Strategy School 3: The Positioning School

3. The Positioning School (Strategy Formation as an Analytical Process)
This post is continuation of my previous posts on strategy, based on Mintzberg's book Strategy Safari.
While the Design School and Planning Schools didn't put any limits on the strategies that were possible in any given situation, the positioning school, in contrast, argued that only a few key strategies - as positions in the economic market place are desirable in any given industry: ones that can be defended against existing and future competitors. Cumulating this logic across industries, this school ended up defining what are called generic categories of strategies - for example, product differentiation and focused market groups.
Premises of the Positioning School

1. Strategies are generic, specifically common, identifiable positions in the market place.
2. The marketplace (the context) is economic and competitive.
3. The strategy formation process is therefore one of selection of these generic positions based on analytical calculation.
4. Analysts play a major role in this process, feeding the results of their calculations to managers who officially control the choices.
5. Strategies thus come out from this process full blown and are then articulated and implemented; in effect, market structure drives deliberate positional strategies that drive organizational structure.

Enter Michael Porter

Porter's Competitive Strategy (1980) and Competitive Advantage (1985) offered a set of concepts to build on. The most prominent among these concepts have been his model of competitive analysis, his set of generic strategies and his notion of value chain. We will take a brief look at each of these:
Competitive Analysis:
Porter's model of competitive analysis identifies five forces in an organization's environment that influences competition. They are:

• Threat of new entrants
• Bargaining power of firm's suppliers
• Bargaining power of firm's customers
• Threat of substitute products
• Intensity of rivalry among competing firms

Given the range of possible external forces, one might imagine that the range of possible strategies is large. But Porter takes the opposite position: only a few generic strategies survive the competition in the long run and this notion is what really defines the positioning school.

Generic Strategies:
Porter argued that there are two basic types of competitive advantage a firm can possess: low cost or differentiation. Being "all things to all people", Porter argued, is a recipe for strategic mediocrity and below-average performance. Combined with the "scope" of a particular business, Porter defined the following three generic strategies:

• Cost Leadership: Low cost producer in the industry.
• Differentiation: Development of unique products or strategies
• Focus: Seek to serve narrow market segments

Value Chain:
Porter introduced a framework he called the value chain. It suggests that a firm can be disaggregated into primary and support activities. Primary activities are directly involved in the flow of product to customer. Support activities exist to support primary activities. Firms achieve profit margins based on how the value chain is managed.
Critique of the Positioning School

1. Concerns about Focus: The approach is not wrong, but the focus tend to be narrow.
2. Concerns about Context: The bias is clearly towards traditional big business
3. Concerns about Process: The message is not to get out there and learn, but to stay home and calculate.
4. Concerns about Strategies: At the limit, the process can reduce to a formula, whereby such a position is selected from a restricted list of conditions.

We are not ready to explore the Entrepreneurial School.

Thank you very much,


RamP!