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What is Strategy ? | Definition, Importance, Nature & Levels of Strategy

Contents -
  1. Meaning and Definition of Strategy.
  2. Importance of Strategy.
  3. Nature of Strategy.
  4. Levels of Strategy.
  5. Differences between Strategy and Policy.

What is Strategy ?


The word "Strategy" is derived from the Greek word "Strategia", which means Generalship. The term strategy entered the business world from military services where it was originally used.
Strategy tries to achieve synergy and balance between objective, resources and concept to maximize the possibility of success and fruitful results. The purpose of formulating strategy is to bring consistency and alignment in the activities of an organisation, which can be accomplished by various methods and resources. Strategy refers to determining the fundamental long-term organisational goals and at the same time developing plans, acquiring. allocating and deploying resources in order to achieve those goals.

Strategy helps an organisation to minimize the strength of competitors by maximizing its own strengths. Strategy work as a blueprint of an organisation that define its vision, mission and also helps in determining the future course of action. Strategy is formulated to achieve current goals of enterprise by optimum allocation and utilization of internal resources and by collaborating different organisational pursuits.

Strategy is not as simple as it seems to be. However, a logical understanding of its theory helps to grasp it and work with more ease. Theories help in understanding various concepts relating to strategy such as definition, term, assumptions and their explanation, proposition and related hypothesis and the techniques used in the rest of modify them.

Definition of Strategy


According to Igor Ansoff :
"Strategy is the common thread among the organisation activities and product market that define the essential nature of business that the organisation was or planned to be in future".

According to William F. Glueck :
"Strategy is a unified, comprehensive and integrated plan designed to ensure that the basic objectives of the enterprise are achieved".

According to Alfred D. Chandler :
"Strategy is the determination of the basic long term purpose and objective of an enterprise and the adopting of course of action and allocation of resources necessary for carrying out these goals".

According to George A. Steiner :
"Strategy means deciding the basic mission of company, the objective which it seeks to archieve and the policies governing the use of resources at the disposal of the firm to achieve its objectives".

Importance of Strategy


Following are the importance of strategy explain in details :

1. Ensures Proper Allocation of Resources -
While formulating a strategy the strategist have to keep in mind information that they have access to and appraise all possible outcomes before selecting a particular alternative. A good strategy help the organisation in allocating resources in the efficient manner.

2. Provide Direction -
Organisations lose their purpose in absence of proper guiding strategies. Strategies direct an organisation to achieve its goals.

3. Synchronizes Activities -
The comprehensive strategy help the organisation in synchronizing the strategic initiatives taken at different levels.
Organisations can also be benefited by developing a master strategy that encompasses the entire organisation.
A company wide strategy also ensure that there are no variations and all the departments are working towards achieving a single goal with minimum conflicts, overlaps and contradictions in the organisation.

4. Facilitates Decision Making -
Strategy facilitates decision making as strategy and strategic initiatives act as a point of reference for any action.

5. Help Accomplishing Goals -
Strategies enable a company to achieve its goals and create a market position by allocating resources, providing proper training to employees, enhancing the capacity of production etc.

6. Improve Communication and Commitments -
Strategy helps in confirming company-wide actions communication and levels of commitment between different department of the organisation by giving a clear description of the vision and responsibilities.

7. Enables Comparison of Alternative Actions -
Strategy ensures that the valuable resources are allocated optimally. Strategies helps in analyzing the record of previously adopted strategic initiatives and allow the top level management to compare the alternative actions and select the best option among them for different business units.

Nature of Strategy


The nature of strategy as explain by following points :

1. Set of Actions -
Strategy is an arrangement of different action that are taken in verifying situation to achieve certain objectives or to solve some problems.

2. Relates an Organisation with the Environment -
Formulating strategy is an important activity by which the enterprise can relate to its environment. With the help of strategy an organisation can interact with the factors of external environment so that the management can take necessary steps to achieve the organisational goals.

3. Provide Structure -
Strategy develops a fundamental road map for providing guidance to the enterprise for making relation decisions and achieving organisational goals. Strategy used to establish and communicate the image of the organisation with the help of its various goals and objectives.

4. Future Oriented -
Strategy can be said that it is future oriented. Strategies are formulated to solve problems that are new and have not been previously handled by the organisation.

5. Integrated Approach -
Strategy directs and support the enterprise in taking necessary decision for maximizing the strength and facing the environmental threats with confidence. A good strategy follows and interactive approach for allocating internal resources and using them for the benefit of the entire organisation.

