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Strategy Definition

It's critical to comprehend the meaning of the word strategy in order to understand how businesses operate. After all, a successful business requires a strategy. The term "strategy" derives from the Greek word "Strategos," which meant "the art of the General."

Yet, in business, the art of war is less important than how managers react to modifications to their company's environment. The phrase "art of the general" first appeared in usage in 6th century C.E. Eastern Roman terminology, and it wasn't until the 18th century that it was translated into Western common languages. This "art of the general" concept covered a number of subcategories of talents, such as military tactics, siegecraft, logistics, etc.

Strategy Definition

Meaning of Strategy

The word "Strategos" was employed in military science in classical Greece to refer to a strategy for winning a conflict. Nevertheless, in business, plans are primarily about comprehending the opposition and creating a strategy to equal or surpass their potential.

Strategy is an organization's long-term plan for development and focus. By putting resources in the right places in a difficult environment to meet market demands and stakeholder expectations, it helps the company gain an edge.

Strategy Definition

Since there are typically few resources available to accomplish goals, strategy is essential. Setting priorities and goals, choosing the best course of action to take to get there, and allocating resources to carry it out are all part of the strategy. A plan outlines the ways by which the outcomes (goals) will be accomplished (resources). As an organization competes or adapts to its environment, a pattern of behavior known as a strategy may develop. Strategic planning and thinking are some of the tasks involved.

Features of Strategy

  • Strategies often include a long-term perspective since they aid in understanding both the future's direction and how it will affect the actions being undertaken now. Nonetheless, tactics could occasionally be created for a shorter time frame.
  • In order for an organization to achieve its goals, it is essential that its strategy clearly outlines the broad path of action that it will take.
  • Strategy's dynamic character, which necessitates an adjustment in response to shifting circumstances, is another crucial aspect of it.
  • An organization's capacity to carry out tasks in the direction of well-defined goals can be affected by a strategy's appropriate balance of internal and external influences.
  • Top-level managers are primarily responsible for formulating strategies, and they also give guidance to middle- and lower-level managers on how to create a sub-strategy.
Strategy Definition
  • By dispersing limited resources across many locations in an effective manner, strategy enables organizations to outperform their rivals.
  • In order to achieve the objectives of the company in the future, strategies are created and put into action with a forward-looking mindset.

Strategy's Importance

The following list of reasons why strategy is important to business organizations

  • Direction and Action Plans: A strategy outlines the best course of action for an organization to take in order to achieve its goals. It offered an organized and thorough action plan for obtaining the desired job in the future. The business receives thorough instructions on how tasks will be completed and objectives will be accomplished.
  • Identification of Trends and Opportunities: Strategy aids in the identification of distinct market trends and potential company possibilities in the future. It aids in assessing various market variations, such as those brought on by social, political, consumer, and technology developments. After the identification of the market changes, the company develops specific strategies to enable the company to adapt to upcoming changes.
Strategy Definition
  • Defining Accountability: In a company firm, strategy aids in defining accountability. Also, it aids in establishing deadlines for achieving certain outcomes for strategic projects.
  • Enhancing Communication and Commitment: A proper, clearly defined strategy helps to explain the accountability and vision of the organization, which improves communication and commitment levels. All of a business's operations are coordinated to uphold the promise with a sound strategic strategy.
  • Allocation of Desired Resources: Every business, no matter how big or small, must distribute resources properly. Because resources are few, strategy defines which products, services, and markets the corporation will pursue in the future. This ensures that resources are used effectively, leading to the company's maximum production.
Strategy Definition
  • Decision-Making Framework: A strategy aids in supplying the right decision-making framework for a certain organization. A strategy also offers a point of reference for organizations to use when making choices to guarantee long-term corporate success.
  • Competitive Advantage: By putting measures in place, organizations may get an edge over rivals. The self-awareness and future aspirations of businesses can be improved. The firm will be most productive in this way since resources are utilized effectively and everything functions smoothly.

Types of Strategy

The process of developing a strategy includes determining the actions that a company may take to meet performance goals, deter rivals, gain a competitive edge, and guarantee its long-term existence. Strategies are started at four levels in a diversified organization that operates many business lines under one roof. The name of the level identifies the strategies used for each level within the company. There are 4 tiers of strategy:

I. Corporate Strategy

The markets and industries that a firm will operate in are determined by its corporate strategy. In a diverse organization, top management develops corporate strategy at the highest level (in our country, a diversified company is popularly known, as a group of companies, such as Alphabet Inc.).

