Need of Strategy in Business Organization Dr. Unmekha Tare, Mr. Anil Mirchandani and Mr. Vishal...

Disseminate Knowledge‐International Journal of Research in Management Science and Technology

ISSN No. 2321-1245 Volume 1 Issue 3 July -September Year 2013

Sanskar Jyoti Vidhya Niketan www.sjvndk.com

Volume 1, Issue 3, July- September 2013 ISSN No.2321-1245

Disseminate Knowledge-International Journal of Research in Management Science and Technology (Disseminate Knowledge-IJRMST) Page 59

Need of Strategy in Business Organization

Dr. Unmekha Tare, Assistant Professor, St. Paul Institute of Professional Studies, Indore

Prof. Anil Mirchandani, Associate. Professor, St. Paul Institute of Professional Studies,

Indore

Mr. Vishal Mehta, Assistant Professor, St. Paul Institute of Professional Studies, Indore

Concept of strategy

A strategy is an unified, comprehensive and integrated plan that relates the strategic

advantages of the firm to the challenges of the environment. It is designed to ensure that

the basic objectives of the enterprise are achieved through proper execution by the

organisation.

Thus, matching the enterprise resources with the varying business conditions remains the

chief activity of a strategy of any organisation. It determines how the organisation should

be positioned in future to take advantage of the market opportunities.

Strategy consists of making choice among alternative action programmes, commitment to

specific product markets, competitive moves and business approaches, on the part of the

managers to achieve organizational objectives.

“Strategy is the direction and scope of an organisation over the long-term which achieves

advantage for the organisation through its configuration of resources within a challenging

environment, to meet the needs of markets and to fulfill stakeholder expectations.”

Features of strategy

• The desired business aims that what an organisation wants to achieve in the long-run

(direction).

• Choice of markets that a business should compete in and the kind of activities

involved in such markets and their scope.

• The way a business can perform better than the competitors (advantages).



• The skills, assets, finance, relationship, technical competence, facilities that are

required for competing (resources).

• Scanning the external, environmental factors that affect the ability of any business to

compete (environment).

• The values and expectations of those who have power in and around the business

(stakeholders).

A strategy begins with the concept of how to use the resources of an organisation most

effectively in a changing environment. It can be simplified by illustrating the concept of a

game plan in sports. Before a team goes into the field, an effective coach examines a

competitor’s past plans, its strengths and weakness and at the same time examines his

own team’s strengths and weaknesses. The coach then designs a competitive strategy to

achieve the objective.

A strategy for a firm is one such game plan. A firm deals with a number of competitors

simultaneously and with the government, suppliers, owners, labour unions and others.

A strategy is oriented toward basic issue such as:

• What is our business?

• What should it be?

• What are our products and markets?

• What can our firm do to accomplish objectives?

• How do we leverage the advantages offered by the environmental parameters?

• How do we stay clear of the threats posed by the environment?

A diagram to show the Strategy Formulation of Business Unit:



Scope and Importance of Strategy

The importance of strategy has been accepted in the history of business in India as well as

abroad. In fact, strategy is more important than ever, particularly for organisations that

want to differentiate themselves from others.

The formulation of a good strategy facilitates a number of actions and desired results that

would be difficult otherwise. A strategic plan provides employees with a clear vision of

the purposes and objectives of the organisation. The formulation of strategy forces

organisations to examine the prospect of change in the near future and to prepare for it

rather than to wait inactively until market forces compel it to change. Strategic

formulation helps the organisation to plan its capital budgeting. Thus even if

organisations have limited funds to invest, they can allocate capital funds where they will

be most effective to derive the highest returns on their investments.

