A strategy is a plan of action that is carried out to achieve a certain long-term goal. It comes from the Greek Stratos = Army and Agein = driver, guide. Applies to the following fields:
- Military strategy: A set of behaviors and themes to conduct the war Strategy game: A genre of games in which strategy is taken into account, whether political, military or economic Business Strategy: It refers to the design of the action plan within a company to achieve its goals and objectives.Strategic Map: It is the process of developing a macro strategic vision, proposed by Kaplan and Norton, which usually precedes the implementation of a balanced scorecard.
In the field of administration, a strategy is the pattern or plan that integrates the main goals and policies of an organization, and at the same time, establishes the coherent sequence of actions to be carried out. A properly formulated strategy helps to put in order and allocate, based both on its attributes and its internal deficiencies, the resources of an organization, in order to achieve a viable and original situation, as well as anticipating possible changes in the environment and the unforeseen actions of clever opponents.
Goals or objectives establish what is to be achieved and when the results will be achieved, but they do not establish how they will be achieved. All organizations have multiple goals, but the main goals that are those that affect the overall direction and viability of the entity are called strategic goals.
Policies are rules or guides that express the limits within which action must occur, and those that guide general direction are called strategic policies.
Elements of an effective strategy
Strategies in the military, diplomatic or business scenario must include at least the following factors and structural elements:
- Clear and Decisive Objectives. The specific goals of subordinate units can transform at the pace of competition, however the central goals of the strategy for all units must always be specific and clear enough to provide continuity and cohesion in selecting tactics over the time horizon. of the strategy.
Not all goals need to be written or specified numerically, but if they must be understood well and be decisive, that is, the achievement of the goals must ensure the viability and life of the company compared to its competitors.
- Keep the initiative. A prolonged reactive position breeds fatigue, lowers morale, gives up the advantage of time and increases costs, decreases the number of positions available, and lowers the likelihood of success. Focus and Attention. Obvious points, but better to double check them Flexibility. The reinforcement of skills in a planned scope of action and the renewed location allow to keep the opponents, with a minimum of resources, at a relative disadvantage.
With concentration and concession, they make it easier for the strategist to reuse the same attributes to dominate selected positions at different times.
They also force less flexible opponents to use more resources to maintain predetermined positions, while there is less allocation of their own resources for defensive purposes.
- Coordinated and Committed Leadership: Leaders must be selected and motivated in such a way that their own interests and values match the needs of the role assigned to them. Use must be made in or during strategy preparation of speed, silence and intelligence to attack, at unexpected times, unsuspecting and deprived opponents. Together with correct timing, surprise can be out of all proportion to the energy used, and can decisively change strategic positions. The strategy must ensure the base of resources and other fundamental operational aspects for the company, it must also develop an effective intelligence system sufficient to prevent surprises by competitors.
The five P's of strategy
The word strategy has been used in multiple ways such as: pattern of action, pattern, position, and perspective.
Strategy as Plan
Strategy is a plan, a kind of consciously determined course of action, a guide to address a specific situation. According to this definition, strategies have two essential characteristics: they are developed before the actions in which they will be applied and they are developed consciously and with a specific purpose.
There are definitions that reinforce this definition, for example, in game theory, strategy is a “complete” plan that specifies the choices that the player will make in each possible situation and, in administration, it is defined as “the strategy is a unified plan, comprehensive and comprehensive designed to ensure that the basic objectives of the company are achieved ”.
Like plans, strategies can be general or specific. There is a meaning of the term in the specific sense: as a plan, a strategy can also be a pattern of action, a maneuver, to win the game over the competitor.
Strategy as pattern
Strategy is a model, a pattern in a flow of actions. According to this definition, strategy is consistency in behavior, whether it is intentional or not.
Definitions of strategy as a plan or as a pattern can be independent of each other, plans can give the impression of arising inadvertently, strategies can be the result of human actions, but not human designs, ironic, but true.
