Dr Richard Dune

23-11-2024

What is strategy, and why is it important?

Image by Rawpixel via Envato Elements

Understanding business strategy: Definitions, importance, and implementation

Most of us have heard the term 'strategy' in business and personal settings. But what exactly is ‘business strategy’, and why is it important? Also, what are the different types of strategies within an organisation, and why do they matter?

In this article, Dr Richard Dune discusses some standard definitions of strategy, noting their differences. He will examine the three types of strategies, namely corporate strategy, business unit strategy, and team strategy, along with some of the main tools and models associated with each.

Dr Dune argues that developing a strategy takes time and resources and is often seen as a distraction from the day-to-day demands of running a business. However, successful business owners and executives understand the importance of having a strategy and committing time and resources to manage its execution. The benefits accrue to them and their businesses as a result.

Let’s start by discussing the various definitions of strategy.

What is strategy?

Business leaders and theorists have studied strategy for years, but there is still no definitive answer as to what it is. Consequently, the concept of strategy remains ambiguous since there is no one-size-fits-all definition. The need for a standard definition of strategy is mainly because people perceive it differently. For example, one should analyse the present situation carefully, anticipate future changes in their market or industry, and then plan how they will succeed. Others believe predicting the future is too complex and prefer to evolve their strategies organically and cross bridges as they encounter them.

In their book, 'Exploring Corporate Strategy', Gerry Johnson and Kevan Scholes note that a company's strategy determines its long-term direction and scope (Johnson and Scholes, 2005). They argue that strategy should determine how organisations should configure resources to meet the needs of markets and stakeholders.

According to Michael Porter, a strategy expert and professor at Harvard Business School, a strategy must define and communicate an organisation's unique position (Porter, 1980). Porter argues that strategy should determine how to combine organisational resources, skills, and competencies to achieve a competitive advantage.

While it is understandable that some evolved elements will always be part of a strategy, planning for market success cannot be overlooked. Therefore, organisations must take full advantage of the opportunities available and anticipate and prepare for the future at all levels.

The next section will discuss why strategy is essential in any organisation.

Why is strategy important?

It is generally accepted that strategy is vital in business and forms the foundation upon which all executives and entrepreneurs build their enterprises. A strategy helps business leaders define their business and gives it a set of values and purpose. It helps them understand what success looks like, provides a roadmap for their business, shows them their destination, and identifies useful stopping points along the way. After all, who would set off on a journey without having some idea of where they were heading or how they would get there?

Here are five reasons why strategy plays such an essential part in any organisation’s success:

• Planning and forecasting
• Identifying strengths and weaknesses
• Building skills and knowledge
• Resource allocation
• Internal and external environmental scan.

In the next section, we will examine why strategy is often ignored despite its benefits.

Why is strategy often ignored?

Despite the importance of strategy for any business, many small and medium-sized organisations do not have formal strategies to support their growth. Some organisations have formal business plans or strategies, while others have only verbal plans or none.

Is there a reason why a business strategy is often forgotten or ignored? Most business leaders and entrepreneurs have some vision in their heads, but it is often unstated and most likely sub-conscious. Their core belief in growth and achievement, coupled with boundless energy, enthusiasm, and hard work, can lead to some initial success. It is common for entrepreneurs to find that as time passes and their business grows busier, they do not have the time to think about long-term strategies. Planning and developing a business strategy becomes complex, a luxury they cannot afford.

If sales drop, operating costs rise, or competition increases, the problem becomes compounded. Every moment of free time is spent putting out fires, and time becomes the most precious of commodities. Entrepreneurs often experience the feeling of being on a ship without a rudder, blown by the winds of fortune with no control over where they may land.

We will discuss how all of this can be avoided in the next section and the three types of business strategies.

Three levels of business strategy

An organisation's strategy needs to be developed on three levels: the corporate level, the business unit level, and the team level.

The corporate strategy of an organisation determines how the organisation as a whole supports and enhances the value of its business units. Business unit strategy describes how individual business units compete and win in their respective markets. Business unit strategies must align with corporate strategy. To achieve an organisation's larger goals and objectives, each team within a business unit needs its own strategy. Whatever your role may be, your work contributes to the team strategy, which contributes to the business unit and corporate strategy.

Each level of strategy is necessary for an organisation to succeed. Now, let’s expand on the three levels of organisational strategy.

Conclusion

Despite the lack of an agreed definition, strategy is likely to determine how we will succeed in the period ahead. Business strategy can be divided into three levels, each having a different focus and requiring various tools and skills. At each level, strategy can be defined as a means of preparing for and achieving success in the future.

An organisation must have a corporate strategy that supports its vision and mission and focuses on the organisation to be successful and productive. In an organisation, business units develop business unit strategies that their leaders use to determine how they will compete in their specific markets. In addition, each team should have a strategy to ensure that its daily activities contribute to the organisation's overall success.

Click here to see online courses and resources that will help you build a successful business strategy for your organisation.

Discover our accreditation details on the CPD Certification Service website and see how a strategic approach to compliance and governance ensures excellence in professional training and development.

Looking for the right solutions? Get in touch today and discover customised strategies designed to align with your vision and drive your organisation forward.

Last updated on 03-01-2025 

Contact us

Complete the form below to start your ComplyPlus^TM trial and transform your regulatory compliance solutions.