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TABLE OF CONTENTS

INTRODUCTION.1 PREMISES OF THE POSITIONING SCHOOL..1 THE FIRST WAVE: ORIGINS IN THE MILITARY MAXIMS.....1 SUN-TZU ...1 VON CLAUSEWITZ .... 2

THE SECOND WAVE: THE SEARCH FOR CONSULTING IMPERATIVES. .2 BCG GROWTH-SHARE MATRIX.....2 BCG: EXPLOITING EXPERIENCE ...2 PIMS .....3

THE THIRD WAVE: THE DEVELOPMENT OF EMPIRICAL PROPOSITIONS ...3 PORTER'S MODEL OF COMPETITIVE ANALYSIS ......3 PORTER'S GENERIC STRATEGIES ....4 PORTER'S VALUE CHAIN ..5 CRITIQUE OF THE POSITIONING SCHOOL ..5 RELEVANCE OF THE STRATEGIC THOUGHT IN 21ST CENTURY6 CONCLUSION....6

The positioning School Introduction The positioning school opened up the prescriptive school to investigation by scholars and consultants in the early 1980s. Michael Porter published Competitive Strategy which portrayed dissatisfaction with the design and planning schools. Competitive Strategy caught the interests of scholars and consultants and made the positioning school dominant. Premises of the positioning School 1. Strategies are generic, specifically common, identifiable positions in the marketplace. 2. That marketplace is economic and competitive. 3. The strategy formation process is therefore one of selection of these generic positions based on analytical calculation. 4. Analysts play a major role in this process, feeding the results of their calculations to managers who officially control the choices. 5. Strategies thus come out from this process full blown and are then articulated and implemented; in effect, market structure drives deliberate positional strategies that drive organizational structure.
THE FIRST WAVE: ORIGINS IN THE MILITARY MAXIMS

The positioning school is by far the oldest school of strategy formation. The writers delineated types of strategies and matched them to the conditions that were most suitable. Sun-Tzu Sun Tzu's, The Art of War (1971) emphasized the importance of being informed about the enemy and the place of battle. He devoted a good deal of attention to specific position strategies, such as locating armies with respect to mountains and rivers, fighting downhill, and occupying level or high ground. He also identified a variety of generic conditions, such as dispersive, frontier, focal, and difficult. Then he presented maxims linking generic strategies to each of this generic condition. Sun Tzu recognized the limits of generic thinking by acknowledging that different circumstances would require different tactics.

Von Clausewitz Carl von Clausewitz (1780-1831) wrote in the aftermath of the Napoleonic Wars. Armies followed the same organization and strategy and there were few surprises. However, Napoleon changed all that by having a change of strategy and thereby defeating numerically superior armies. In his masterwork On War, Clausewitz (1989) sought to replace the established view of military strategy with a set of flexible principles to govern thinking about war. Strategy intentions are likely to be frustrated by chance and ignorance (friction). THE SECOND WAVE: THE SEARCH FOR CONSULTING IMPERATIVES The Boston Consulting Group (BCG) focused on strategy and came up with two techniques in particular: the growth-share matrix and the experience curve. PIMS came along later, with its data base for sale. BCG GROWTH-SHARE MATRIX The growth share matrix addressed the question of how to allocate funds to the different businesses of a diversified company. Bruce Henderson built the matrix and stated to be successful a company should have a portfolio of products with different growth rates and different market shares. The matrix consisted of the following; Cash cows - Products with high market share and slow growth. Dogs - Products with low market share and slow growth ( All products eventually become either a "cash cow" or a "dog."). Problem Child- Low-marketshare, high-growth products. They almost always require far more cash than they can generate. If cash is not applied, they fall behind and die. Stars -these generate large amounts of cash because of their strong relative market share, but also consume large amounts of cash because of their high growth rate. If a star can maintain its large market share, it will become a cash cow when the market growth rate declines. BCG: Exploiting Experience :Research done in 1936 suggested that as the cumulative production of a product doubles, the cost of producing it seems to decrease by a constant percentage (generally 10 to 30 percent).The widespread application of the experience curve often led to an emphasis on volume as an end in itself. Scale became all important and firms were encouraged to manage experience directly.

