Excerpted from Barney, J.B. & Griffin, R.G. "The management of organizations: Strategy, structure, behavior." Houghton Mifflin, 1992.
Raymond Miles and Charles Snow suggest that business level strategies generally fall into one of four categories: prospector, defender, analyzer, and reactor. An organization that follows a prospector strategy is a highly innovative firm that is constantly seeking out new markets and new opportunities and is oriented toward growth and risk taking. 3M is an excellent example of a firm that uses prospector strategies. Over the years, it has prided itself on being one of the most innovative major corporations in the world. Employees at 3M are constantly encouraged to develop new products and ideas in a creative and entrepreneurial way. This focus on innovation have led 3M to develop a wide range of products and markets, including invisible tape and antistain fabric treatments. Another example: Johnson & Johnson links decentralization with a prospector strategy. Each of the firm's different businesses is organized into a separate unit, and the managers of these units hold full decision-making responsibility and authority. Often, these businesses develop new products for new markets. As the new products develop, and sales grow, Johnson & Johnson reorganizes so that each new product is managed in a separate unit.
Rather than seeking new growth opportunities and innovation, an organization that follows a defender strategy concentrates on protecting its current markets, maintaining stable growth, and serving its current customers. BIC Corporation used defender strategies, despite its history as an innovative firm (the original BIC "crystal" and the BIC "biro" pen were significant innovations in the writing instruments industry). Since the late 1970's, with the maturity of the market for writing instruments, BIC has adopted a less aggressive, less entrepreneurial style of management and has chosen to defend its substantial market share in the industry. It has done this by emphasizing efficient manufacturing and customer satisfaction.
Another example: Often a firm implementing a prospector strategy will switch to a defender strategy. This happens when the firm successfully creates a new market or business and then attempts to protect its market from competition. Mrs. Fields Inc. was one of the first firms to introduce high quality, high-priced cookies. Mrs. Fields sold its product in special cookie stores and grew very rapidly. This success, however, encouraged numerous other companies to enter the market. Increased competition, plus reduced demand for high-priced cookies, has threatened Mrs. Fields's market position. To maintain its profitability, the firm has slowed its growth and is now focusing on making its current cookie operation more profitable.
An organization that follows an analyzer strategy both maintains market share and seeks to be innovative, although usually not as innovative as an organization that uses a prospector strategy. Most large companies fall into the third category, because they want both to protect their base of operations and to create new market opportunities. IBM uses analyzer strategies. Thousands of customers have purchased IBM computers over the last several decades. It is in IBM's interest to keep these customers satisfied and to introduce new products and services that update their computer facilities. Whenever IBM introduces a new computer system, for example, it develops procedures that help its customers to move from the older system to the new system. In this way IBM maintains its customer base. However, IBM also tries to create new markets. Its line of personal computers represents an effort to expand beyond its traditional base of mainframe computers.* IBM has also invested in biotechnology, superconductivity technology, and other projects which are very innovative.