Company’s strategy is a set of answers to the questions “how.” These issues can be different and depend on their situation and business objectives. In any business market conditions allow even the competitors to avoid close-twins strategies: some choose the way of lowering costs, others – differentiating of products or services, the third ones – market niches servicing or needs’ satisfaction of narrow-specific buyers. Some companies compete locally or regionally, others – globally. There are many ways of doing business and positioning, so the description of the strategy must be very detailed, reflect the specifics of the company.
The primary purpose of the company is receiving steady dividends per high invested capital. In order the profitability of investments was higher than those of the competitors, a competitive advantage over them must be constant and stable, in other words, the quality of consumer goods and services should be higher. In order the profitability to become resistant, you need to invest in the development of productive capacities, guaranteeing the conservation of competitive superiority for the future. Thus the strategy depends on the definition of competitive advantage, development of resources and production opportunities that provide stable superiority in this changing world.
In fact, the strategy is the definition of how the company participates in the competition. The strategy creates industry position of the company and provides internal co-ordination of its policies for achieving these positions. The strategy is not a detailed plan describing what the company will do. The strategy defines the direction of development and fixes what exactly the company will not do.
The strategy consists in establishing of the position, in the rejection of certain activities and harmonization of the selected activities. It is the creation of the unique and advantageous position, including many areas, renunciation of specific activities. The strategy is determined by the decisions about what the company does not intend to do.
All in all the strategy is the harmonization of the selected areas.
In the process of developing a strategy, the notion about how to achieve sustainable competitive superiority arises continuously. The task of the strategic planning is to give managers a new vision of the reality, existing risks, and opportunities, develop a new understanding of the essential factors of competition.
In such a way it is possible to mark three levels of the strategy: corporate or the strategy of business direction totality, competitive or the strategy for individual business areas and functional or strategy of any business direction.
The corporate strategy is the definition of company’s values at the expression in financial and other purposes. It rests on the identification, creation or acquisition of key resources and production capabilities and entails the decisions about how the company intends industries to compete and how different business directions will be linked. The corporate strategy sets out the allocation of resources between different areas of business, and therefore there is clarity that should be done and what must be abandoned.
The competitive strategy defines the way in which the company intends to compete in a particular industry. The competitive plan consists in how the company creates a favorable position in the industry. It includes the definition (evident and non-evident) of consumer groups, on which the company aims, and methods to move goods and services. But the competitive strategy is more than a vision of consumer and marketing techniques. It is also a combination of certain activities and processes that will enable the company to attract and retain the planned group of customers. In such a way, the strategy entails and harmonization of the various business directions of the company, through which all efforts serve for a strengthening of the potential benefits of the company in the market.
Functional strategy – marketing strategy, financial, manufacturing, technology and the strategy of research and development – increase the company’s competitive strategy and determine the types of activities and processes, allowing having benefited from them. A detailed description and analysis of the functional strategy help to determine how and to what extent they correspond to the competition strategy, and offer an opportunity to focus on the coordination of various functions.
In practice, different approaches to the development of strategies are used, such as schemes of industry profitability analysis, competitive positioning, identifying of the basic productive capacity, resources, strategic intentions and developing of scenarios for the future development. Each of these approaches helps in the understanding of critical issues, but no one responds. Responses are caused by the processes of analysis and appear like the discernment. Efficient use of any of the approaches is a skill, so those different managers will inevitably prefer to work with one approach and avoid others.
Prudence will not inhibit in a collision with the latest fashionable approaches to the comprehension of strategies. They may prove to be very useful, but there is a danger that the modern idea will result in a situation when the competitors will choose a similar style of competition and forget the need to keep their style. The essence of competitive superiority is to compete differently, to be aimed at specific consumer groups, using unique methods of production, marketing, etc.
The completed development of the strategy involves the creative use of several methods of analysis. So, there are seven stages of the process, covering the essential questions of strategy development. They are:
- Industry Analysis – the profitability of today and tomorrow.
- Positioning – a source of competitive superiority.
- An analysis of past activities of competitors and forecast for the future.
- Analysis of the company – the valuation of its relative strength and sustainability.
- Analysis of possibilities – the review of new consumer groups and areas for development.
- The assessment of future possibilities.
- The choice of strategy – positioning, cutting off variants, coordination of the selected areas.
Summing everything up, it is necessary to underline once more that competent, well-planned company’s strategy is the grand motive for its development and what is more it a real success for the company.
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