What is a strategy and how is it developed?

Introduction: Strategy

The concept of strategy originated in the military field. It is probable that the first text on the subject is “The Art of War”, by Sun Tsu (1963) written approximately in the year 500 BC.

The word strategy comes from “strategos” which is Greek for general. In this field it is defined as “The science and art of military command applied to the planning and conduct of large-scale combat operations.”

Only quite recently has this term been applied to other human activities and in particular to business activities. Its meaning has evolved in such a way that it is now part of the way organizations run.

Definition of Strategy:

It is the adaptation of the organization’s resources and skills to the changing environment, taking advantage of its opportunities and evaluating risks based on objectives and goals.

Peter Drucker defines strategy as an answer to two questions:

  • What is our business?
  • That should be?

On the other hand Alfred Chandler JR. He defines it as the determination of basic long-term goals and objectives of the company, the adoption of courses of action and the allocation of resources necessary to achieve said goals.

Igor Ansoff specifies strategy as the common link between the organization’s activities and product-market relationships such that they define the essential nature of the business the organization is in and the businesses that the organization plans for the future.

In summary, we can define it as a set of activities, purposes and resources that are analyzed, organized and proposed in such a way that they meet the objectives that the organization determined in a certain time.

Strategy Approaches

General strategy

Historically, the concept of strategy has been linked to the direction of military operations aimed at achieving pre-established objectives. In this work, we will relate it to a set of decisions and criteria by which an organization is oriented towards obtaining certain objectives.

It refers to the general purpose of an organization and establishes an average basic conceptual framework from which it transforms and adapts to the environment in which it is found, normally influenced by rapid and continuous changes.

In the concept of strategy, linked to planning, several dimensions are considered with which a global definition can be formed. Thus, for example, the definition of the objectives and their corresponding strategies will allow to select the priority activities for the improvement of the service or organization and to take advantage of the advantages that appear related to their activity.

The general Strategy is in charge of conceiving the overall direction of the organization. Its role starts from the organization’s own Mission and from the values in which said mission is going to be supported with all this, the general policies of the organization are established.

Those general policies can be:

  • Technology to incorporate
  • Customer Support
  • About production

The strategy determines and reveals the organizational purpose in terms of long-term objectives, action programs, and resource allocation priorities.

Select the businesses and activities in which the Organization participates or should participate. It tries to achieve a long-term sustainable advantage in each of its businesses and activities, responding appropriately to opportunities and threats from the environment in which it operates, and to the strengths and weaknesses of the Organization. Identify specific management tasks at the corporate business and functional levels. It constitutes a unifying and integrating decision pattern. Define economic and non-economic contributions. It aims to develop and promote the core competencies of the Institution. It is a means to selectively invest in tangible and intangible resources that guarantee a sustainable competitive advantage.

Business strategy

Currently, the environment changes very fast, new technologies are increasingly influencing the management of companies, talent is scarce and at the same time more necessary, globalization is becoming an increasingly important phenomenon.

Therefore, all Institutions need to be clear about the reason for their existence in the market and where they want to go, when, how and with what human and financial resources. And in addition, the team must be equally clear so that internal communication is final.

The Strategy in companies is the complement of the General Strategy. It takes place in the field of operations. Logistical and tactical factors intervene in a highly relevant way

It is the one that determines the form and sequence of the most appropriate and necessary operations for the fulfillment of the objectives in each area of activity of the organization.

Its application corresponds to the leader, director or person in charge of the area in question. Strategic planning is not an enumeration of actions and programs, detailed in costs and times, but involves the ability to determine an objective, associate resources and actions destined to approach it and examine the results and consequences of those decisions, taking as reference the achievement of predefined goals. So it should have at least five attributes to be a strategy:

  • That can be measured.
  • That can be controlled.
  • That consumes resources.
  • Have a clear objective.
  • That a person in charge can be assigned to him.

Strategy creation pyramid

Creating a strategy is not just a task for executives, decisions about what business approaches to adopt and what new measures to initiate involve executives in the corporate office, heads of business units and from product divisions, to heads of different functional areas within a business or division, to administrators and supervisors. In diversified companies, strategies start at four different organizational levels.

