The term strategy, in business, generally refers to a singular thought - an answer or solution to a specific business problem. strategic decision-making involving choices from the myriad of ways and the means by which a stated objective will be achieved. Strategy, in a business context, is about how an organization seeks to survive and prosper within its environment over the long-term. Strategy in business exists at various levels in an organization, board level, executive level, senior management level, etc. The various levels at which strategy exists in an organization can be defined as: corporate level, business unit level, operations level, and business functions level. The strategies at those levels can be organized into a layered strategy model of the organization.
The term "strategy", as used in everyday business conversations, is an overloaded word. Every company ( "for-profit" or "non-profit") has a strategy, but most people including professional practitioners do not bother to explicitly establish their perspectives (points of view). This creates confusion, since strategy in the business context, is essentially, a layered concept.
Strategy in Business Organizations
Most executives in business organizations realize that to proper in the future, they need to turn to the fundamental issue of strategy. Strategy, in the business context, answers two (2) basic questions:
Strategy combines the "where?" and "how?" to create a continuing flow of temporary and shifting competitive advantage. Creating a series of shifting advantages is challenging. This involves selecting an attractive market, choosing a defensible strategic position, or building core competencies. It requires effective strategic decision-making at several levels in the organization; at the unit level, to improve business competitive strategy; at the multi-business level, to create collective strategy and cross-business synergies; and at the corporate, to articulate major inflection points in strategic direction. Strategy provides an organization with an offensive device to compete against competitors and guides their decisions and actions when faced with a range of choices.
Strategy - A Layered Model
The various levels at which strategy exists in an organization can be defined as: corporate level, business unit level, operations level, and business functions level. The strategies at these various levels can be organized into a layered hierarchy, such as: corporate strategy, business competitive strategy, and operations strategy, with a crosscutting layer comprising the strategies of the other business functions functional strategy. The scope of each of the layers is described below.
The actual/realized strategy of an organization is the combination of the executed parts of deliberate strategy and emergent strategy.
Strategy as Strategic Decision-Making Process
Strategic decision-making in concerned with how strategic decisions are made - formulated and implemented (Elbanna 2006). At various levels in a business organization, management's (strategic) decision-making is the process of making choices by recognizing the problem, gathering information about feasible solutions, and finally choosing the best alternative. Strategic decision-making is the means by which management intentions are realized (formulated and implemented). Strategic decision-making is inextricably linked to strategic planning because it concerns the distribution of resources and the company's long-term direction.
Strategic decision-making involves issue comprehension, concepts structuring, and concepts formulation into cause-effect relations model. While the cause-effect relations are based on logical and deductive reasoning, the issues comprehension that triggers it, involves choice of assumptions which is to some extent arbitrary and inductive in nature. It is important that managers understand that their choice of assumptions is arbitrary and influenced by their beliefs and mind-set (mental model), and might not accord with reality. So strategic decisions logically flowing from these assumptions, if they turn out to be bad/erroneous assumptions, can lead to failure.
Strategic decision-making is a critical skill for effective leadership in business organizations and other organizations, i.e., military, sports, political, etc. The outcomes of a leader's choices significantly impacts employees, customers, the market and success of the organization.
Strategic decision-making is typically more complex, novel (new) and open-ended (Mintzberg, Raisinghani and Theoret, 1976), and is characterized by independent elements that by definition cannot be formulated, let alone solved independently of one another.' (Mitroff and Emshoff, 1979:1).
The concept of strategy is usually used in different ways, even though traditionally, it has been defined in only one way. Explicit recognition of the multiple definitions corresponding to the different viewpoints can help people when developing strategies. The various viewpoints can be defined in terms of Mintzburg's 5Ps of strategy:
Decision makers or managers start with a given perspective, conclude that it calls for a certain position, and sets about achieving it by way of a carefully crafted plan. Over time things change; a pattern of decisions and actions marks movement from starting point to destination end-point (goal).
A strategic decision is a specific commitment to action (usually, a commitment of resources). Strategic decisions are long-term decisions; they are taken in accordance with the organization's mission, vision, and values. Strategic decisions are characterized by a number of features including:
Strategic decisions concern the organization's external environment(s), the organization's resources, the people who form the organization, and the interface between the organization and its environment.
Strategic decisions are those decisions, taken by top management, that have influence over years or decades, and even beyond the lifetime of the projects that implemented/realized those decisions. Some examples of strategic decisions include:
The success of strategic decisions depends on the ability of decision makers to influence the desired outcomes through the people that are members of the organization, and the expectation to outperform the competition/rivals.
Strategic decisions are novel (new) - there are no well understood or agreed upon procedures for making them, important (i.e., consequential) and non-routine. Success depends on the ability of managers to influence the desired outcomes through its people, and the need/expectation to outperform rivals.
Strategic decisions are different from administrative, tactical and operational decisions. For these decisions, decision makers can actively influence outcomes of strategic choices, using their abilities to make things happen, and success means doing better than rivals. Strategic decisions require the decision maker to provide judgment based on insights into the problem situation and choices from alternatives.
Strategic decision makers such as business executives, coaches in sports, or political candidates are not like shoppers or administrators making routine choices that lead to one outcome, or another. They can influence the outcomes by the way they lead and communicate, and through their ability to inspire and encourage others. Moreover, executives are in charge of organizations that compete vigorously with others; success means doing better than rivals.
Roles of strategy in Business
Strategy plays a number/variety of roles in organization's success, including:
Strategy is a significant determinant on a company's success or failure, in addition to the significance of competence of its managerial leadership.
I am a computer scientist by education and training. My interests are in modeling complex business and social systems to foster better strategic and operations management processes in delivering value to customers while meeting the expectations of stakeholders.