Think for a minute that "what does the word STRATEGY mean to you?" Everyone forms some or the other strategy in life in order to achieve the desired goal. For example; as a student I form the strategy to finish my assignments in the given time frame or a strategy to pass the exam.
So strategy is nothing but a plan.
Business strategy gives us a plan of what an organization wants to achieve and how to achieve. It includes the purpose, goal, plan, method and objective of the entire organization.
Business strategy is used to persuade people to invest in the venture. It is used to convince the banks to lend them money or invest the money. It helps in focusing on what is important for the business in order to achieve the desired target.
What is business strategy?
Business strategy is the long-term direction and objective, the resources and the environment it has and the return made by it to the holder.
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Strategy has 3 business levels corporate, business and operational/functional level.
Corporate strategy is concerned with the whole business.
Business strategy is concerned with strategic business unit i.e. how the business competes in the market.
Operational strategy is concerned with the market, finance, hr and operation in the business.
Definition of strategy
There are several definitions of strategy defined by different people out of them 2 possible definitions are as below.
"Strategy is the direction and scope of the organization for the long-term, which achieves advantage for the organization through its configuration of resources within the challenging environment, to meet the need of market and to fulfil stakeholder's expectations." Johnson & Scholes (2002)
"Strategy is concerned with an organization's basic direction for the future, its purpose, its ambition, its resource and how it interact with the world in which it operates." Lyuch (2000)
How to form a business strategy?
Basic questions to be kept in mind while forming a business strategy are:
Whether the idea is feasible or not?
Is there enough finance to work on the project?
What is the market for your product or service?
How will you guard your idea?
Who are your competitors and how is your product different from others?
If you are able to answer the above question satisfactorily then proceed for the business plan.
Factors required for strategy plan
Vision- there should be brief statement describing direction and growth plans.
It should be considered the vital goal. Vision is constant with time and also motivating to the firm; it is the core if success.
Mission- it is the eye-catching, practical and convincing description of your organization. Mission statement is easy to remembered written statement illustrating the vision and goal of the business. It's a cautiously formed statement of objectives that identifies how the business exists, how the business will increase its competitive advantage and will sustain the business and how will the business reacts with its competition.
Essential success elements- it is the key element to know whether business will achieve the vision and mission statement. Some of the crucial factors include:
Maintain quality and standards of the product
Do market research to be in touch with the customers
Create the company's standards
Operations and manufacture should be cost-effective
Strategy to deal with the downfall if occurs
Ensure adequate cash flow
Policies and system to improve employees do their work effectively
Actions & Strategies- strategy and action plan helps to identify how the work will be done and by whom. Strategy and action plan is required to implement and design a customer service system and know about what the customers think regarding the product and service.
Prioritized implementation schedule- prioritize the crucial elements and action plans in regards to their importance.
Example: McDonalds vision and mission is "to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile."
Example for strategy-TESCO
Always on Time
Marked to Standard
Tesco is a general merchandising and global grocery retailer, headquarter is in Cheshunt, UK. Measured by revenue it is the fourth largest retailer in the world and measured by profit it is the second largest retailer in the world. The first Tesco store was opened in Burnt Oak, Edgware, UK in 1929.
Strategy- "PILE IT HIGH AND SELL IT CHEAP."
Mission- creating values for customers, to earn their lifetime loyalty.
Tesco focuses on the four main strategies- a strong UK business, international, non-food and retail service- by focusing on doing what they can do for the customers:
Making shopping trips as easy as possible
Seeking to reduce prices constantly
Offering the availability of large or small store
Bringing value and simplicity in the difficult market.
All business, organization and firms have stakeholders. From a local grocer to a multinational company all have stakeholders. The number of stakeholder, their importance and influence will vary as per the business.
A person, group or an organization having stake in an organization and can affect or get affected by organizations plan, action and policies is a stakeholder
Who are the stakeholders?
Managers and employees are the internal stakeholders and are located inside the company and so they affect the daily activities of the organizations. Customers, suppliers and shareholders are the connected stakeholders who invest or deal with the company. Local council, government, neighbours, pressure group are the external stakeholders and are not linked directly with the organization but can influence or be influenced the activity of the company through various means.
Why are stakeholders important?
