What is strategy?

What is strategy?

•      Strategy: It is derived from the Greek word “Strategos” which is used in military terms.

•      Definition:

Strategy is a course of action through which an organization relates itself with environment so as to achieve its objectives

1. Strategic Fit concept:

¨ Michael Porter and other eminent classical strategy Gurus have the dominant figure in shaping this framework of business strategy. According to them, the central thrust of the strategy is to gain a sustainable competitive advantage over the competitors which results in the superior profitability of the firm.

¨ In their opinion, the difference in profitability among the firms operating in the industry can be attributed to the external environment and not to the internal resource base. This happens due to mobility of factors which wipes out the heterogeneity of the resource base in the long run. Then the higher profitability is attributed to the higher adaptive capacity of the firm in adapting to changing external environment. So monitor the environment, find opportunities and modify the resource base.

¨ So according to this view, strategy is a set of action plans which is used to monitor the external environment of the firm in order to adapt the firm according to the changes of the environment aiming at gaining a sustainable competitive advantage.

2. Strategic Stretch concept:

¨ This concept evolved out of the quest for success of Japanese firm in 1970s when they entered the U.S market. It was attributed to the factor that not the adaptive capacity but to the quality of the resource base that makes the difference in commercial success.

So, the purpose of strategic management is to improve the quality of the resource base. The notion of core competencies is closely related to the so called resource based view of the firm., which is most recent model to understand the mechanism for achieving competitive advantage. It represents a major departure from a strategic approach based on market driven considerations

Difference between Policy and Strategy

¨ The term “policy” should not be considered as synonymous to the term “strategy”. The difference between policy and strategy can be summarized as follows-

¨ Policy is a blueprint of the organizational activities which are repetitive/routine in nature. While strategy is concerned with those organizational decisions which have not been dealt/faced before in same form.

¨ Policy formulation is responsibility of top level management. While strategy formulation is basically done by middle level management.

¨ Policy deals with routine/daily activities essential for effective and efficient running of an organization. While strategy deals with strategic decisions.

¨ Policy is concerned with both thought and actions. While strategy is concerned mostly with action.

¨ A policy is what is, or what is not done. While a strategy is the methodology used to achieve a target as prescribed by a policy.