Topic :- What is Strategy?

Definition, Characteristics, Levels, and Need

What is Strategy?
Strategy is the means to achieve long-term goals and objectives that best utilize resources and
aims at a sustainable competitive advantage. It is a long-term or potential action plan that
includes top management decisions and a significant amount of organizational resources.
A strategy gives a clear direction to the organization on how to achieve desired goals and
objectives efficiently and effectively. It integrates reasonably organizational scarce resources
with an action plan by a thorough analysis of the internal and external forces of the
organization and future potentialities.
The term “Strategy” is derived from the Greek word “Strategos” meaning “General Art”. It
influences the organization’s long-term prosperity, typically for 5 years. It is multifunctional
and requires close consideration of internal and external factors an organization is facing. A
strategy may include geographic expansion, diversification, acquisition, product
development, market penetration, retrenchment, divestiture, liquidation, and joint venture.
An effective strategy is vital for the organization to efficiently use scarce resources, increase
productivity, be different from others, and achieve objectives competitively. So it is said that
“Without a strategy, an organization is like a ship moving around in a circle without radar”.
Strategies Definition:
 “A strategy is a unified, comprehensive, and integrated plan that relates the strategic
advantage of a firm to the challenges of the environment. It is designed to ensure that
basic objectives of the enterprises are achieved through proper execution of the
organization.” – Jauch and Glueck
 “Strategy is the direction and scope of an organization over long-term which achieves
advantage for the organization through its configuration of resources within a
changing environment and to fulfill stakeholders’ expectations.” – Johnson and
Scholes
 “Strategies are the means by which long-term objectives will be achieved.” – David
 “A strategy is an integrated and coordinated set of commitments and actions designed
to exploit core competencies and gain a competitive advantage.” – Hitt, Ireland, and
Hoskisson
In this sense, strategy is a combination of commitments and activities that work together to
leverage core competencies and generate a competitive advantage. In this sense, the firm’s
selected strategy reveals what it will and will not undertake.
The strategy of a company also shows how it differs from its competitors. In today’s
competitive company world, effective strategic management processes lower the likelihood
of business failure.
Characteristics of Strategy
Strategies are the long-term action plans which are formulated and implemented considering
potential consequences and potentialities of external and internal environmental factors in
order to achieve goals in the best possible way.
Some major characteristics/features of strategy are mentioned below:
Future-Oriented
Strategy is future-oriented, it always considers the future businesses of the organization, and
less consideration is given to current affairs. Typically strategies are formulated and
implemented to utilize of 5 years goals.
Strategic Means
It is a strategic means that strategically handles the organizational performance – structures,
policies, functions, plans – and goes for proper implementation of plans reducing the likely
failures while implementing. It creates a straightforward roadmap for the organization, stating
“where is the organization now” and “where it will be in the future”.
Goal-Oriented
Strategies are goal-oriented, they are typically built to achieve organizational goals and
objectives. Their main motive is to accomplish desired goals.
General Means Not A Tactic
Strategy is general means, not a tactic as its epistemological concept says. Tactics and
strategies both talk about how to achieve a certain goal. Strategies talk about how to generally
achieve goals and tactics talk about how to specifically achieve goals.
Tactics are more tangible and strategies are abstract. As Chinese general and philosopher Sun
Tzu wrote, “All the men can see the tactics I use to conquer, but what none can see is the
strategy out of which great victory is evolved.”
Resource Allocation
Strategies ensure effective allocation and utilization of organizational resources. The strategy
helps to best allocate time, talent, and budget as such managers get enhanced performance
and likelihood of achieving expected goals.
Levels of Strategy
In organizational settings, mainly strategies exist on three levels viz. corporate, business, and
functional level strategy.
Corporate Level
Corporate-level strategies are formulated considering the overall growth, performance, and
scope of the organization. They are formulated by complying with the vision and mission
statement.
They are prepared by top executives considering the overall risk and return to the
organization. The corporate level strategy also includes four main types of strategies that a
firm can opt for:
 Stability: It aims to continue the current operations of the organization without any
significant changes in direction.
 Growth: Organizations who aim to expand their business aim this strategy. It is
designed to achieve growth in sales, assets, profits, or some combinations.
 Retrenchment: Aims to reduce the size or diversify of a company for financial