Strategy as position
Strategy is a position, particularly a means of locating an organization in what organizational theorists often call an environment. According to this definition, the strategy becomes the mediating force or the coupling between the organization and the environment, that is, between the internal context and the external context, in terms of the administration, a domain of the market product, that is, the place where resources are concentrated.
In military or game theory terms, strategy is generally applied within the context called "two-person game," better known in business as open competition. The definition of strategy as position, allows itself to expand the concept of what is known as games for "x" people, that is, many players.
In other words, a position can be defined in terms of a single opponent, or it can also be considered in the context of several opponents, or in relation to the markets of a product or with respect to a specific environment.
Strategy as perspective
While the previous definition looks outwards, seeking to locate the organization in an external environment and in specific positions, the fifth looks inside the organization, that is, towards the heads of the collective strategist, but with a broader vision. Here, the strategy is a perspective, its content implies not only the selection of a position, but a particular way of perceiving the world. There are organizations that favor marketing and build an entire ideology around it, for example Sony, which has supported its electronics and engineering culture for decades, while companies such as Barcel de México have become famous based on their emphasis on quality, service and cleanliness.
In this sense, strategy is for the organization what personality is for the individual. This definition suggests that strategy is a concept, which has a particular implication, that is, all strategies are abstractions that exist only in the minds of the interested parties, each strategy constitutes an invention, a system created by imaginative minds, already are strategies conceived with the intention of regulating a particular behavior before it occurs, or conceptualized as patterns to describe a behavior that has already occurred.
However, the most important thing in this concept is that the perspective is shared, since the strategy is a perspective shared by and among the members of an organization through their intentions and actions. When you talk about strategies in this context, you enter the realm of the collective mind; individuals united by affinities of thought or behavior or both.
In the study of the development of strategies, one of the fundamental aspects is how to perform the mechanisms of the collective mind and thus understand how intentions are disseminated through the system that we call "the organization" after being shared and how actions are exercised. that are articulated on the collective bases, and that want to be, at the same time, consistent.
What is the Corporate Strategy?
Corporate strategy is a pattern or model of decisions that determines and reveals its objectives, purposes or goals, likewise, said pattern produces the main policies and plans to achieve such goals, defines the business sphere to which a company aspires, establishes the class economic and human organization that it is or pretends to be, and also specifies the nature of the contributions, economic and non-economic, that it tries to make to its shareholders, employees, customers and communities.
The strategic decision included in this pattern is one that is effective for long periods, and affects the company in various ways since it concentrates and commits a very significant part of its resources around the expected results.
This pattern or model will make possible the specification of particular objectives that will be achieved through a temporal sequence of decisions on investment and implementation, and will directly govern the mobilization or deployment of resources to make these decisions effective.
Corporate strategy is an organizational process and has two fundamental aspects: formulation and implementation.
The activities of formulating the strategy include the identification of opportunities and threats in the environment in which the company operates, as well as the attribution of a risk estimate to each of the discernible options. Before going for a particular option, the strengths and weaknesses of the company should be assessed along with the available resources and scope of the company. It will be necessary to determine, with the greatest objectivity possible, their real and potential capacity to take advantage of the perceived needs of the market, as well as their capacity to face the risks inherent in their performance.
The strategic option that results from combining corporate opportunity and capacity at an acceptable level of risk constitutes the economic strategy.
Determining the strategy also requires consideration of which options are preferred by both the chief executive and his immediate subordinates, far beyond economic considerations. Personal values, aspirations and ideals influence the final choice of purposes, what the executives of a company want to carry out must be coupled with the strategic decision.
The strategic choice has an ethical feature, the options can be ordered in relation to the degree of risk they entail, they can also be examined in relation to the response margins, chosen by the strategist, to the expectations of society.
The implementation of the strategy comprises a series of activities of an administrative nature if its purpose has been determined, then it is possible to mobilize the company's resources, in order to achieve its realization.
An appropriate organizational structure for the efficient performance of the required tasks must be translated into information systems and relationships that allow the coordination of subdivided activities.