Stakeholders brings down the investment amount and the investment risk
Powerful stakeholder can help in accessing the useful resources
Participation of stakeholder can help to shape the project
Stakeholders can significantly improve the quality of the project
Swot analysis is conducted by the business at the beginning of the planning to identify the strength, weakness, opportunities and threats. It is important to take the decision as per the analysis.
Example: SWOT for Nokia
Nokia has the largest network of distribution and selling compared to other mobile phone companies in the world
The financial aspect is very strong as got many profitable business
As the product is user friendly there is the great demand of product in the market and so it's the number one mobile seller in the world.
Wide range of products for all class
Resale value of nokia product is high compared to other products
Through excessive advertisement and effective market communication it can strong its reputation and increase its sales and also create good brand imageamong the people.
Telecommunication market is growing very fast and so nokia has the great opportunity to expand and grow
It can also capture more market and attract more customers by changing the price and introducing new products in the market.
Should introduce more featured loaded phones in the market to beat the competitors.
Some of the product are not user friendly
The service centre in India are very few and scare
After sales services not good
More companies are getting into the market which is a threat to nokia
Some companies are offering low price products with good features so the customers are getting attracted towards them
Increase in competition due to the launch of 3G in the market.
With the help of SWOT analysis the strength weakness opportunities and threats can be identified and accordingly a strategy can be formed to sustain with the competitors.
Implementing a business strategy
It is a necessity to have a business strategy but its execution is equally important as it determines the success and failure. After forming a business strategy it is necessary to ensure that the staff is capable to deliver the results.
Before implement a strategy a SWOT analysis should be conducted to identify the strength and weakness and the loopholes in the organization.
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The first and the most important step is to reveal the managerial commitment. Commitment regarding the planning and the result to the plan. Commitment should not only be demonstrated by words but also by actions by showing your readiness through providing the necessary resources for the strategy.
The next step would be to select the appropriate team members starting from the top management. These people would be the expertise to your strategic plan.
Gather the right information not only regarding the finance but also regarding customers and the advantage they are looking for in purchasing your product or the service. Also gather the information regarding the competitors; their strength and weakness and also compare their offering with yours.
Next make the employees participate in the process and try to get their inputs on it. This will make the employees feel like they are the part of the company and will show their dedication and commitment to the company.
while planning implementation
Motivate and encourage the members of the team to work towards the strategy and ensure that the expertise are good enough in handling the planning team interpersonal dynamics.
Focus on the most important or the key success elements.
Build aims that can be measured with the present or available report system.
Create a balanced list of objectives for the successful implementation of the strategy.
Estimate the resource requirement for implementing the strategy.
Finally develop a monitoring system to ensure the implementation.
Resource requirement for implementing business strategy
Resource provide support to the business. Resource is a physical body consumed to obtain the benefit from it. There are four main resources required to implement a business strategy and they are human resource, financial resource, tangible resource and intangible resource.
Out of the four resources it is very much necessary to have a clear face of intangible resources as the intangible resource forms the ground of the business. Intangible resource drives the business and business relationship. Without it would be difficult to commit time, energy and tangible resources move the business. Values, belief, attitude and capabilities are the required intangible resources.
Reviewing business strategy
Accept and identify the present situation of the business.
Take the accountability of where you are now.
Identify problems and search and implement solutions
Ensure that performance are restricted according to the strategic aims.
Ensure that performance are steady with organizations vision, mission and goal.
Re-examine the internal and external changes which may require modification to the organization activity.
Developing business strategy
Break up the action plan and assign responsibilities to achieve the objectives with a set time frame.
Budget the required resource in executing the action plan.
List the key strategy and goals and competitive analysis.
Have a perspective on the product, service and chief elements.
Difference between strategy and tactical planning
It is long-term
It is the managerial activity
Not easy to reverse
Major committed resources
It is short-term
It can be left to the lower order employee
Easy to reverse
Less committed resources
Difference between strategy and operational planning
It's a long-term plan
It decides the direction and strategy for the organisation
Its proactive and non reversible
It defines: What we do? Why we do? How we do it?
It's a day to day plan
It is the division if the strategic work plan
Its proactive but changes can be made as per the current requirement
It defines: where are we now? Where we want to go? How to get there?
In business strategic planning is important as it provide direction to achieve the goals and to compare and compete with market opportunities. It helps in focusing on the target. A business without strategy planning will be loose and people will be wrapped in the day to day activities rather than having any goal and a plan in achieving it.