Three Kinds of Business Strategy
Figure 1 - Three Kinds of Strategy
Strategy in GeneralStrategy, in general, refers to how a given objective will be achieved. Consequently, strategy in general is concerned with the relationships between ends and means, between the results we seek and the resources at our disposal. Strategy and tactics are both concerned with conceiving and then carrying out courses of action intended to attain particular objectives. For the most part, strategy is concerned with how you deploy or allocate the resources at your disposal whereas tactics is concerned with how you employ or make use of them. Together, strategy and tactics bridge the gap between ends and means (see Figure 2).
Figure 2 - "Bridging the Gap"
Corporate versus Competitive StrategyCorporate strategy defines the markets and the businesses in which a company will operate. Competitive or business strategy defines for a given business the basis on which it will compete. Corporate strategy is typically decided in the context of defining the company’s mission and vision, that is, saying what the company does, why it exists, and what it is intended to become. Competitive strategy hinges on a company’s capabilities, strengths, and weaknesses in relation to market characteristics and the corresponding capabilities, strengths, and weaknesses of its competitors.
According to Michael Porter, a Harvard Business School professor and the reigning guru of competitive strategy, competition within an industry is driven by five basic factors:
1. Threat of new entrants.
2. Threat of substitute products or services.
3. Bargaining power of suppliers.
4. Bargaining power of buyers.
5. Rivalry among existing firms.Porter also indicates that, in response to these five factors, competitive strategy can take one of three generic forms: (1) focus, (2) differentiation, and (3) cost leadership.
Factors Affecting Corporate and Competitive StrategyWriters on the subject of strategy point to several factors that can serve as the basis for formulating corporate and competitive strategy. These include:
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- Operational Excellence Strategy is predicated on the production and delivery of products and services. The objective is to lead the industry in terms of price and convenience.
- Customer Intimacy Strategy is predicated on tailoring and shaping products and services to fit an increasingly fine definition of the customer. The objective is long-term customer loyalty and long-term customer profitability.
- Product Leadership Strategy is predicated on producing a continuous stream of state-of-the-art products and services. The objective is the quick commercialization of new ideas.
Some Fundamental QuestionsRegardless of the definition of strategy, or the many factors affecting the choice of corporate or competitive strategy, there are some fundamental questions to be asked and answered. These include the following:
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SummaryThe preceding discussion asserts that strategy in general is concerned with how particular objectives are achieved, with courses of action. Corporate strategy is concerned with choices and commitments regarding markets, business and the very nature of the company itself. Competitive strategy is concerned with competitors and the basis of competition. These basic points are illustrated in Figure 3.
Figure 3 - Basic Points about Strategy