Organizational processes of performance measurement, compensation, administrative development, must be directed toward the kind of behavior required by the organizational purpose and objectives. For the success of the strategy, the role of personal leadership is important and in some cases decisive.
Corporate strategy outline
Formulation (decide what to do):
Identification of opportunity and risk.
Determine the material, technical, financial and administrative resources of the company.
Personal values and aspirations of the administrative of another level.
Recognition of non-economic responsibility before society.
Implementation (achieve results):
Structure and relationships of the organization:
- Division of labor Coordination of responsibility Information systems
Organizational Behavior and Processes.
- Standards and quantifications Incentives Control systems Recruitment and development of administrators.
High level leadership.
- Strategic.Organizational.Personal.
Determining the right strategy for a company begins with identifying the opportunities and risks in its environment. This is interested in the identification of a margin of strategic options, the reduction of this margin caused by the recognition of the restrictions imposed by corporate capacity, and in the determination of one or more economic strategies at acceptable risk levels.
The Nature of the Company's environment
The environment where the company develops, is the pattern or model of all the decisions and influences of the environment that affect its life and its development, such aspects are:
Technology. Technological developments are not only the fastest, but the most far-reaching to expand or restrict opportunities for an established company.
Ecology. With increasing sensitivity to the impact on the physical environment caused by industrial activity, it becomes essential and often a legal requirement to consider planned expansion, and even how continuous operation under changing parameters could affect the quality of life of any area. where a company seeks to establish itself.
Economy. Because companies are more used to monitoring economic trends than any other type of trend, they are unlikely to be caught off guard by drastic developments. The consequences of global economic trends need to be monitored in much greater detail than in any industry and company.
Industry. Although the industrial environment is one where the strategists of a company believe they are best aware, the opportunities and risks found in it are misinterpreted due to familiarity and acceptance without critical elements.
Society. It is important to take social development into consideration but with a focus on equity and gender, as well as equality and justice. It is important to develop companies but you must be very careful with Ecology, respecting nature is respecting life itself.
Politics. Political forces are important due to the relationship between state and private enterprise, as well as the impact of national planning on corporate planning, but for the good of all, first it is the working class and its social struggles, which on this planet increasingly they are older.
The Evaluation of Strategies
Without a strategy evaluation process, a strategy cannot be formulated, nor can it be adjusted to changing circumstances, whether such analysis is carried out through an executive or through a process that the company has established as a process..
For many executives, strategy evaluation is just a simple estimate of how the business works. However, factors that cannot be observed directly or are susceptible to measurement must be taken into account, and that by the time the opportunities or threats in the strategy directly affect the operating results, it takes time to generate an effective response.
To evaluate a business strategy it is important to answer the following questions:
1. Are the business objectives adequate?
2. Are the plans and policies adequate?
3. The results obtained so far, do they confirm premises on which the strategy is based or do they refute them?
The points that the analyst must confront to answer the previous questions are basically summarized in the following factors:
- Each business strategy is unique and original. Then the evaluation of the strategy will know how to rely on a type of situational logic that is not specified in a better way, but whose objective can be adapted depending on the problem that must be faced. The strategy is dedicated as a priority to the selection of goals and objectives. Many people, including experienced executives, find it much easier to set goals and try to achieve them than to evaluate them, this is because there is a tendency to confuse values, which are fundamental expressions of the human personality, with objectives that are resources to confer on it. Coherence to action. Formal systems for reviewing strategies, which are initially attractive and arouse interest, can generate truly explosive conflict situations.
The Evaluation of Strategies
It is impossible to demonstrate that a specific business strategy is optimal and you can even guarantee that it will work, however it is important to put it through tests to determine its main omissions.
