What is Strategy in Business?

The term “Business Strategy” is widely used in the business world to influence business action. Business students, managers and employees worldwide are accustomed to the word “strategy” in their day-to-day activities. But do we really know what a business strategy entails? What is business strategy, really?

Definition of Strategy

Various authors have come up with different definitions of business strategy. Down below we’ll highlight some of the most commonly adopted definitions in business management literature, theory and practice. It is a brief definition of strategy by various authors, followed our own definition based on our understanding of the concept from those authors.

We first learn from Mainardes, Ferreira and Raposo (2014) that there is no single and definite definition of strategy, and that there are numerous meanings, forms, levels, and complexities of strategy.

Mainardes et al (2014) further argue that strategy can mean different things for different people depending on the context and application – it could be about objectives, goals, programs, tactics, policies, etc.

The authors postulate quite elaborately that the definition of business strategy “is neither closed nor simple to establish a consensus on. We cannot say any particular definition is correct. Each existing definition is correct but contains limitations in its set of assumptions and related dimensions.”

Barnard (1938) defines strategy from an external point of view, where organizations focus on those activities that matter to its key stakeholders. According to Barnard, strategy concerns itself with the alignment of business objectives with the needs of the internal and external environment.

Von Neumann & Morgenstern (1947) suggest that strategy is a set of actions carried out by an organization based on a given situation. This means developing activities in response to a certain situation or need.

Drucker (1954) argue that strategy “is analyzing the present situation and changing it whenever necessary.” In this regard, the concept of strategy in business management refers to the process in which a firm identifies its existing resources to determine whether they are in a position to compete effectively.

Chandler’s (1962) definition of strategy in business management is one that I consider the most precise and simple: “Strategy is the determinant of the basic long-term goals of a firm, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.”

Yet, McCarthy, Minichiello and Curran (1975) have come up with a definition that many scholars have adopted in business management literature:

“Strategy is an analysis of the environment where the organization is located and the selection of alternatives that will direct the resources and objectives of the organization, taking into consideration the risk and potential profits, and the feasibility that each alternative offers.”

In 1976, Glueck defined strategy as a unified, comprehensive and integrated plan used by a company to achieve its basic objectives.

Michel (1976) also suggests that strategy is the process by which an organization decides which resources to acquire and use to take advantage of existing opportunities and overcome the challenges that may hinder the achievement of desired results.

Henderson (1989) posits that strategy is the use of reason and imagination to understand the business environment and generate competitive advantage for the firm.

Strategy in business can also be defined as “a set of rules for decision making to guide the behaviour of an organization” (Ansoff and McDonnell, 1990).

Ansoff and McDonnell (1990) have identified four elements that should be present when defining a strategy in relation to management and organizational context:

  • Objectives or targets: standards or rules that measure the desired or future performance of the organization.
  • Business strategy: rules used to develop relationships with the external environment
  • Organizational concept: standards, rules and procedures that guide internal processes and relationships within the organization.
  • Operational policies: rules that guide the day-to-day operations of the company

Henderson (1991) brings in the aspect of deliberate action in business strategy: “Strategy is the deliberate search for an action plan to develop and adjust the competitive advantage of a company.”

Miller and Dess (1996) define strategy as the set of plans or decisions that companies develop to help them achieve their objectives.

Lastly, Wright, Kroll and Parnell (1997) suggest that strategy is tool used by the top management of organizations to achieve results that are relevant and consistent with the mission and objectives of the organization.

We can go on and on, but we do not have the mental capacity resources to divulge all the hundreds or thousands of definitions of strategy. The above definitions can all be used in different contexts to guide management practices.

In summary, strategy refers to the deliberate plans and decisions of an organization to identify objectives, gather the right resources, and develop courses of action to achieve those objectives; which are linked to the needs of the external environment.

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