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What Is Strategy?

Preprint · October 2019

DOI: 10.13140/RG.2.2.26435.35369

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Syed Abdul Rehman Bukhari

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S A Rehman Bukhari Concept Paper 2019

What Is Strategy?
You've probably heard the term "business strategy" used in the workplace. But what is strategy,
exactly? Also, are you aware that you need different types of strategy at different levels within
your organization? In this article, we're discussing some common definitions of strategy. We'll
focus on three strategic levels – corporate strategy, business unit strategy, and team strategy – and
we'll look at some of the core tools and models associated with each area.
Strategy has been studied for years by business leaders and by business theorists. Yet, there is no
definitive answer about what strategy really is. One reason for this is that people think about
strategy in different ways. For instance, some people believe that you must analyze the present
carefully, anticipate changes in your market or industry, and, from this, plan how you'll succeed
in the future. Meanwhile, others think that the future is just too difficult to predict, and they prefer
to evolve their strategies organically.
According to Johnson and Scholes (2005), “strategy determines the direction and scope of an
organization over the long term, and they say that it should determine how resources should be
configured to meet the needs of markets and stakeholders.” Michael Porter, a strategy expert and
professor at Harvard Business School, emphasizes the need for strategy to define and communicate
an organization's unique position, and says that it should determine how organizational resources,
skills, and competencies should be combined to create competitive advantage.
While there will always be some evolved element of strategy, we believe that planning for success
in the marketplace is important; and that, to take full advantage of the opportunities open to them,
organizations need to anticipate and prepare for the future at all levels. For instance, many
successful and productive organizations have a corporate strategy to guide the big picture. Each
business unit within the organization then has a business unit strategy, which its leaders use to
determine how they will compete in their individual markets.
In turn, each team should have its own strategy to ensure that its day-to-day activities help move
the organization in the right direction. At each level, though, a simple definition of strategy can
be: Determining how we are going to win in the period ahead. We'll now look more deeply at each
level of strategy – corporate, business unit, and team.
Corporate Strategy
In business, corporate strategy refers to the overall strategy of an organization that is made up of
multiple business units, operating in multiple markets. It determines how the corporation as a
whole support and enhances the value of the business units within it; and it answers the question,
"How do we structure the overall business, so that all of its parts create more value together than
they would individually?"
Corporations can do this by building strong internal competences, by sharing technologies and
resources between business units, by raising capital cost-effectively, by developing and nurturing

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a strong corporate brand, and so on. So, at this level of strategy, we're concerned with thinking
about how the business units within the corporation should fit together, and understanding how
resources should be deployed to create the greatest possible value. Tools like Porter's Generic
Strategies, the Boston Matrix, the ADL Matrix and VRIO Analysis will help with this type of
high-level analysis and planning.
The organization's design is another important strategic factor that needs to be considered at this
level. How you structure your business, your people, and other resources – all of these affects
competitive advantage and can support your strategic goals.
Business Unit Strategy
Strategy at the business unit level is concerned with competing successfully in individual markets,
and it addresses the question, "How do we win in this market?" However, this strategy needs to be
linked to the objectives identified in the corporate level strategy.
Competitive analysis, including gathering competitive intelligence, is a great starting point for
developing a business unit strategy. As part of this, it's important to think about your core
competencies, and how you can use these to meet your customers' needs in the best possible way.
From there you can use USP Analysis to understand how to strengthen your competitive position.
You will also want to explore your options for creating and exploiting new opportunities. Porter's
Five Forces is a must-have tool for this process, while a SWOT Analysis will help you understand
and address the opportunities and threats in your market.
Your business unit strategy will likely be the most visible level of strategy within each business
area. People working within each unit should be able to draw direct links between this strategy and
the work that they're doing. When people understand how they can help their business unit win,
you have the basis for a highly productive and motivated workforce. As such, it's important to have
a clear definition of the business unit's mission, vision and values.
Keeping in view; for smaller businesses, corporate and business unit strategy may overlap or be
the same thing. However, if an organization is competing in different markets, then each business
unit needs to think about its own strategic direction. It's important, though, that each business unit's
strategy is aligned with the overall strategy of the corporation, particularly where the corporation's
brand is important.
Team Strategy
To execute your corporate and business unit strategies successfully, you need teams throughout
your organization to work together. Each of these teams has a different contribution to make,
meaning that each team needs to have its own team-level strategy, however simple. This team
strategy must lead directly to the achievement of business unit and corporate strategies, meaning
that all levels of strategy support and enhance each other to ensure that the organization is
successful.

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S A Rehman Bukhari Concept Paper 2019

This is where it's useful to define the team's purpose and boundaries using, for example, a team
charter; and to manage it using techniques such as Management by Objectives and use of key
performance indicators. You need to be working efficiently to achieve the strategic objectives that
have been set at higher levels of the organization; so, an important element of your team strategy
is to implement best practices to help your team to meet its objectives. Activities that optimize
supplier management, quality, and operational excellence are also important factors in creating
and executing an effective team strategy.
Subjectively; Strategy can be difficult to define, but a good definition is: Determining how we will
win in the period ahead. In business there are different levels of strategy. Each of these has a
different focus, and needs different tools and skills. Corporate strategy focuses on the organization
as a whole, while business unit strategy focuses on an individual business unit or market. Finally,
team strategy identifies how a team will help the organization meet its overall goals and objectives.
Porter’s Generic Strategy
These three approaches are examples of "generic strategies," because they can be applied to
products or services in all industries, and to organizations of all sizes. They were first set out by
Michael Porter in 1985 in his book, "Competitive Advantage: Creating and Sustaining Superior
Performance."
Porter called the generic strategies Cost Leadership (no bells & whistles), Differentiation
(creating uniquely desirable products and services) and Focus (offering a specialized service in a
niche market). He then subdivided the Focus strategy into two parts: Cost Focus and
Differentiation Focus. These are shown in figure below.