Among the criteria to which a business strategy must be subjected, the main ones can be distinguished:
- Consistency, the strategy should not present goals or policies inconsistent with each other. Inconsistency in a strategy is not just an error in logical approach. A key function of the strategy is to confer coherence to the actions of the organization, a clear and explicit concept of the strategy will favor a climate of tacit coordination that turns out to be more efficient than most administrative mechanisms. Consonance; The strategy must present an adaptive response to the external environment, as well as to the relevant changes in which they occur. The key to assessing consistency is understanding why the business, as it stands today, exists at all and how I succeed in assuming its current shape. Superiority;Competitive strategy is the art of generating or exploiting those advantages that are the most notable, effective, lasting, and difficult to duplicate or imitate. The competitive strategy focuses on the differences between the companies, instead of being interested in common missions. Feasibility; The financial resources of a company are the easiest to quantify and, in general, they constitute the first limitation with which the strategy has to be measured. When weighing the capacity with which a given organization can undertake a strategy, it is important to ask yourself three basic questions:The financial resources of a company are the easiest to quantify and, in general, they constitute the first limitation with which the strategy has to be measured. When weighing the capacity with which a given organization can undertake a strategy, it is important to ask yourself three basic questions:The financial resources of a company are the easiest to quantify and, in general, they constitute the first limitation with which the strategy has to be measured. When weighing the capacity with which a given organization can undertake a strategy, it is important to ask yourself three basic questions:
1. Has the organization demonstrated that it has problem-solving skills and the levels of competence required by the strategy?
2. Has the organization demonstrated the degree of integrative coordinating ability necessary to undertake the strategy?
3. Does the strategy represent a challenge and motivation for key personnel, and is it accepted by those who have to provide their support?
Michael Porter's Strategy
Porter is one of the pioneers in developing reference frameworks, such as the concept of generic strategies, of which I point out three in particular: the cost of leadership, differentiation and focus or scope and his discussion about the “value chain”, which it is a way of breaking down the activities of a company to apply different types of strategic analysis.
The essence of the formulation of the strategy is to adapt or adapt to the competition, also in the battle to participate in the market, the competition is not only manifested by the counterpart, on the contrary, the competition situation in an industry is rooted in its fundamental economy, and there are competitive forces that are: customers, suppliers, potential participants and substitute products are all prominent depending on the industry from which they come. The collective strength of these factors determines the maximum potential utility of an industry. It can change in intensity, from low, where no company achieves spectacular returns on investment, to moderate, in industries where there is scope for very high returns.
In the economists' "perfectly competitive" industry, the position game is out of control and entry is very easy. This type of structure in an industry offers the worst long-term profit prospect, however the weaker the Taken together, the greater the opportunity for better performance.
Suppliers and Buyers. They can exercise their bargaining power with industry participants by increasing prices or by reducing the quality of goods and services purchased. The power of each supplier or group of buyers depends on various characteristics of their market situation and the importance of their purchases or sales in the industry compared to their businesses globally.
Substitute Products. The more attractive the payoff from the price performance of substitute products, the firmer the cap on the industry's profit potential. Substitutes not only limit profits in normal time, they reduce the bonanza that an industry can generate during boom times.
New participants. New entrants to an industry bring new skills, a desire for market share, and often substantial resources. The degree of seriousness of competition risk depends on the barriers present and the reaction of existing competitors that the new entrant can expect. There are six main sources of barriers to competition:
- Scale economics. They avoid competition by forcing the applicant to compete on a large scale or accept a cost disadvantage. Product differentiation. Identifying a brand creates a barrier by forcing new entrants to spend a lot to overcome customer loyalty. Capital requirements. The need to invest significant financial resources to compete creates a barrier to entry Cost disadvantages regardless of size. Positioned companies can have cost advantages, this can be derived from the learning curve, the patented technology, in short, access to distribution channels. The more limited the wholesale and retail distribution channels and the more tied-in with existing competitors, the more difficult it will be to compete in the industry.Government Policy. The government is able to limit and avoid competition in industries with controls such as licensing requirements and limited access to raw materials.
The Game by Positions. The rivalry between existing competitors often takes the form of a game for positions using tactics such as price competition, product introductions, and advertising. The rivalry is related to factors such as: The competitors are so numerous and of the same size and their power is similar, the growth of the industry is slow, the entry barriers are high, in short.
