Student Name: Zain Asim
Student ID: 10111453
Course Name/Code: BUS 101
Assignment Question: IMPORTANCE
OF STRATEGIES AND THEIR TYPES.
Attempt Count: 1
INTRODUCTION:
Strategy is an important part of business management. It is a set of organizational plans for
implementing the decisions made for achieving organizational goals. Strategy is basically of the
types: Corporate Strategy, business (or competitive) strategy, functional strategy. Further detail
and formulation process is explained below:
STRATEGY:
DEFINITION:
The definition of strategy as given bybusinessdictionary.com:
"A method or plan chosen to bring about a desired future, such as achievement of a goal or
solution to a problem."
FORMULATION OF STRATEGIES:
Strategy formulation is the process by which an organization chooses the most appropriate
courses of action for the realization of organizational goals and objectives and thereby
achieving the organizational vision.
1. SETTING STRATEGIC GOALS:
The strategic goals are "The planned objectives that an organization strives to achieve."
They are derived directly from the firm's mission statement. The firm's mission statement
includes components like; firm's customers, firm's geographic location, firm's growth and
financial objectives, firm's basic beliefs and values, etc.
Step 2: DOING AN EXTERNAL ANALYSIS:
In external analysis, managers should examine the economic, demographic, socio cultural,
technological, political/legal and global components to see the trends and changes in external
environment. It is also called environmental analysis in which the firm scans the opportunities
and threats to the firm in external environment. Opportunities are the positive trends in the
external environment and threads are the negative trends in external environment.
STEP 3: DOING AN INTERNAL ANALYSIS:
After doing external analysis, company must examine internal factors, by performing internal
analysis. In internal analysis, company understands its strengths and weaknesses. Strengths are
the company's unique resources. While weaknesses are the short comings of the companies. It
also gathers information about its resources and core competencies. Resources are the assets
of the company that are used to develop, manufacture and deliver products to the customers.
Core competencies are the competitive weapons of the company.
The step 2 and 3 combined perform SWOT (Strengths, weaknesses, opportunities and threats)
Analysis.
STEP 4: MATCHING THE ORGANIZATION AND ITS ENVIRONMENT:
The final step in strategy formulation is matching environmental threats and opportunities
against corporate strengths and weaknesses. The firm should consider the realities of the
external environment and their available resources and capabilities in order to design strategies
that will help an organization achieve its goals. This matching process is at the heart of strategy
formulation. The firm should attempt to leverage its strengths and wheels or at least not allow
the weaknesses to detail other activities. Understanding strengths and weaknesses may also
determine whether a firm typically takes risks of behaves more conservatively.
TYPES OF STRATEGIES:
Broadly, there are three types of strategies:
1. CORPORATE STRATEGIES:
Corporate strategy is concerned with the top level management. Corporate strategy:
i. Determines the firm's over all attitude towards growth.
ii. Determines what businesses a company is currently in or wants to be in future.
iii. It also determines what plans it has regarding these businesses.
iv. Is based on the mission and goals of the organization and the roles that each
business unit of the organization will play.
Corporate strategies are further divided into three Main types:
A. GROWTH STRATEGY:
When a company decides to grow itself, it opts for growth strategies. Growth strategies are
used for entering new markets or introducing new products offering whether by current
businesses or through new businesses. Growth strategies are further divided into following:
Concentration: focuses on company's primary line of business.
Vertical integration: the company becomes its own supplier or distributor.
Horizontal integration: a company grows by combining with competitors.
Diversification: when a company combines with other companies whether related or
unrelated with in its industry.
B. STABILITY STRATEGY:
When a company decides to carry on with its current products, it opts for Stability Strategy. It is
a corporate strategy in which company continues to do what it is currently doing.
C. RENEWAL STRATEGY:
Renewal strategy addresses declining performance. It is of two types:
1. Retrenchment: it is short run Renewal Strategy, which is used for minor Renewal problems.
2. Turnaround: it is used when the problem is much serious and severe and managers take
steps like cutting costs or restructuring the company.
2. BUSINESS (OR COMPETITIVE) STRATEGIES:
Some corporations have multiple businesses. So they use separate business Strategy for each
business. This strategy focuses on business unit or product line level for how an organization
will compete In its business(es). Its Main focus is on improving a firm's competitive position.
The separate businesses operating independently with separate competitive strategies are
referred to ex. STRATEGIC BUSINESS UNITS.
A company can use different strategies as competitive advantage. I.E. It can use quality, design
thinking, social media, etc. It can also use industry analysis and other strategies to sustain
competitive advantage.
3. FUNCTIONAL STRATEGIES:
These strategies are formulated for specific areas or departments of production. These are
made to support the competitive strategies. These strategies help in how best to achieve goals
of specific functional areas like marketing, production, finance etc.
IMPORTANCE/ ROLE OF STRATEGIES:
Today, every business needs a strategy. Both business organizations and not for profit
organizations use strategic management. Strategy is essential for the success and sustainability
of any business venture. Some reasons are following:
RELATIONSHIP BETWEEN STRATEGIC PLANNING AND PERFORMANCE:
Good strategies can make a difference in how well an organization performs. Research has
found that organizations that use strategic management have higher level of performance.
GIVES DIRECTION:
One of the most important benefits of well-planned business strategy is that it gives direction
to the firm and helps the organization stick to its goals. Strategies help firms to plan on
corporate, business or functional level.
TACKLING CHANGING SITUATIONS:
Ina fast moving world today, companies have to cope and keep up with continually changing
situations. An effective business strategy will allow your organization to predict and meet the
changing demands of the current market. It increases company's adaptability and helps it better
identify new market trends and adapt their strategy as required.
COMPLEXITY OF ORGANIZATION:
Strategies help corporations organize its business to work together or business's functions to
function properly. It helps company in facing complexity and diversity of organizations.
CONCLUSION:
Strategy formulation is one of the most important functions in business scenario. It helps firms
merging together its bits and pieces and helps firms keep itself on track. Strategies are
formulated on corporate, business and functional levels. Strategies start from
realizingcompany's goals and objectives. Then company performs SWOT analysis, matches the
organization and is environment and finally formulates strategies accordingly.
Works Cited
5 Reasons Why Strategy is Important: Albu strategy management. (n.d.). Retrieved from Albu
strategy management: http://albu-strategymanagement.com/2014/11/5-reasons-strategy-
important/
The imprtance of business strategy: vLinkD. (n.d.). Retrieved from vLinkD:
http://www.vlinkd.com.au/future-links/the-importance-of-business-strategy/
what is a strategy? definition and meaning: BusinessDictionary.com. (n.d.). Retrieved from
BusinessDictionary.com: http://www.businessdictionary.com/definition/strategy.html
Robbins, C. (2010.). 11th edition, Management. Pearson Education, Inc.
Ebert, R. J., & Griffin, R.W., (2013), Business Essential, 9th Edition, Pearson Education Inc.
Marks obtained were 80-90
