography :
Web article

MARC MASOULI (2008), Igor Ansoff, de la planification au management stratgique

Alternatives conomique

Available at
https://www.alternatives-economiques.fr/igor-ansoff-de-planification-management-
strategique/00036788

The Economist:

- Strategic Planning (2009)

- Alfred Chandler (2009)
- Henry Mintzberg (2009)
- Max Weber (2009)
- Henry Fayol (2009)
- Scientific Management (2009)

JAN J. JRGENSEN (2008), Michael Porters contribution to strategic management

Redalyc

Available at

http://www.redalyc.org/html/3372/337228636008/

TARA DUGGAN (2017), What are the positive and negative effects on the scientific
management studies in the workplace?
Career Trend

Available at

https://careertrend.com/positive-negative-effects-scientific-management-studies-
workplace-31232.html
ANGUS BANCROFT and SIONED ROGERS (1977) Max Weber Bureaucracy
Cardiff Academy

Available at

https://www.cardiff.ac.uk/socsi/undergraduate/introsoc/weber12.html

Encyclopaedia de lAGORA (2012), Les principes de la direction scientifique des

entreprises

Easy strategy (2014), Igor Ansoff, the father of Strategic management

Available at

http://www.easy-strategy.com/igor-ansoff.html

Provenmodels (2005), Six coordination mechanisms

Available at

https://www.provenmodels.com/17/six-coordination-mechanisms/henry-mintzberg

MindTools (2017), Minstbergs 5 Ps of Strategy

Available at

https://www.mindtools.com/pages/article/mintzberg-5ps.html

GLENN RIFKIN (1996), The Art of hypercompetition

Available at

https://www.strategy-business.com/article/14886?gko=c7ef4

PAUL SISMESTER (2011), Hypercompetition by Richard DAveni

Available at
http://www.differentiateyourbusiness.co.uk/hypercompetition-by-richard-daveni

Books:

HENRY MINTZBERG (1983), Structures in five: Designing Effective Organizations

Prentice Hall

FABIEN DE GEUSER (2015), Petite histoire des thories du management

Manager Attitude (PDF)

Available at
http://www.managerattitude.fr/wpcontent/uploads/2015/03/LivreBlanc_Histoire_theo
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