Issues in Strategy1: Some Discussions of Irreverence

In a slightly tongue-in-cheek approach, the article documents a hypothetical discussion between Lord Krishna and Shakuni, who has been re-born on earth, and now wants to study strategy under Lord Krishna. The discussion starts with a debate on the meaning of strategy and the need to distinguish between strategy and operational efficiency, leading to the understanding of strategy as a sub-optimal choice. This leads to the definition of the generic strategies that Porter suggested and their interpretation as also sub- optimal choices. The discussion then veers to the inevitable linkage of strategy with uncertainty, and takes the view that instead of trying to reduce uncertainty, strategy should instead leverage it, and this is why most of the cor porate plans go wrong. This, and of course the obsession with growth. The desire for new opportunities should not be based on expected rates of return but instead, should seek to answer the question, do these activities result in some corporate advantage: thereby inevitably linking up the growth strategies to the question of core competence. Towards the end, the discussion is around the two schools of thought that have emerged in strategy: the stretch vs consistency schools of thought. What emerges, using the two concepts of marginal efficiency of capital and increasing returns to scale, is that convergence can be established by the simple product life cycle curve. The discussion ends with an exposition on power, and the primal need for survival. 1. I must confess to having shamelessly borrowed this idea from Amartya Sen, 'On some debates in Capital Theory', Economica, August 1974. 2. George Orwell. 1984. Penguin. 3. Henry Mintzberg. 'The Rise and Fall of Strategic Planning', Harvard Business Review, 1994, see also 'Musings in Management', also in the HBR, 1996. 4. Here I would like to take to broader and more gen eric definition of competition, moving beyond the standard product; market based definitions to an 'implicit' definition, 'Any things that takes money away from me (as a producer) is competition. 5. This is where some of academics would disagree with the Business Policy course at Harvard titled 'Competition and Strategy'. A monopolist who may not have competition may also want to think about strategy. Competition is not only about existing players; it is also about future players. A product may also compete with itself. After all, as a con sumer, I also have a choice not to consume at all. In 1996, due to a variety of factors, the prices of onion increased seven times. Housewives stopped con suming onions. This is also competition in the broadest sense. 6. Michael Porter. 'What is Strategy?', Harvard Busi ness Review, 1996. 7. As we write this, there are reports in some seg ments of the press that HLL is thinking of buying up the Nirma brand. If this happens, then it should be clear that one effect of this would be that Wheel would certainly be closed down. It would then cease to give any strategic benefit to the company. 8. C. Rajagopalacharya. 1951. Mahabharata, Bharitya Vidya Bhawan. 9. It is interesting to note this often unrealized connection between the SWOT and mission state ment. For example, the Steel Authority of India has 200,000 people. Is this a strength or weakness? Obviously there is no unique answer unless of course we look at the Mission statement. If the mission is to create employment, this is a strength, if the mission is to make profits, this may become a weakness! 10. Lionel Robins. 1931. An Essay on the State and Nature of Economic Science, Cambridge. 11. Porter. 1996. Op. cit. 12. Interested readers may also like to refer to Mintzberg, Rise and Fall of Strategic Planning, HBR, 1994 for a brilliant exposition on why planning is not strategic. 13. Porter. 1980. Competitive Strategy. Free Press. 14. Porter. 'What is Strategy', Harvard Business Review, 1996. 15. There are, however, exceptions to this rule. The Reliance group of Industries in India is one, which has successfully demonstrated a growth strategy that has been based on backward integration for the past three decades. 16. Igor Ansoff. Corporate Strategy, Penguin, also discussed in Pankaj Ghemawat, Strategy and the Business Landscape, Pearson, 1998. 17. Rawls. 1956. Theory of Justice, Oxford. 18. Under Reginald Jones, GE bought up the Utah Mining Corporation. Subsequently, Welch sold it for a substantial profit. Although the business itself was highly profitable, Welch felt that the money could be used elsewhere for better advantage to the corporation. Determining growth directions based merely on profits may not lead to a sus tainable position. 19. C.K. Prahalad, 'The Core Competence of the Cor poration', Harvard Business Review, 1992. 20. Notably Ram Charan, Every Business is a Growth Business' Unicor, 1998. 21. This is perhaps at the crux of the distortions that have plagued the Indian economy since in dependence. The Industrial Policy Resolution 1956 curtailed the growth of business into the sectors of existing competences by an elaborate system of licenses. Perforce thus, industry had to move to areas in which they had little competency. Thus TISCO, a steel major, went in for shrimp farming. This also led to a flourishing secondary market in Industrial Licenses: and the emergence of the classic 'rent seeking' behaviour of organizations. 22. The '7-s' framework developed in the eighties says that if success is to be achieved, there must be a fit between strategy, staff, styles, structure, shared values, superordinate goals, and of course, systems. 23. Peter F. Drucker. 'Theory of Business', Harvard Business Review, September 1994. 24. Specifically in his classic 'Strategic Intent', Harvard Business Review, 1990. 25. Theodore Levitt. 'Exploit the Product Life Cycle', Harvard Business Review, 1965. 26. It may be interesting to note that John Hicks was himself very wary of the Increasing Returns to Scale concept, fearing that this would destroy the foundations of most of economic thought at that time. This is not surprising, remembering that his major contributions of both the indifference curves in micro economic theory and the IS-LM inter pretation of Keynes' General Theory are both based on the strict assumption of perfect competition and thus Constant Returns to Scale. See also Hicks' Mr Keynes and the Classics, 1939. 27. W. Brian Arthur. 'Increasing Returns and the New World of Business', Harvard Business Review, 1996. 28. We must remember that while the IRS is in oper ation the monopolist gains by restricting output. This discrepancy in his behaviour is explained by the fact that he is interested in maximizing not total revenue but unit profits. 29. Jones, Patricia and Larry Kahaner. Say It and Live It. Currency Doubleday 1995. 30. Russell, Power, George Allen and Unwin.1938. See also McClelland and Burnham, Power is the Great Motivator, Harvard Business Review, 1976. 31. George Orwell. Op. cit. 32. For a more detailed exposition see Prasad, On Corporate Strategy and Excellence, Review Section, Management & Change, IILM, 1998, pp. 431-33.