Strategy is
the thing that every year organizations spend on millions of pounds.
There are several
definitions of strategy:
Mintzberg
(1972) defines strategy as ‘a pattern in a stream of decision’.
Chandler
(1963) defines strategy as ‘the determination of the long run goals and
objectives of an enterprise and the adoption of courses of action and the
allocation of resources necessary for carrying out these goals’.
Johnson and
Scholes (2011) claim that strategy is the long-term direction of an organisation.
According
to Chandler’s definition, it is formal and rational. He gives a clue of the
steps an organisation has to do. In other words there is a planning approach. However,
Mintzberg’s definition is more restrained and based on learning approach.
Planning
|
Learning
|
|
Approach
|
Prescriptive
|
Descriptive
|
Content
|
Analytical
tools
|
Limited use of
tools
|
Nature of
processes
|
Formalised,
systematic, top down
|
Adaptive, top
down and bottom up
|
Outcomes
|
Lots of
planning and assumption that plans are achieved
|
Plans made but
it is accepted that not all are achieved, some may emerge
|
Context
|
Stable
environment, assumes the future can be predicted
|
Future
unpredictable, complex, dynamic
|
PESTLE analysis
helps to identify what are Political, Economic, Sociological, Technological,
Legal and Environmental factors have impact on business.
- Government policies
- Trading policies
- Wars and conflicts
- Corruption
- Trading policies
- Wars and conflicts
- Corruption
·
Economic factors
- Inflation
- Industry growth
- Inflation
- Industry growth
·
Sociological
factors
- Demographics
- Consumer attitudes and opinions
- Cultural Taboos
- Demographics
- Consumer attitudes and opinions
- Cultural Taboos
·
Legal
factors
- Legislation
- Health and safety regulations
- Legislation
- Health and safety regulations
·
Environmental
factors
- Environmental regulations
- Ecological regulations
- Environmental regulations
- Ecological regulations
Porter's Generic strategies
There are three
strategies such as Cost Leadership, Differentiation and Focus. These strategies
used by businesses for achieving competitive advantage.
The
target of this strategy is to become a lowest cost producer in industry. It
targets a broad scope. Likely aspects are high level of productivety and
capasity utilisation. Eg. Wal-Mart.
2. Differentiation
This strategy aimed to differentiate its product to compete more successfull.
Firms create unique resources to sutisfy customers needs. Companies that have
thriving differentietion strategy such as BMW Group Automobiles which upgrades
car because of personal desires of customer that may be anything, Nike which
gives opportunity to its customer to make their own sneakers by choosing colour
and unique inscription.
Focus strategy concentrates either on market segment with narrow scope or on
mass market with broad scope. With regards to narrow scope, firms operate on
certain niche of market. The choice
of focusing on low prices or differentiation depends on demand of this segment,
eg. PepsiCo has a strong competitive position in the beverages segment. According
to broad scope, there is the same situation but firm’s choice based on needs of
mass market. For example Apple inc. aims the mass market by iPods and iPhones, simultaneously
it diversifies this with design and branding.