Three Kinds of Business Strategy
Figure [ 1 ]: Three Kinds of Strategy
There are at least three basic kinds of strategy with which people must concern themselves in the world of business: (1) just plain strategy or strategy in general, (2) corporate strategy, and (3) competitive strategy (see Figure 1). The purposes of this post are to clarify the differences between and among these three kinds of strategy and to provide some questions useful in thinking about all three.
Strategy in General
Strategy, in general, refers to how a given objective will be achieved. Consequently, strategy in general is concerned with the relationships between ends and means, between the results we seek and the resources at our disposal. Strategy and tactics are both concerned with conceiving and then carrying out courses of action intended to attain particular objectives. For the most part, strategy is concerned with how you deploy or allocate the resources at your disposal whereas tactics is concerned with how you employ or make use of them. Together, strategy and tactics bridge the gap between ends and means (see Figure 2).
Strategy and tactics are terms that come to us from the military. Their use in business and other civilian enterprises has required little adaptation as far as strategy in general is concerned. However, corporate strategy and competitive strategy do represent significant departures from the military meaning of strategy. Figure [ 2 ]: "Bridging the Gap"
Corporate versus Competitive Strategy
Corporate strategy defines the markets and the businesses in which a company will operate. Competitive or business strategy defines for a given business the basis on which it will compete. Corporate strategy is typically decided in the context of defining the company’s mission and vision, that is, saying what the company does, why it exists, and what it is intended to become. Competitive strategy hinges on a company’s capabilities, strengths, and weaknesses in relation to market characteristics and the corresponding capabilities, strengths, and weaknesses of its competitors. According to Michael Porter, a Harvard Business School professor and the reigning guru of competitive strategy, competition within an industry is driven by five basic factors: 1. Threat of new entrants
2. Threat of substitute products or services
3. Bargaining power of suppliers
4. Bargaining power of buyers
5. Rivalry among existing firms
Porter also indicates that, in response to these five factors, competitive strategy can take one of three generic forms: (1) focus, (2) differentiation, and (3) cost leadership. Factors Affecting Corporate and Competitive Strategy
Writers on the subject of strategy point to several factors that can serve as the basis for formulating corporate and competitive strategy. These include: * Products-services offered
* Natural resources
* Sales-marketing methods
* Production capacity-capability
* Users-customers served
* Size/growth goals
* Distribution methods
* Market types and needs
* Return/profit goals
Michael Treacy and Fred Wiersema suggest that "value disciplines" should serve as the basis for settling on strategy (corporate or competitive). The three basic "value disciplines" they present are: Operational Excellence
Strategy is predicated on the production and delivery of products and services. The objective is to lead the industry in terms of price and convenience. Customer Intimacy
Strategy is predicated on tailoring and shaping products and services to fit an increasingly fine definition of the customer. The objective is long-term customer loyalty and long-term customer profitability. Product Leadership
Strategy is predicated on producing a continuous stream of state-of-the-art products and services. The objective is the quick commercialization of new ideas. Some Fundamental Questions
Regardless of the...