The Importance of Strategy in Business
Strategy is an important element of any business. It provides the direction and scope of a company in the long run, helping managers to achieve their goals. It also ensures that the market’s needs are met and that resources are used efficiently.
A strategy is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty. It is a means of defining a business’s objectives and creating a common thread among its employees, so that if the company experiences difficulties or challenges, its vision remains intact.
It is an intelligent allocation of resources through a unique system of activities that creates a sustainable and distinctive competitive advantage.
While operational effectiveness focuses on individual activities, strategy concentrates on integrating and configuring them into a coherent system that delivers competitive advantages. Moreover, fit locks out imitators by configuring an activity chain that is as strong as its strongest link (Porter’s three generic strategies).
The strategy process begins with a thorough diagnosis of the business’s position in the market and identifies the challenges to be addressed. Next, a guiding policy for the strategy must be developed and a series of actions to accomplish it must be established.
These actions should be practical, coordinated, and aimed at a “greater sum” effect where they add value to each other.
In a good strategy, the business’s values, work process and identity are considered as well. This is critical because it helps the company to make decisions that are in accordance with its own character.
It can be hard to separate a company’s strategy from its culture, but it is essential to have a clear idea of what the core of the business stands for. The values are reflected in the business’s products, services, and operations.
A successful strategy can help the organization grow and develop its brand image, improve customer relations, expand into new markets, increase sales, and maintain a competitive edge over rivals in the industry.
Developing a good strategy is an art that requires strong leadership, a willingness to make trade-offs, and the ability to forge fit among the various activities of the business.
Senior management should be able to establish and communicate the core company’s unique position, forge fit among its activities, and decide which changes in the industry or customer demands, are they going to respond to.
They should also be able to teach their employees about strategy, and they should say no when they’re asked to do something that isn’t in the best interest of the company.
Executives must be prepared to deliver in multiple strategy domains and must actively seek out leadership and business architects who are capable of delivering across all strategy areas.
Strategy development should occur over a longer horizon, not as a single planning cycle, because continuity promotes improvements in individual activities and the fit among them. Continuity also reinforces the identity of the organization and creates distinctive capabilities that are custom-fitted to its strategy, a key factor in competitive advantage.