You must have heard from your seniors or teachers to make a proper strategy for achieving your life goals.
This strategy makes stands tall in all the different life situations, be it personal life goals, professional life goals or business life goals.
Strategy can be understood as a plan of action designed by paying heed upon different factors to accomplish one or more goals.
“A vision without a strategy remains an illusion” – says Lee Bolman and it is 100% true.
Different types of strategy come into play for empowering your vision to meet reality.
In this article, we will understand what strategy is, how you can make a befitting strategy for the successful channelization of your business and what the different concepts are that play a key role in strategy making.
What is Strategy?
Strategy refers to the various actions undertaken by the managers and other people in high-level positions to achieve the goals of the company.
It can also be called as the general direction and various other components that the company uses to meet its targets.
Effective strategizing can lead to the quicker achievement of said goals and targets.
In the words of Jim Rohn, an American entrepreneur, author, and motivational speaker-
“Success is 20% skills and 80% strategy. You might know how to succeed, but more importantly, what’s your plan to succeed?”
So, when you know the formulation of the right strategies for your business, you will head towards the exponential growth, and your success rate will tremendously jump up.
Let us now have a look upon the formulation of strategies-
How is Strategy Formulated?
While formulating a strategy, it is primarily about allocating the limited resources to the various organizational units of the company, so that the objectives are achieved.
While the company is formulating a strategy, they must keep in mind that it is not done in isolation but keeping in mind the different stakeholders like customers, investors, employees, suppliers, etc.
While formulating strategies, another thing that needs to be kept in mind is how there can be uncertainty, especially in the behavior of others.
For instance, if a company bases its strategy on the premise that their competitors are going to price their products higher, and if the latter does not increase the prices, it can be a setback for the company.
There must be room for error in strategies.
It is often called as the ‘blueprint of the company’, as it details the plans of the company and means to achieve them, also deciding how it is also going to contribute to the betterment of the society.
So, strategizing is not just about achieving goals but also about giving back to the community and finding effective ways to do it.
Therefore, a strategy is bridging the gap between where the company is presently and where it wants to be soon.
While making your strategy, it is essential to be real and practical to adjust your strategy as per the precise results that you get in the process.
Some of the critical steps of strategy formulation in a company are-
- Setting objectives of the company
- Evaluation of the organizational environment of the company
- Setting different types of quantitative targets as per different objectives
- Making division plans and doing performance analysis
- Finalizing the right strategy as per company goals, strengths, potentials and limitations
In the next section, we will cover some of the essential features that a successful strategy should always incorporate. So, let us delve into those features right away-
Features of a Successful Strategy
- Strategizing is concerned with long-term achievements and plans rather than daily operations that are essential for the smooth functioning of the company. Strategies are usually in terms of sales or production targets, quality management, innovations, expansion to newer markets, etc.
- It helps in foreseeing the future. Since it is impossible to predict the future accurately, strategizing helps in avoiding risks and other uncertainties that are an essential part of any business environment.
- Strategizing also takes into consideration the behavior patterns of employees, customers, etc. because it mainly revolves around them. For instance, if a company decides to switch to a more innovative way of production, it will take into account the behavior of the employees so that there is smooth functioning without any disruptions.
Three levels of strategy
There are three levels of strategy that can be implemented in a business. Let us have a look upon those here and now-
1) Corporate strategy
This refers to the overall strategies of the company, which is further divided into various units and functioning in many business markets.
This strategy majorly deals with how the company as a whole complements to these various functioning units and adds value to them. It also tries to understand how the overall business structure can be structured so that the different groups can add to the value of these individually functioning units.
It can be done by the effective allocation of resources to these different units, economically raising capital, building a sharp brand image and building secure internal communication channels.
For instance, if a company has various branches or manufacturing units, a corporate strategy must be used to ensure that all these units function effectively and contribute to the profits of the company as a whole.
The design of the organization is also another factor that needs to be considered while formulating a corporate strategy. How the company’s business is structured, and inter-departmental relations affect the advantage the firm has over its competitors and in achieving the targets.
2) Business unit strategy
This strategy involves formulating plans that help understand the dynamics of the market and how to be successful in these individual markets.
The starting point of the business unit strategy is collecting competitive intelligence so that the nuances of the market to thrive and earn profits. It is significant to understand the core competencies of the company and the product’s or service’s USP and how it can satisfy the customer’s needs.
USP analysis can be used to understand the core competencies of the company and create the product or service accordingly. There must be an analysis for understanding the threats and opportunities of the market so that the product can be placed subsequently.
SWOT analysis is a useful tool for the same. If the business is smaller, corporate strategy and business unit strategy might overlap.
Still, if the smaller businesses are operating in different markets, then each market must be studied for optimum profits. It will be the most visible strategy, and people at each level must be able to connect to this strategy and their work.
It is usually done by motivating the workforce, which leads to higher outputs, hence better profits for the company.
3) Team Strategy
For the effective implementation of the strategies mentioned above, the teams need to be aware of the company’s goals and be motivated to work to achieve them.
Teams are the lowest level of organization in the company, and they need to have their strategies and work together for the overall success of the company.
Since this involves achieving the targets set at higher levels of management at the organization, team strategies must formulate the best practices that enable effective functioning of the team which will contribute to achieving the goals of the organization.
There needs to be proper communication between the different teams of the organization to avoid miscommunication which might result in wastage of resources, time and effort.
The development of appropriate team strategies can help prevent these things and also set achievable goals for the teams.
So, these are three different levels of strategies that play a crucial role in channelizing the overall business strategy. Now, in the next section, we will go through the various components of a business strategy statement of a company-
Components of a Business Strategy Statement
There are four components of the strategy statement of a business, and they are-
1) Strategic Intent
It tells about the purpose behind the existence of a business, and why it will continue functioning.
2) Mission Statement
This strategy statement comes in play for describing why the company is operating, plus it also tells the roles through which a company is supposed to serve its different stakeholders.
3) Vision Statement
This strategy statement is used for speaking about the aspirations and dreams of the company for the future. It will tell where the company wants to reach in the future.
4) Goals and Objectives Statement
Such strategy statements are used for specifying the key things that need to be done for meeting the mission and vision of the company.
Now, for making a productive business strategy, it is essential to have a proper understanding of the strategic management process. So, let us have a look at the critical steps of the strategic management process of a business strategy-
Components of Strategic Management of a Business Strategy
For doing effective management of your business strategy, you need to go through below given four elements-
- Environmental Scanning
- Strategy Formulation
- Strategy Implementation
- Strategy Evaluation
Strategizing is a crucial component of a successful business organization, especially if it wants to survive in the long run.
The success of an organization not only depends on the kind of product or service it provides but also the effective management of its resources which can be done through the formulation of effective strategies.
It must not only be done at the macro-level (higher management) but also at the micro-level, in each department so that there is proper flow of communication.
On the concluding note, it is essential to understand that to make a strategy impactful; it is necessary to do its adept implementation. That is why, Richard M. Kovacevich, an American business executive and the former CEO of Wells Fargo & Company once said-
“A vision and strategy aren’t enough. The long-term key to success is execution. Each day. Every day.”
So, we hope this post would have helped you understand what strategy is, what its components are, and how vital its immaculate implementation is.
How important do you consider the strategy for accomplishing business goals?
What strategy do you follow for widening the reach of your business and increasing conversions?
Share some of the top business strategies that you find befitting for new-age entrepreneurs in the comments below.
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Samson Ishaku says
Explain types and importance of strategy including relationship between corporate strategy and financial strategy