What is Strategy?
The word Strategy is derived from the Greek word 'Strategos' which means a general. A strategy is a declaration of intent, it defines what the organization wants to become in the longer term. The overall aim of strategy at corporate level will be to match or fit the organization to its environment in the most advantageous way possible. It is an integrated set of action at securing a sustainable competitive advantage.
Basically, a strategy is a set of decision-making rules for the guidance of organizational behavior.
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| What is Strategy? |
Definition of strategy
- Kenneth Andrews (1955) "The pattern of objectives, purpose, goals and the major policies and plans for achieving these goals stated in such a way so as to define what business the company is in or is to be and the kind of company it is or is to be"
- Igor Ans off (1965) explained the concept of strategy as "the common thread among the organizations, activities and product markets, that defines the essential nature of business that the organization was or planned to be in future".
- Alfred Chandler (1962) “Strategy and structure of the American Enterprise". “The determination of the basic long-term goals and objectives for an enterprise and the adoption of action and the allocation of resources necessary for carrying out these goals".
- Johnson and Scholes "Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations"
- A plan or course of action or a set of decision/rules making a pattern or creating a common thread.
- A pattern or common thread related to the organization’s activities which are derived from the policies, objectives and goals.
- Concerned with pursuing those activities which move an organization - from its current position to a planned future position
- Concerned with the resources necessary for implementing a plan or a predetermined course of action.
Five Ps of Strategy
- Strategy is a Plan
- Strategy is a Ploy
- Strategy is a Pattern
- Strategy is a Position
- Strategy is a Perspective
Elements of strategy
- Where is the business trying to get to in the long-term (direction?)
- How can the business perform better than the competition in those markets? (Advantage)?
- What external, environmental factors affect the businesses' ability to compete? (Environment)?
- What are the values and expectations of those who have power in and around the business? (Stakeholders)
- What resources (skills, assets, finance) are required in order to be able to compete? (Resources)?
- It is derived from its policies, objectives and goals.
- It is related to per sue those activities which move an organization current position to a desired future state.
- It is concerned with the requisite resources to implement a plan.
Features or charactertics of strategy
- Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the firms must be ready to deal with the uncertain events which constitute the business environment.
- Strategy deals with long term developments rather than routine operations, i.e., it deals with probability of innovations or new products, new methods of productions, or new markets to be developed in future.
- Strategy is created to take into account the probable behavior of customers and competitors. Strategies dealing with employees will predict the employee behavior.
Functions of strategy
- It provides a dual approach to problem solving. Firstly, it exploits the most effective means to overcome difficulties and face competition. Secondly, it assists in the deployment of scarce resources among critical activities.
- It focuses attention upon changes in the organizational set up, administration of organizational process affecting behavior and the development of effective leadership.
- It offers a technique to manage changes. The management is totally prepared to anticipate, respond and influence to look at changes. It also offers a different way of thinking.
- It furnishes the management with a perspective whereby; the latter gives equal importance to present and future opportunities.
- It provides the management with a mechanism to cope with highly complex environment characterized by diversity of cultural, social, political and competitive forces.
Kinds of corporate strategy
There are four grand strategic alternatives. They are stability, expansion, retrenchment and any combination of these three. These strategic alternatives are also called as grand strategies.
1. Stability Strategy- It is adopted by an organization when it attempts to improve functional performance. They are further classified as follows:
- No change strategy
- Profit strategy
- Pause/Proceed with caution strategy.
2. Expansion Strategy - It is followed when an organization aims at high growth. They operate through
- Concentration
- Integration
- Diversification
- Cooperation
- Internationalization.
- Mergers, takeovers, Joint ventures and strategic alliances come under expansion through cooperation.
3. Retrenchment Strategy - It is followed when an organization aims at a contraction of its activities. It is done through turnaround, divestment and liquidation in any of the following three modes:
- Compulsory winding up
- Voluntary winding up
- Winding up under supervision of the court.
4. Combination Strategies - They are followed when an organization adopts a combination of stability, expansion and retrenchment either at the same time in different businesses or at different times in the same business.
