What Is Strategy and Why Is It Important?
A company's strategy consists of the competitive moves and business approaches that managers are employing to grow the business, attract and please customers, compete successfully, conduct operations, and achieve the targeted levels of organizational performance. A company achieves sustainable competitive advantage when an attractive number of buyers prefer its products or services over the offerings of competitors and when the basis for this preference is durable. Changing circumstances and ongoing management efforts to improve the strategy cause a company's strategy to evolve over time—a condition that makes the task of crafting a strategy a work in progress, not a one-time event. A company's strategy is shaped partly by management analysis and choice and partly by the necessity of adapting and learning by doing. A strategy cannot be considered ethical just because it involves actions that are legal. To meet the standard of being ethical, a strategy must entail actions that can pass moral scrutiny and that are aboveboard in the sense of not being shady, unconscionable, injurious to others, or unnecessarily harmful to the environment. A company's business model explains the rationale for why its business approach and strategy will be a moneymaker. Absent the ability to deliver good profitability, the strategy is not viable and the survival of the business is in doubt. A winning strategy must fit the enterprise's external and internal situation, build sustainable competitive advantage, and improve company performance. Excellent execution of an excellent strategy is the best test of managerial excellence—and the most reliable recipe for turning companies into standout performers.
The tasks of crafting and executing company strategies are the heart and soul of managing a business enterprise and winning in the marketplace. A company's strategy is the game plan management is using to stake out a market position, conduct its operations, attract and please customers, compete successfully, and achieve organizational objectives. The central thrust of a company's strategy is undertaking moves to build and strengthen the company's long-term competitive position and financial performance and, ideally, gain a competitive advantage over rivals that then becomes a company's ticket to above-average profitability. A company's strategy typically evolves and reforms over time, emerging from a blend of (1) proactive and purposeful actions on the part of company managers and (2) as-needed reactions to unanticipated developments and fresh market conditions. Closely related to the concept of strategy is the concept of a company's business model. A company's business model is management's story line for how and why the company's product offerings and competitive approaches will generate a revenue stream and have an associated cost structure that produces attractive earnings and return on investment–in effect, a company's business model sets forth the economic logic for making money in a particular business, given the company's current strategy. A winning strategy fits the circumstances of a company's external situation and its internal resource strengths and competitive capabilities, builds competitive advantage, and boosts company performance. Crafting and executing strategy are core management functions. Whether a company wins or loses in the marketplace is directly attributable to the caliber of a company's strategy and the proficiency with which the strategy is executed.
The Managerial Process of Crafting and Executing Strategy
A strategic vision describes the route a company intends to take in developing and strengthening its business. It lays out the company's strategic course in preparing for the future. The distinction between a strategic vision and a mission...