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Strategy: Theory and Practice

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 STRATEGY AC TI CE
Y & PR
THEOR

EGG
STEWART CL
ER
CHRIS CART
IN KO R N BERGER
MART
CH EN SC H WEITZER
J O

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 © Stewart Clegg, Chris Carter, Martin Kornberger and Jochen Schweitzer 2011

First published 2011

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as
permitted under the Copyright, Designs and Patents Act, 1988, this publication may be reproduced,
stored or transmitted in any form, or by any means, only with the prior permission in writing of the
publishers, or in the case of reprographic reproduction, in accordance with the terms of licences issued
by the Copyright Licensing Agency. Enquiries concerning reproduction outside those terms should be
sent to the publishers.

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ISBN 978-1-84920-151-3
ISBN 978-1-84920-152-0 (pbk)

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Printed and bound in Great Britain by Ashford Colour Press Ltd
Printed on paper from sustainable resources

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 STEWART
For Lynne, Jonathan and William

CHRIS
For my wife, Ingrid, and to the memory of my grandfather,
Albert G. Carter (1912–2002)

MARTIN
For Jess

JOCHEN
For Meghan

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 Finally, something different in a strategy text! This new volume provides a broad view of strategy covering the
conventional as well as less mainstream alternatives like the growing strategy-as-practice perspective. It also does
a great job of providing balanced critiques of the existing orthodoxy and provides explicit connections to some of
the more accessible academic articles, providing more depth to the arguments presented. All in all, it is an excellent
break from the unfortunate tendency to make strategy a narrow economic enterprise in a world that is far more
complex and social than that. Strategy: Theory and Practice is a welcome addition to the available texts on strategy.
Nelson Phillips, Professor of Strategy and Organizational Behaviour, Imperial College of Business, UK,
Co-Editor, Journal of Management Inquiry

This book has the critical edge that is lacking in most books on strategy, yet is very much needed – what
strategy and strategizing are all about. It explains where strategy originates from and how contemporary
ideas and practices facilitate or constrain decision-making and action. In particular, this book illuminates
the role of power and politics in strategy – an issue that has been overlooked in most textbooks in this area.
Enjoyable and inspiring reading for students, researchers and practitioners.
Eero Vaara, Professor of Management and Organization, Dean of Research Hanken School of Economics,
Helsinki, Finland

This book unravels the neatness of traditional economics-based views of strategy and replaces them with
much needed social, political and organizational lenses. The authors have produced a refreshing book
which rightly establishes organization theory at the centre of strategic analysis and practice.
David C. Wilson, Professor of Strategy and Organization, Warwick Business School, UK

We have waited a long time for a book like this: it is eminently readable, genuinely ground-breaking
and absolutely timely. Students will find it indispensable, scholars will find it thought-provoking and
practitioners will find it energizing, even liberating. It revitalizes our understanding of strategy and disposes
of some tired clichés and well-worn dogmas along the way.
Susan J. Miller, Professor of Organizational Behaviour, Hull University Business School, UK

Bravo! Finally, a strategy text that takes issues of power, politics and organizing seriously. Integrating
concerns about ethics, corporate social responsibility and sustainability, Strategy: Theory and Practice
provides a provocative and critically engaged approach to understanding strategy and strategizing as a
complex, distributed and unpredictable activity. As such, it is an important contribution to pedagogy at the
intersection of strategic management and organization studies.
Professor Michael Lounsbury, Alex Hamilton Professor, University of Alberta, Canada

This brilliant book moves away from the rational toolbox approach and highlights the organizational
determinants and political outcomes of strategy. Clegg and his colleagues bring a much needed perspective
to understanding how strategy impacts on society and what can be done.
Bernard Forgues, Professor of Organization Theory, EMLYON Business School, France

