Business strategy

Question 1

Define strategy.

Answer 1

Strategy is the long term action plan that is formulated and implemented to achieve sustainable competitive advantage.
It is concerned with the long term direction of the organization.

It is a potential plan of actions that includes top management decisions and significant number of resources.

Question 2

Define vision.

Answer 2

Vision is forward looking statement that outlines what an organization hope to achieve in the long term.
it serves as a guiding star for strategic planning and decision making.

Question 3

Characteristic of strategy

Answer 3

1. Long term: strategy is a long term plan. it is normally prepared for 5 years or more. it ensures long term direction of an organization.
2. comprehensive action plan: It involves a detailed plan that outlines steps to achieve objectives, ensuring all aspects of the organization are aligned.
3. competitive advantage: Strategy covers all the units & departments of an organization. Hence, it is broad & comprehensive. Strategy determine overall organizational priority & provides long-term directions
4. stakeholder expectation: It considers the needs and expectations of various stakeholders ensuring their interests are addressed.
5. strategic fit: strategy aligns with the organization’s internal capabilities and external environment to ensure coherence and effectiveness.
6. A means only: strategy is only a means to achieve organizational goals.
7. Top management oriented: strategy is formulated by top management. The results of the strategy are reflected in the operational level.
8. strategic decision based: strategic decisions are long-term managerial decision which are consequential and directive and strategy is based on strategic decision.

Question 4

level of strategy

Answer 4

1. corporate level strategy
2. business level strategy
3. functional level strategy

Question 5

Corporate level strategy (related with direction of whole organization)

Answer 5

• It is concerned with entire organization and direction of a firm as a whole.
• it is uppermost level of strategy
• it co-ordinates business units so that the company as whole succeeds as a family.
• it addresses the question as ‘what business we are in?’

Different types of corporate level strategy
1. stability strategy: This strategy aims to continue the current operations of an organization without any significant changes in direction. it is appropriate for a successful company operating in a stable and predictable environment.

2. Expansion/growth strategy: It focuses on expanding operations through new markets, products.
3. Retrenchment (reduce) strategy: It aims to reduce the size or diversity of a company or reduction in expenditure for financial stability. It is adopted when organization has weak competition position in some or the entire product lines.
4. combination/mixed strategy: If an organization adopts stability, growth and retrenchment strategy in different business unit, it is said to be follow combination strategy.

Question 6

Business level strategy

Answer 6

• It the strategy pursued by a firm to gain competitive advantage in specific product market.
• it deals with the question ‘how do we compete?’
• it indicates how a firm competes successfully in individual product market.

Different types of strategy
1. cost leadership strategy: It is the strategy where goods and services are produced at the lowest cost with the features that are acceptable to customers and relative to the competitor.

2. differentiation strategy: It aims to provide goods and service with different features than competitors at acceptable cost.
3. focus strategy: It aims to serve a particular buyer group or particular segment effectively than the competitors.

Question 7

Functional level strategy

Answer 7

• It is concerned with each function of an organization.
• it refers to a detailed plan of action designed to achieve short term goals within specific functional areas of an organization such as marketing, finance, human resources, and R&D.
• these strategies are prepared for a year or even less than this.

different types of strategy
1. Production strategy: It determines how and where a product or service is to be manufactured. production department is responsible for formulation and implementation of production strategy.

2. Marketing strategy: it deals with pricing, selling and distributing a product. It focuses on satisfying customers with proper marketing mix.
3. Financial strategy: It focuses on optimum utilization of the finance for maximizing shareholder’s wealth.
4. Human resource strategy: It focus on acquisition, development, utilization and retention of people needed in the organization.
5. Research and development strategy: R&D deals with acquisition, use and development of technology.