Such a strategy outlines the organization's overarching course for all of its many companies and product lines. Corporate strategy is typically taken into consideration while developing a business strategy. The business plan places a strong emphasis on areas including market expansion, product innovation, vertical and horizontal integration, and diversification.

Strategy Definition

Corporate strategy outlines the long-term goals and often has an impact on all business divisions that fall under its purview. P&G, for instance, would use acquisition as part of its corporate plan to take control of the leading tissue paper producers in Canada. When a business conducts its activities concurrently across many industries, it must pick from a variety of strategic possibilities.

II. Business Strategy

The foundation on which a corporation will compete is defined by its business strategy. It is a strategy developed at the level of the business unit by the senior management of the division. Increasing a company's ability to compete in its products or services is a key component of this strategy. Competitive and collaborative business strategies are included in business strategy.

The whole course of action taken to compete with rival businesses as well as the management's methods for addressing various strategic problems are all included in the company strategy. According to Hitt and Jones, a company's business strategy is made up of the plans of action its strategic managers utilize to make the most of its resources and unique skills in order to outperform its competitors in a market.

Strategy Definition

Business strategy focuses on the initiatives managers take to enhance the company's position in the market by gratifying consumers. It is necessary to take action against industry rivals in order to improve market position. In contrast to cooperative strategy, the idea of competitive strategy has a competitor focus.

The objective of a competitive strategy is to win over consumers by meeting their demands, and then to outperform rivals (or rival businesses) and gain an edge over them. An organization's skills, strengths, and limitations, as well as those of its rivals, determine whether a competitive strategy will be successful.

Businesses deal with a variety of strategic problems every day. To remain competitive in the market, management must successfully solve each of these problems. Together with how to compete, these topics are covered by business strategy. An organization's decision to do business in a certain market or sector is represented by the collection of strategic options it selects as its business-level strategy.

III. Functional Strategy

The departmental or division plan created for each organizational function is actually what is meant by a functional strategy. As a result, there could be a plan for manufacturing, marketing, advertising, sales, human resources, inventories, finances, training, etc. A functional strategy is a plan of action that places special emphasis on one or more organizational functional areas. By optimizing resource productivity, it is designed to help a business unit accomplish some of its goals.

Considering that every corporate function is often assigned to a department, functional strategy is occasionally referred to as departmental strategy. For instance, the production division of a manufacturing corporation creates a "production strategy" as the departmental plan, or the training division creates "a training strategy" to teach the staff.

Strategy Definition

Creating a unique capability to provide a company unit a competitive edge is the focus of a functional strategy. Every business unit or corporation has a unique collection of departments, and each department has a functional strategy. To help a competitive strategy succeed, functional strategies are implemented.

For instance, a business using a low-cost competitive strategy needs a production strategy that prioritizes lowering operational costs and a human resource strategy that prioritizes keeping the fewest amount of highly qualified individuals on staff. To complement the business-level competitive strategy, other functional plans must also be developed, such as marketing, advertising, and finance strategies.

IV. Operating Strategy

Operational units within an organization are where operating strategy is developed. An organization could create an operational plan for a factory, a sales region, or certain areas within a department.

Strategy Definition

An operational strategy is often created by the operating managers and field-level managers to accomplish short-term goals. In big businesses, the mid-level managers frequently provide a hand to the operational managers as they establish the operating strategy. Depending on the departments or divisions, managers in certain businesses "create an operational plan for each set of yearly targets.

Essentials Of Strategy

Every effective strategy has objectives, steps, and measurements. Great strategies incorporate these components, regardless of the strategy's scope, complexity, or even the size of the firm. So, effective strategic planning takes into account all three. When these components are used in a strategic planning process, strategies are made clear and serve as a decision-making framework.

Defining your Vision

According to the majority of web resources, identifying an organization's objectives should come first when developing a plan. Yet, this implies that the product, market, and intended audience have already been established and goes too far, too early. To be effective, a strategy must first consider the fundamental values of the organization as well as its anticipated future position in the market. The company's vision is another name for this.

Strategy Definition

The offer, the company's clients, and the market may all be identified based on the company's vision. This is a crucial phase in the strategy-building process because it guarantees that the proposed approach accurately represents the demands of the target market. Some of the biggest corporations' vision statements include the following examples:

"With its cutting-edge hardware, software, and internet services, Apple aims to provide the finest personal computing experience to students, educators, creative professionals, and consumers worldwide." - Apple

"To be the greatest customer-centric company on Earth; to offer a destination where people can go to find and learn about everything they could want to purchase online." - Amazon

Set your Top-Level Objectives

After defining the vision, the next step in creating a firm strategy is to set the organization's broad goals. These objectives frequently revolve on increasing a company's revenues and profitability since doing so ensures its existence and, if it is listed on a public market, increases shareholder value. The lower-level plans, like the marketing or operational strategy, are later designed while keeping in mind the basic principles and mission.

