Strategy is a plan of action to achieve short, middle and long term desired goals.
There are generally three 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. The functional strategies are about the strategic goals to achieve the business goals, and to keep developing the functional area itself.
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 (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, 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.
Today’s modern business and markets act on a planning from dynamic strategies. Companies and organizations need to have 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.
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 strategies 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? What are their success stories and practical tips when you apply these? These posts are all about great tools and methods that can help you to achieve your goal or understand certain aspects that come with strategic planning.
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