Business Strategy - What is Strategy?

One of the mostly quoted definition for a strategy is “the determination of the basic long term goals and objectives, and the adoption of courses of action and the allocation of resources necessary for carrying out the goals”, which was offered by Chandler (1962). As it has been put in this definition, a strategy includes three main contents, which are determination of goals, adoption of courses of action and allocation of resources.

The strategy of a business should be clear at how the organisation will achieve its aims and objectives. The most important aims of an organisation are ‘to ensure that it survives’,’ to make it profitable’ and ‘to sustain its growth at a reasonable pace’. The strategic plan tries to find the optimum match between business’s resources and opportunities and takes into account how it will adapt in a changing competitive environment. The plan is based on careful analysis of the relative strengths and weaknesses of the company and an assessment of the opportunities in the markets open to it. This means that the strategic plan has to deal with intangibles like market opportunities and technological changes as well as tangibles like financial resources, personnel and supplies.

From the different aspects mentioned above we can summarise the main considerations of a strategy as follows:

1) Direction of the organisation.

2) Identification of business objectives

3) Type of growth

4) Management structure

5) Identifications of opportunities and threats in the market.

Gary Hamel and C.K Prahalad (1996) advocate that a critical ingredient in the strategies of outstandingly successful companies is what they term “strategic intent”. And at this point, business should determine its vision and mission. Company vision is the setting direction of a business and where it’s going to be in the future. Company mission outlines the purpose, reason for being and how the vision is to be translated into reality. Through vision and mission, business can set specific objectives.

Strategy Analysis

Once company clarifies its vision and mission, next step is to do strategic analysis. This activity includes conducting a scan or review of the organization’s environment. This environment can be political, social, economic or technical. Planners assess various driving forces in these environments and these driving forces are commonly defined as:

1. Competition from other businesses in the market place; this depends on factors such as market share and product differentiation;

2. The threat of competition from potential entrants to the market;

3. The power of the buyers

4. The power of the suppliers

5. Threats from substitute products

In light of these forces, planners look at company’s strengths, weaknesses, opportunities and threats (which is also known as SWOT analysis). After a careful valuation of company, planners come to conclusion about what the organization must do as a result of the major issues and opportunities facing the organization. These conclusions include what overall accomplishments (or strategic goals) the organization should achieve, and the overall methods (or strategies) to achieve those accomplishments. These are worded as much as possible to be realistic, timely, specific, and measurable.

Laying out how the strategic goals will be accomplished is called action planning. Action planning is about specifying objectives or results for each strategic goal. Therefore, meeting a strategic goal involves accomplishing set of objectives along the way. Action planning also includes specifying responsibilities and timelines against each objective. And it should also include techniques to monitor and evaluate the plan.

It’s now a common task for an organisation to develop an annual plan which includes strategies, objectives, responsibilities and timelines that must be achieved in the year ahead.

The planning model mentioned above is known as Mission and Issue Based strategic planning and it is most common method for planning strategies. However there are also other methods that can be more suitable for some organizations.

Organic Strategic Planning is one of the model which starts by articulating the organization's vision and values. It requires continual reference to common values, dialoguing around these, and continued adhesion to them to achieve goals. The key point is to use dialogue for clarification of organization’s values and vision and asking working groups to portray their strategic plans and what they are going to do to achieve their goals.

Another model is Scenario Based Planning which helps planners to ensure they are conducting a strategic thinking. It is about examining various external forces which might influence the organization such as regulations, demographic changes. For each of those forces, planners develop three different future organizational scenarios including best, worst and reasonable cases. And then, they suggest what organisation might do in response to these scenarios and select the most likely external change and reasonable strategy to effect organization.

Alignment Model is to ensure that organization is sticking its vision and mission. It is especially useful for companies that need fine tuning in their strategies and figuring out why they are not effective as expected. Planners identify what is working well and what is not. And then addresses to those that are not working and readjust their strategies to correct problems.

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