PIMS PIMS stands for Profit Impact of Market Strategies. Developed in 1972 for General Electric , later became a standalone data base for sale, the PIMS model identified a number of strategy variables such as investment intensity, market position , and quality of products and service and used them to estimate expected return on investment, market share, and profits . PIMS developed a data base of several thousand businesses that paid in, provided data, and in return could compare their positions with samples of others. THE THIRD WAVE: THE DEVELOPMENT OF EMPIRICAL PROPOSITIONS Porter's Competitive Strategy, published in 1980, followed by another, called Competitive Advantage in 1985, offered a foundation rather than a framework. Business strategy, in Porter's view, should be based on the market structure in which firms operate. Porter's Model of Competitive Analysis a) Threat of New Entrants: Firms gain admittance to an industry by overcoming barriers to entry such as economies of scale, basic capital requirements, and customer loyalty to established brands. b) Bargaining Power of Firm's Suppliers: Since suppliers wish to charge the highest prices or their products, a power struggle naturally arises between firms and their suppliers. c) Bargaining Power of Firm's Customers: A firm's customers wish to get prices down or quality up. Their ability to do so depends on how much they buy, how well informed they are, their willingness to experiment with alternatives, and so on. d) Threat of Substitute Products: Competition depends on the extent to which products in one industry are replaceable by ones from another. When one industry innovates, another can suffer. e) Intensity of Rivalry Among Competing Firms: Firms jockey for position. They may attack each other, or tacitly agree to coexist, perhaps even form alliances. This depends on the factors discussed above. Porter's Generic Strategies Two basic types of competitive advantage a firm can possess are low cost or differentiation These strategies are described below:
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1. Cost Leadership: This strategy aims at being the low-cost producer in an industry. The cost leadership strategy is realized through gaining experience, investing in large-scale production facilities, using economies of scale, and carefully monitoring overall operating costs. 2. Differentiation: This strategy involves the development of unique products or services, relying on brand/customer loyalty. A firm can offer higher quality, better performance, or unique features, any of which can justify higher prices. 3. Focus: This strategy seeks to serve narrow market segments. A firm can focus on particular customer groups, product lines, or geographic markets. The strategy may be one of either differentiation focus, whereby the offerings are differentiated in the focal market, or "overall cost leadership focus, whereby the firm sells at low cost in the focal market. This allows the firm to concentrate on developing its knowledge and competences. Porter's Value Chain In his 1985 book, Porter introduced a framework he called the value chain. It suggests that a firm can be disaggregated into primary and support activities. Porters diagram:

CRITIQUE OF THE POSITIONING SCHOOL The separation of strategy thinking and implementation just like the design school can hinder the learning process of strategy in the sense that the top may not be aware of the practicability of the strategies given that they are removed from implementation. The calculations by analysts can impede learning and creativity created by having experience. The lack of involvement of the implementers in the strategy formulation can bring a lack of commitment to the strategies or rejection by the
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implementers. The theories do not take note of the non quantifiable factors that influence strategy such as the political and social environment setting. They are concerned mainly with the economic such as management of costs and increase of market share. An example of a political influence on strategy would be the government control of licensing and access to raw materials given by a government protectionist policy. The positioning school theories are biased towards the big, the established, and the mature industries and firms. It reflects itself in a bias toward conditions of stability that are normally found in the larger industries. It does not take account of the smaller firms that would be operating in a fragmented industry that is highly unstable. Industries structure also keeps changing requiring much faster speed of response in strategy. The positioning school takes note of the external conditions affecting the firm but does not mention the importance of internal capabilities to actualize the strategy. For example even after identifying a product as a star, there is need for the firm to have marketing capabilities to grow the market share. Relevance of the strategic thought in 21st Century The positioning school is relevant today as managers will often make decisions out of data and analysis by the analysts who may be employees of the company or consultants. For example it may collect market information before introduction of a new product or conduct market surveys to gauge popularity of product. Under this thought, the company is chooses a generic strategy out of the analyzed calculations given. For example, Safaricom opted for a low cost strategy to enter the market. Companies therefore identify an attractive market, locate a defensible position in it and continuously defend their position with the ultimate goal of profitability.

The implementation of strategic planning tools serves a variety of purposes in firms, including the clear definition of an organization's purpose and mission, and the establishment of a standard base from which progress can be measured and future actions can be planned (Fred 2000).For

example, The BCG matrix is its ability to provide a comprehensive snapshot of the positions of a company's various business concerns. Companies employ the Porters competitive strategy to outdo competition by undertaking activities that create superior value above its rivals. A company wants the gap between perceived value and cost of the product to be greater than the competition. A competitive advantage can be
gained by offering the consumer a greater value than the competitors, such as by offering lower prices or providing quality services or other benefits that justify a higher price. The strongest competitive advantage is a strategy that that cannot be easily imitated by other companies.

Conclusion Strategy making is a far richer and complex process than the orderly static process depicted by the positioning school. Strategy analysis is appropriate where conditions are well established and stable but the consideration of soft factors alongside the hard data have to be considered. The positioning school provided a powerful set of concepts for practice which can be combined with views of other schools and by doing so contributed immensely to the development strategic management.

References David, R. Fred (2003). Strategic Management: Concepts and Cases. NJ Upper Saddle River, Prentice Hall. Porter M.E, (1985). Competitive advantage: Creating and Sustaining Superior Performance, NY, The Free Press. Porter M.E, (1980) Competitive Strategy: Techniques for analyzing industries and competitors, NY, The Free Press.