Strategy comes from Greek word strategia meaning office of general or command. In an organizational context, strategy means a plan of action which when followed leads to the achievement of a specific goal. Companies strategize to take advantage over their competitors by exploiting emerging possibilities. Take for instance a profitable company like Apple which strategizes on coming up with products driven by customer values and the quest to satisfy market demands. Though its products are highly priced, Apple creates value for its customers. Apple’s daring strategies are key to its success in the competitive electronics industry.
Companies can evaluate the success of their strategies using criteria like profitability and most importantly longevity of the profitability or how long the company enjoys what profits and for how long. Sustainability of the strategies is a key consideration. Take Toyota for instance, it strategizes on brand differentiation to increase its profitability and spread risks when technical issues arise such as when some of its car brands had faulty brakes. The company recalled the faulty products, compensated its customers and rectified the technicalities to ensure that it retained its customers through the value it had previously created.
As companies create value for their customers they must also create value for the stakeholders. The stakeholders include those involved in the supply chain, employees, shareholders, management among others. The success of companies such as Starbucks, BMW among other car companies can be attributed to the successful integration of stakeholders in the strategies employed by a company. When companies create value for all their stakeholders, they in turn enjoy increased cooperation. This can come in various forms for example more timely deliveries from their suppliers.
Strategies involving the creation of value for customers call for tradeoffs. This is where a company chooses to forego some quality aspects in order to gain others. For instance in the car industry, an automobiles company can choose to forego some of a car’s finishing aspects in order to gain on the power of its engine or the speed. Tradeoffs can also create more variety for the company, whereby foregoing some quality aspects reduces the cost of production and therefore enhances the achievement of several others at lower costs. This increases the profitability as well as enhances the sustainability of companies. Eventually the company is able to gain significant competitive advantage and assert its dominance over other industry players
New entrant companies need to establish a niche in the industry they wish to venture. For instance, a company planning to compete with Starbucks in the restaurants industry will need to establish how to make better coffee than Starbucks and its competitors. It can for start source higher quality coffee beans. In addition, the company should adopt more effective marketing strategies. Other companies take advantage of being the first entrants into a particular market. Amazon.com and Google have taken advantage of being pioneer companies in internet business. The companies market themselves vigorously and are always seeking ways to improve themselves in order to maintain the competitive advantage they have in the internet industry.
Other successful companies also centre their strategies on enhancing their human resources. The companies do this by continual training and improved working conditions for employees. The company managements do this by compensating their employees better as well as appreciation through promotions and gifts. The companies also enhance teamwork by adopting a matrix organizational structure rather than a hierarchical one. This way, employees in a company become average players in superior team rather than superior players in an average team.
The creation of more value per unit cost is the core purpose of strategizing and forms the basic idea of a business model. Google and Microsoft follow different avenue of making money in that Google sells advertising spaces, webhosting among other related services while Microsoft sells softwares. While Google offers most of its services free Microsoft limits the services it offers free to its customers. The two companies are somehow complementary in their business model and in the way they create value for their customers through the increase of value per unit cost.
It is not enough for business to identify a niche in the environment in which it operates. Part of effective strategy involves businesses develop themselves internally to take advantage of the external situation. Some of these strategies include increasing its asset base to be able to finance strategies at the core of increasing profitability. The companies may source for funds from financial institutions or plough back profits in order to accelerate the attainment of newer and more visionary strategies. Education and the level of technology also affect the attainment of strategies. Organizations must look out for these factors in order improve their capacity to achieve their goals.
Managements must have a vision of what they want their companies to be in a specific time in the future. They must also have a mission statement to guide them to accomplish their vision. Mission comprises of what organizations do in everyday life while vision is what they plan to achieve in future. In addition they must set specific, measurable and time-bound goals if they are to succeed in the achievement of their vision. But how do mission and vision statements help in creating value for customers and thus qualify to be strategies? The two give direction to the staff in an organization to work collectively towards a specific goal which increases their chances of achieving laid out goals as a team. In addition to a mission and vision statement, most organizations have a value statement which states what the organization aims to deliver to its customers.
In the pursuance of a certain major strategy, company managements may be compelled to come up with an emerging strategy which acts as a precursor in the achievement of the main strategy. Organizations use projections to access the how far they have to go in achieving strategies. Some of the tools used include financial statements. The bottom-line of strategies is the creation of value for customers in terms of pricing, quality and customer service all of which set a business apart from its competitors thereby increasing its market shares and profitability.