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Understanding the Concept of Strategy

The document discusses the concept of strategy, defining it in various ways and outlining its key aspects and processes. Strategy is defined as the direction and actions taken by an organization to achieve its goals and relate to its environment. The document also discusses the core competency theory of strategy and how organizations should develop strategies around their core competencies.

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Hanisha Ravi
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280 views3 pages

Understanding the Concept of Strategy

The document discusses the concept of strategy, defining it in various ways and outlining its key aspects and processes. Strategy is defined as the direction and actions taken by an organization to achieve its goals and relate to its environment. The document also discusses the core competency theory of strategy and how organizations should develop strategies around their core competencies.

Uploaded by

Hanisha Ravi
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

1.

Explain the concept of strategy


Strategy is an action that managers take to attain one or more of the organization’s goals. Strategy
can also be defined as “A general direction set for the company and its various components to
achieve a desired state in the future. Strategy results from the detailed strategic planning process”.

A strategy is all about integrating organizational activities and utilizing and allocating the scarce
resources within the organizational environment so as to meet the present objectives. While
planning a strategy it is essential to consider that decisions are not taken in a vaccum and that any
act taken by a firm is likely to be met by a reaction from those affected, competitors, customers,
employees or suppliers.

Definitions of Strategy
Kenneth Andrews defined strategy as “the pattern of major objectives, purposes or goals and
essential policies or plans for achieving the goals, stated in such a way as to define what business
the company is in or is to be in and the kind of company it is or is to be.” This definition of strategy
emphasizes on purpose and the means by which purpose will be achieved. It also emphasizes on
the values and the cultures that the company stand for.

Strategy as Action, inclusive of Objective Setting


In 1960’s, Chandler made an attempt to define strategy as “the determination of basic long term
goals and objective of an enterprise and the adoption of the courses of action and the allocation of
resources necessary for carrying out these goals. This definition provides for three types of actions
involved in strategy :

• Determination of long term goals and objectives


• Adoption of courses of action
• Allocation of resources

Strategy as Action, exclusive of Objective Setting


This is another view in which strategy has been defined. It states that strategy is a way in which the
firm, reacting to its environment, deploys its principal resources and marshal’s its efforts in pursuit
of its purpose. According to Johnson & Scholes strategy is “the direction and scope of an
organization over the long period, ideally which seeks to match its resources to its changing
environment and in particular its markets, customers or clients so as to meet stakeholder’s
expectations”. A Michael Porter has defined strategy as “Creation of a unique and valued position
involving a different set of activities. The company that is strategically positioned performs different
activities from rivals or performs similar activities in different ways”

Nature of strategy
• Strategy is a major course of action through which an organization relates itself to its
environment particularly the external factors to facilitate all actions involved in meeting the
objectives of the organization.
• Strategy is the blend of internal and external factors. To meet the opportunities and threats
provided by the external factors, internal factors are matched with them.
• Strategy is the combination of actions aimed to meet a particular condition, to solve certain
problems or to achieve a desirable end. The actions are different for different situations.
• Due to its dependence on environmental variables, strategy may involve a contradictory
action. An organization may take contradictory actions either simultaneously or with a gap of
time. For example, a firm is engaged in closing down of some of its business and at the same
time expanding some.
• Strategy is future oriented. Strategic actions are required for new situations which have not
arisen before in the past.
• Strategy requires some systems and norms for its efficient adoption in any organization.
• Strategy provides overall framework for guiding enterprise thinking and action.
Essence of Strategy
Strategy, according to a survey conducted in 1974, includes the determination and evaluation of
alternative paths to an already established mission or objective and eventually, choice of the
alternative to be adopted. Strategy is characterized by four important aspects:

• Long term objectives


• Competitive advantage
• Vector
• Synergy

Process of Strategy
There are mainly two processes which are generally used in the strategy management.

1) Prescriptive Strategic Process. :“A prescriptive strategy is one whose objective is defined in
progress and whose main elements have been developed before the strategy commences.”
Such an approach usually starts with an analysis of the outside environment and the
resources of the company. The objectives of the organization are then developed from this.
There then follows the generation of strategic options to achieve the objectives, from which
one (or more) may be chosen. The chosen option is then implemented.

2) Emergent Strategic Process : An emergent or Learning strategy does not have the similar
set objective. The whole process is more experimental with various possible outcomes
depending on how matters extend. “An emergent strategy is one whose final objective is
undecided and whose elements are developed during the course of its life, as the strategy
proceeds.” Thus the early stages of emergent strategy may be similar to prescriptive strategy
– analysis of the environment and resources. But then the process becomes more round,
knowledge and experimental.

2. “Strategies are developed marketing by its core competence with industry


opportunities”
Discuss the statement
Core Competency Theory
The core competency theory is the theory of strategy that prescribes actions to be taken by firms
to achieve competitive advantage in the marketplace. The concept of core competency states
that firms must play to their strengths or those areas or functions in which they have
competencies. In addition, the theory also defines what forms a core competency and this is to
do with it being not easy for competitors to imitate, it can be reused across the markets that the
firm caters to and the products it makes, and it must add value to the end user or the consumers
who get benefit from it. In other words, companies must orient their strategies to tap into the core
competencies and the core competency is the fundamental basis for the value added by the firm.