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 vii

We’ve known for some time now that the discipline of Strategy is fragmenting. What I like about this book
is that it not only helps us make sense of why this is happening, but it offers a coherent new framework
for understanding what strategy means in the 21st century. Clegg et al. begin by revealing the dirty little
secret of strategy – most of it is highly revisionist. From In Search of Excellence to the adulation of Enron
before its collapse, by looking backward we now see that those who study strategy really do a terrible
job of predicting ‘winners’ and ‘losers’ but do a great job of explaining success after the fact. Clegg et al.
demonstrate the reason for this – i.e. strategy is much less about firm performance than it is about politics
and power both inside and outside the firm. As such, this book provides a refreshing new perspective on
strategic management. It demonstrates an awareness that firms compete not only in the material world for
hard resources but also in the political world for power. It is essential reading for anyone who wants to
make sense of modern (or should I say post-modern) strategic management.
Roy Suddaby, Eric Geddes Professor of Business, Alberta School of Business, Canada

This volume provides a much needed complement to traditional texts on strategy and strategic management.
Its unique contribution lies in its comprehensive treatment of the history of strategic management thought
and its compelling introduction to emerging strategy research informed by critical social theory. As such, it
goes considerably beyond conventional strategy textbooks and should expand the horizons of students and
researchers alike by deepening their understanding of the politics and social dynamics of the strategy process.
Sven Modell, Professor of Accounting, Manchester Business School, UK

At last! A strategy textbook that speaks the truth to the flatulence that is ‘USDA prime’ Strategy Research.
‘Is that a strategic decision, or did you think about it?’ managers used to say at Philips HQ in Holland. Here,
finally, is a strategy book that will enable students, and their teachers, to ‘think about it’.
Keith Hoskin, Professor of Strategy and Accounting, Warwick Business School, UK

The book is full of fresh approaches and lively descriptions that combine theories into sensible narratives that
students and teachers can easily retain, play with, argue over – put differently, learn! The book emphasizes
managerial capabilities and processes, how to think about these, see these, and how to make them better.
The book also highlights new thinking in all areas and pushes these ideas forward into the future – which
is very important.
Deborah Dougherty, Professor of Management and Global Business, Rutgers Business School, Rutgers
University, US

This is a fabulous, groundbreaking book. When the hype is stripped away, strategy is hugely consequential –
politically and ecologically. Stewart Clegg and his colleagues show us how and why. At last, a strategy text
that does justice to the theory and the practice of strategy.
Hugh Willmott, Research Professor in Organization Studies, Cardiff Business School, UK

At last, a critical text on strategy that is historically informed, starting with a masterful exposition of
Machiavelli and Hobbes. This historical perspective means that strategy in the present can only be
understood in the context of global capitalism, and the authors build a rich picture of contemporary
capitalism, drawing on a much wider range of sources than any conventional strategy text. The authors not
only debunk much of the mainstream strategy literature, exposing its teleological limitations, they also set
out a dazzling agenda for the study of strategy in the 21st century.
A book that lecturers and students in strategy have been waiting for, even if they didn’t know it.
Michael Rowlinson, Professor of Organization Studies, Queen Mary University of London, UK

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 AUTHOR BIOGRAPHIES

Stewart Clegg is a prolific publisher of several hundred articles in leading aca-

demic journals in strategy, social science, management and organization theory; is
also the author and editor of about fifty books, as well as a Fellow of the British
Academy of Social Sciences, a Distinguished Fellow of the Australian and New
Zealand Academy of Management, a Fellow of the Academy of the Social Sciences
in Australia, and the recipient of significant awards from the American Academy
of Management for his contributions to management theory and practice.

Professor Chris Carter is from Cornwall, he teaches strategy at the University of

St Andrews and also holds a visiting fellowship at the University of Technology,
Sydney. His research explores the politics of strategy and campaigns. Chris
received his PhD in Organization Theory from Aston Business School. He lives in
Edinburgh.

Martin Kornberger received his PhD from the University of Vienna in 2002.
Currently he works as full time Visiting Professor at the Department of
Organization, Copenhagen Business School. Trained as philosopher, he researches
and teaches about practices of organizing, strategizing, accounting, and market-
ing, and explores how they shape, and are shaped by, the economy and society at
large.

