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Strategic Management-History and Development
Strategic Management-History and DevelopmentUntil the 1940s, strategy was seen as primarily a matter for the military. Military history is filled with stories about strategy. Almost from the beginning of recorded time, leaders contemplating battle have devised offensive and counter-offensive moves for the purpose of defeating an enemy. The word strategy derives from the Greek for generalship, strategia, and entered the English vocabulary in 1688 asstrategie. According to James’ 1810 Military Dictionary, it differs from tactics, which are immediate measures in face of an enemy. Strategy concerns something “done out of sight of an enemy.” Its origins can be traced back to Sun Tzu’s The Art of War from 500 BC.
Over the years, the practice of strategy has evolved through five phases (each phase generally involved the perceived failure of the previous phase):
Basic Financial Planning (Budgeting)
James McKinsey (1889-1937), founder of the global management consultancy that bears his name, was a professor of cost accounting at the school of business at the University of Chicago. His most important publication, Budgetary Control (1922), is quoted as the start of the era of modern budgetary accounting.
Early efforts in corporate strategy were generally limited to the development of a budget, with managers realizing that there was a need to plan the allocation of funds. Later, in the first half of the 1900s, business managers expanded the budgeting process into the future. Budgeting and strategic changes (such as entering a new market) were synthesized into the extended budgeting process, so that the budget supported the strategic objectives of the firm. With the exception of the Great Depression, the competitive environment at this time was fairly stable and predictable.
Long-range Planning (Extrapolation)
Long-range Planning was simply an extension of one year financial planning into five-year budgets and detailed operating plans. It involved little or no consideration of social or political factors, assuming that markets would be relatively stable. Gradually, it developed to encompass issues of growth and diversification.
In the 1960s, George Steiner did much to focus business manager’s attention on strategic planning, bringing the issue of long-range planning to the forefront.Managerial Long-Range Planning, edited by Steiner focused upon the issue of corporate long-range planning. He gathered information about how different companies were using long-range plans in order to allocate resources and to plan for growth and diversification.
A number of other linear approaches also developed in the same time period, including “game theory”. Another development was “operations research”, an approach that focused upon the manipulation of models containing multiple variables. Both have made a contribution to the field of strategy.
Strategic (Externally Oriented) Planning
Strategic (Externally Oriented) Planning aimed to ensure that managers engaged in debate about strategic options before the budget was drawn up. Here the focus of strategy was in the business units (business strategy) rather than in the organization centre. The concept of business strategy started out as ‘business policy’, a term still in widespread use at business schools today. The word policy implies a ‘hands-off’, administrative, even intellectual approach rather than the implementation-focused approach that characterizes much of modern thinking on strategy. In the mid-1900s, business managers realized that external events were playing an increasingly important role in determining corporate performance. As a result, they began to look externally for significant drivers, such as economic forces, so that they could try to plan for discontinuities. This approach continued to find favor well into the 1970s.
While the theorists were arguing, one large US Company was quietly innovating. General Electric Co. (GE) had begun to develop the concept of strategic business units (SBUs) in the 1950s. The basic idea-now largely accepted as the normal and obvious way of going about things-was that strategy should be set within the context of individual businesses which had clearly defined products and markets. Each of these businesses would be responsible for its own profits and development, under general guidance from headquarters.
The evolution of strategy began in the early 1960s, when a flurry of authoritative texts suddenly turned strategic planning from an issue of vague academic interest into an important concern for practicing managers. Prior to this strategy wasn’t part of the normal executive vocabulary.
Read here:Strategic Management-History and Development
Over the years, the practice of strategy has evolved through five phases (each phase generally involved the perceived failure of the previous phase):
- Basic Financial Planning (Budgeting)
- Long-range Planning (Extrapolation)
- Strategic (Externally Oriented) Planning
- Strategic Management
- Complex Systems Strategy:
- Complex Static Systems or Emergence
- Complex Dynamic Systems or Strategic Balance
Basic Financial Planning (Budgeting)
James McKinsey (1889-1937), founder of the global management consultancy that bears his name, was a professor of cost accounting at the school of business at the University of Chicago. His most important publication, Budgetary Control (1922), is quoted as the start of the era of modern budgetary accounting.
Early efforts in corporate strategy were generally limited to the development of a budget, with managers realizing that there was a need to plan the allocation of funds. Later, in the first half of the 1900s, business managers expanded the budgeting process into the future. Budgeting and strategic changes (such as entering a new market) were synthesized into the extended budgeting process, so that the budget supported the strategic objectives of the firm. With the exception of the Great Depression, the competitive environment at this time was fairly stable and predictable.
Long-range Planning (Extrapolation)
Long-range Planning was simply an extension of one year financial planning into five-year budgets and detailed operating plans. It involved little or no consideration of social or political factors, assuming that markets would be relatively stable. Gradually, it developed to encompass issues of growth and diversification.
In the 1960s, George Steiner did much to focus business manager’s attention on strategic planning, bringing the issue of long-range planning to the forefront.Managerial Long-Range Planning, edited by Steiner focused upon the issue of corporate long-range planning. He gathered information about how different companies were using long-range plans in order to allocate resources and to plan for growth and diversification.
A number of other linear approaches also developed in the same time period, including “game theory”. Another development was “operations research”, an approach that focused upon the manipulation of models containing multiple variables. Both have made a contribution to the field of strategy.
Strategic (Externally Oriented) Planning
Strategic (Externally Oriented) Planning aimed to ensure that managers engaged in debate about strategic options before the budget was drawn up. Here the focus of strategy was in the business units (business strategy) rather than in the organization centre. The concept of business strategy started out as ‘business policy’, a term still in widespread use at business schools today. The word policy implies a ‘hands-off’, administrative, even intellectual approach rather than the implementation-focused approach that characterizes much of modern thinking on strategy. In the mid-1900s, business managers realized that external events were playing an increasingly important role in determining corporate performance. As a result, they began to look externally for significant drivers, such as economic forces, so that they could try to plan for discontinuities. This approach continued to find favor well into the 1970s.
While the theorists were arguing, one large US Company was quietly innovating. General Electric Co. (GE) had begun to develop the concept of strategic business units (SBUs) in the 1950s. The basic idea-now largely accepted as the normal and obvious way of going about things-was that strategy should be set within the context of individual businesses which had clearly defined products and markets. Each of these businesses would be responsible for its own profits and development, under general guidance from headquarters.
The evolution of strategy began in the early 1960s, when a flurry of authoritative texts suddenly turned strategic planning from an issue of vague academic interest into an important concern for practicing managers. Prior to this strategy wasn’t part of the normal executive vocabulary.
Read here:Strategic Management-History and Development