WHAT YOU NEED TO KNOW ABOUT BUSINESS STRATEGY

In today's business environment, terms like "strategy" or "strategic" are frequently used, yet many people misunderstand their true meaning. Often, the term "strategic" is used to add importance to statements or events that do not align with the real concept of strategy. Here are common examples of misused strategy:

  • “Our strategy is to be market leaders.”
  • “Our strategy is to export to the European market.”
  • “The company will use the following sales strategies.”
  • “Our plan includes several strategies.”
  • “Our strategy is to merge with company X.”
  • “20 successful strategies for Facebook.”
  • “Sales Guide – 261 marketing and sales strategies.”

While there is an abundance of information on strategy online, much of it fails to accurately explain the concept. Many confuse strategy with business plans, projects, objectives, visions, or tools for diversification. Therefore, it's important to clarify what strategy is NOT:

  • Strategy is not just a set of objectives (though objectives are a part of strategy).
  • It is not a vision or mission (these are components of a strategy).
  • It is not a project (strategy management involves projects, but strategy is broader).
  • It is not merely a plan (strategic planning is just one phase of the strategic management process).
  • It should not be confused with operational efficiency (which can be a strategic goal).
  • Mergers or acquisitions are not strategies in themselves (they are tools for business diversification).
  • Strategy is not something that can be replicated or packaged ("off-the-shelf"); each business has only one strategy.
  • No two organizations have identical strategies.

What is Business Strategy?

Over time, many experts have defined business strategy. In 1996, Michael Porter published an article in Harvard Business Review titled "What is Strategy?" focused on competitive strategy. According to Porter, a competitive strategy involves the following key elements:

  1. Differentiation from competitors – the art of being different.
  2. Offering unique value to the client that is hard for competitors to replicate.
  3. Sustaining long-term competitive advantages.

Despite the various definitions from experts, many still struggle to fully capture the essence of strategy. This confusion and difficulties in understanding strategy often arises from the following facts:

  • Strategy can be formulated at three levels: a) Corporate strategy, b) Business unit strategy (competitive strategy), and c) Functional strategy. Although these levels of strategy are interdependent and overlap, they have different approaches to development and implementation.
  • Strategy must be viewed through the lens of the main stages of the strategic management process: strategic analysis, strategy formulation, strategic planning, strategy execution, strategy execution control, and strategy adjustment.
  • As strategic thinking has evolved, various concepts have emerged in the field of strategy, systematized by Henry Mintzberg (professor at INSEAD and McGill University). After analyzing nearly 1,500 works on strategy, Mintzberg identified 10 major schools, each approaching strategy differently.

The Key Stages of the Strategic Management Process

Strategy should be viewed through the main stages of the strategic management process, which include:

  1. Strategic analysis – Evaluating the internal and external environment to identify business opportunities and risks.
  2. Strategy formulation – Establishing the organization's vision, mission, and setting strategic objectives. Analyzing and selecting development options.
  3. Strategic planning – Developing a detailed plan that outlines the tools and steps required to achieve strategic objectives. Ensuring organizational alignment.
  4. Strategy implementation – Putting the plan into action and coordinating day-to-day activities.
  5. Control and adjustment – Regularly monitoring progress and adjusting the strategy based on internal and external factors.

Understanding Different Strategy Levels

  1. Corporate Strategy
    This refers to managing the business units portfolio of a diversified company. It answers essential questions such as:
    • How many businesses will the organization manage?
    • How will resources be allocated between them?
    • How will synergies be created between different business units?
  2. Business Unit Strategy (Competitive Strategy)
    This strategy is developed for each business unit operating in a single market, with a specific competitive environment. Competitive strategy focuses on:
    • Identifying the target customers
    • Offering unique value
    • Developing sustainable competitive advantages over time.
  3. Functional Strategy
    Functional strategies are developed for specific areas like marketing, sales, finance, or human resources, and are integrated into the overall strategy to support higher-level strategic objectives.

Conclusion:

Business strategy is crucial for the long-term growth and success of any organization, yet many confuse it with goals, plans, or projects. True strategy is about positioning your business uniquely in the market, ensuring that you leverage your strengths, and achieving sustainable competitive advantage. A well-developed strategy includes multiple levels—corporate, business unit, and functional—and requires alignment and continuous adjustment as your business evolves.

An effective strategy involves the following stages:

  • Strategic analysis
  • Strategy formulation
  • Strategic planning
  • Implementation
  • Ongoing adjustment and improvement

With a clear, forward-thinking strategy, businesses can navigate the complex environment, maximize opportunities, and mitigate risks, ensuring long-term success and profitability.