× Close
Home » Strategy Theories

Strategy Theories

It is possible to define strategy as a plan of action to achieve short, middle and long term desired goals. Depending on the context, strategy meaning can change drastically. This strategy definition is not only applicable to business performance, but also in other fields.

It is possible to define strategy as a plan of action to achieve short, middle and long term desired goals. Depending on the context, strategy meaning can change drastically. This strategy definition is not only applicable to business performance, but also in other fields.

What is strategy in business?

There are generally three hierarchical types of strategies in business. The corporate strategy defines the strategic goals of the overall company. The second type of strategy, the business strategy, establishes the strategic goals for a business unit. Functional strategies are the third type of strategy. A functional strategy is about the strategic goals to achieve the business goals, and to keep developing the functional area itself.

In business, it is possible to define strategy as a plan of action to achieve improvement goals in several aspects of an organization or company. Strategy can be used to for example improve profits, customer satisfaction and efficiency. In this use, strategy meaning a plan for improvement can be viewed. This shows that strategy is a versatile concept, even in the sole area of business.

How does strategy function?

Goals are important for organizations to determine the future direction of a company. A good strategy always stems from a thorough analysis of the company’s position in the market. This is where a company’s strengths and weaknesses, as well as opportunities and threats, are incorporated in the strategy. A great example of a tool that assists in determining a strategy in this aspect is the SWOT analysis.

The usefulness of an effective strategy (importance) does not stop with providing direction for management and employees. In addition to its function as a North Star, strategy also plays an important role in the decision-making process. For organizations that have an adequate understanding of their strengths and weaknesses, the strategy helps managers decide where best to spend efforts and resources.

Tools to improve strategy

Today’s modern business and markets act on a planning from dynamic strategies. Companies and organizations need to have strategy to survive, save their market position and expand with new products and customers. Various tools exist to support this process. For example, the CAGE Distance Framework is used to identify important differences between countries that companies should take into account when developing the strategy. The McKinsey Three Horizons of Growth model helps companies avoid a gap between what a company wants to achieve in the future and where it is now in relation to its strategy.

A strategy charts the course of a business. There are many theories and methods that orient themselves towards the best one. It’s always about the best fit and the commitment that’s required to make it successful. An example of this are the 5 Ps of Strategy by Henry Mintzberg. Kenichi Ohmae’s 3C model focuses on the three key factors for success that must be balanced in the form of a strategic triangle.

All strategy tools are aimed at improvement of business performance. A strategy can be modeled after a tool, but the resulting strategic plan should still suit the business. Every business or organization has a unique identity, set of values and work process. A strategy is effective if these aspects are considered as well.

In order for companies to be unique in business, competitive strategy is also applied. Competitive strategy can be a part of strategic management to develop a unique aspect in a business. Competitive strategy aims to create a competitive advantage. If a company follows such a strategy, it is possible for the strategy to lead to a unique place in the market. In order for a business to develop in the way that the strategy plan estimates, a strategy will consist of business approaches and initiatives.

From strategy to strategic plan

A strategy is usually translated into a strategic plan. The strategic plan consists of five elements, namely vision-mission, objectives, core values, KPIs (Key Performance Indicators) and policy & responsibility. The vision and mission align an organization. In this way, people in the organization can join forces to increase efficiency. A company’s core values reflect what it is good at and what it is proud of. A plan is furthermore nothing without well-defined objectives, the fourth part of a strategic plan. Suitable KPIs are selected to monitor progress towards the objectives.

There have been lots of scientific and practical studies on this topic by Michael Porter, C. K. Prahalad, Gary Hamel and many more, from a learning and developing point of view. Michael Porter in particular has become known for his vision of strategy.

According to him, a strategy is aimed at cost leadership, differentiation and focus. These strategies are known as Porter’s three generic strategies. Porter’s strategies basically describe the trade-off of strategy between cost minimization, product differentiation strategies and market focus.

Strategy methods, theories and tips

What are the most known and used theories and management models to improve strategy? What are their success stories and practical tips when you apply these? These posts are all about great strategy tools and methods that can help you to achieve your goal or understand certain aspects that come with strategic planning.

Theory of Constraints by Eliyahu Goldratt

December 27th, 2023

Theory Of Constraints (TOC): this article explains the Theory Of Constraints or TOC, developed by Eliyahu Goldratt in a practical way. Next to what it is, this article also highlights the strategy plan and steps, the internal and external…

Flywheel Concept by Jim Collins

December 22nd, 2023

Flywheel Concept: this article describes the Flywheel Concept, created by Jim Collins, in a practical way. Next to what it is, this article also highlights the Doom Loop effect and the signs that are involved. After reading you…

Grand Strategy Matrix: theory and examples

December 22nd, 2023

Grand Strategy Matrix: this article explains the Grand Strategy Matrix in a practical way. Next to what it is, this article also explaines the 4 quadrants and it’s relatioship with Market Share. After reading it, you understand the basics of…

SPACE Analysis, a strategy theory and tool

December 22nd, 2023

SPACE Analysis: this article explains the SPACE Analysis model in a practical way. Next to what it is, this article also highlights the importance of the organisation’s external environment, the internal environment, the four positions within the matrix and the…

Business Intelligence Model explained

December 22nd, 2023

Business Intelligence Model: this article provides a practical explanation of the Business Intelligence Model (BIM). Next to what it is, this article also highlights the applications and tools and the roadmap. After reading, you’ll understand the basics of this…

Balanced Scorecard Framework and Template

November 21st, 2023

Balanced Scorecard Framework: this article explains the Balanced Scorecard Framework, developed by Robert Kaplan and David Norton, in a practical way. It offers an explanation of what a BSC is and how it can be implemented. It also…

TOWS Matrix explained: example and template

November 21st, 2023

TOWS Matrix: this article describes the TOWS Matrix, developed by Heinz Weihrich in a practical way. The article starts with the definition of the TOWS Matrix, followed by reaons why this method is essential. You will read about the…

Business Transformation Strategy and Model

November 20th, 2023

Business Transformation Strategy and Model: this article provides a practical explanation of Business Transformation Strategy and Model. Next to what it is, this article also highlights why these are necessary, what operational transformations are and how do I implement…

ADL Matrix by Arthur D. Little explained

November 13th, 2023

ADL Matrix: this article explains the ADL Matrix, developed by Arthur D. Little, in a practical way. The article contains a practical explanation of the matrix, the answer to 2 very important questions regarding the ADL matrix and…
© Copyright 2013-2024 | Privacy | Toolshero.nl (Dutch) | Toolshero.es (Spanish)