WHAT IS A STRATEGY?
Chapter 2
A Primer in Strategic Management for Media Firms
The goals of gaining a competitive advantage and increasing profitabil- ity are quite challenging for media firms, which constantly have to wrestle with their social responsibilities, regulatory concerns, techno- logical advances, and changing consumer preferences. Historically, these media firms’ attempts to analyze, plan, and implement strategies in response to environmental changes have been largely presented de- scriptively in media management literature. For example, most have ac- knowledged that terrestrial radio stations have started delivering programming products online, but few have investigated the drivers be- hind these strategic decisions. It is also well documented that nearly all television networks have invested in joint ventures with Internet-based firms, but what factors contributed to such alliances and what kind of partnerships produce a sustainable competitive advantage? Many of these managerial decisions are a result of the dynamic relationship be- tween a media organization, its environment, and its attempt to develop and implement activities that align its organizational resources with environmental changes. And how our media environment has changed in the last 20 years! The previous chapter depicted this magnitude of change with discussions on the additions of new media, media outlets, and distribution systems; trends in consolidation and convergence; and alternative business models in today’s media marketplace. Under such a dynamic environment, media managers have to be proactive, anticipate change, and continually refine their strategies to stay competitive. Ac- cordingly, it is essential for media scholars to go beyond the mere syn- thesis of current industry practices and examine the antecedents and
13Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.
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predictors of certain firm conducts. Such an emphasis on developing and testing theory-based propositions offers a better contextual expla- nation of the firm and the linkage between strategy and superior per- formance in this particular sector.
Nevertheless, moving from anecdotal, descriptive studies to analyti- cal, prescriptive research of media firms requires a sound understanding of various economics and management concepts in firm behavior. The current chapter offers a primer of some relevant frameworks and con- structs in “strategic management” because this field of study addresses the process and content of a firm’s efforts in aligning its resources with the changing environment, the premise as well as focus of this book. In this context, strategic management offers valuable insights about the nature of mass media as business entities at the firm level, complement- ing existing media economics research that often provides the norma- tive view of resource allocation of media goods. Furthermore, strategic management highlights the importance of traditional decision-making research; the critical process of strategic planning; the tug of war be- tween environment and resources; the fluidity of competitive dynam- ics; and the many market phenomena we witness daily in media industries such as mergers and acquisitions, corporate diversification, and strategic alliances. Given the broad and diverse nature of strategy research, our goal here is not to provide a comprehensive review of all streams of strategic management literature. Instead, after briefly re- viewing some key strategic management concepts and frameworks such as strategic decision making, value creation, the resource-based view (RBV), and competitive dynamics theories, this chapter focuses on how these concepts and frameworks might be applicable to media prod- ucts in the context of a changing marketplace.
WHAT IS A STRATEGY?
The term strategy can be defined and subsequently studied from two distinctive perspectives: “process” and “content”; that is, “how” a strat- egy is formulated and implemented and “what” the strategy is. Inte- grating both perspectives, strategy involves a range of a firm’s decisions and activities that are enacted to fulfill the firm’s strategic missions and goals through the effective use of skills and resources, considering the opportunities and threats in its market environment. For example, a media strategy study may encompass the examination of one or more aspects of the financial, marketing, operation, and personnel functions that lead to the sustainable competitive advantage (SCA) of a firm or a group of firms in media industries. Consequently, strategic manage- ment is generally defined as the “analysis,” “decisions,” and “actions” an organization takes to create and sustain competitive advantages. Task-wise, strategic analysis generally involves the examinations of or- ganizational objectives, the external and internal environments, and a
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Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.
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firm’s intellectual assets; strategic decisions include the formulation of business, corporate, international, and Internet strategies; and strategic actions entail the implementation of strategic control and corporate governance, effective organizational designs and structures, and ongo- ing activities that aim to achieve organizational excellence, ethical be- havior, and entrepreneurship (Dess, Lumpkin, & Taylor, 2004).
