What is a Business Strategy?
Business strategy is a concept that has been used to mean different things in business theory. To discuss all the variants in definition would require a book not an article. However, I will try to explore the concept of strategy from a broad perspective, and then offer some insight into the different ways the term has been used.
Broadly speaking, what is business strategy?
In one of the most important texts on this subject, Michael Porter stated in 1980 in his book “Competitive Strategy”: “The essence of formulating competitive strategy is relating a company to its environment”. Here we can see some fundamental elements of strategy: the link between the firm and the environment that it operates in, and the process of formulating a strategy that will enhance the firm’s competitiveness in this environment.
Business strategy therefore must consist of some form of analysis and a process of formulation, where the company defines itself and its activities within its environment so as to perform better. Since any company has the ultimate goal of improving its stakeholders’ interests, this must ultimately be the end goal of business strategy.
Broadly speaking, we can answer the question “what is a business strategy?” as follows:
- A framework for how a company intends to act within its given environment, with the goal of maximizing stakeholder interest.
- The process of formulating business strategy depends on an analysis of the company and its operating environment.
- In the context of a business plan, this process usually begins with the vision, then the mission statement, then the formulation of goals, and finally the business strategy itself (the means by which the firm aims to achieve its goals).
So, what more is there to business strategy?
The definition formulated above provides a very general view of strategy. The concept of strategy is complicated however by different foci. Some emphasise the response to opportunities and threats, others regard strategy more as a definition of the firm’s competitive domain, others still, regard it as a system for the differentiation of managerial tasks at different levels, and so on. As mentioned earlier, providing a discussion of all these positions is far beyond the scope of this article, however what one should remember is to make sure that everyone you are communicating is using (or at least aware of) the same definition.
For the most part however, when most people ask what business strategy is, they mean the general definition outlined above.
Once an overall business strategy has been formulated, individual departments then set their own strategic and tactical goals, e.g. the marketing strategy, the human resources strategy, the supply chain management strategy, the knowledge management strategy and so on.
I will elaborate more on different kinds of strategy later.