Corporative strategy

It is the general management action plan for a diversified company. It is extended to the whole company, covering all its diversified businesses. It is made up of measures that establish a business position in different industries and approaches that are used to manage the company’s business group.

It involves four kinds of initiatives:

  1. Create measures to establish positions in different businesses and achieve diversification.
  2. Initiate actions to improve the combined performance of the businesses towards which it has diversified.
  3. Find ways to capture the synergy between related business units and turn it into a competitive advantage.
  4. Establish investment priorities and guide corporate resources towards the most attractive business units.

Business strategy

Action plan that starts the administration for a single business. It is reflected in the pattern of approaches and measures created by management in order to produce successful performance in a specific line of business.

The fundamental thrust of the business strategy is how to create and strengthen the company’s long-term competitive position in the market. To this end, the strategy is interested in:

  1. Develop a response to changes that occur in industry, the general economy, regulatory areas, and others.
  2. Create competitive measures and approaches to the market that lead to a sustainable advantage.
  3. Create valuable competencies and skills.
  4. Unite the strategic initiatives of the functional departments.
  5. Address certain strategic problems that the company’s business faces.

Functional strategy

Refers to the administrative action plan for a particular functional activity, business process, or key department within a business. It is required for each business activity and for each competitively relevant organizational unit.

They add pertinent details to your overall action plan by determining the focus and practical tasks to be carried out in the management of a functional department or process. His main role is to support the company’s business strategy and competitive approach. They provide the company with competencies, skills and resource strengths.

Operation strategy

They concern more limited strategic approaches and initiatives for managing key operating units and managing day-to-day operating tasks that have strategic significance. They add greater detail and integrity to functional strategies and the overall business plan. Primary responsibility for these is delegated to front-line managers, who are subject to review and approval by higher-ranking managers.

Components of the Strategy

There are four fundamental elements in the strategy that together form a whole.

1) Vision: It refers to the vision that the leader of the company has in the long term of the same. As well as the businesses in which it will seek to venture, which it will put aside, which it will keep, etc.

2) Positioning: The necessary positioning for the company and also that of its products in the consumer must be determined, which will be achieved thanks to the “positioning drivers” unique to the company. These drivers should not be modified since it means a total and very elaborate repositioning with a previous analysis.

3) Plan: After having carried out the first two factors, you can think about determination and land the goals, which will require a strategic plan.

4) Integrated Behavior Pattern: Finally, there will be the total integration of said factors forming the strategy, which must be known to all the members of the company, putting it into practice.

How to develop a strategy

Planning is a process in which the strategic guidelines, or master lines, of the company or organization are systematically defined, and they can be developed into dedicated guides for action, resources are assigned in the most efficient way, and they are reflected in documents (plans).

Strategic planning gives clarity on what you want to achieve and how you are going to achieve it.

The strategy allows answering the following questions:

  • About us?
  • What capacity do we have and what can we do?
  • What problems are we dealing with?
  • What influence do we want to cause?
  • What critical issues do we have to answer?
  • Where should we put our resources and what are our priorities?

Once these questions have been answered, it is possible to answer the following:

  • What should our immediate goal be?
  • How do we have to organize ourselves to achieve our goal?
  • Who does what and when? (see the tool on Action Planning).

The strategy indicates how we are going to achieve the objectives, it is the path that we must follow.

In order to identify this strategy, it is necessary to establish:

  • Corporate goals
  • Missions and goals that the company has defined
  • Diagnosis of the situation

The strategy becomes action programs for each of the components including plans, budgets, controls, etc.

Five “Ps” for strategy

Another way to classify strategies is the one indicated by Mintzberg and Quinn (1988), in their 5 ā€œPā€ (due to its English origin) for strategies:

1.- Plan (Plan): consciously determined course of action. Guide or set of guides to face a situation, prepared in advance of the actions to which they will be applied and developed in a conscious way and with a specific purpose.

2.- Ploy (Stratagem or maneuver): Specific form proposed to overcome an opponent or competitor.

3.- Pattern: Regularities of behavior that occur in practice without being preconceived.

4.- Position: Way of locating the organization in the environment. Represents a mediating condition or match (match) between the organization and its environment.

5.- Perspective (Perspective): Particular form inherent to the organization, of perceiving the world. Strategy is to the organization what personality is to the individual.