“Strategy as Stretch and Leverage”
G. Hamel and C.K. Prahalad (1993)
A Critical Analysis
Word Count: 1624
Introduction Strategy, and the form it should take when used in business processes have long been a source of debate – and with extremely varied outcomes being proposed as the ‘best approach’. This said there are some key themes and core strategic ideas that have emerged and developed across these ideas over time. In this article by Hamel and Prahalad (1993), strategy is discussed as stretch and leverage. This analysis will look at where Hamel and Prahalad’s article sits in the grand scheme of the strategy debate. It will go on to analyse the supporting theory including the ...view middle of the document...
In their article, Hamel and Prahalad also present this idea, although take it further by explicitly proposing five methods in which this can be achieved. They stress that it is not the quantity of resources available, but the way that this resource base is leveraged to “get more from less” (Hamel and Prahalad, 1993). The concentration, accumulation, complementation, conservation and recovery of resources, they say, are key to successful resource leverage. In contrast, the positioning view exerts that an organisation is primarily affected by the external environmental forces in operation (Porter, 1996). Giving rise to his “five forces” model demonstrating this, Porter explores the idea that a firm must position itself – and its products – most appropriately in the environment in order to gain competitive advantage, calling this the concept of “fit” (Porter, 1996). Conversely, Hamel and Prahalad propose that a competitive advantage is derived by ensuring that a firms’ ambitions are sufficient in relation to its available resources – however miniscule those resources may be – calling this “stretch”. Although this highlights a difference between an external and internal approach to strategy, Hamel and Prahalad do not disagree with the idea of “fit”. In fact, they argue that the consideration of a firm’s environment “goes without saying” but promote that their idea of “stretch” is supplementary to this. The creation of “stretch”, they say, is “the single most important task senior management faces” (Hamel and Prahalad, 1993). Chaharbaghi and Willis (1998) state that “Success depends not on competition, but on being different”. This is another area where common attributes are found between resource-based and positioning views. The resource-based view highlights that in order to be successful in a competitive marketplace, a company must be unique. According to Hamel and Prahalad (1993), this uniqueness can take several forms including a firm “redefining the industry” or targeting
“underdefended territory”. A fundamental characteristic of Porter’s argument is that a company must create a unique and valuable position (Porter, 1996). The difference here lies in the constitution of ‘value’. For Porter, this is essentially profit-maximisation, whereas for Prahalad and Hamel this is the company’s resource-base – with profits an assumed byproduct. Although elements of Hamel and Prahalad’s article disseminate ideas that draw on elements of both the resource-based and positioning views on strategy, it errs on the side of resource-based primarily because it is concerned with the organisation. The proposal for creation of value and advantage focuses mainly on internal factors such as management attitude and the resource-base and how effective control of these can propel a company to a competitive advantage (Hamel and Prahalad, 1993).
Article assumptions and theoretical underpinnings Hamel and Prahalad’s article discusses how a company is to obtain...