Generic Porter Strategies
Porter's generic strategies framework has been used very often. Porter argues that there are two basic types of competitive advantages that companies can possess: low cost and differentiation, which are combined with the scope of a company's operations, to produce three generic strategies and achieve the achievement of a superior performance: the cost of leadership, differentiation, and reach.
Companies can differentiate their products in six different ways:
- Price Differentiation Strategies: The most basic way to differentiate a product or service is simply to sell it at a low price. In the case of identical or similar products, most people will end up deciding on the cheapest product in the end. Image Differentiation Strategy: Aesthetic differences of the product can be included that in no way affect its performance. Support Strategy to Differentiation: More substantial, although without effect is the product itself, it is the differentiation based on something that is accompanied by the product, a support base. This service can refer to both sales and services to the offering of a product or service related to the sale. Quality Differentiation Strategy:Quality differentiation has to do with the characteristics of the product that make it better, not necessarily different, but better. Design Differentiation Strategy: offer something that is truly different, that breaks with the dominant design, to provide unique characteristics, original and innovative, do not confuse this with putting the product as a fashion, this is only temporary and as it comes, it goes away.Non-Differentiation Strategy: It constitutes a very common strategy, where there is an empty space in the total circle, the open spaces of the market and administrators without the capacity or will to differentiate what they sell, give rise to imitators or “pirate” products as we say in Mexico.offer something that is truly different, that breaks with the dominant design, to provide unique, original and novel characteristics, do not confuse this with putting the product as a fashion, this is only temporary and as it comes, it goes. Differentiation: It constitutes a very common strategy, where there is an empty space in the total circle, the open spaces of the market and administrators without the ability or willingness to differentiate what they sell, give rise to imitators or "pirate" products as we say in Mexico.offer something that is truly different, that breaks with the dominant design, to provide unique, original and novel characteristics, do not confuse this with putting the product as a fashion, this is only temporary and as it comes, it goes. Differentiation: It constitutes a very common strategy, where there is an empty space in the total circle, the open spaces of the market and administrators without the ability or willingness to differentiate what they sell, give rise to imitators or "pirate" products as we say in Mexico.where there is an empty space in the total circle, the open spaces of the market and the administrators without the ability or the will to differentiate what they sell, give rise to imitators or “pirate” products as we say in Mexico.where there is an empty space in the total circle, the open spaces of the market and the administrators without the ability or the will to differentiate what they sell, give rise to imitators or “pirate” products as we say in Mexico.
In the scope of the products and services that are offered, that is, the extension of the markets in which the products and services are sold, the concept of scope refers to the impulse of demand, starting from the market itself, that is, what exists in it. Outreach strategies include the following strategies:
- The strategy without Segmentation: Through the basic configuration of the product it offers, the organization tries to capture a larger proportion of the market The Segmentation Strategy: Just as the degrees of segmentation are limited, the possibilities are also limited because some organizations prefer be comprehensive in order to serve all segments, while others prefer to be selective and compete rigorously only in certain segments. The Niche Strategy. They focus on a single market segment, in a certain way all strategies are in some sense of a niche, since they are characterized both by what they exclude and what they include. No organization can be all things to all people. The all-encompassing strategy cannot in any way be considered a strategy.Manufacturing on Order Strategies: Represents the extreme case of segmentation, the disintegration of the market to such a degree that each client in itself constitutes a unique segment, when it is a custom design these cases involve the entire value chain, The product is not only distributed in a personalized way, but it is designed for a particular client.
All this finally constitutes and generates a common company in one that has the vision that can reach success. The world market is increasingly positioning itself, than just being on the list of those who compete, therefore, a strategy is necessary that not only gains the market, but also gains the public, that is the most important thing, in music there are many genres such as pop or rock in Spanish, which sell discs with marketing, but there are other genres such as High Energy that, despite not having large advertising agencies, continues to sell albums by artists from more than 20 years ago, thanks to a public that prefers musical quality to passing quality like fashion itself.
Bibliography
Nieves, Felipe. Contemporary World Strategy. Ed. HiTEK Patrick M. Mexico.
