Strategy appears to be a complex word but it is not. It is important to understand what is true meaning of strategy. Strategy is not goal but it is just a milestone in the journey towards strategy. It is important to understand and clearly define strategy for your business. Misconceptions about this many times lead to mistakes and creates confusion in the company.
Definition of strategy
Strategy is a combination of action / functions to reach a long term unique position in the industry. It is not about creating the best company but it is about positioning.
There are two important questions which need to be answered
- How can we create unique value for my customers
- What do we want to offer to customers
As a entrepreneur or CEO you should not try to create a best company because there is no best company. You have to create different ways to compete within the industry so that your company achieves the unique position which is defined by strategy.
Business strategy is always about making choices about your business, customers, products etc. Competition in the industry will drive your choices about each of the element mentioned above. Strategy is always about making long term choices to operate and to remain competitive in the industry.
Strategy can be achieved in one of the two following ways.
- To differentiate from the competition in terms of product or
- To offer the same product at lower cost.
However you can not achieve both the objectives at the same time. You can chose one of the path. It is impossible to offer differentiated and unique product at lower cost than competition. As CEO you need to watch the competitive forces in the industry to ensure that your strategy is not effected. It is very rare to find out a company which can offer differentiated product at lower cost unless the company has extremely efficient operating costs.
Corporate strategy needs to be percolated down to lowest level in the company. In case of diversified products or companies operating in diversified industries, the strategy for each of the division will be different and should not be mixed.
Strategy is not about tomorrow or next month but it is always long term. Maximizing profit can not be strategy. Strategy is about creating competitive advantage thereby remaining at the unique position in the industry. For multinational companies the global strategy has to be same but operating strategy in each of the country can be different. It is important because every country will have their unique set of problems and unique industrial culture.