Strategy

content

 The concept of strategy

 meaning and importance.
 Deducing strategy and articulating a summary
statement of strategy
 The concept of strategy

 The word “strategy” is derived from the Greek word

“stratçgos”; stratus (meaning army) and “ago”
(meaning leading/moving).
 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”.
 The dictionary meaning of strategy is, "the art of
moving or disposing the instrument of warfare as to
impose upon enemy, the place time and conditions
 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
 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.
 Meaning of Strategy

 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 vacuum and that
any act taken by a firm is likely to be met by a
reaction from those affected, competitors,
customers, employees or suppliers.
 Strategy can also be defined as knowledge of the
goals, the uncertainty of events and the need to
take into consideration the likely or actual behavior
of others.
 Strategy is the blueprint of decisions in an
organization that shows its objectives and goals,
reduces the key policies, and plans for achieving
these goals, and defines the business the company
is to carry on, the type of economic and human
organization it wants to be, and the contribution it
plans to make to its shareholders, customers and
society at large.
 Strategy is a well defined roadmap of an
organization. It defines the overall mission, vision
and direction of an organization. The objective of a
strategy is to maximize an organization’s strengths
and to minimize the strengths of the competitors.
 Strategy, in short, bridges the gap between “where
 Importance of a Business Strategy

 In the initial phase of a business, a lot of planning is required.

While a plan clarifies the goals, it is the strategy that helps in
executing and reaching the vision.
 When leaders formulate a strategy, it helps them understand
their strengths and weaknesses. This way, they can
capitalize on what they are good at and improve on their
weaker aspects.
 It ensures that every aspect of a business is planned. This
means more efficiency and better and more effective plans.
Everyone in the team is aware of what they need to do, and
the capital is allocated properly.
 It can help businesses gain competitive advantage over
others in the segment. It also makes them unique in the eyes
of their customers.
Deducing strategy and articulating a summary statement
of strategy

 A strategy statement communicates your company’s

strategy to everyone within your startup.
 The statement consists of three components:
objective, scope and competitive advantage. All
three components must be expressed as clearly as
possible.
 A well-written strategy statement will help
employees and the organization to understand their
roles when executing the company’s strategy.
 Without this understanding, your enterprise may be
pulled in different directions and lose its focus.
 The purpose of the strategy statement is to ensure
that employees have a clear understanding of the
company’s strategy.


Hierarchy of company statements
Elements of a strategy statement
 Defining the strategic objective

 The strategic objective is the single, specific

objective that will drive the business over the next
few years.
 It is based on the maxim, “If you don’t know where
you are going, any road will get you there.”
 It is not to be confused with the company’s mission,
vision or values, which are not useful as strategic
goals.
 The objective must be specific, measurable and time
bound.
 It must also be a single goal (that is, growth or
profitability), although subordinate goals may follow
from the strategic objective.

 Defining the scope

 The company’s scope encompasses three dimensions—the

target customer or offering, geographic location, and
vertical integration (that is, whole product).
 Each dimension may vary in relevance (for example, the
customer may be more important than geographic
location).
 Clearly defining the boundaries in each area should make it
obvious which activities to concentrate on (and which ones
to avoid).
 The company’s scope does not determine exactly what
should be done within those boundaries, as there is room
for experimentation and initiative.
 However, it should specify where the company or business
will not go. This will prevent employees from wasting
resources on projects that do not fit the corporate strategy.
 Defining the competitive advantage

 The competitive advantage is the most important part of

the strategy statement.
 It describes the logic of why you will succeed, how you
differ, or what you are doing better than the competition.
To define the competitive advantage:
 State the customer value proposition.
 Explain why customers should buy your product or
service.
 Map your value proposition against those of your
competitors to identify what makes yours distinctive.
 Outline the unique activities, or complex combination of
activities, that allow your company to deliver your
customer value proposition
 Developing a strategy statement

 First, create a great product strategy based on

careful evaluation of the industry landscape. Then,
develop a strategy statement that captures the
strategy’s essence in a way that makes sense to
everyone at the company.
 The process should involve employees in all parts of
the company and at all levels. Work through the
wording of the strategy statement in as much detail
as possible.
 The end result is a brief statement that reflects the
three elements of an effective strategy and makes
sense to everyone in the company. It may include
explanatory notes to clarify issues and implications.
Strategy Statement
 Strategic Intent

 An organization’s strategic intent is the purpose that

it exists and why it will continue to exist, providing it
maintains a competitive advantage.
 Strategic intent gives a picture about what an
organization must get into immediately in order to
achieve the company’s vision.
 It motivates the people. It clarifies the vision of the
company.
 Strategic intent helps management to emphasize
and concentrate on the priorities.
 Strategic intent is, nothing but, the influencing of an
organization’s resource potential and core
competencies to achieve what at first may seem to
be unachievable goals in the competitive
environment.
 A well expressed strategic intent should guide/steer the
development of strategic intent or the setting of goals and
objectives that require that all of organization’s
competencies be controlled to maximum value.
 Strategic intent includes directing organization’s attention on
the need of winning; inspiring people by telling them that the
targets are valuable; encouraging individual and team
participation as well as contribution; and utilizing intent to
direct allocation of resources.
 Strategic intent differs from strategic fit in a way that while
strategic fit deals with harmonizing available resources and
potentials to the external environment, strategic intent
emphasizes on building new resources and potentials so as
to create and exploit future opportunities.
 VISION:
1st level of Strategic Intent

VISION: It is a position that a company would like to achieve in the

distant future (10-15 years). It is a powerful motivator to action.
Vision of Walt Disney: To make others happy.
It is a category of intentions that are broad, all-inclusive and foreword-
thinking.
Why vision is needed?
a. Good visions are inspiring.
b. Good visions help in creation of a common identity and a shared sense
of purpose.
c. Good visions are competitive, original and unique.
d. It promotes risk-taking and experimentation.
e. It promotes long-term thinking… IO
 MISSION:

2 level of Strategic Intent
nd
nd

Vision is a foreward-thinking view of what an organization

wants to be. Mission is what an organization is and why it
exists.

