As I have mentioned in my previous post, this series of posts is all about business strategy as seen from a third person's perspective.
But before we get started, let us first understand what business strategy means.
Strategy:
Strategy is a plan of action to bring about a desired result.
We frequently encounter this term in such cases as battles, wars, sports, multiplayer video games, and businesses.
Wikipedia defines strategy as a high level plan to achieve one or more goals under conditions of uncertainty. What this essentially means is that, given a limited set of resources and uncertain conditions, to arrive at a predefined goal, we make certain assumptions and make a to-do list that will get us to this goal in the most efficient manner.
Business Strategy:
Deliberately choosing a set of actions to deliver a unique mix of values is called business strategy. In simple words, it is the strategy employed in a business scenario.
Such strategies are focused primarily on one or more of the following:
1. Growth
a. Operations - Expansion / Globalization
The focus here is to increase revenues by either increasing production (quantity and/or variety) or by increasing reception (larger customer base).
b. Finance - Profits
This is achieved by increasing revenues and/or by decreasing costs.
2. Competitive Advantage
a. Quality
Build products that are unique and better (in functionality) than those of the competitors.
b. Service
Many a company has fallen not because it didn't have great products but because it didn't have great services for those products. Better marketing, better customer care, and ease of use go a long way in making a product successful.
Creating sustainable, socially responsible solutions also falls under the ambit of business strategy.
(Source)
Strategy vs Vision:
How is strategy different from vision?
Well, remember the goals that we talked about above? Vision is defining those goals, making them realistic/achievable, yet ambitious.
What's more important - strategy or vision?
While some might argue that vision is more important than strategy, I believe that the two are symbiotic. Knowing where you want to go and knowing how to get there are both equally important.
Levels of Strategy:
While setting up action plans and giving the business a strategic path forward is the task of top executives in the company, it becomes impractical with scale and tasks have to be divided into smaller, manageable parts. This is the case with business strategy too.
Business Strategy can be broadly classified into 3 levels: (Source)
1. Corporate level:
At this level, the company defines the direction it wants to head in. This strategy directly relates to the vision of the company and is usually broad in scope.
2. Business Unit level:
This is where a company creates a roadmap for the business of its product - marketing, revenue generation, cost-cutting, beating the competition, etc. These plans are created keeping in mind the corporate level strategy of the company.
3. Functional level:
Here, a company puts into place operational methods that execute the business unit level strategies. For example, cost-cutting may be assigned to the development and operations teams of a product whereas gaining market share may be assigned to the marketing team of the product. It has been noted that strategies at this level are often interdependent.
Looking at the three levels above, it's clear that, as we move down the line, the strategies become less vision-oriented and more action-oriented. This is precisely why most companies have a pyramidal structure of hierarchy - actions require more man power than vision. While this pyramidal structure forms natural hierarchies in an organization, it is imperative that every employee of that organization be aware of the strategies in place from top to bottom. This helps the employee relate his work to the bigger picture and become an integral part of the organization.
Now that we know what business strategy means, we will move to real examples of businesses and strategies employed by them in the subsequent posts.
'til next time,
Ganesh
"It's the possibility of having a dream come true that makes life interesting."
But before we get started, let us first understand what business strategy means.
Strategy:
Strategy is a plan of action to bring about a desired result.
We frequently encounter this term in such cases as battles, wars, sports, multiplayer video games, and businesses.
Wikipedia defines strategy as a high level plan to achieve one or more goals under conditions of uncertainty. What this essentially means is that, given a limited set of resources and uncertain conditions, to arrive at a predefined goal, we make certain assumptions and make a to-do list that will get us to this goal in the most efficient manner.
Business Strategy:
Deliberately choosing a set of actions to deliver a unique mix of values is called business strategy. In simple words, it is the strategy employed in a business scenario.
Such strategies are focused primarily on one or more of the following:
1. Growth
a. Operations - Expansion / Globalization
The focus here is to increase revenues by either increasing production (quantity and/or variety) or by increasing reception (larger customer base).
b. Finance - Profits
This is achieved by increasing revenues and/or by decreasing costs.
2. Competitive Advantage
a. Quality
Build products that are unique and better (in functionality) than those of the competitors.
b. Service
Many a company has fallen not because it didn't have great products but because it didn't have great services for those products. Better marketing, better customer care, and ease of use go a long way in making a product successful.
Creating sustainable, socially responsible solutions also falls under the ambit of business strategy.
(Source)
Strategy vs Vision:
How is strategy different from vision?
Well, remember the goals that we talked about above? Vision is defining those goals, making them realistic/achievable, yet ambitious.
What's more important - strategy or vision?
While some might argue that vision is more important than strategy, I believe that the two are symbiotic. Knowing where you want to go and knowing how to get there are both equally important.
Levels of Strategy:
While setting up action plans and giving the business a strategic path forward is the task of top executives in the company, it becomes impractical with scale and tasks have to be divided into smaller, manageable parts. This is the case with business strategy too.
Business Strategy can be broadly classified into 3 levels: (Source)
1. Corporate level:
At this level, the company defines the direction it wants to head in. This strategy directly relates to the vision of the company and is usually broad in scope.
2. Business Unit level:
This is where a company creates a roadmap for the business of its product - marketing, revenue generation, cost-cutting, beating the competition, etc. These plans are created keeping in mind the corporate level strategy of the company.
3. Functional level:
Here, a company puts into place operational methods that execute the business unit level strategies. For example, cost-cutting may be assigned to the development and operations teams of a product whereas gaining market share may be assigned to the marketing team of the product. It has been noted that strategies at this level are often interdependent.
Looking at the three levels above, it's clear that, as we move down the line, the strategies become less vision-oriented and more action-oriented. This is precisely why most companies have a pyramidal structure of hierarchy - actions require more man power than vision. While this pyramidal structure forms natural hierarchies in an organization, it is imperative that every employee of that organization be aware of the strategies in place from top to bottom. This helps the employee relate his work to the bigger picture and become an integral part of the organization.
Now that we know what business strategy means, we will move to real examples of businesses and strategies employed by them in the subsequent posts.
'til next time,
Ganesh
"It's the possibility of having a dream come true that makes life interesting."
