After reading this article you will learn about:- 1. Meaning of Strategy 2. Features of Strategy 3. Importance 4. Essentials 5. Types 6. Implementation.
Meaning of Strategy:
The term strategy has been derived from Greek work “Strategies” which means general. So, the word strategy means the art of general. Thus strategy may be defined as gamesmanship or an administrative course of action designed to achieve success in the face of difficulties. It is the grand design or an overall plan, which a company chooses in order to move or reach the mission and objectives.
Candler defined strategy as “the determination of basic long-term goals and objectives of an enterprise, and the adoption of course of action and the allocation of resources necessary for carrying out these goals.”
Features of Strategy:
The following feature can be identified based on the above definitions:
1. Strategy is a dynamic or relative concept as it is designed to meet the demands of a particular situation. Every situation requires a different strategy. Strategies may have to be revised frequently because of changes in the situation.
2. Strategies are a complex plan encompassing other plans in order to achieve organisational objectives.
3. Strategy is forward looking: It has to do orientation towards the future. Strategic action is required in a new situation, nothing new requiring solutions can exist in the past so strategy is relevant only to future. It may take advantages of the past analysis.
4. Strategy provides the direction in which human and physical resources will be allocated and deployed for achieving organisational goals in the face of environmental pressure and constraints.
5. Strategy is the right combination of factors both external and internal. In relating an organisation to its environment, management must also consider the internal factors too, particularly in terms of its strengths and weakness, that is, what it can do and what it cannot do.
6. Strategy may involve even contradictory action. Since, strategic action depends on environmental variables, a manager may take an action today and may revise or reverse his steps tomorrow depending on the situation.
Importance of Strategy:
The following importance can be identified:
1. Strategies provide the framework for plans by channeling operating decisions. If strategies are developed carefully and understood properly by managers, there will be more consistent framework by managers. Therefore, strategies help to ensure efficiency and consistency in the allocation and employment of resources.
2. A business strategy sets the direction for the activities required to achieve the objectives of the organisation. It is the catalyst and thrust of the business.
3. Strategy formulation is essential for the long-term survival and growth of an organisation.
4. It enables the enterprise to take advantage of environmental opportunities and to combat environmental pressures. It provides useful framework for guiding, thinking and action.
Essentials of a Sound Strategy:
The basic guidelines of an effective strategy are as follows:
1. The strategy should be consistent with the objectives, policies and other strategies of the organisation.
2. The strategy should be workable. It must be able to meet the needs of the particular situation. It must contribute to the progress of the organisation.
3. A sound strategy must be suitable to the environment of the business. A strategy, which is not consistent with the environment, can put the organisation in danger.
4. The strategy should be designed in the light of available resources. A strategic decision involves commitment of right amount of resources to the opportunity and reservation of sufficient resources for unanticipated demands.
5. The risk involved in the strategy must be reasonable in view of its expected pay-offs. A high-risk strategy may threaten the survival of the enterprise, if things go wrong.
Types of Strategy:
Strategies may be classified into the following categories:
1. Stability strategy,
2. Growth strategy,
3. Retrenchment strategy, and
4. Combination strategy.
1. Stability Strategy:
Stability strategy implies, “to leave the well enough along”. If the environment is stable and the organisation is doing well, then it is better to make no changes. This strategy is exercised most often and is less risky as a course of action.
2. Growth Strategy:
Growth means expansion of the operations of the company and addition of new areas of operations. Growth strategy can be very risky and involves forecasting and analysis of many factors that affect expansion like resource availability and market availability. However, growth is necessary due to volatility of business and industries. For the success of an organisation, growth must be properly planned and controlled.
3. Retrenchment Strategy:
Retrenchment primarily means reduction in product, services and personnel. This strategy is many times useful in the face of tough competition, scarcity of resources and re-organisation of the company to reduce waste. Retrenchment strategy, though reflecting failure of the company to some degree becomes highly necessary for the very survival of the company.
4. Combination Strategy:
Combination strategy means using a combination of other strategies and is primarily used by large complex organisations who may want to cut back in some areas and expand in others. Also, in time of financial difficulties, a company may employ entrenchment strategy and resort to growth strategy, if the economic situation improves.
In order to make strategic planning effective, it is necessary to have the right people involved who would objectively and intelligently look at all angles and all factors involved in the success of these plans and strategies.
Implementation of Strategies:
Implementation of strategy is the process through which a chosen strategy is put into action. It involves the design and management of systems, it achieve the best integration of people, structure, processes and resources in achieving organisational objectives.
Important factors in strategy implementation are given below:
1. Institutional of Strategy:
The first basic action that is required for putting a strategy into operation is its institutionalization. Since strategy does not become either acceptance or effective by virtue of being well designed and clearly announced, the successful implementation of strategy requires that the strategy framer act as its promoter and defend.
Often strategy choice becomes a personal choice of the strategist because his personality variables become an influential factor in strategy formulation.
2. Setting Proper Organisational Climate:
It is important in making strategy to work. Organisational climate refers to the characteristics of internal environment, which conditions the corporation, the development of the individuals the extent of commitment and dedication of people in the organisation and the efficiency with which the purpose is translated into results.
Organisations whose strategy is implemented with matching climate are more effective than whose are not. People are the instruments in implementing a particular strategy and organisational climate is basically people-oriented.
3. Developing Appropriate Operating Plans:
Operating plans means action plans, operational programmes and decisions. If they are made to reflect desired of organisational objectives by focusing attention on those factors, which are critical to the success of the organisation as spelled out during the strategy formulation process.
4. Developing Appropriate Organisation Structure:
Organisation structure is the pattern in which parts of the organisation are interrelated or interconnected. It prescribes relationships among various positions and activities. The organisation structure should be designed according to the needs of the strategy for the implementing strategy.
The relationship between strategy and structure can be thought of in terms of utilizing structure for the strategy implementation because structure is a means to an end, that is to provide facilities for implementing strategy. Therefore both should be integrated.
5. Periodic Review of Strategy:
There should be periodic review of strategy to find out whether the given strategy is relevant. This is required because even the carefully developed strategies might cease to be suitable if events change, knowledge becomes more clear, or it appears that the environment will not be as originally thought.
Thus strategies should be reviewed from time to time. Major strategies should be reviewed at least once a year. In fact this is done by most of the organisations who believe in relating themselves with the environments.