The word “strategy” derives from ancient Greece, and means "the art of planning and the engagement of war". It emanates from the combination of words "army + led" (I lead). In modern times the term has been expanded, and it is applied with success in the areas of business, as the art of preparation and materialization of a business strategic plan, whereby determining the businesses primary long-lasting objectives, and its way of conduct.
Business Strategy has one main objective, to increase profitability. Every business has its own way of competing, of taking decisions, increasing profits and developing. The way to accomplish it, has to do with the strategy were to follow!
You own a Business. Without knowing, subconsciously and unplanned, you apply a type of strategy daily in your Business. You have your own way in approaching new customers, close deals, make payments, choose your suppliers, hire personnel, and many more. All of these choices you make and apply are the Strategy your business is following. The problem is that is not organized, is not planned, and is hard to measure the success or failure of it.
The Strategy includes two separate stages. The first stage is the planning, and the second is the implementation. The first stage is not considered effective without the second, and vice versa. Napoleon was the first strategist who sort a plan in order to take-up Russia and afterwards tried to materialize it. The planning was exceptional, the implementation however was not!
In 1983, one of the biggest businesses of electrical goods in the world, General Electric, released the entire planning department which consisted of 200 persons, because it was discovered that they were too occupied with the economical and functional details, that they had forgotten the strategy they should have followed. As a result a lot of Japanese companies overtook them. To plan a path in order to reach a destination is one thing, but to cross that path is totally a different thing! And this is the hard part of strategy development process.
In his book on the strategic management, Michael Porter, has stated that “a business that gains a much larger return from a competitor in the same market, is because of a differentiated and better strategy that follows”.
The European airline company Easy-Jet, does not follow the normal. It avoids the larger airports. Is active only in Europe and it flies to specific cities that it has selected. It does not provide food. It provides one class of seating where by, the earlier you make a “reservation” for a flight, the lesser you will pay. It is economical. It does not use travel agents, it encourages the usage of internet, and payments are done via credit cards. It is very different from other airline companies.
IKEA the Swedish owned furniture store, it also functions differently. It uses a self-service system, much like a super-market, without a salesman as most stores of this nature have. It is designed with a low cost basis, with style and functionalism, furniture that adapts to contemporary houses. Furniture is assembled by the buyer and not from the maker. In this way the customer becomes the “participant” with the product and the company succeeds in reducing its costs.
These two examples are referred to throughout the international bibliography, as examples of successful companies who differentiated among their competitors. This differentiation did not happen accidentally. It was the result of sound strategy development, strategic planning and decisions.
Planning a strategy can bring you much closer to success. You have to remember that Strategy places directions. Create objectives. Set measures. Envision the future. Decreases the uncertainty and helps you to “differentiate” from your competitors. Strategic planning helps you take better decisions on the growth of your business.