Strategy Definition

As a result, a strategy only aims to offer an answer to the question of how a business may effectively remain competitive in order to boost its revenue while also improving its financial condition. A company's purpose or core values are not represented by any goals that are included in the development of high-level objectives. This is so because a general business plan's principal goal is to increase the company's economic value for its shareholders or owners.

Analyse the Market and your Company

After defining the vision and goals, strategy makers must consider the benefits and drawbacks of their own business as well as the possibilities and dangers facing the sector. A SWOT analysis can be used for this (Strengths, Weaknesses, Opportunities, Threats)

In order to formulate a strategy that takes into account both the internal features of the organization and the external circumstances of the market sector, information acquired during a SWOT analysis is used as a foundation. With these insights, decision-makers may ensure that a company's strengths capitalize on market opportunities while also addressing any flaws and dangers that can impair the organization's long-term success.

Gaining Competitive Edge

The topic of how the specified objectives are accomplished is addressed in the fourth phase of the strategy formulation process. Companies in competitive marketplaces must strategize how to differentiate themselves from the competition, create demand, increase sales, and increase profitability.

Strategy Definition

Build a Strategy Framework

A broad business strategy may be prepared based on completing the aforementioned procedures. Yet unless this general plan is converted into more detailed lower-level strategies, departments like marketing or finance won't be able to contribute successfully to it. A strategy framework is created when various lower-level plans that support a general corporate strategy are put together.

It assures the general business plan's success by capturing the goals and demands of each department and relating them to the more high-level ones. Only a few examples of the strategies that help a company's overall generic business plan succeed include product, branding, marketing, and operational strategies.

Examples of Business Strategies

Amazon and Reckitt Benckiser are two instances of businesses that have effectively implemented their general business strategies, and they serve as an excellent illustration of the previously described ideas.

Case 1: Amazon

Amazon is widely known for its top-notch customer service and rapid shipping options. Also, by continually innovating in both developed and developing markets, Amazon achieves its goal of being the most customer-focused company in the world. The results are increased growth and increased shareholder value.

Strategy Definition

The company's four driving principles?obsessing over the customer rather than the competition, being passionate about innovation, committing to operational excellence, and having a long-term perspective?were created by Jeff Bezos himself in his first shareholder letter from 1997.

Amazon's overall business strategy attempts to gain an advantage through cost leadership (cost reduction) and its ability for innovation in the market. At all times, the demands of the final consumers are given first consideration.

With this, Amazon can catch up to its competitors within a few years, whereas they typically find it difficult to do so (ST-Strategy). All of its lower-level tactics adhere to the basic strategy of focusing on choice, price, and economies of scale to provide value for clients (operational, marketing, etc.). Due to its strategic framework, Amazon has developed into one of the most successful digital businesses of the twenty-first century.

Strategy Definition

Case 2: Reckitt Benckiser

Reckitt's brand portfolio includes household brands like Finish, Dettol, Nurofen, Vanish, or Durex despite the fact that the majority of consumers are unfamiliar with the company's name. Due to weaker sales and more competition in 2012, the company had to change its business model in order to resume a path of stable growth.

Strategy Definition

According to the revised plan, RB:

focused on R&D for new product lines, which enabled it to accomplish its high-level goals to boost sales and profits;

increased its spending in markets with above-average growth to encourage more expansion;

revised its branding and marketing plans and boosted spending in certain areas;

To boost its net sales growth by +200bps vs. market average every year till 2017, the company set and actively evaluated a number of key performance measures.

Strategy Definition

Reckitt was unable to meet all of its objectives, but the company was nevertheless able to expand sales and earnings beyond the industry standard because of changes made to its business plan. Hence, between 2012 and 2017, RB increased its stockholders' worth by 33 billion.


The path of action necessary to carry out an organization's aims and goals is referred to as a strategy. Hence, a strategy serves as a tool for achieving objectives. In order for a company to accomplish its corporate objectives, strategy is crucial. A strategy describes the long-term focus and direction of an organization. With effective resource allocation, it aids a company in gaining an advantage over rivals. Along with meeting all stakeholder expectations, it also makes sure that the demands of the market are addressed.

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