Jochen Schweitzer is a researcher, educator, business writer and management

adviser based at the University of Technology, Sydney. With extensive professional
experience and as a scholar he offers both a scientific and practical perspective on
questions of strategic management, innovation, collaboration and the manage-
ment of creative organizations.

ix

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 SUMMARY OF CONTENTS

Guided tour xviii PART THREE

Companion website xxii
Preface xxiii THE POLITICS OF STRATEGY 213

7 Strategists, Top Management Teams

PART ONE and Governance 215
INTRODUCTION 1
8 Strategic Decision-Making 259
1 The Context and Emergence of
Strategic Thinking 3 9 Organizational Politics and
Strategy 293

PART TWO
CENTRAL CURRENTS IN PART FOUR
STRATEGY 45 GLOBAL STRATEGIES 319

2 Strategy and Competitive 10 International and Collaborative

Performance 47 Strategies 321

3 Strategy Discovers Uniqueness: The 11 Financialization, Risk and

Role of Resources and Knowledge 83 Accountability 359

4 Strategy as Process and Practice 117 12 Globalization and Strategy 391

References 431
5 Marketing and Branding as Index 457
Strategic Forces 149

6 Strategy and Innovation 182

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 CONTENTS

Guided tour xviii Strategy as process and practice 25

Companion website xxii The limitations of strategy 29
Preface xxiii Surprise 29
Serendipity 33
What’s wrong with this picture? 34
Summary and review 36
PART ONE Exercises 39
Additional resources 39
INTRODUCTION 1
Web section 40
Looking for a higher mark? 40
1 The Context and Emergence of Case study 41
Strategic Thinking 3
Before you get started . . . 4
Introduction 4 PART TWO
What is strategy? 4
What do strategists actually do when CENTRAL CURRENTS
they strategize? 4 IN STRATEGY 45
Lineages of strategy 6
Strategy as a paradigm 9
Interpreting strategy 14 2 Strategy and Competitive
Elements in the dominant strategy Performance 47
paradigm 15
Learning objectives 47
Alfred Chandler: strategy drives
Before you get started . . . 48
structure 15
Introduction 48
Igor Ansoff: rational planning 16
Industrial organization and the structure–
Edith Penrose: the theory of the firm
conduct–performance approach 49
and strategy 17
The basics 49
Michael Porter: industry analysis 18
Qualifications 50
Strategy styles 18
Organizational performance and sustainable
Evolution 19
competitive advantage 52
Revolution 20
Understanding the macro-environment 53
Complexity 23
xi