feasibility.
 Mixed: Adoption of stability, growth, and retrenchment strategies in different
business units and operations.
Business Level
Business level strategies help to successfully implement corporate-level strategies and outline
how to compete with current market competition and how to retain customers.
These are all about how an organization successfully competes with competitors and achieves
competitive advantages by exploiting organizational core competencies. It also includes three
main types.
 Cost Leadership: This strategy attempts to achieve a competitive advantage by
providing acceptable products at lower than the competitors.
 Differentiation: Involves providing goods and services which are different than those
of competitors at an acceptable cost.
 Focus/Niche: Aims to serve a particular buyer group or niche more effectively than
the competitors.
Functional Level
Functional level strategies are formulated to operate the day-to-day operations of the
organization more effectively. It aims to operate daily activities effectively, enhance
effectiveness in different functional areas, and support business-level strategies and
ultimately to the corporate level.
Functional level strategies are also called operational level strategies. It also has a number of
types:
 Marketing: It deals with customers and competition. It is basically related to market
position, marketing mix, reputation, and brand.
 Production/Operation: This strategy determines how and where a product or service
is to be manufactured. It also deals with the level of vertical integration in the
production process, deployment of physical resources, relationships with suppliers,
and the optimum level of technology.
 Finance: It includes activities related to the acquisition and management of funds
required for business. It mainly aims at enhancing the financial value of the business.
 Human Resource: It deals with the acquisition, development, and facilities of human
resources. It also addresses the skill, motivation, and diversification of human
resources.
 Research and Development: It mainly deals with the acquisition, use, and
development of technology.
Need for Strategy
Globalization and the advancement of information technology have made the current
business environment extremely competitive. Managers must develop a new mindset in such
a competitive business climate, one that values flexibility, speed, creativity, and the
challenges that arise from constantly changing business conditions.
Firms typically actively confront their competitors in a competitive market to improve their
competitive position and performance. In this case, strategy becomes a tool for obtaining a
long-term competitive advantage.
It is a potential plan of actions that includes top management decisions and a considerable
amount of resources. It is prime objective is to achieve a sustainable competitive advantage
over competitors. The following are some of the points to show the need for a strategy for the
organizations.
 To understand the competitive environment and compete successfully
 To effectively adapt to the environment
 To adopt a suitable business model
 To acquire and utilize resources optimally
 To set a competitive organizational structure
 To retain the customers by building a relationship with them
 To expand the business
 To fulfill the stakeholder’s expectations
 To ensure the sustainability of the business
Strategic Management Process - Meaning, Steps and Components
The strategic management process means defining the organization’s strategy. It is also
defined as the process by which managers make a choice of a set of strategies for the
organization that will enable it to achieve better performance.

Strategic management is a continuous process that appraises the business and

industries in which the organization is involved; appraises it’s competitors; and fixes
goals to meet all the present and future competitor’s and then reassesses each strategy.

Strategic management process has following four steps:

1. Environmental Scanning- Environmental scanning refers to a process of

collecting, scrutinizing and providing information for strategic purposes.

It helps in analyzing the internal and external factors influencing an organization.

After executing the environmental analysis process, management should

evaluate it on a continuous basis and strive to improve it.

2. Strategy Formulation- Strategy formulation is the process of deciding best

course of action for accomplishing organizational objectives and hence achieving
organizational purpose.

After conducting environment scanning, managers formulate corporate, business

and functional strategies.

3. Strategy Implementation- Strategy implementation implies making the strategy

work as intended or putting the organization’s chosen strategy into action.

Strategy implementation includes designing the organization’s structure,

distributing resources, developing decision making process, and managing
human resources.

4. Strategy Evaluation- Strategy evaluation is the final step of strategy

management process.

The key strategy evaluation activities are: appraising internal and external
factors that are the root of present strategies, measuring performance, and taking
remedial/corrective actions.

Evaluation makes sure that the organizational strategy as well as it’s

implementation meets the organizational objectives.