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Strategies of an Organization: Miles and Snow Typology
Miles and Snow's typology is a time-tested strategy in various types of organizations including hospitals, banks, insurance firms, and industrial product companies. This strategy typology is based on the idea that a manager formulates a strategy in response to the organization’s external environment. He/she seeks to strike a balance between the external and internal environment. In this pursuit, the manager can take one of the four stands. He/she can be a prospector, defender, analyzer, or reactor.
Crucial Strategies of an Organization
Let us understand each of the stands in detail with some real-life examples −
This strategy is the most aggressive of the four strategies. It propagates taking risks, continuously innovating, and proactively seeking out new market opportunities. Rather than reaping the benefits of the previously developed products, the managers are expected to look for the next big thing. This strategy is a two-edged sword. The organization can have huge gains or big losses. This strategy is best suited for a growing environment where creativity plays a more important role than efficiency. Organizations that opt for this strategy constantly push their competitors to strive for more.
One of the companies that exemplifies this strategy is Biocon. Before 2007, the company focused on maintaining its sales for revenue. There was a lack of funds for high-scale research. But it was in 2007, that they decided to reap the benefits of Intellectual Property. It was the year when Dr. Iyer was made the head of R&D. He decided to go for high-risk innovation. The need to opt for a Prospector strategy became necessary as the number of competitors in the industry was surging. It was because Pharmaceuticals as an industry had little barrier for the new entrants. Thus, to stand out in the market, the company took an aggressive stance and has fared considerably well since then.
This strategy takes a conservative path and is almost the opposite of the prospector strategy. It propagates the ideas of maintaining the status quo and retaining existing customers. They try to continue producing high-quality products for their customer base. Hence, these companies usually have a loyal customer base. Companies with this strategy do not strive to innovate or grow. Whatever little changes are introduced are aimed at improving internal efficiency like the quality of manufacturing, cost savings, etc. This strategy is relevant to an industry that is in its declining phase or the environment is stable. Hence, being a defender, the companies want to milk the last bit of profits.
One of the companies that adhere to the principles of this strategy is Paramount Pictures. They do not focus much on high-profile films or huge blockbusters. They bet their money on reliable hits that give them a steady stream of revenue while other studios have lost their money.
Starbucks is another good example of a company using a defender strategy. Being an innovator when it first opened up in 1971, lately, it has reduced the rate of opening new stores. Instead, it has mainly focused on improving the efficiency of its existing stores.
This strategy believes in maintaining stability while innovating at the same time. It is an optimum mix of Prospector and Defender strategies. The company with this strategy strives to defend its existing market share while looking for new market opportunities. Hence, efficient production is maintained while catering to the existing market while new, innovative products are launched for the new and more dynamic market. But analyzers are not pure innovators. They would rather prefer improving upon someone else’s creation. Hence, these companies spend a considerable amount of time observing the market.
One of the best examples of an Analyzer company would be Amazon. The company started its journey as a book-selling company. Till now it has continued its core business of selling books and other commodities. While doing this, the company has also entered uncharted territories. For example, it came out with a digital book called Amazon Kindle, entered into the online movie rental business, introduced a video streaming platform called Amazon Prime, and finally launched a digital music store to compete with iTunes. Hence, Amazon perfectly personifies an analyzer who keeps doing its core business while innovating in other domains.
Being a reactor is not a strategy as such. Reactor companies are simply catching up. They behave according to the threats and opportunities of the external environment. These companies lack a long-term vision or an organizational goal. They are simply reacting to their immediate needs. This strategy is good for survival but cannot take the company off the shore. Companies that were once successful and big become mere reactors when their top management does not take decisions that are aligned with the customer's needs. Hence no company wants to be classified as a reactor.
One of the companies that had faced this predicament is Dell, once the biggest seller of personal computers in the world. After a successful stint, their strategy became outdated. They reached the limit of the “make PCs cheap and build them to order” strategy. Since then the quarterly profits have been disheartening. The competitors have taken over. Dell has failed to identify new strategic decisions to gain a competitive edge and unfortunately become a mere reactor to environmental needs.
It is important for an organization to understand where it lies in the framework. Once the position is known, the company can tune its operations to the strategy required. For example, if the company wants to be a prospector, it will need to accumulate creative thinkers. An important point to be noted is that the company need not follow a single strategy for the entirety of its existence. A company that was once an innovator can shift toward being a reactor once the market opportunities become limited and new innovations are not possible. Hence, understanding the need to shift from one strategy to another is equally important as it can make or break the firm.
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