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 xii CONTENTS
How different types of markets define
competitive environments 56
How five forces determine competitive
attractiveness 59
Another force? 63
Strategic groups 65
The value chain 66
Generic strategies 69
Cost leadership 69
Differentiation 70
Focus strategies 71
Value-creating disciplines 74
Innovation as strategic driver 75
Summary and review 76
Exercises 76
Additional resources 77
Web section 77
Looking for a higher mark? 77
Case study 78
3 Strategy Discovers Uniqueness: The
Role of Resources and Knowledge 83
Learning objectives 83
Before you get started . . . 84
Introduction 84
Strategy: looking inwards 84
The firm as a bundle of assets 84
The foundations of the RBV 85
Economics and the RBV 86
Understanding resources and
capabilities 86
Barney’s VRIN framework 87
Practising strategy with the RBV 88
What are the rent-generating activities
of the capacities? 90
Core competencies and competitive
advantage 93
What’s wrong with the RBV? 95
Strategic entrepreneurship 97
Dynamic capabilities: the ghost in the
RBV theory machine 98
Value creation and capture 100
Repertoires and structural poses 101
Knowledge as a crucial resource 103
Business process reengineering (BPR) 105
The knowledge economy 107
The professional project of IT
professionals 109
KM methods 110
Mining knowledge: the role of
intranets 110
Stories and knowledge 111
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Summary and review 113
Exercises 113
Additional resources 114
Web section 114
Looking for a higher mark? 114
Case study 115
4 Strategy as Process and Practice 117
Learning objectives 117
Before you get started . . . 118
Introduction 118
The importance of being rational 118
Strategy as emergent, grounded and not
rational planning 121
Mintzberg and managerial behaviour 121
Mintzberg and grounded theory 125
Deliberate vs emergent strategy 126
Andrew Pettigrew and process 128
Strategy is what strategists do,
know, say … 129
Strategy as practice (s-as-p) 129
Strategy and learning 134
Strategy and culture 135
Strategy, sensegiving and sensemaking 137
Strategy as narrative 140
From strategy as competing literal
representations to strategy as a
constitutive discourse 143
Summary and review 145
Exercises 145
Additional resources 145
Web section 146
Looking for a higher mark? 146
Case study 147
5 Marketing and Branding as
Strategic Forces 149
Learning objectives 149
Before you get started . . . 150
Introduction 150
Service-dominant logic 152
Understanding customer desire – market
segmentation, targeting and competitive
positioning 153
Segmentation 154
Targeting 156
Positioning 157
Managing the customer relationship 158
Relationship marketing 158
CRM as cause-related marketing 160
Branding and identity 161
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Brand capital and brand formation 163
Brand-driven strategy 166
Critical perspectives on branding 172
Summary and review 176
Exercises 177
Additional resources 177
Web section 178
Looking for a higher mark? 178
Case study 179
6 Strategy and Innovation 182
Learning objectives 182
Before you get started . . . 183
Introduction 183
Innovation: process, product and
platform 184
Creative destruction and disruptive
technologies 186
Theorizing innovation 189
Rational discontinuities 189
Incremental discontinuities 191
Which organizations innovate best? 192
Designing organizations for innovation 193
Creativity and design thinking 193
Innovation environments 199
Institutional innovation and
environments 199
The co-creation of value 200
Open innovation and open strategy 203
National innovation systems, learning
networks and clusters 205
Innovation experiments 206
Social innovation 207
Summary and review 209
Exercises 209
Additional resources 209
Web section 209
Looking for a higher mark? 210
Case study 211
PART THREE
THE POLITICS OF STRATEGY
7 Strategists, Top Management Teams
and Governance 215
Learning objectives 215
Before you get started . . . 216
Introduction 216
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CONTENTS xiii
Strategists in practice 217
The role of leadership 222
Strategy as the work of top management
teams 224
The reproduction of business elites
and the centrality of strategy 226
The MBA and strategy 230
Strategy as the work of consultants 232
Organizational surgery 233
Organizational retooling 235
Organizational therapy 235
Organizational metaphysics 236
Ownership and control of strategy 237
The debate about ownership and control 237
Corporate governance in contemporary
times 240
Strategy in and around the boardroom 243
Tensions in TMTs 244
Corporate codes 246
What do codes do? 246
Ethical codes in practice 247
Summary and review 249
Exercises 249
Additional resources 250
Web section 250
Looking for a higher mark? 250
Case study 251
8 Strategic Decision-Making 259
Learning objectives 259
Before you get started . . . 260
Introduction 260
Executive decision 261
Bounded rationality 261
Muddling through 263
Garbage cans 266
Politicized strategy: the politics of
decisions 267
Action generators 270
On the politics of organizational
decision-making 274
Top decisions – Bradford studies 275
Decision-making in high-velocity
environments 277
213
Non-decision-making 279
Risk, bureaucracy and decisions 282
The 1986 Space Shuttle disaster: risky
technology and decision-making 283
Strategic decisions make the manager who
makes strategic decisions 287
Summary and review 288
Exercises 288
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 xiv CONTENTS
Additional resources 289
Web section 289
Looking for a higher mark? 289
Case study 290
9 Organizational Politics and
Strategy 293
Learning objectives 293
Before you get started . . . 294
Introduction 294
Interests and strategy 294
Strategic interests and micro-politics
Strategy as a political game 297
Interests and action 297
Game stakes 299
Strategy as a game of power and
resistance 300
The dimensions of power 303
Strategy as the institutionalization
of myth 304
Politics and complex organizations
Multinational corporations 306
MNCs and mandates 307
The politics of strategy and structure
in different contexts 310
Summary and review 314
Exercises 314
Additional resources 314
Web section 315
Looking for a higher mark? 315
Case study 316
PART FOUR
GLOBAL STRATEGIES 319
10 International and Collaborative
Strategies 321
Learning objectives 321
Before you get started . . . 322
Introduction 322
Why collaborate? 322
Why become an MNC? 323
Market factors 323
Comparative advantage 324
Efficiency 325
Institutional factors 325
Strategies for MNCS 326
Decentralized federation; multinational
strategy 326
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Coordinated federation; international
strategy 327
Centralized hubs; global strategy 327
Matrix organizations; binary strategy 329
Integrated network; transnational
strategy 330
Defining strategic alliances – key benefits
and latent issues 332
The alliance choice – to make, buy
or ally 336
Alliance organization – contractual
agreements and governance 337
295 Types of collaboration 339
Strategic rational 339
Completeness of contract 340
Alliance lifecycle 343
Alliance foundation 344
Development and maturity 344
Termination 345
Collaborating through polyphony 346
Alliancing and the future perfect
306 strategy 349
Strange conversations 351
End games and the practice of
workshopping 352
Projecting feelings, concerns and issues 353
Summary and review 355
Exercises 355
Additional resources 355
Web section 356
Looking for a higher mark? 356
Case study 357
11 Financialization, Risk and
Accountability 359
Learning objectives 359
Before you get started . . . 360
Introduction 360
The golden age of capitalism 361
The triumph of neo-liberal capitalism 362
Financialization 364
Shareholder value 364
Private equity 368
Private equity strategy 369
Strategy and the global financial
crisis 370
From buccaneers to bankrupts 370
The 2008 banking crash 371
Strategy in a crisis 377
Risk and audit 378
Rankings and reactivity: how public
measures recreate social worlds 381
Summary and review 386
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 CONTENTS xv