Core competence and strategies

Some core competencies that firms might have include technical superiority, its customer
relationship management, and processes that are vastly efficient. In other words, each firm has
a specific area in which it does well relative to its competitors, this area of excellence can be
reused by the firm in other markets and products, and finally, the area of strength adds value to
the consumer. The implications for real world practice are that core competencies must be
nurtured and the business model built around them instead of focusing too much on areas where
the firm does not have competency. This is not to say that other competencies must be neglected
or ignored. Rather, the idea behind the concept is that firms must leverage upon their core
strengths and play to their advantages.

How Core Competencies work:

To develop Core Competencies a company must take these actions:

• Isolate its key abilities and hone them into organization-wide strengths
• Compare itself with other companies with the same skills to ensure that it is developing unique
capabilities
• Develop an understanding of what capabilities its customers truly value, and invest accordingly
to develop and sustain valued strengths
• Create an organizational roadmap that sets goals for competence building
• Pursue alliances, acquisitions and licensing arrangements that will further build the
organization’s strengths in core areas
• Encourage communication and involvement in core capability development across the
organization
• Preserve core strengths even as management expands and redefines the business
• Outsource or divest noncore capabilities to free up resources that can be used to deepen core
capabilities

Companies use Core Competencies to:

• Design competitive positions and strategies that capitalize on corporate strengths


• Unify the company across business units and functional units, and improve the transfer of knowledge and
skills among them
• Help employees understand management’s priorities
• Integrate the use of technology in carrying out business processes
• Decide where to allocate resources
• Make outsourcing, divestment and partnering decisions
• Widen the domain in which the company innovates, and spawn new products and services
• Invent new markets and quickly enter emerging markets
• Enhance image and build customer loyalty

Common questions

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Strategy aligns with organizational goals by serving as a guide to achieving long-term objectives through specific actions and policies. It involves determining the direction and scope of activities while ensuring resources are appropriately allocated to meet the set objectives . Strategy is future-oriented, requiring thorough planning to adapt to both internal and external environmental variables, thus ensuring organizational efforts are purpose-driven and aligned with overarching goals .

Internal and external factors significantly influence both the formulation and implementation of a strategy. Internally, a firm must effectively allocate its resources and integrate its activities to meet current objectives while externally, it must respond to the environment which includes market conditions, competition, and stakeholder expectations . Strategies need to adapt to these external factors, which may involve contradictory actions such as expanding in some areas while retracting in others to balance opportunities and threats .

Core competency plays a crucial role in achieving competitive advantage by allowing firms to leverage their unique strengths that are difficult for competitors to imitate, can be used across various markets, and add value to end-users . Firms are encouraged to focus on and nurture these competencies, building their business models around them to strengthen their competitive position .

The nature of strategy facilitates an organization's interaction with its environment by enabling it to establish a major course of action that relates internal objectives and resources to external factors. This interaction often involves adapting to environmental changes, seizing opportunities, and counteracting threats, thus maintaining alignment between the organization's activities and its shifting external circumstances . Strategy aids in orchestrating a combination of actions needed to meet specific conditions and achieve desired outcomes .

Strategic positioning is closely related to the unique activities a firm undertakes as it involves the creation of value through distinct actions that differentiate a firm from its rivals. According to Michael Porter, strategic positioning means performing different activities from competitors or similar activities in innovative ways to establish a unique and valuable market presence . This positioning helps firms to better meet customer needs and build a competitive advantage based on distinctiveness rather than direct competition .

The prescriptive strategic process involves having a predefined objective and developing the main elements of the strategy in advance. It begins with analyzing the external environment and resources, setting objectives, generating strategic options, selecting one (or more) options, and then implementing the chosen strategy . In contrast, the emergent strategic process does not start with a predefined objective; instead, it is more experimental and adaptable, with various potential outcomes as it progresses. This strategy develops its elements over time, taking a more rounded and adaptable approach as the situation evolves .

Core competency theory influences strategic decisions by encouraging firms to focus on their unique strengths when deciding on outsourcing or forming partnerships. Companies are advised to divest or outsource non-core activities to free up resources for areas where they hold a competitive advantage, thereby enhancing their core competencies. Strategic partnerships and alliances can further build strengths and broaden competencies, which contributes to a more robust competitive position .

Integrating technology into core competency development is significant as it enhances the firm's capabilities and operational processes. By using technology, companies can improve their competitive positions, facilitate innovation, and streamline business operations to capitalize on their strengths . The effective use of technology in developing competencies helps unify the company, improve knowledge transfer, and sustain competitive advantages .

Strategy is characterized by long-term objectives, competitive advantage, strategic direction (vector), and synergy. These aspects guide an organization's decision-making processes and tactical execution, ensuring alignment with mission goals while fostering a sustainable competitive advantage in the market . This characterization also involves evaluating alternative paths and selecting the most viable options to achieve objectives .

Emergent strategies develop within an organization through iterative learning and adaptation to internal and external changes, rather than following a rigid, predefined plan. This implies that strategic planning must be flexible, allowing for adjustments as strategies evolve over time in response to new opportunities, challenges, and learnings . An emergent strategy does not have a set final objective, permitting organizations to respond dynamically to unforeseen circumstances and modify their approach as the environment and business needs change .

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