What is strategy ?

Definitions of strategy

The strategy is the way by which a firm fullfills its mission and attains its objectives.

According to Brandenburger & Stuart, the essence of strategy lies in creating favorable asymmetries between a firm and its rivals.

According to Barney (1997), Strategy is a pattern of resource allocation that enables firms to maintain or improve their performances. A good strategy neutralizes threats, exploits opportunities, capitalizes on strenghts and/or fixes weaknesses.

According to Porter, a company can outperform rivals only if it can establish a difference that it can preserve.

• Ways of being different :

• Create a unique and valuable position, involving a different set of activities
• Make trad-offs in competing (e.g. choose what NOT to do)

Strategic Management

Strategic management is the process by which mission and objectives are chosen, strategies decided and implemented through policies and tactics.

Levels of Strategy :

Corporate Strategy defines the scope of the firm in terms of industries and markets in which it competes. In other words, Corporate strategy answers the fundamental question : WHICH IINDUSTRIES SHOULD WE BE IN ?

Corporate strategy decisions include investment in diversification, vertical integration, acquisitions, and new ventures; the allocation of ressources between the different businesses of the firm; and divestments.

Corporate Strategy of ACCOR Group Accor's Strategic Vision : http://www.accor.com/en/group/accor-strategic-vision.html Soustainable development: http://www.accor.com/en/sustainable-development.html

Business Strategy is concerned with how the firm competes within a particular industry or market. What business or businesses should we be in (corporate strategy) and within each business : HOW SHOULD WE COMPETE ? (against competitors, for targeted customers, to sustain performance). In single-business firms there is no distinction between corporate and business strategy.

The distinction between Corporate Strategy & Business Strategy corresponds to the organization structure of the typical multibusiness corporation. Corporate Strategy is the responsability of the top management team, supported by corporate strategy staff. Business Strategy is formulated and implemented primarily by the individual businesses (typically organized as divisions or business units).

There is also a third level of strategy : functional strategy. Functional Strategies are the elaboration and implementation of business strategies through individual functions such as production, R&D, marketing, human resources and finance. They are primarily the responsability of the functional departments.

Strategy is not a detailed plan or programm of instructions. It is a unifying theme that gives coherence and direction to the actions and decisions of an organization.

The purpose is to guide management decisions toward superior performance (rate of profit above the competitive level) through establishing competitive advantage.

Management's approach to strategy must be dynamic, flexible and innovative.

Four characteristics of a successfull strategy :

• Goals are simple, consistent and long term (confused objectives = failure)
• Profound understanding of the competitive environment
• Objective appraisal of resources
• Effective implementation

 

Sources :

Gaining and Soustaining Competitive Advantage, Jay. B. Barney, Addison-Wesley, 1997

Contemporary Strategic Analysis, Robert M. Grant, 3th edition, Blackwell, 1998

Strategic Management, Raphael Amit, Professor at Wharton University of Pennsylvania, US

 

 

 

 

ECOFINE.COM, Bernard Jaquier, Professor in Economics and Finance, Lausanne, Switzerland, 2020