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S A Rehman Bukhari Concept Paper 2019

According to Porter's Generic Strategies model, there are three basic strategic options available to
organizations for gaining competitive advantage. These are: Cost Leadership, Differentiation and
Focus. Organizations that achieve Cost Leadership can benefit either by gaining market share
through lowering prices (whilst maintaining profitability) or by maintaining average prices and
therefore increasing profits. All of this is achieved by reducing costs to a level below those of the
organization's competitors. Companies that pursue a Differentiation strategy win market share by
offering unique features that are valued by their customers. Focus strategies involve achieving
Cost Leadership or Differentiation within niche markets in ways that are not available to more
broadly-focused players.
The Cost Leadership Strategy
Porter's generic strategies are ways of gaining competitive advantage – in other words, developing
the edge that gets you the sale and takes it away from your competitors. There are two main ways
of achieving this within a Cost Leadership strategy:

• Increasing profits by reducing costs, while charging industry-average prices.

• Increasing market share by charging lower prices, while still making a reasonable profit on
each sale because you've reduced costs.
The Cost Leadership strategy is exactly that–it involves being the leader in terms of cost in your
industry or market. Simply being amongst the lowest-cost producers is not good enough, as you
leave yourself wide open to attack by other low-cost producers who may undercut your prices and
therefore block your attempts to increase market share. Remember that Cost Leadership is about
minimizing the cost to the organization of delivering products and services. The cost or price paid
by the customer is a separate issue!
Companies that are successful in achieving Cost Leadership usually have:

• Access to the capital needed to invest in technology that will bring costs down.
• Very efficient logistics.
• A low-cost base (labor, materials, facilities), and a way of sustainably cutting costs below
those of other competitors.
The greatest risk in pursuing a Cost Leadership strategy is that these sources of cost reduction are
not unique to you, and that other competitors copy your cost reduction strategies. This is why it's
important to continuously find ways of reducing every cost. One successful way of doing this is
by adopting the Japanese Kaizen philosophy of “continuous improvement”.
The Differentiation Strategy
Differentiation involves making your products or services different from and more attractive than
those of your competitors. How you do this depends on the exact nature of your industry and of
the products and services themselves, but will typically involve features, functionality, durability,

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support, and also brand image that your customers value. To make a success of a Differentiation
strategy, organizations need:

• Good research, development and innovation.

• The ability to deliver high-quality products or services.
• Effective sales and marketing, so that the market understands the benefits offered by the
differentiated offerings.
Large organizations pursuing a differentiation strategy need to stay agile with their new product
development processes. Otherwise, they risk attack on several fronts by competitors pursuing
Focus Differentiation strategies in different market segments.
The Focus Strategy
Companies that use Focus strategies concentrate on particular niche markets and, by understanding
the dynamics of that market and the unique needs of customers within it, develop uniquely low-
cost or well-specified products for the market. Because they serve customers in their market
uniquely well, they tend to build strong brand loyalty amongst their customers. This makes their
particular market segment less attractive to competitors.
As with broad market strategies, it is still essential to decide whether you will pursue Cost
Leadership or Differentiation once you have selected a Focus strategy as your main approach:
Focus is not normally enough on its own. But whether you use Cost Focus or Differentiation Focus,
the key to making a success of a generic Focus strategy is to ensure that you are adding something
extra as a result of serving only that market niche. It's simply not enough to focus on only one
market segment because your organization is too small to serve a broader market (if you do, you
risk competing against better-resourced broad market companies' offerings).
According to Porter's Generic Strategies model, there are three basic strategic options available to
organizations for gaining competitive advantage. These are: Cost Leadership, Differentiation and
Focus. Organizations that achieve Cost Leadership can benefit either by gaining market share
through lowering prices (whilst maintaining profitability) or by maintaining average prices and
therefore increasing profits. All of this is achieved by reducing costs to a level below those of the
organization's competitors. Companies that pursue a Differentiation strategy win market share by
offering unique features that are valued by their customers. Focus strategies involve achieving
Cost Leadership or Differentiation within niche markets in ways that are not available to more
broadly-focused players.
VRIO Analysis
According to Barney (1991), the resources and assets that are valuable, rare and inimitable, and
that you are organized to use effectively, will likely contribute most to delivering your
organization's mission. Therefore, you need to make sure that you make the fullest use of such
resources, and take care to protect them. VRIO Analysis was developed by Jay Barney, at first, he

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used the terms "Value," "Rareness," "Inimitability," and "Substitutability" but, in later writings, he
changed "Substitutability" to "Organization," leading to the acronym we know today: VRIO. See
figure below;

References
Johnson, G. and Scholes, K. (2005), Exploring Corporate Strategy (7th edition), Prentice Hall.
Porter, Michael (1985), Competitive Advantage: Creating and Sustaining Superior Performance
Barney, Jay (1991), Firm Resources and Sustained Competitive Advantage,
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