The concept of strategy is old, originating in the military field, and since the times of ancient Greece this concept had high components of planning as well as decision-making or actions.
The strategy can be defined from two perspectives:
- From the perspective of what an organization intends to do, from the perspective of what an organization ultimately does.
In the first perspective, the strategy is "the general program to define and achieve the objectives of the organization and implement its mission." In this definition, the term program implies an active, rational, and well-defined role that managers play in formulating the organization's strategy.
In the second perspective, strategy is "the pattern of the organization's responses to its environment over time." Every organization has a strategy (not necessarily effective), this strategy vision is applicable to organizations whose managers are reactive, those who respond passively and adjust to the environment only when the need arises.
Various criteria are entered in this field such as:
The joint determination of the company's objectives and the lines of action to achieve them, that is, it expresses what the company wants to do in the future, which defines the business strategy as “the dialectic of the company with its environment” 1.
In this sense, it defines as "explicit the general objectives of the company and the fundamental courses of action, in accordance with the current and potential means of the company, in order to achieve the optimal insertion of this in the socio-economic environment" 2.
Strategies are general programs of action that carry with them commitments of emphasis and resources to implement a basic mission. They are patterns of objectives, which have been conceived and initiated in such a way, with the purpose of giving the organization a unified direction3.
The business strategy proposes to make explicit the great options of the company that will guide, in a decisive way, the decisions of the company on activities and structure of the organization, and likewise establish a frame of reference in which all the actions that the company will undertake during a certain time period.
The strategy acquires its meaning within strategic planning. This intention to dominate and channel the destiny of the company, specified in the strategy, can be carried out within the framework of strategic planning defining it as: the rational analysis of the opportunities and threats that the environment presents for the company, of the strengths and weaknesses of the company in the face of this environment, and the selection of a strategic compromise between these two elements that best satisfies the aspirations of the managers in relation to the company4.
In the concept of strategic planning, the basic ideas are: that of a systematic and rigorous analysis, both of the internal sphere of the company and its environment, in search of their respective negative and positive aspects, and a compatibility between both. In addition, there is a clear awareness of the company of what its aspiration is regarding the role it wants to develop in the socioeconomic environment in which it is immersed; and it is the senior management who best knows and can express said mission and who is responsible for its being fulfilled.
The strategy of the company will be the result of this triple analysis and reflection, and will express how the strategy, emphasizing the strengths of the company and reducing its weaknesses, will allow to overcome the threats of the environment and take advantage of the opportunities that it offers..
When the existence of a turbulent environment and the need for a strategic attitude are accepted in strategic planning, it will require the formulation not of a single and unique strategy of the company for the future, but of several alternative and contingent strategies elaborated according to the different scenarios that may arise.
Strategic planning represents an important progress in relation to previous attempts at long-term planning, as it introduces a systematic analysis of the environment, within the strategic diagnosis of the company; an effort to generate various strategic alternatives; and the participation of senior management in the formulation of strategies.
The word strategy takes on different meanings if it refers to the strategy of an organization, its businesses, or the strategy of the different functional areas, hence they are different in scope. Therefore, reference can be made to the corporate, business and functional strategy5.
The corporate strategy expresses the creed and general guidelines of the organization set out in the mission, general objectives, business and policies.
The business strategy represents what to do in each business to guarantee what is foreseen in the corporate strategy, that is, how to grow, how to position itself.
The functional strategy shows how to manage to articulate the different activities of the organization based on the achievement of the proposed objectives.
The development of a strategy requires a way of doing that is nothing other than technology for its design and implementation, there are different technologies by different authors, but they all use the same categories of mission, internal and external analysis and implementation, as It is represented schematically in the following graphic.
Graph 1.- Categories for the elaboration of a strategy.
Source: Díaz I. “Business strategy: by way of introduction”. Strategic direction. M. in Direction. CETED. University of Havana. 2006.
The mission defines what the organization exists for, in terms of business or in the businesses it operates, the market it is targeting and customers, what distinguishes it from the competition, its growth, its purposes for employees, shareholders and society.
The development of the mission is one of the most complex phases of the strategy, because it represents the reason for the organization to be fulfilled in a long period of time, in addition to synthesizing the general features that characterize the way in which the organization has to satisfy customers 6.
It is recommended for the preparation of the mission to carry out a previous diagnosis of the organization, both of its internal and external aspects, which will allow the correct analysis in relation to the factors that have an impact on its performance, whether generated by it, or as a consequence of the environment in which its activity takes place.
After the mission is finished, the strategic objectives should be formulated, which reflect the most important needs, consistent with the mission, thus allowing the concentration of resources and energy, reducing distraction on less important tasks and focusing the evaluation of the results.
Objectives must be clear, specific in scope, achievable, measurable, result-oriented and subject to fixed deadlines or other time constraints.
Subsequently, the different strategies that allow meeting the established objectives must be defined, but for this the organization must determine the opportunities and threats in the environment, extracted from the external analysis and the strengths and weaknesses obtained from the internal analysis. For this, you can use two fundamental tools: the analysis of the business portfolio and the analysis of the SWOT Matrix (Weaknesses, Threats, Strengths and Opportunities) 7.
The analysis of the business portfolio will allow the organization to know the conditions in which each of its businesses are located and the synergy between them to guarantee the fulfillment of the proposed objectives, by analyzing the position that each one of them occupies. in the market and the benefits that this brings to the organization.
