The diversified concepts of business strategy

While talking business we frequently use the term ‘strategy’. The term is pervasive and indicates different meanings to different people and situations.

As a result different expert groups define strategy in their own perception. For example, strategy has been defined by the Cambridge dictionary, Management Study Guide, Webster dictionary, Collins English dictionary, Wikipedia, Britannica dictionary, Longman dictionary differently, although the essence remains the same.

Actually what the term indicates shall be discussed here in this write-up.

Strategy may be defined as an overall plan for the organization to accomplish its objectives in the context of environmental forces beyond the control of the organization. By its very nature, it implies long-term planning.

A strategy is primarily concerned with an organization’s relationship to the external environment and the competitive situation therein. It seeks to specify how the enterprise plans to meet the uncertain and competitive world outside and to do this end makes different assumption as regards the tactics and the strength of the competitors.

Types of Strategies

The following are some of the important strategies which can be adopted to accomplish organizational objectives.

Stability: In case the organization is satisfied with the present level of activities it may follow the stability strategy. The factors which contributed to this line of approach will be (a) stable environment (b) limited number of products and services (c) limited number of customers, suppliers and competitors (d) minimum need for specialized knowledge and skill (e) values, attributes, of the top management which may dislike growth for its own sake. However, an important drawback of stability strategy is that it may make the management complacent as also hostile to any change, so that when the external environment undergoes a change, the organization may not be prepared to bear its effects.

Product Development: The main thrust of product development strategies is development of new product for the existing market, creation of new uses for existing products for existing markets and development of new products for new markets. Generally, product development strategies will be followed in an environment which is dynamic with a large number of products and services as also customers, suppliers and competitors.

Market Development: Market development strategies will be concerned with either selling the existing range of products in the new markets or selling new products in the new markets, the object in each case being to expand the customers served by the products and services of the organization.

Vertical integration: Vertical integration is a process of consolidation whereby an organization diversifies its activities either backwards toward the supply of essential materials or forwards towards sales outlets. Thus it may decide to produce the raw materials necessary for its production activity so as to assure continuous supply or to develop its own sales outlet in order to serve the customers.

Vertical integration strategy will be followed in response to a dynamic environment having a plenty of products and services and a number of customers, suppliers and competitors.

Merger: As a strategy, merger of two or more business units aims to expand products range and markets. Such a strategy is followed in a dynamic environment by an organization which desires growth and expansion without waiting for its own projects to lead to the same result.

Divestment or Retreat: As a strategy, divestment means to give up production of unprofitable products to achieve rationalization of the product range and to avail the benefits of standardization. The products chosen for elimination should be those which contribute little or no profit. But this exercise should in each case be undertaken with a great deal of care and caution as even elimination of products with low profits could adversely affect the total position of profits.

Other Strategies: An organization may adopt various other strategies such as distribution strategy, technological strategy, financial strategy, cost reduction strategy, human resource development strategy etc.in order to accomplish the specific objectives.

Strategy is important to make decisions, conduct operation, attract customers, compete successfully and attain the organization’s goal. Creating a strategic plan is crucial regardless of the size of the organization. A good strategy helps to create a foundation for causing growth and success. It helps in formulation of policies and establishing a good focus for performance. Having a flexible strategy as a vital one, it operates as a changing factor of organizational environment. Organizations need to understand what made them successful yesterday may not bring success tomorrow. Therefore, a flexible strategy can adapt quickly to changes within their environment.

Understanding the main goals of an organization helps employees work productively to assure success. Without a focus on the strategy employees will fail to understand what to prioritize. As such it will pose a threat to growth.

The writer is former DG of Export Promotion Bureau. He can be contacted at hassan.youngconsultants@gmail.com