DEVELOPMENT OF STRATEGIC MANAGEMENT STUDIES
The history of the strategic management discipline is rooted between the economic and behavioral/organizational perspectives and reflected by a variety of prior theories such as industrial organization (IO) eco- nomics, game theory, leadership, human resource management, Penrose’s theory of the growth of firms, evolutionary theory, organiza- tional learning, and cognitive models (Sanchez & Heene, 2004). Meth- odologically, most of the early studies were carried out by profiling of actual managerial decisions and thus were more descriptive and anec- dotal. In addition, the focus on the “strategy” component of a firm or a group of firms actually began in the general capstone courses offered in many master of business administration (MBA) programs in the United States. Such an origin has significant implications for the initial direc- tion of strategic management as an academic field of inquiry. For in- stance, the emphasis on integrating disciplines and practical applications translated into limited theory construction during its early stage of development, with a focus on models and typologies of various approaches to strategy formulation rather than synthesis of multiple, integrated theoretical perspectives (Hoskisson, Hitt, Wan, & Yiu, 1999).
Because of the complexity and breadth of this subject, many different theories on the studies and practice of strategic management eventually emerged. They may be summarized in two main approaches: the pre- scriptive and the evolutionary. Although the two basic approaches share the same commonalities, the prescriptive approach stresses that the practice of strategic management is a rational and linear process with well-defined and -developed elements before the strategy begins. By comparison, the evolutionary view does not present a clear, final ob- jective for its strategy as proponents believe that strategy emerges, adapts, and evolves over time (Lynch, 1997). Chaffee (1985) further suggests that strategy can be studied from three distinct approaches: linear strategy, which focuses on planning and forecasting; adaptive strategy, which emphasizes the concept of “fit” and is most related to “strategic management”; and interpretive strategy, which sees strategy as a metaphor and thus views it in qualitative terms. After analyzing contemporary research and taking into consideration the historical per- spectives in this area, Mintzberg, Ahlstrand, and Lampel (1998) identi- fied 10 “schools” of strategy research that have developed since strategic management emerged as a field of study during the 1960s. These schol- ars proposed that the “design schools” see strategy as a process of con-
A PRIMER IN STRATEGIC MANAGEMENT I 15
Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.
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ception, the “planning schools” treat strategy as a formal process, the “positioning schools” view strategy as an analytical process, the “entre- preneurial schools” regard strategy as a visionary process, the “cogni- tive schools” see strategy as a mental process, the “learning schools” treat strategy as an emergent process, the “power schools” view strat- egy as a process of negotiation, the “cultural schools” regard strategy as a collective process, the “environmental schools” see strategy as a reac- tive process, and the “configuration schools” treat strategy as a process of transformation. The contrasting definitions of the 10 emphases clearly show that the studies of strategy or strategic management have evolved tremendously over time.
THEORETICAL FOUNDATIONS IN STRATEGIC MANAGEMENT
To establish a base on which applicable frameworks and propositions might be suggested for media products, this chapter first reviews some major theoretical foundations in strategy studies.
The Essence of Strategic Thinking
Fundamental to the development of strategy literature and the practice of strategic management, “strategic thinking” is a particular mode of thinking with specific characteristics (Liedtka, 2001). Mintzberg (1994) stressed that, unlike strategic planning, which is preoccupied with fol- lowing preprogramming rules, strategic thinking involves synthesis, intuition, creativity, and exploration, which results in an integrated perspective for reaching organizational goals. Liedtka succinctly identi- fied five elements that define “strategic thinking.” Specifically, strategic thinking is built on a systems perspective, under which the interrela- tionships between a firm and its external business ecosystem have to be seen as interdependent and evaluated as an end-to-end system of value creation. Strategic thinking is intent focused with a directed organiza- tional energy toward the intended goals. Strategic thinking also in- cludes intelligent opportunism. This means that the intention should be flexible enough to allow for unanticipated opportunities and the emer- gence of new, alternative strategies for a changing environment. Strate- gic thinking also stresses time continuity in that it takes into account institutional memory and historical context in working toward its in- tended goals. Finally, strategic thinking is a hypothesis-driven process in that it formulates hypotheses and analytically tests the hypotheses. Applications of strategic management in media industries, conse- quently, first need to be consistent with these principles.
Strategic Decision-Making, Agency Theory, and Strategic Leadership
Within the strategic thinking context, research in decision making fo- cuses on determining how decisions are made in organizations to best develop a competitive advantage and how to improve such processes for
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Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.