Contrary to the process and content approaches which are narrowly defined in terms of their strategic focus and scope, some experts and scholars view business strategy as a process that is very wide and complex. As a wide and complex process, they believe an effective business strategy cannot be formulated by using simpler approaches such as process and content approaches. These experts and scholars proposed other different approaches to be used to conceptualize and formulate business strategies. According to them, the strategic focus and scope of the business strategy should include:
The whole organization;
The industry in which it operates;
The competitive environment in which it competes;
Long-term direction;
Organizational resources;
The distinctive capabilities of the organization; and
The prospect for success.
Since the process of business strategy is more complex and has a wider focus as well as scope in the economic context, experts and scholars introduced two distinctive approaches. The two include the economic and the organizational approaches.
The economic approach primarily emphasizes the need for organizations to develop their business strategy based on economic conditions and opportunities. More specifically, this approach advocates that the focus and scope of the business strategy should include the best way to position a firm in each structure of the competition and economic system. According to Rumelt et al. the lack of theory building in the early works of business strategy, the increased use of knowledge in economics by strategy scholars and the ability of economists to contribute to this field have also led to the adoption of the economic approach. In addition, these scholars contended that the infusion of this approach has also been driven by at least five economic forces that have in turn shaped the connection between economic forces and business strategy. The five economic forces include:
a) The need to interpret economic performance data;
b) The experience curve;
c) The problem of persistent profit;
d) The changing nature of economics; and
e) The emphasis on economics in business schools.
On the other hand, the proponents of the organizational approach view the process of developing business strategy from the organizational perspective. According to them, organizations are not only imperfect but also problematic. This approach perceives the internal components of organizations such as structures, culture, and resources as not only troublesome but also as obstacles to strategy formulation. Given this, the organizational approach emphasizes the need for organizations to first identify and improve the internal components before developing their strategy. Based on this approach, the focus and scope of developing a business strategy are based on the improved internal components. The earliest evidence of the adoption of the organizational approach among organizations can be found in the studies conducted by Burn et al. [33–36]. In addition, the findings of these studies indicated positive relationships between corporate strategy, organizational structure and economic performance.
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