Every organization needs a strategy. Be it an established business, an emerging entrepreneurial venture, or a non-profit organization, a strategy sets the direction of the enterprise, informs priorities and the allocation of scarce resources, and helps guide the myriad decisions that an organization makes every day.
But what exactly is strategy? Kenneth Andrews provides the following definition: [S]trategy is the pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organization it is or intends to be, and the nature of the economic and noneconomic contribution it intends to make to its shareholders, employees, customers, and communities.2
Such a definition of strategy highlights its complex nature. Strategy encompasses several different sets of considerations. An organization’s strategic goals, or objectives, refer to the organization’s mission, its unique purpose and scope. The strategic plan, sometimes called strategic intent, is how the organization tailors its offerings and develops and leverages internal resources and capabilities to accomplish strategic goals. Strategic actions are those tangible actions taken to operationalize the strategic plan in pursuit of the strategic goals of the business. Together, this triad of mission, intent, and actions defines an organization’s strategy. They reveal how an organization creates unique value for its customers and other stakeholders, and how it distinctively positions itself relative to other organizations in its field. Understanding and assessing an organization’s strategy is criticaly important to many organizational constituents. One need not be the CEO, President, or a member of the top management team to engage in such analysis. Consultants, investment bankers, entrepreneurs, and others frequently must assess the strategy of firms, whether their own businesses, clients’, or competitors’. Managers, consultants, and analysts are frequently asked to identify and assess the strategy of a business
1. This chapter was adapted from Jared D. Harris, Michael J. Lenox, Jeanne Liedtka, and Scott Snell, “Introduction to Strategy,” UVA-S-0183 (Charlottesville, VA: Darden Business Publishing, 2010), which was based on an earlier technical note (UVA-S-0166) by Ming-Jer Chen, Gregory B. Fairchild, R. Edward Freeman, Jared D. Harris, and S. Venkataraman. 2. Kenneth Andrews, The Concept of Corporate Strategy (Homewood, IL: Richard D. Irwin, 1971).
T H E ST R AT E G I ST ’ S TO O L K IT
or an organization. Whether it is to properly value a business or acquisition target, undertake a new corporate initiative, or enter a new market, one needs an understanding of an organization’s strategy to formulate an informed and robust recommendation. The purpose of this book is to provide an organized framework and a set of tools to aid those who wish to analyze the strategy of an organization, be it their own or another organization they are interested in. This book explains a number of basic tools necessary to be an effective strategic analyst, or strategist, an individual skilled in the art of assessing an organization’s strategy. Strategic analysis is a powerful tool for analyzing the competitive context in which an organization operates. An effective strategist makes reasoned and reasonable recommendations for how an organization should position itself relative to its peers and for assessing what actions the organization should take to maximize value creation for its various stakeholders. While our bias is towards analysis of business organizations operating in market environments (e.g., corporations, small and medium size businesses, entrepreneurial ventures), the tools presented here could be applied to organizations in the...