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Date Added: June 04, 2007 02:14:32 AM

Strategy in the generic sense refers to the methodology used to achieve an objective. Coaches use strategy to win games. Generals use strategy to win wars. Business leaders use strategy generally to maximize their profit margin and achieve dominance in whole industries and regions.

    Before it can define its business strategy, a company must first be able to clearly state its objectives within a definite and long term time framework.  Only then can it draw up the policies and programs that will help it to achieve those objectives.

Business strategies must reflect the realities of the local and global economy, the strengths and weaknesses of the company and its competitors as well and other internal and external factors. Since these factors all undergo changes, business strategies cannot be regarded as unchanging and static. Strategies should be evaluated when significant developments occur and assessed to see if they are still effective, if they need minor or major adjustments, or should be junked altogether.

In the 60s, business strategy was identified with the process of corporate planning. In the 70s, business strategy focused on the question of diversification to ensure company stability. The next two decades, the 80s and 90s on the other hand, shifted the stress to building up a company’s core competencies and people-friendly management.  Now the issue seems to revolve around the particular and distinctive abilities of each company.

SWOT: A Tool for Defining Strategy

       Once a company has clarified its objectives    it can define its strategy to achieve its objectives. When you conceptualize a business strategy you must have a totally realistic grasp of the state of your company, its various competitors and the environment in which your business operates.  To do this, you should undertake a SWOT analysis – an analysis of strengths, weaknesses, opportunities and threats. The SWOT should be as specific, detailed and concrete as possible.  A strategy that is based on generalizations cannot be used to solve specific problems and therefore will not be effective. Strengths and weaknesses refer to the internal state of the company and its competitors. A company’s strengths and weaknesses are often intangible and refer (but are not limited)  to the following:

- Employees  (number, skills, loyalty, efficiency, training)
- Public image and reputation
- Brand names
- Production Cost and Capacity
- Management (Leadership skills, relations with employees, image/reputation)
- Ethics and Principles (especially critical when the company’s operation or products affect the environment)

Opportunities and threats usually refer but are not limited to the following:

- Wars and conflicts
- Breakthroughs in technology with either negative or positive impact on the company
- Serious breakout of dangerous diseases such as the bird flu or FMD that can affect global markets.
- Bad publicity/drawbacks regarding company image and public trust or its opposite
- Mergers/Take-over
- Changes in ruling or dominant political parties, with either negative or positive results
- New international laws such as the Kyoto Convention

The strategies employed by businesses can be divided into three groups. The first strategy involves across the board cost cutting, from production and distribution to advertising. This strategy can result in favorable profit margins despite intense competition from rival firms. It can however be the source of conflict if cost cutting affects employee pay, work hours, and benefits.

The second strategy involves promotion of the company’s product as unique and therefore desirable and deserving of consumer loyalty. Its uniqueness may be its design, its material, and other qualities. This strategy attempts to build a strong following loyal to the company brand.  This strategy is popular among companies that deal in high-end products and use celebrities to project an exclusive image. Examples are Louis Viutton and Cristal champagne. The strategy may fail if say another company specializing in high-end products proves to be more attractive to consumers. 

The third strategy consists of the company focusing on a specific market, whether this is a sector such as senior citizens or an area such as Asia. To be successful the strategy must compensate for the limits it sets on its market. Concentrating on China for example may be more profitable for example when it helps the company to significantly raise the number of its customers even it concentrates on only one country instead of the whole of Asia.

Greater participation of the rank and file is a recent development in the formulation of business strategies.  This responsibility used to be shouldered by top management, who all too often have very little contact with and practical grasp of consumers in general and its customers in particular.  Companies are starting to be more aware that many of their employees can contribute valuable insights aimed at business strategy conceptualization and in the actual day-to-day implementation of the strategy.  In fact not only employees but also customers themselves can provide the company with a deeper appreciation of what the public wants.

There are other benefits to be gained from the participative approach to formulating business strategies.  It can boost employee morale, maximize their skills and experience, and train them to take on more responsibilities.  It can also improve the consumers’ perception of the company and develop their company and brand loyalty.

Business strategy can exist on several levels. It can be a strategy at the corporate level, or what is known as a mission statement -- the corporation’s commitment to comply with the expectations of its stockholders. A business unit can also have its own strategy, which is focused on making sure the company does well in a particular market. A business unit strategy covers concerns such as products, customer needs, competitors and how to maximize opportunities. This is very important, especially for transnational corporations that operate in several countries and have to adjust to local conditions. An operational strategy on the other hand, refers to how the company is organized to provide strategic direction to its corporate and business unit levels. It focuses on the management of people, processes and resources.

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