Mission is a statement that def ines the role an organization

plays in a society.
Eg: A newspaper & TV news editor: mission- information.

It is the purpose or reason for the organization’s existence..

Characteristics of Mission:
1. It should be feasible.
2. It should be precise; not too narrow & broad.
3. It should be clear.
4. It should be motivating.
5. It should be distinctive; unique from competitors.
6. It should indicate how objectives are to be achieved.
Eg-Microsoft’s mission is to help people and businesses
throughout the world to realize their full potential.
Wal-Mart’s mission is “To give ordinary folk the chance to
buy the same thing as rich people.”
 Goals & Objectives

A goal is a desired future state or objective that an

organization tries to achieve. Goals specify in particular
what must be done if an organization is to attain mission
or vision. Goals make mission more prominent and
concrete. They co-ordinate and integrate various
functional and departmental areas in an organization.
Well made goals have following features-

 These are precise and measurable.

 These look after critical and significant issues.
 These are realistic and challenging.
 These must be achieved within a specific time frame.
 These include both financial as well as non-financial
components.

 Objectives are defined as goals that organization
wants to achieve over a period of time. These are the
foundation of planning. Policies are developed in an
organization so as to achieve these objectives.
Formulation of objectives is the task of top level
management. Effective objectives have following
features-
 These are not single for an organization, but multiple.
 Objectives should be both short-term as well as long-term.
 Objectives must respond and react to changes in environment,
i.e., they must be flexible.
 These must be feasible, realistic and operational.
 What is a strategic objective?

 Strategic objectives are purpose statements that

help create an overall vision and set goals and
measurable steps for an organization to help
achieve the desired outcome.
 A strategic objective is most effective when it is
quantifiable either by statistical results or
observable data.
 Businesses create strategic objectives to further the
company vision, align company goals and drive
decisions that impact daily productivity from the
highest levels of the organization to all other
employees.
 Strategic objectives

Strategic objectives are goals on non-financial factors that the company

aims to achieve with a specific indicator that will allow it to be
measured in a specific period of time.

 Increase number of employees

 Positioning the brand
 Diversifying supply
 Promote a work environment thus to increase efficiency in the
processes of the organization
 Consolidate the business as a solid and orderly organization
 Use the appropriate human resources
 Agile processes focused on innovation
 Give customer benefits for choosing our brand
 Consolidate good relations to retain customers


 Financial objectives

For our company, a growing company it is vital to set goals, for this is necessary to
impose a series of objectives that will support the success of these goals, among them
are the financial objectives that provide the basis for a solid plan to move forward on the
path of success for our organization these financial goals are:
Growth income
It is essential for us to present solid annual revenues with a margin of 20% increase from
the first 5 years, so from the second year cover initial expenses and generate the expected
profits.
Profit margins
Obtain profit margins to meet the needs of the organization and include it to also invest in
the business for expansion and distribution among employees in a profit-sharing
agreement.
Sustainability
We refer to the characteristics of development that will have the business in order to hold
and at the same time provide more jobs and a steady improvement gradual growth.
Return of investment
This term return on investment refers to money recovered for capital spending, our
company expects to get 100% return on investment within 2 years of profit, generating a
profit margin of 20% the first 5 years and longer 40% from the sixth
 Strategy Formulation Process

 Definition: Strategy Formulation is an analytical

process of selection of the best suitable course of
action to meet the organizational objectives and
vision.
 It is one of the steps of the strategic management
process.
 The strategic plan allows an organization to
examine its resources, provides a financial plan and
establishes the most appropriate action plan for
increasing profits.
Steps in Strategy Formulation Process
 Establishing Organizational Objectives: This involves
establishing long-term goals of an organization. Strategic
decisions can be taken once the organizational
objectives are determined.
 Analysis of Organizational Environment: This involves
SWOT analysis, meaning identifying the company’s
strengths and weaknesses and keeping vigilance over
competitors’ actions to understand opportunities and
threats.Strengths and weaknesses are internal factors
which the company has control over. Opportunities and
threats, on the other hand, are external factors over which
the company has no control. A successful organization
builds on its strengths, overcomes its weakness,
identifies new opportunities and protects against external
threats.
 Forming quantitative goals: Defining targets so as to
meet the company’s short-term and long-term objectives.
Example, 30% increase in revenue this year of a company.

 Objectives in context with divisional plans: This involves
setting up targets for every department so that they
work in coherence with the organization as a whole.
 Performance Analysis: This is done to estimate the
degree of variation between the actual and the standard
performance of an organization.
 Selection of Strategy: This is the final step of strategy
formulation. It involves evaluation of the alternatives
and selection of the best strategy amongst them to be
the strategy of the organization.
Strategy formulation process is an integral part of
strategic management, as it helps in framing effective
strategies for the organization, to survive and grow in
the dynamic business environment.