Strategy
Strategy refers to the managerial action plan for achieving organizational objectives. In
effect, strategy is a management tool for achieving strategic targets. It is the mechanism
used to align firms with their environments. Therefore, in order to survive and prosper
firms must answer the many important questions. Some of these are: What is our
business? What should it be? What products should we produce, and at what level of
quality? Who are our customers, and what types of customers do we want to serve?.
When the questions are answered, a strategy is formulated.
Levels and Types of Strategy
Corporate Strategy
Corporate strategy provides the guidelines for the businesses to achieve their long term
objectives. When developing a corporate strategy, it is essential to determine the
purpose and the scope of the organizational activities. Then about the nature of its
business by considering the environment in which it operates, its marketplace position
and the level of competition it faces.
Corporate strategy is created based on the vision of the organization. This is the most
important level of strategy since it is heavily influenced by the investors in the business
activities and acts to guide strategic decision-making throughout the business.
Corporate strategy is verbally expressed in the company mission statement. Usually, in
every organization the top management is responsible for establishing the corporate
strategy.
Business Strategy
A strategic business unit can consist of a product line, division, or other profit centers
that can be planned separately from the other business units of the company. At this
level, there are less strategic issues relating to the coordination of operating units and
about developing and achieving a sustainable competitive advantage for the
manufactured goods and services.
The strategy formulation phase at the business level deals with:
• Positioning of the business against rivals which is: cost leadership, differentiation or
focus on developing and marketing the product for a particular segment of the market.
In nutshell the differences between the two can be summarized as:
• Business-level strategies deal with a particular business unit while corporate strategies
deal with the entire company, which may consist of several business units.
• Business-level strategies deal with specific issues, such as determining the price of
the products, increasing sales or introducing a new product.
• Corporate strategies tend to be very broad and are focused on gaining a competitive
advantage in the industry.
• Corporate strategies will often affect business-level strategies. This is mainly done by
allocating specific resources to particular business units.
Functional strategy
Functional strategy focuses on supporting the corporate and business strategies. This
strategy is the a strategy for each specific functional unit within a business. Functional
strategies primarily are concerned with the activities of the functional areas of a
business (i.e., operations, finance, marketing, personnel, etc.) will seaport the desired
competitive business level strategy and complement each other.
Some authors also distinguish: operating strategy and industry strategy. For example,
Thompson and Strickland explain that,
"operating strategy refers to the even narrower and more detailed approaches and
moves devised by departmental-subunit managers and geographic-unit managers to
achieve the strategy-supporting performance objectives established in their areas of
responsibility"
The idea of strategic fit assumes that these three levels of strategy are
consistent. Moreover, lower-level strategy supports and complements higher-
level strategy and contributes to the achievement of organization objectives.
What is Strategic Management?
It is goals-oriented management in which:
The mission and planned achievements of an organization are clearly set out.
All management processes are designed and monitored toward reaching the
organization's overall goals.
Steps that have already been taken to reach the goals of the organization are
carefully evaluated to make sure that they have been carried out in the most
efficient manner possible and that they were indeed in line with the overall goals
as set forth in the mission statement which governs the strategic management
process.
So basically it is planning, implementing and control of the strategic goals.