On the contrary, an organisation lacking a clear strategic plan gives its decision makers

no direction other than the maintenance of the present status. The organisation becomes

purely reactive to external pressures and less effective at dealing with change. In highly



competitive markets, an organisation without a coherent strategy is likely to be

outmanoeuvred by its rivals and may face a declining market share or even declining

sales. Moreover strategy leads to the following benefits:

1. Financial benefits in terms of profit and cost minimization.

2. Improved ability to prevent problems.

3. Improved quality of decisions through group interaction.

4. Better employee incentive.

5. Clear role identification of employees avoiding duplication of work.

6. Reduced gaps and overlaps in activities.

7. Lesser reluctance to change.

Steps of Strategy

The formulation of a reliable strategy can be executed through six important steps:

1. The company or organisation must first choose the industry in which it wishes to

engage- in other words, the corporate strategy.

2. The organisation should then put forward a “mission statement” consistent with its

business definition.

3. The organisation must develop strategic objectives or goals and set performance

objectives (e.g., at least 15 percent sales growth each year).

4. Based on its overall implication, an analysis of both internal and external factors, the

organisation must create a specific business or competitive strategy that will fulfill its

corporate goals (e.g., pursuing a market niche strategy, being a low-cost, high-volume

producer).

5. The organisation then implements the business strategy by taking specific steps (e.g.,

lowering prices, forging partnerships, entering new distribution channels).


Disseminate Knowledge-International Journal of Research in Management Science and Technology (Disseminate Knowledge-IJRMST) 3

6. Finally, the organisation needs to review its strategy’s effectiveness, measure its own

performance and possibly change its strategy by repeating some or all of the above

steps.

7. These steps form the core of strategic management in the organisation.

Strategic Decision-making

The concept of strategy becomes a process of taking decisions when the organisation

formulates a strategic plan. While determining the future, strategic decisions develop the

identity and character of the organisation. They do this by determining if the organisation

will continue in the same business line, or diversify in broader fields of activities. They

also explore the possibility of the organisation’s entry in a new market or its dominant

increase in the existing market.

Strategic decisions principally deal more with external than internal business problems

and specifically with the selection of the product mix (the full range of products on offer

by the organisation).

Strategic decisions are different from operating decisions that are concerned with the

daily activities or current operations. Examples of such activities are resource allocation

monitoring, performance and applying controls, production planning and scheduling

inventory management and control.

Strategic decisions also differ from administrative decisions that deal with structuring the

firm’s resources in order to create a maximum performance potential. These decisions

involve several activities, which are as follows:

• Establishing authority-responsibility relationships,

• Establishing work flows, communication, distribution channels,

• Locating facilities as well as acquiring and developing resources,

• Developing sources of raw materials supply, personnel training and development,

• Financing and acquisition of plant and equipment.



Strategic decisions have the following dimensions:

• Top management involvement: Strategic decisions are associated with several fields

of organisational operations. This call for an understanding of major implications and

the essential authority that allows allocating resources for the implementation of

strategic decisions. Such understanding and authority exists only with the top

management, which is dominant in strategic decision-making.

• Allocation of large amount of resources: Strategic decisions call for obligation of

the organisation to long term activities that aim the operation of substantial resources.

These resources in the form of men (personnel), machines (plant), materials (raw

materials) and money (capital) have to be attained from organisation’s surplus.

• Impact on long-term prosperity of the organisation: Strategic decisions have a

significant impact on the organisation’s prospective growth and success. This is due

to the organisation’s commitment to any strategy chosen before along with its specific

product-market features. It is difficult to shift the organisations perspective by

adopting a radically different strategy in the short run.

• Future-Oriented: Strategic decisions are based on foresight, anticipated by the

management. In a fast changing competitive world, a proactive business approach is

adopted to meet the projected changes.

• Multi functional or multi business consequences: Strategy formulation may have

implications for several functional departments, Strategic Business Units (SBUs) and

units of operation in terms of allocation and reallocation of resources and

responsibilities. These implications may result from strategic decisions bearing on

product-mix, organisational structure and competitive emphasis.

• Consideration of factors in the external environment: The open system in which

the firms interact with the environment, calls for strategic decisions to be made in

light of how suppliers, creditors, customers, competitors and government are likely to

react to environmental changes.



• Readiness to make non-self-generative decisions: Often managements do not have

any forewarning that strategic decisions are necessary. This is a challenging

dimension that involves real time issues or ‘mid-year surprises’ (unforeseen and

uncertain events that occur in the market). The organisation should therefore remain

flexible and prepared to make strategic decisions at any point of time.

