What is a Strategy?

Published by Thomas Herold in Corporate Finance, Economics, Investments

'Strategy' is explained in detail and with examples in the Corporate Finance edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

Where businesses are concerned, strategy proves to be both the scope and direction that a business pursues over a longer term time frame. Strategy gains a business or other organization advantages through optimally deploying and utilizing all types of resources in competitive environments. Strategy is utilized to fulfill the needs that markets experience and to live up to the expectations and anticipation of the share holders in the firm or stake holders in the organization.

Strategy covers many components of a company. It pertains to the direction, or place that a firm is trying to arrive at over a longer time frame. Strategy explores the markets that are most effective for businesses to become involved with, as well as the types of activities that they should pursue in these markets, known as the scope of a business. Strategy seeks to determine what advantage a business can acquire, or how it might operate more efficiently and effectively than the various competitors in the markets.

Businesses are also interested in a number of other elements with strategy. They are concerned with the resources that they will need to compete in these markets. Resources for a business can include facilities, technical abilities, contacts, finance, specific skills, and particular assets. Companies also look into strategy as it pertains to the external environment of the business and its abilities to compete effectively. Finally, a firm must consider the wishes and expectations of the share holders in the business with their strategy.

Strategy can be found on three main levels of a business or organization. These run from the entity at the highest level on down to the individual employees who work within the company or group. Corporate strategy is the macro level. It deals with the entire scope and purpose of a business in achieving the expectations of share holders. Investors are commonly involved and consulted with in the development of corporate strategy. Corporate strategy is typically outlined specifically within the corporate mission statement.

The different business units also have strategy, referred to as Business Unit Strategy. This level of strategy worries about the ways that the company is competitive in specific markets. Strategic decisions at this view involve choices and ranges of products, the ways of gaining an advantage over the competition, satisfying the business’ customers, and creating and discovering different opportunities on which the business or organization may capitalize.

Finally, operational strategy works with the ways that all parts of the company in question are arranged to work together in order to provide both business units and corporate strategy direction. With operational strategy, processes, resources, and people are concentrated on in particular.

Strategy of a business or organization is handled and created in the processes of strategic management. Strategic management simply goes through the thought process to make strategic decisions. There are three core parts of strategic management. These are strategic analysis, strategic choice, and strategy implementation.

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The term 'Strategy' is included in the Corporate Finance edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.