January 24, 2017

Role of Strategy

There are many roles of strategy within an organization. This article presents 4 role of strategy which is present in each strategic organization.

1. Framework For Operational Planning.

Strategies provide the framework for plans by channeling operating decisions and often predeciding them. If strategies are developed carefully and understood properly by managers, they provide more consistent framework for operational planning. If this consistency exists and applied, there would be deployment of organizational resources in those areas where they find better use. Strategies define the business area both in terms of customers and geographical areas served. Better the definition of these areas, better will be the deployment of resources. For example, if an organization has set that it will introduce new products in the market, it will allocate more resources to research and development activities, which is reflected in budget preparation.

Role of strategy

2. Clarity in Direction of Activities.

Strategies focus on direction of activities by specifying what activities are to be undertaken for achieving organizational objectives. They make the organizational objectives more clear and specific. For example, a business organization may define its objective as profit earning or a non-business organization may define its objective as social objective. But these definitions are too broad and even vague for putting them into operation. They are better spelled by strategies, which focus on operational objectives and make them more practical. For example, strategies will provide how profit objective can be sharply defined in terms of how much profits is to be earned and what resources Of how much profit is to be earned and what resources will be required for that. When objectives are spelled out in these terms, they provide clear direction to per-sons in the organization responsible for implementing various courses of action. Most people perform better if they know clearly what they are expected to do and where their organization is going

3. Increase Organizational Effectiveness.

Strategies ensure organizational effectiveness in several ways. The concept of effectiveness is that the organization is able to achieve its objectives within the given resources. Thus, for effectiveness, it is not only necessary that resources are put to the best of their efficiency but also that they are put in a way which ensures their maximum contribution to organizational objectives. In fact, taking strategic management, which states the objective of the organization in the context of given resources, can do this. Therefore, each resource of the organization has a specific use at a particular time. Thus, strategies ensure that resources are put in action in a way in which these have been specified. If this is done, organization will achieve effectiveness

4. Personnel Satisfaction.

Strategies contribute towards organization effectiveness by providing satisfaction to the personnel of the organization. In organization where formal strategic management process is followed, people are more satisfied by definite prescription of their roles thereby reducing role conflict and role ambiguity. If the decisions are systematized in the organization, everyone knows how to proceed, how to contribute towards organizational objectives, where the information may be available, who can make decisions, and so on. Such clarity will bring effectiveness at the individual level and consequently at organizational level. Strategies provide all these things in the organization through which everything is made crystal clear.

Looking into the role of strategy, Ross and Kami have suggested “without a strategy the organization is like a ship without a rudder, going around in circles. It is like a tramp; it has no place to go.” They ascribe most business failures to lack of strategy, or the wrong strategy, or lack of implementation of a reasonably good strategy. They conclude from their study that without appropriate strategy effectively implemented, failure is a matter of time.

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