Exercises 386 Procurement flows 403

Additional resources 386 People flows 405
Web section 386 Communication flows 407
Looking for a higher mark? 387 Global strategies: convergence, divergence
Case study 388 or translation? 408
Convergence thesis 410
Divergence thesis 411
12 Globalization and Strategy 391
Translation thesis 412
Learning objectives 391 Futures of globalization? 413
Before you get started . . . 392 China 414
Introduction 392 Summary and review 418
Globalization 393 Exercises 418
Born global 395 Additional resources 418
Uneven globalization; uneven risk 397 Web section 418
Globalizing flows 400 Looking for a higher mark? 419
Globalizing finance, procurement, people, Case study 420
and communication 402
Financial flows 402 References 431
Index 457

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 LIST OF CASE STUDIES

1 A strategic vision for Cambodia 41

Stewart Clegg, Miguel Pina e Cunha and Arménio Rego

2 Competitive positioning in the Australian online apparel industry:

the case of Brands Exclusive 78
Lars Groeger

3 Arthur Andersen 115

Chris Carter

4 Google 147
Martin Kornberger

5 Providing a service and managing the customer relationship – or

how things can go wrong at TELESTAR 179
Jochen Schweitzer

6 Cirque du Soleil 211

Martin Kornberger

7 Marks & Spencer, 1990–2001: boardroom battles 251

Chris Carter

8 United Nations Climate Change Conference 2009 290

Chris Carter

9 The 1998 Australian waterfront dispute: different strategic interests,

different strategies, different weapons 316
Stewart Clegg

xvi

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 LIST OF CASE STUDIES xvii

10 Arts collaboration: Menagerie – Contemporary Indigenous Sculpture 357

Meghan Hay

11 Private equity unplugged: EMI, 2007–9 388

Chris Carter

12 Shell 420
David Bubna-Littic and Crelis Rammelt

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