Back To: BUSINESS STRATEGY
What is Business Strategy?
Summary: Business strategy is a planned approach toward a commercial activity. It involves the direction of the organization in achieve a short-term goal or long-term mission. Strategy considers the use or configuration of resource within the business environment to achieve an intended goal. It is not specific actions, rather it is a general method of approaching the business activity in order to achieve and intended outcome or goal. Strategy is largely mental and it entails approaching each business task (operations, marketing, sales, financing, etc.) from this strategic perspective. Strategy employs tactics, which are the actual tasks or procedural maneuvers used to achieve a strategic objective.
Strategy can be understood as a process or general orientation toward achieving an intended outcome. The strategy is drawn from a purpose and provides direction in carrying out that purpose. Perhaps the best way of defining strategy is by comparing it to tactics. If a person wants to achieve an objective, they will develop an approach for achieving that objective. The individual actions the individual takes in furtherance of achieving that objective are tactics. Here are some examples to illustrate the distinction between strategy and tactics:
- I am in a negotiation with you. I know that I will need to uncover specific information about your bargaining position. I then plan on using that uncovered information to persuade you to see my point of view. Uncovering information with the objective of persuading is a strategy. My tactic in the initial strategy may be to get you intoxicated and talking haphazardly.
- An alternative strategy would be to leverage your lack of information and attempt to coerce you against your will. In this scenario, my tactic may be to lie about information and threaten to expose that information if you do not comply with my demands.
In summary, strategy is a planned course of action that is general in nature, but the purpose of the course of action is clearly understood. A tactic is an individual action taken as part of that general plan.
Strategy and Business
Businesses develop strategies for achieving organizational goals or objectives. Managers develop strategy at every level of the organization, from the board of directors to the lowest-level supervisor. Strategic planning starts with organizational goals and maps out clear plan for achieving those goals. The plan will generally lay out milestones or clear performance measurements to gauge progress. Employees employ tactics consistent with the manager’s strategy. This includes employing learned methods and applying situationally relevant information to achieve the task at hand. Here are some examples to illustrate the distinction between strategy and tactics in the business context:
- My strategy is to increase company market share in a particular product segment. I achieve this strategic objective by employing numerous tactics, such as lowering prices.
- My strategy is build awareness of my brand as luxury. My tactic is to dramatically raise prices and market to the yachting community.
- My strategy may be to build the companies technical superiority. My tactic may be to higher managers with engineering or computer science backgrounds.
- My strategy may be to expand into new market segments. My tactic may be to vary features of my product that better align with target markets.
It is important to understand that tactics are born from an established strategy. Any number of different tactics may be used to achieve the same objective. Likewise, the same tactics may further different strategies. Remember, however, it is poor practice to develop a strategy around tactics that achieve a favorable objective. This is often referred to as short-term thinking. The strategy of a firm should align with the ground purpose of vision of the organization. These larger purposes are the guiding forces for developing strategies, in the same way that strategy is the guiding force for employing tactics.
Strategy & Operations
Having reviewed the concept of strategy as distinct from tactics, it is important to also define strategy in the context of business operations. Strategy is carried out through operations, which employs any number of tactics. Strategy drives operations toward better or greater efficiency, which can be a source of competitiveness or competitive advantage for a business.
Operations concerns the delivery of value by the company. That is, it concerns the value chain. It consists of all of the activities that generally characterize business practice: engineering, manufacturing, logistics, information technology and infrastructure, finance, accounting, marketing, sales, customer service, etc. All of these make up the daily activities that constitute delivering the value proposition to the customer and receiving value in return.
Strategy seeks to orient operations in the manner necessary to achieve the business’s goals or objectives. For example, strategy may employ operational resources in a particular manner, sequence, or timeframe in order to achieve the business objective of expanding market share. Strategy can also transform operations by making it more efficient or employing new methods of carrying out operations – all with the purpose of achieving a company goal, such as creating a competitive advantage. The competitive advantage achieved through operations may include lower costs of production, greater supply capability, or creating additional value propositions for the customer.