These days MBA students at almost all MBA colleges learn the art of business strategy. ISBR Business School is no exception to the rule. Its importance is outlined by the fact that ISBR offers the option to its Ph.D students in Management & Commerce of specializing in 'Corporate Strategy and Business Excellence'. In fact, business strategy forms one of the themes on which the Case Study Club of ISBR conducts Case Study League competitions. So, what exactly is business strategy?

Alfred Chandler defines strategy as follows: “Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.” Business strategy then is a set of objectives, goals, and plans, usually formulated by the senior management of an organization, which determines the direction and scope of an organization for the long-term, usually 3-5 years or longer. This entails the marshalling of the organizational resources, competencies, and skills so as to create a competitive advantage in the marketplace for the organization. Michael Porter, a professor at Harvard Business School, opines that the strategy should define and communicate an organization’s unique position that distinguishes it from its competitors. Strategy can be formulated at three different levels – corporate strategy, business unit strategy, and operational strategy.

Corporate Strategy

An organization may be consisting of many business units operating in different markets, or even in different countries. Such an organization needs to function in a cohesive manner so that the business units function in an integrated and synergistic fashion to achieve the overall goals of the organization. For this, one needs to formulate an overall strategy for the organization, the corporate strategy, which enhances the value of the business units that comprise it so that they deliver more value in combination than they would if they operated individually. The corporate strategy is usually spelled out through such means as the organization’s vision, mission, values, and annual speeches, etc.

To formulate the corporate strategy, one can use tools like Porter’s Generic Strategies, the ADL Matrix, the Boston matrix, or VRIO Analysis. Corporate strategy can be operationalized by (1) Building and enhancing internal competencies, (2) Sharing resources and technologies among the business units, (3) Raising capital in a cost-effective manner, and (4) Developing and maintaining a robust corporate brand image.

Business Unit Strategy

This level of strategy is applicable only to a multi-business unit organization. Otherwise, the corporate strategy would be synonymous with business unit strategy if there is only one business unit, that is, the organization itself. The business unit strategy is formulated with an eye on succeeding in its particular market by increasing its market share. At the same time, such a strategy should not deviate from the overall strategy of the organization, but instead should complement it and promote it.

The business unit should gather and analyze information about its competitors in the market and how it stands in relation to them, so as to formulate a strategy. In doing this, it needs to take a look at its core competencies and assess how it can use them to meet its customers’ needs efficiently. This could involve a USP Analysis. Other methodologies to formulate a business unit strategy are SWOT Analysis, Porter’s Five Forces Analysis, Scenario Planning, Market Segmentation, Critical Success Factor Analysis, and Directional Policy Matrix.

Business unit strategy interfaces with the market, hence the employees of the business unit should be able to draw parallels between their work and the strategy. When the employees know the business unit’s vision, mission, and values, they will be able to draw sustenance and meaning for their work from it. Only then will the employees be motivated and productive.

Operational Strategy

Operational strategy is concerned with how the various components of the business are organized to align with the strategy spelt out in the business unit strategy and corporate strategy. Hence, the focus of operational strategy is on issues of the deployment and optimal utilization of resources, processes, people, etc.

Given that the majority of the organizations these days get their work accomplished through teams, formulating an operational strategy involves also drawing up a team strategy. Each team contributes differently to the organization, so each team needs to have its own strategy. These team-level strategies must ultimately promote the achievement of the mission and goals of the business unit and the organization.

Finally speaking, we have to realize that senior managers typically deal with unpredictable situations, so their way of strategizing has to be ad hoc, flexible, dynamic, and implicit. So, one can agree with Chester Barnard that strategy formulation is more an art than a science: “The process [of formulating a strategy] is the sensing of the organization as a whole and the total situation relevant to it. It transcends the capacity of merely intellectual methods, and the techniques of discriminating the factors of the situation. The terms pertinent to it are ‘feeling’, ‘judgement’, ‘sense’, ‘proportion’, ‘balance’, ‘appropriateness’. It is a matter of art rather than science.”
 

- Contributed by Dr. D. Samarender Reddy (ISBR Business School)

Disclaimer: The views expressed in this article are the author's personal views and has nothing to do with Campuswalkin.com.

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