The SWOT Matrix allows combining the internal strengths and weaknesses of the organization with the threats and opportunities that the environment rethinks.
The determination of the strengths and weaknesses arises from the internal analysis of the organization, and for this, all functional aspects of the organization must be analyzed, such as: state of technology, research and development, management form, financial conditions and financing, etc., the result of the analysis of the business portfolio must also be taken into account.
Opportunities and threats may be more difficult to determine, as they will depend on how well informed the organization is in relation to events in the environment, both on macro variables such as demographic trends, economic evolution, cultural, political and legal aspects, such as others of a more micro nature such as: trends in consumer preferences, movements in competition, trends in demand, etc. The analysis of the business portfolio also provides information regarding the evolution of the environment.
The crossing of strengths, weaknesses, threats and opportunities allows the design of four types of strategic actions: offensive (strengths vs. opportunities), defensive (strengths vs. threats), reorientation (weaknesses vs. opportunities) and survival (weaknesses vs. threats).
After the general strategic formulation of the organization has been decided, policies, work programs and the control system should be designed.
The three elements play a decisive role in the implementation of the strategy, since the policies will govern the how to do of the organization and will set the guidelines together with the mission and objectives, for the elaboration of the business strategies of the organizations.
The work programs will establish the tasks to be carried out to contribute to the success in the execution of the strategy and finally the control system that must guarantee the rationality in the variables, whose evaluation and control are essential to correct possible deviations and take timely measures that guarantee the strategy.
Once the Corporate strategy is concluded, the strategy of the different businesses of the organization will be formulated, for which, of course, it will take into account the results of the Corporate strategy, in this case an external analysis will be carried out, specifically, in terms of analysis of the competition sector and market analysis.
The analysis of the competition sector will study the five forces operating in this sector8. It must take into account entry barriers to new competitors, exit barriers from the sector, the degree of competitive rivalry, the possible threat of substitute products and the bargaining power of customers and suppliers.
It is also necessary to evaluate the market, its size, its growth, consumer behavior, the evolution of demand and more specific aspects of competition can also be analyzed here.
From both analyzes, the opportunities and threats offered by the environment can be determined, but this does not mean anything if at the same time the possibilities that the organization has, in that business, to take advantage of the opportunities and / or reject the threats are not taken into account, for which it is necessary to carry out the internal analysis of the business.
And in order to carry out such internal analysis, the business value chain must be defined. The value chain is nothing more than breaking down the business into its primary and secondary activities, evaluating in which of them value is generated (the value that is perceived by the customer) and where the strengths and weaknesses in each business activity lie. This analysis will determine the source of the competitive advantage.
The competitive advantage can be in cost, so the business will aim to have the lowest costs of the competition or differentiation, that is, the business is distinguished from the competition because it is capable of providing the customer with superior value, in terms of cost reduction or increased performance for the buyer, for example: installation service, maintenance, purchase and payment methods, etc.
The competitive advantage is the core of the business strategy, since it will depend on how to satisfy the client in a different way from the competition, so it is very important to determine the source where that advantage lies, since it must be sufficient strong and consistent in such a way as to guarantee a sustainable competitive advantage over time and difficult to imitate by competitors, characteristics that will guarantee the success of the business in the market9.
To the extent that the organization is able to reconfigure its value chain, that is, to do things differently from the competition, based on detecting a gap in customer satisfaction, it has a greater chance of achieving a non-imitable advantage and sustainable. For this, it is important to ask the following questions: How can each activity be done differently or one of them eliminated? How can a group of value activities be regrouped?
Once the external and internal aspects of the business have been determined and using the SWOT Matrix, the strategic alternatives for the business will be defined from which the definitive business strategy will emerge by answering questions, such as: What market is it in and which should it be in? be? Who are the customers and who should they be? What is the competitive advantage? Is it sustainable? How is it going to grow? How am I going to compete? How is the business going to be profitable?
Once the strategies of the different businesses have been determined, the organization must prepare for the coordination of all its activities that channel the execution of the strategies, it must design the marketing, technological, human resources, operations and financial strategies that satisfy the requirements of corporate and business strategy.
Functional strategies allow setting goals for the different functional areas and / or structures, are more detailed and are designed for shorter periods of time, helping to coordinate efforts and resolve conflicts10.
For the determination of each of the functional strategies it is necessary to take into account the changes that are taking place in the technologies of each of them (for example the development of financial engineering, participatory systems of human resources), as well as what the competition is doing and of course, the premise is the information resulting from corporate and business strategies that represent the compass for the design of these strategies. The development of functional strategies must guarantee compliance with the master strategy.
Bibliography
- Ansoff, I.; "Company's strategy". Editorial University of Navarra. 1976. Menguzzato and Renau. "The strategic direction of the company. An innovative approach to management ”. Publishing House of the Ministry of Higher Education. April 1997. Koontz, H. and O'Donnell, C.; "Administration". McGraw-Hill Publishing. 1985. Menguzzato and Renau. Ob. Cit. Diaz, I; "Business strategy: by way of introduction". Strategic direction. M. in Direction. CETED. University of Havana. 2006. Stoner, J.; "Administration". Editorial EMPSES. Menguzzato and Renau. Ob. Cit. Porter, M.; "Competitive advantage". CECSA, Mexico. 1988. Porter, M.; Ob. Cit. Stoner, J.; Ob. Cit
