Strategy

What is Strategy?

The authors of “Exploring Corporate Strategy,” Gerry Johnson and Kevan Scholes defines, It is the direction and scope of an organization over the long term, which achieves an advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations. Michael Porter, a strategy specialist says that an organization should determine how its resources, competencies, and skills are combined to achieve a competitive advantage. In simple words, It is a course of action, including specification of resources required , to attain a specific objective.

Three Types of Strategy

1- Corporate Level

It answers the question of which market or business we should enter. The corporate level strategy defines the overall direction of an organization, means where to enter or to leave. it is concerned with:

  • Entering new market
  • Leaving existing market

For example, A food company decides to open up a new division for textile manufacturing.

2- Business Level

It involves:

  • How to gain competitive advantage
  • How to avoid competitive disadvantage

For example, A company invests on IT infrastructure, to save costs and charge low price than a competitor.

3- Functional Level

It is about departmental strategy to deliver value to the end customer. For example, what is our operational , information system or marketing strategy etc. in manufacturing and selling of a product, how our product will differentiate from our competitor?

Examples

Corporate level strategy (Which):

  • Should the company invest in a new product?
  • Should the company divest its un-profit product?
  • Should the company expand it’s operational internationally?

Business level strategy (How):

  • What price should we charge for a product?
  • How to minimize cost, in order to get increased saving and decreased product price
  • How to compete competitor?

Functional level strategy (day to day):

  • What is our marketing strategy for our newly launched product?
  • How to utilize human resource efficiently?
  • Which IT systems need to be installed?

Why it Matters (Importance)?

Strategy plays an important role for an organization to achieve its objectives, it improves control and clarifies the direction.  It involves in defining a scope of organizational activities. Usually, It is formed for following reasons:

  • To gain competitive advantage
  • To get more finance either through debt or equity
  • To stay in the market for long-term
  • To meet and fulfill customer needs
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