"Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations".
In other words, strategy is about:
* Where is the business trying to get
to in the long-term (direction)
* Which markets should a business compete
in and what kind of activities are involved in such markets? (markets; scope)
* How can the business perform better
than the competition in those markets? (advantage)?
* What resources (skills, assets, finance,
relationships, technical competence, facilities) are required in order
to be able to compete? (resources)?
* 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)
Strategy at Different Levels of a Business
Strategies exist at several levels in any organisation - ranging
from the overall business (or group of businesses) through to individuals
working in it.
Corporate Strategy - is concerned with the overall
purpose and scope of the business to meet stakeholder expectations. This
a crucial level since it is heavily influenced by investors in the business
and acts to guide strategic decision-making throughout the business. Corporate
strategy is often stated explicitly in a "mission statement".
Business Unit Strategy - is concerned more with
how a business competes successfully in a particular market. It concerns strategic
decisions about choice of products, meeting needs of customers, gaining advantage
over competitors, exploiting or creating new opportunities etc.
Operational Strategy - is concerned with how each
part of the business is organised to deliver the corporate and business-unit
level strategic direction. Operational strategy therefore focuses on issues
of resources, processes, people etc.
How Strategy is Managed - Strategic Management
In its broadest sense, strategic management is about taking
"strategic decisions" - decisions that answer the questions above.
In practice, a thorough strategic management process has three
main components, shown in the figure below:
This is all about the analysing the strength of businesses'
position and understanding the important external factors that may influence
that position. The process of Strategic Analysis can be assisted by a number
of tools, including:
PEST Analysis - a technique
for understanding the "environment" in which a business operates
Scenario Planning - a technique
that builds various plausible views of possible futures for a business
Five Forces Analysis -
a technique for identifying the forces which affect the level of competition
in an industry
Market Segmentation - a
technique which seeks to identify similarities and differences between
groups of customers or users
Directional Policy Matrix - a technique which summarises the competitive strength of a businesses
operations in specific markets
Competitor Analysis - a
wide range of techniques and analysis that seeks to summarise a businesses'
overall competitive position
Critical Success Factor Analysis - a technique to identify those areas in which a business must outperform
the competition in order to succeed
SWOT Analysis - a useful
summary technique for summarising the key issues arising from an assessment
of a businesses "internal" position and "external"
This process involves understanding the nature of stakeholder
expectations (the "ground rules"), identifying strategic options,
and then evaluating and selecting strategic options.
Often the hardest part. When a strategy has been analysed and
selected, the task is then to translate it into organisational action.
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