Business strategy as a term is frequently used in the world of commerce, yet its definition can be pretty elusive. Essentially, business strategy refers to a company’s plan of action to achieve its long-term goals and objectives. It involves the allocation of resources, the identification of key strengths and weaknesses, and the implementation of tactics that will lead to sustainable competitive advantage.
Business strategy has many definitions, all emphasizing its complex nature’s various aspects. To begin with, Michael Porter, a leading expert on business strategy, defines it as “the creation of a unique and valuable position involving a different set of activities” (Porter, 1996). This definition emphasizes the need for companies to differentiate themselves from their competitors by creating products or services that are distinctive and difficult to replicate.
Other experts have defined business strategy in different ways. According to Gary Hamel and C.K. Prahalad, two well-known business theorists, strategy should focus on identifying and exploiting a company’s core competencies (Hamel & Prahalad, 1994). This means that companies should build on their strengths and develop capabilities that are difficult for competitors to imitate. Similarly, Kenichi Ohmae, a former partner at McKinsey & Company, has argued that business strategy should focus on creating customer value (Ohmae, 1982). In other words, companies should strive to meet the needs of their customers better than anyone else in the market.
Despite the different business strategy definitions, several key elements are common to most approaches. Firstly, a good business strategy should be focused on achieving long-term goals and objectives. As a result, companies should consider factors such as market trends, customer needs, and the competitive landscape to develop a plan of action that will lead to sustainable growth over time.
Secondly, a good business strategy should be based on thoroughly understanding the company’s strengths and weaknesses. To be more specific, strategists should consider factors such as the company’s financial resources, human capital, and technological capabilities, as well as its reputation and brand image. By understanding its strengths and weaknesses, a company can develop a strategy that leverages its unique assets and minimizes its vulnerabilities.
Thirdly, a good business strategy should be implemented through tactics and initiatives to achieve specific goals and objectives. A detailed action plan must outline how the company will allocate its resources, invest, and build capabilities to achieve its long-term goals. Planning must be followed by monitoring and evaluating performance metrics to ensure the strategy is on track and progressing toward its objectives.
Research has shown companies that develop and implement effective business strategies are more likely to achieve long-term success and sustainable competitive advantage. A study by Bain & Company found companies that develop and execute effective strategies achieve higher revenue growth, profitability, and market share than their peers (Bain & Company, 2017). Another Harvard Business Review study found that companies with a clear and well-defined strategy are more likely to outperform their competitors (Lafley & Martin, 2017).
In conclusion, business strategy is critical to long-term success and sustainability in commerce. While there are many different definitions of business strategy, most experts agree that it involves a plan of action that is focused on achieving long-term goals and objectives, leveraging the company’s unique strengths and capabilities, and implementing a set of tactics and initiatives that are designed to achieve specific goals and objectives. By developing and executing an effective business strategy, companies can achieve sustainable competitive advantage and position themselves for long-term success in the market.
References
- Porter, M. (1996). What is strategy? Harvard Business Review, 74(6), 61–78.
- Hamel, G., & Prahalad, C.K. (1994). Competing for the future. Harvard Business Review Press.
- Ohmae, K. (1982). The mind of the strategist. McGraw-Hill Education.
- Bain & Company. (2017). Achieving more with less: How companies can get the most out of their resources. Retrieved from https://www.bain.com/insights/achieving-more-with-less/
- Lafley, A.G., & Martin, R.L. (2017). Playing to win: How strategy really works. Harvard Business Review Press.
