Strategy

Everything Old is New Again: PEST and Strategy

Recently I read an interesting strategy article in Academy of Management Perspectives, entitled, “The Institution-Based View as a Third Leg for a Strategy Tripod”, By Mike Peng, Sunny Sun, Brian Pinkham and Hao Chen.  The fundamental idea of the article is that, along with Porter’s industry based view of strategy and the firm specific resource-based view of strategy, a third perspective needs to be incorporated into our understanding of strategy.

The authors define the third perspective as the institution-based view.  And what are institutions?  Formal institutions include laws, regulations and rules; while informal institutions include norms, cultures and ethics.   Hmm.  Sounds to me like the PEST model, or some variation thereof.  You know, Political, Economic, Social or Technological forces and trends in the environment that help to shape our strategic decisions.

I’m not arguing that the institution-based view does not belong in strategy. I’m arguing that it is already extensively discussed in strategy.

It seems like my academic colleagues see the need to reinvent the wheel every few years.  Perhaps it is like my friend the Skinny Professor believes, that we’ve run out of relevant useful things to study, so we have to “reposition” old concepts into new concepts.

Recently the Skinny Professor sent me a new analytical framework called STEEPV.  STEEPV stands for Social, Technological, Economic, Environmental, Political and Values.  Stick environmental into social or technological categories, and stick values into the social category and it sounds a lot like a PEST analysis.

This desire to put a new stamp on an old idea reminds me of my days as a marketing manager in consumer packaged goods. A new manager would be assigned to a brand.  In order to be seen as “doing something”, the first thing the manager would do is develop a new brand strategy, packaging and marketing campaign, to be able to say that he or she had made a difference to the brand. Brands would go through a re-positioning every few years, not because they needed one, but because their new managers needed to say they had repositioned a brand.

In the end, it’s not about the framework you use, but about how deeply you think about the trends and influences, and about how effectively you translate those influences to implications for your business. The big message is that you can’t just stare at your navel; you have to be aware of the world around you.

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1 reply »

  1. This is exactly what I thought while reading this same article today. As a 22 year old Business Administration student I thought it would be interesting to write my thesis about a topic on International business strategy.
    While searching for literature I came across this article by Peng et al. However interesting to read, all I could think off was that the so called third leg of strategy, the ‘Institutional-based view’, is just an acronym for Porter’s PESTEL framework.

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