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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.

OGSM Framework explained

August 23rd, 2023

OGSM Framework: this article provides a practical explanation of the OGSM Framework. The tool was popularised by Proctor & Gamble, and can be applied to an entire organisation, but also to a person’s personal development. This article covers what…

Hoshin Kanri Matrix

August 23rd, 2023

Hoshin Kanri Matrix: this article explains the Hoshin Kanri Matrix in a practical way. The article starts with the general definition of this method, followed by practical information about its use and an example. This article also contains a downloadable…

Core Competence Model (Hamel and Prahalad)

August 23rd, 2023

Core Competence Model: this article explains the Core Competence Model, developed by Gary Hamel and C. K. Prahalad in a practical way. After reading you will understand the basics of this powerful strategic management and competitive advantage tool. What…

Levers of Control model (Simons)

August 23rd, 2023

Levers of Control: this article explains the Levers of Control model, developed by Robert Simons, in a practical way. After reading it, you understand the basics of this strategy and management related tool. What is the Levers of…

5 P’s of Strategy by Henry Mintzberg

August 22nd, 2023

Mintzberg 5 P’s of Strategy: this article describes the concept of the 5 P’s of Strategy by Henry Mintzberg in a practical way. Next to what it is, this article also highlights the planning process. This article also contains two…

Case Study explained including an example

August 21st, 2023

Case study: This article explains the concept of case study in a practical way. The article starts with the definition and meaning. You will then read all about the usefulness of the results in these studies and an example of…

Modern Portfolio Theory by Harry Markowitz

August 20th, 2023

Modern Portfolio Theory (MPT): this article provides a practical explanation of the Modern Portfolio Theory (MPT) by Harry Markowitz. The article starts with a general definition of the Modern Portfolio Theory, followed by examples of basic formula and the…

GE McKinsey Matrix explained

August 16th, 2023

GE McKinsey Matrix: this article explains the GE McKinsey Matrix in a practical way. It covers what it is, what it looks like in a model, which factors can be used to determine market attractiveness and competitiveness, which strategies can…

Critical Success Factors (CSF’s)

August 14th, 2023

Critical Success Factors Critical Success Factors (CSF’s): this article offers a practical explanation of Critical Success Factors (CSFs). The article begins with the meaning of CSFs, followed by information on the relationship of this concept to strategic planning. Then…

Heckscher Ohlin Model

August 6th, 2023

Heckscher Ohlin Model: this article explains the Heckscher Ohlin Model, developed by Eli Heckscher and Bertil Ohlin in a practical way. The article contains a general definition of the model, followed by an example and practical tips. What is…

Hedgehog Concept (Collins)

August 6th, 2023

Hedgehog Concept: this article describes the Hedgehog Concept by Jim Collins in a practical way. After reading you will understand the definition and basics of this powerful strategy tool. Highlights include: what is the Hedgehog Concept? Why is it called…

Blue Ocean Strategy: theory and examples

August 6th, 2023

Blue Ocean Strategy: this article explains the Blue Ocean Strategy (BOS), developed by W. Chan Kim and Renée Mauborgne, in a practical way. This summary covers what Blue Ocean Strategy is, how it compares to Venture Strategy and…
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