Defining Strategic Management and Strategy
The first step in considering developing a strategic plan is understanding its basic elements. It is important to know what strategy is and what it is not. These sections will provide a foundation for an understanding of business strategy. When you have completed these sections, you will be able to define strategy and explain how it is used in a business setting.
1.2 Defining Strategic Management and Strategy
Defining Strategy: The Five Ps
Defining strategy is not simple. Strategy is a complex concept that involves many different processes and activities within an organization. To capture this complexity, Professor Henry Mintzberg of McGill University in Montreal, Canada, articulated what he labeled as "the 5 Ps of strategy". According to Mintzberg, understanding how strategy can be viewed as a plan, as a ploy, as a position, as a pattern, and as a perspective is important. Each of these five ways of thinking about strategy is necessary for understanding what strategy is, but none of them alone is sufficient to master the concept.
Table 1.1 Defining Strategy: The Five Ps
| Plan – a carefully crafted set of steps that a firm intends to follow in order to be successful | Virtually every firm creates a strategic plan to guide its future. Plans are important to individuals too. If you are reading this, you probably have a career plan that requires a college degree. |
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| Ploy – a specific move designed to outwit or trick competitors | A pizzeria owner in Pennsylvania once tried to sabotage his competitors by placing mice in their shops. Although most strategic ploys are lega, this one was not and the perpetrator was arrested. |
| Pattern – the degree of consistency in a firm's strategic actions | Apple always responds to competitive challenges by innovating. Some of these innovations are complete busts, but enough are successful that Apple's overall performance is excellent. |
| Position – a firm's place in the industry relative to its competitors | Old Navy offers fashionable clothes at competitive prices. Old Navy is owned by the same corporation as the Gap and Banana Republic; each brand is positioned at a different pricing level. |
| Perspective – how executives interpret the competitive landscape around them | In the mid-1990s, the Internet was mainly a communication tool for academics and government. Jeff Bezos viewed the Internet as a sales channel and he began selling books online. Today, the company he created-Amazon.com-is a dominant retailer. |