Overview
Strategy is hard to define, and can have different meanings depending on the context. For a business, strategy would include an indication of how the business views the value it provides to its clients, as well as its plans for delivering that value.
Strategy often includes an evaluation of competitors and how the company's actions will play with respect to them, including the ways in which they will likely react. (see competitive decision making in optimal decision making.)
Steps
- Formulate a Vision and Objective - for a business, this often involves Positioning and Competitive Advantage
- Strategic Planning
- Assess the environment and the Players
- Create a strategy designed to achieve the objective - the process of developing a firmwide strategy.
- Execution - Implement the Strategy and Adjust as new Information
Tactics
- Forecasting
- Understand and Ride Current Trends - informed strategists need to not only understand their current environment, but where its going. Often, this can be accomplished by simply identifying the trends.
- Anticipate and Capitalize on Inflection Points - inflection points are key strategic moments for a firm. Firms that recognize and utilize change to create disruption can often conquer their space very quickly. Firms that ignore or dont recognize inflection points can struggle going forward, or even perish.
- Utilizing Surprise - surprise is a key tactic in the strategy toolkit. Keeping a strategy hidden, and maybe even creating a diversion can lead ones competitors to reduce their defenses in a contested area.
Example Corporate Strategies
- Reshuffling Corporate Boundaries - Determining which activities in the supply chain the company should take control of or outsource can reshape the companies cost structure and position within their industry.
- Company Size - the size of the company will affect the companies costs, and affect the company's brand within the market.
- Markets - the markets that the company chooses to enter, for example, international vs domestic markets
Lifecycle Considerations
In addition to the position of a company within the competitive landscape of its industry, the position of the firm within the scope of the corporate lifecycle can dictate the strategic concerns that the company must address.
- Industry Lifecyle and Stage - critical to strategic planning, the current phase of the company's industry and its forecasted evolution over time.
- Corporate Lifecyle and Stage - understanding the stages in a company's lifecycle, and the location of the current firm within that framework can help inform strategy
Lifecyle considerations often lead to companies adopting one of two stances:
- Play to Win - play to win companies are those that are aggressively trying to grow, typically by staking out new competitive positions, and challenging their competitors.
- Cash Cow - cash cow companies are companies that have an established position that generates a good return. They typically don't want to take unnecessary risks in order to protect a healthy dividend for shareholders.
Strategy and Game Theory
Strategy is fairly closely tied to game theory considerations. That is, when formulating strategy, it is necessary to consider how a firm's competitors will act, and in particular, how they will react to the firm's strategy. There are some nuanced points that occur in strategic thinking that are often not addressed in game theory, primarily
- Game theory usually assumes that all players of a game are rational, and that all possible moves in the game are known. Often, strategy involves finding a strategy that takes the opponent by surprise. That is, a strategic consideration often assumes that the opponents do not see all the moves, and reasons from that stance forward.
Frameworks
- SWOT - strengths, weaknesses, opportunities, threats