Role of a Strategist

A strategist is someone who is expert in developing and implementing strategies. He is

however, responsible for more than developing a strategic plan. He is someone who helps

the organisation, and the people within it to create their futures. Strategists try to capture

the imagination of their customers for better selling purposes. They inspire the

organisation’s employees to channel their energy into actions that support the company’s

vision. The role of a strategist is, therefore, much larger. An efficient strategist plays the

following roles:

• Forecaster: A forecaster is a person who sees the future. The efficient strategist helps

his team to imagine the future within which they will be competing. He identifies the

organisation’s competencies and unique strengths. He studies changes occurring in

the macro environment, the markets, the industry and the competitors of the business.

He then uses imaginative thinking to help the team visualise and thus adjust to the

future changes that their organisation will face.

• Sculptor: A sculptor is an artist ‘who carves a form’ out of raw materials. The

sculptor strategist creates a unique role or purpose for the organisation. He predicts

the reason why the organisation will be successful within any specific imagined

future. The sculptor begins by defining the organisation’s future target markets. He

then provides the future shape of the organisation by defining why its future

customers will choose to support its products, instead of those produced by any other

future imagined corporate competitor. Having got the basic form for his sculpture, the

sculptor strategist then carves away everything that isn’t contributing to the sculpture.



So the strategist changes systems, structures, rewards, alliances, products and services

to ensure that everything supports the organisational purpose.

• The Diplomat: A diplomat is someone who is ‘skilled in the art of manoeuvring and

manipulation.’ The diplomat strategist knows the power players in the organisation.

He knows what drives each leader. He knows who is motivated by ego and who is

motivated by money. He is aware who needs to be recognized and who thrives on

‘making a difference’.

• Mentor: A mentor is ‘a person who gives personal spiritual guidance to his

disciples.’ The strategist guru i.e. the mentor shows how each individual employee in

the company can contribute to the greater, noble organisational goal. He helps

individual employees to discover their unique personal purpose. Then he guides them

to channel their energy and talent towards living their purpose, while at the same time

performing to support the organisational goal.

• Innovative Entrepreneur: Many employees find that their talents, passions,

creativity, imagination and energy are locked behind bars of the company culture.

Fearful managers who want to be in control’, and ‘avoid making mistakes’, often bar

the keys to creativity, passion, self-confidence and innovation. The Entrepreneur

strategist shows employees how to escape from captivity of boredom and fear without

altering their fearful managers. He provides the key to unlocking their talents,

creativity and energy. He shows the employees how to frame their passions as

‘simply a tool for helping the company to achieve its strategies’.

Conclusion:

Strategic decision is related to decision concerning the scope of the organisation and the

internal skills and resources required to achieve the scope. This needs the selection and

execution of a sound strategic decision that can influence major investment patterns.

A strategy operates at several levels. Corporate-level strategic management is the

management of activities, which define the overall character and mission of the



organisation, whereas business level strategic management includes policies involving

new product development, marketing mix, research and development, personnel etc.

Strategy is useful in practice and contributes optimally to the performance of the

organisation. Research has shown that organisations which practice and implement

strategy; not only surpass other non managing organisations but also improve their own

past performance.

Strategy is a significant and critical factor in determining business organisation’s success.

In today’s fast changing business environment, where technology, product, market

conditions, economy and climate keep varying, strategy is only measure through which

future opportunities and problems can be anticipated by the organizations. It helps the

executives to provide necessary directions to business organisation, to take maximum

advantage of new opportunities and minimize the prevailing risk. Strategy enables

business management to enhance the chances of making long term decisions that are

timeless. The growth and expansions of business purely depends upon the effective

strategy.

References

1. R. C. Shirley – ‘Limiting the scope of strategy: A decision based approach.

2. W. F. Gweck and J. R. Jausch – Business policy and strategic management.

3. W. R. King and D. I. Cleland – Strategic planning and policy.

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