Organisations and strategy

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 is a strategic framework for understanding external influences on an organisation. Businesses could increase its opportuninties and drop the threats by knowledge of these external factors of influence.

PESTLE analysis helps to identify what are Political, Economic, Sociological, Technological, Legal and Environmental factors have impact on business.

          ·        Political factors

       - Government policies
- Trading policies
- Wars and conflicts
- Corruption

·        Economic factors
- Inflation
- Industry growth

·        Sociological factors
- Demographics
- Consumer attitudes and opinions
- Cultural Taboos

·        Technological factors
- Research and Innovation
- Information and communications

·        Legal factors
- Legislation
- Health and safety regulations

·        Environmental factors
- 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.

      1.     Cost Leadership

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.

3.    Focus 

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.