The Environmental School of Strategy Formation
The Environmental School of Strategy Formation is one of the ten schools of thought on strategy formation proposed by Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel in their book "Strategy Safari." This school focuses on the idea that strategy is primarily shaped by external factors and the organization's environment. According to the Environmental School, strategy formation is a reactive process in which organizations adapt to their environment, respond to external pressures, and seek to position themselves effectively within their industry or market.
Purpose: The main purpose of the Environmental School of Strategy Formation is to emphasize the importance of the external environment in shaping an organization's strategy. This school promotes the idea that organizations must be responsive to their environment and that successful strategies are largely determined by their ability to adapt to external conditions and pressures.
Role: The role of the Environmental School is to provide a perspective on strategy formation that highlights the influence of external factors and the organization's environment. It offers a contrasting view to other schools of thought, such as the Learning School or the Design School, which focus more on the internal dynamics of the organization. The Environmental School underscores the importance of understanding and responding to the external context to develop effective strategies.
Components: The Environmental School of Strategy Formation comprises several key components:
- External focus: A primary emphasis on the external environment and its impact on the organization's strategy, recognizing that external factors often play a critical role in determining its strategic direction.
- Adaptation and positioning: Organizations must adapt to their environment and position themselves effectively within their industry or market to develop successful strategies.
- Reactive approach: A focus on the organization's need to respond to external pressures and changes rather than proactively shaping its environment or pursuing a predetermined strategic direction.
Importance: The Environmental School of Strategy Formation is important because it highlights the need for organizations to be responsive to their environment and to recognize the influence of external factors on their strategic direction. By emphasizing the importance of adaptation and positioning, the Environmental School can help organizations develop more effective strategies better aligned with their external context.
History: The Environmental School of Strategy Formation emerged in the 1970s and 1980s as researchers and practitioners began to recognize the growing importance of the external environment in shaping organizational strategies. It was later proposed as one of the ten schools of thought on strategy formation by Mintzberg, Ahlstrand, and Lampel in their book "Strategy Safari," published in 1998.
- Responsiveness to the environment: The Environmental School promotes the idea that organizations must be responsive to their external environment, helping them to develop strategies that are better aligned with their context and more likely to be successful.
- Improved understanding of external factors: By emphasizing the importance of the external environment, the Environmental School encourages organizations to develop a deeper understanding of the factors that influence their industry or market, which can inform more effective strategic decision-making.
- Enhanced ability to adapt and position: The Environmental School's focus on adaptation and positioning can help organizations to be more agile and responsive to changes in their environment, increasing their chances of success in a dynamic and competitive landscape.
Pros and cons:
- Highlights the importance of the external environment in shaping strategy.
- Encourages organizations to be responsive to their environment and adapt to external pressures.
- Helps organizations to develop a deeper understanding of the factors that influence their industry or market.
- May underestimate the importance of internal factors, such as organizational culture, capabilities, and resources, in shaping strategy.
- Can lead to a reactive approach, which may limit the organization's ability to shape its environment or pursue innovative strategies proactively.
- May not provide a clear framework or process for strategy formation, as it focuses primarily on the organization's need to respond to external factors.
Examples to illustrate key concepts:
- A retail company facing increased competition and changing consumer preferences reevaluates its strategy based on the current market conditions. By analyzing the external environment, the company identifies new trends and opportunities, such as the growing demand for sustainable products, and adapts its strategy accordingly. This example illustrates the value of the Environmental School's approach to strategy formation, as the company's strategy is shaped by its responsiveness to external factors.
- A technology firm operating in a highly dynamic and competitive industry continuously monitors its external environment, tracking market trends, competitor moves, and regulatory changes. By staying attuned to these external factors, the firm can adapt its strategy and maintain a strong competitive position quickly. In this case, the Environmental School's emphasis on adaptation and positioning helps the organization develop a more effective strategy.
In conclusion, the Environmental School of Strategy Formation is a perspective that emphasizes the importance of the external environment in shaping an organization's strategy. While this school offers valuable insights into the role of external factors and the need for responsiveness and adaptation, it may not be suitable for all organizations or situations, particularly those that require a more proactive or internally-focused approach to strategy formation. The Environmental School's strengths, such as its emphasis on the external environment and responsiveness, should be considered alongside its limitations, such as its potential underestimation of internal factors and the lack of a clear strategy formation framework. However, for many organizations operating in dynamic and competitive environments, the Environmental School's focus on the external context can provide a valuable foundation for effective strategy development.