Marketing Summary and Future Work

In the preceding pages we have focused attention on three aspects of strategy.

(1) The manner in which management attention is directed to the needs and opportunities for strategic change.

(2) The chronological steps in the logistic process by which strategic change is conceived and implemented, and the management actions which accompany this process.

(3) Two basic types of strategic change: expansion, which is an extension of the current dynamics of the firm, and diversification which is a radical departure. In analyzing these our concern has been with the importance of top management commitment and participation and with their respective effect on the organizational structure.

In summary, our concern has been with the organizational process by which the firm handles strategic change. An earlier work (6, Chapter 5) explored the information process by which objectives and strategy of the firm are formulated. Both works contain descriptive and normative hypotheses. In this paper the hypotheses are addressed to the process of management involvement in strategy; the former work dealt with management decision-making given the involvement.

Neither set of hypotheses is fully operational at present. They specify the important variables and the types of dependencies among variables, but not the specific relationships among them. The next major step will be to make the relationship specific enough to permit computer simulation of the overall process.

This is now being attempted in two related ways. One is a large-scale empirical study of past behavior aimed at relating the strategic behavior of firms to their financial performance. The other is a theoretical formulation of relationships among the variables, based on an extension of A Behavioral Theory of the Firm by Cyert and March (1). This extension will have to include the following features:

(1) Broadening descriptive behavior from a single typical firm to describe behavior of different firms in different environments;

(2) Consequent broadening of an essentially conservative behavior regime to include planning and entrepreneurial types of behavior;

(3) Replacement of operating decisions (price, quantity) with appropriate strategic decisions (objectives, strategy, project selection, project divestment).

A complete strategic theory of the firm must model two distinctive phenomena: (a) the relation between external and internal stimuli on the firm and the resulting strategic action; (b) the relation between a given strategic action and the consequent performance of the firm. For a purely descriptive study of management behavior, the first model would be sufficient. However, prescriptive insights can be derived only if strategic actions can be related to their consequent success or failure. Modeling and testing the outcome of strategic moves presents some special problems. One major problem stems from the fact that data on strategic activity is usually not a part of permanent record in firms. Another problem is posed by the long lag times between strategic actions and their outcomes. It remains to be seen whether a current effort' to overcome these problems through a combination of questionnaires and historical analysis will be successful.