6. Involves Contradictory Actions -
Strategic actions are influenced by environment factors at times certain decisions taken on the basis of the strategy may be contradictory in nature. These actions may occur simultaneously or consecutively.

7. Combination of Internal and External Factors -
Strategy tries to match the internal strength and meet external opportunity and threats. Therefore it is a combination of internal and external factors of the environment.

8. System Oriented -
To work efficiently, strategy operates under a certain system that consists of rules and standards followed in the organisation.

Levels of Strategy


The desired outcome is the creation of a hierarchy of objectives spanning the organisation from top to bottom and their formation of a corresponding hierarchy of strategies to achieve the objectives at each level in the organisation. There are three levels of strategies, Corporate Strategy, Business Strategy and Functional Strategy.
It is worth stressing that strategy exists at different level in the organisation. Once managers have determined "what is our business, what will it be and what should it be?", then they have a basis for setting challenging and achievable performance objectives for formulating strategies to achieve them.

1. Corporate Strategy -
Corporate strategies guide an organisation to become what it wants to be in order to maximize the performance levels.
Corporate level strategies or corporate strategies are plans of top level management developed for supervising the overall functioning of the enterprise and achieving the expected level of performance. These strategies outline the organisational activities and objectives in various areas of an organisation like product line, divisions, technologies, consumers and their needs etc.
For example :
The efforts of Nokia to launch its own operating system failed, in the year 2011. Microsoft and Nokia formed an alliance in which Nokia agreed to produce smartphones with the Windows operating system. With this alliance, Microsoft was able to access the market of one of the largest cell phone manufacturer. Nokia was able to retain its market share with the help of this merger.

2. Business Strategy -
Business level strategies are also called as Business Strategies or Strategic Business Unit, Level Strategy. A Strategic Business Unit (SBU) is based on the idea of recognizing the separate market segments catered by the company. Business strategies are formulated differently for each segment due to the differences in their environment conditions. The business level strategies are formulated to satisfy the need of the customers of different segments and also to provide value to them. Hence, fulfillment the demands of customers belonging to different segments help the organisation in increasing and sustaining is competitive advantage.
For example :
Domino's Pizza owes its success to Turnaround strategy that had positive effect due to the organisation wide efforts of achieving a simple and clear goal that was "have a clear win against competitor in a taste test".

3. Functional Strategy -
Functional level of an organisation provides input to a higher level strategies such as business level and corporate level strategies and convert them into the action plans for various department. These plans are needed to be carried out for the strategy to be successful. Higher level strategies depend on the functional level for information regarding resources and capabilities on the basis of which strategies at business and corporate level are formulated.
Functional level denotes the operating division level and apartment in an organisation such as marketing, finance, human resources, information system, manufacturing and research and development etc.various strategic decisions at functional level are associated with business practices and value chain. The functional level strategies are focused on expanding and synchronizing the resources for implementing the business level strategies in an efficient manner.
For example :
Marketing strategy can be broken into various functional level strategies such as pricing strategies, promotion strategies, distribution strategies, sales strategies etc.


Difference between Strategy and Policy


There are some basic differences between strategy and policy, which are as follows :

Basis Of Difference

Strategy

Policy

Meaning

A strategy provides a direction in which the organisation needs to go for achieving the organisational goals by employing various resources.

A policy provides guidelines to the employees for decision making and smooth operations.

Nature

With the help of strategy the formulated policies are applied practically within a stipulated time frame.

A policy just instructs in work but is not associated with any time frame.

Features

Strategies are formulated for those situations which have yet not occurred and hence the organisation has no formal response.

Policies are formulated for the activities which are repetitive in nature.

Orientation

Strategy is formulated for critical issues and required constant attention from the top level management.

Policies are formulated by the top level management for day to day activities. After the policies are formulated it becomes the responsibility of subordinates to implement those without the involvement of top management.

Scope

Strategies are formulated on the basis of actions.

Policies are formulated on the basis of thoughts.

Implementation at level of organisation

Strategy is implemented at every level in the organisation.

Policies are implemented by the middle and lower level employees.

Objectives

Strategies are the ways to achieve the organisational objectives.

Policies are the instructions to achieve the objectives.

Overall goal

Strategies are formulated to utilise the available resources to achieve the organisational goals efficiently.

Policies are formulated to direct the operations and activities of the organisation.


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