Organizational strategy is all about where the company is, what it wants to achieve, and how it is going to reach there. Whether it is a small family-owned business or a multinational company, organizational strategy is crucial for growth.
What is organizational strategy?
Organizational strategy refers to the plans and actions that an organization takes to achieve its goals and objectives. It is a high-level plan that outlines how the organization will use its resources to achieve its desired outcomes. It typically involves defining the organization’s direction and making decisions about the allocation of its resources in order to achieve its goals. Organizational strategy is important because it helps the organization to focus its efforts and resources on achieving its objectives and to adapt to changes in its internal and external environment.
An organizational strategy will result in a business plan that brings together the company’s vision with its goals. It can also help to clarify the vision and bring together the employees so that they are on the same page. In essence, the organizational strategy can be divided into three main levels to create a roadmap for growth: corporate strategy, business-level strategy, and functional strategy. Each of these components provides a critical building block for meeting the organization’s strategic goals.
Levels of strategy of an organization
To build a successful business, an organization needs a robust strategy. There are typically three levels of organizational strategy:
- Corporate-level strategy – This is the highest level of organizational strategy and focuses on the overall direction and goals of the entire organization. It involves making decisions about the types of businesses in which the organization should be involved and how to allocate resources among those businesses. Corporate-level strategies have a broader scope, are complex, and are targeted to achieve the organization’s strategic goals. These strategies typically include differentiation, diversification, liquidation, and other growth strategies.
- Business-level strategy – Strategy at this level focuses on how each individual business within the organization will compete in its market. It involves making decisions about how to differentiate the business from its competitors and how to position it in the market. Business strategies are about distilling down corporate strategies into manageable goals. Some business strategy examples include new product launches, rebranding, or exploring new potential markets. These business-level goals can help organizations set up functional-level strategies.
- Functional-level strategy – Functional strategies focus on how each individual function within the organization, such as marketing or finance, will support the business’s goals. It involves deciding resource allocation and how to coordinate activities within each function in order to support the goals of the business. Functional strategies are much more specific and give employees specific tasks and actions. Examples of these strategies include debugging a code, A/B testing, or market survey.
These three strategies combine to make up the very broad structure of the organizational strategy that every business needs to grow and succeed.
Key elements of an organizational strategy
Organizational strategy should have certain elements to make the best and most effective roadmap to growth and success:
- Specific – An organizational strategy should not have broad objectives but be specific and measurable. It will provide the team with a better understanding of what is expected from them and enable them to work towards achieving the particular goal. For example, saying, “We want to have more customers” is not specific enough. Instead, “We want to have 10% more customers than last year by the end of this year” is specific and achievable.
- Realistic – The goals and objectives of the organizational strategy should be realistic and achievable. This means that they should be challenging but not impossible to achieve. For example, a start-up aiming to become as big as some other giants in the industry is unlikely to happen in a short time. Instead, it is better to leverage the organizational strategy to create more reasonable goals.
- Measurable – Organizational strategy goals and objectives should be measurable so that progress toward achieving them can be tracked and evaluated. Milestones and metrics can help keep track of whether or not the strategy is being implemented successfully.
- Limited – The objectives set in an organizational strategy should have a set timeframe so that the employees know when they should be achieved by. This helps to ensure that the organization stays focused and on track to achieving its goals.
How to create an organizational strategy – organizational strategy in practice
- Define the organization’s vision and mission – The first step in creating an organizational strategy is to clearly define the organization’s vision and mission. The vision should describe the organization’s desired future state, while the mission should explain the organization’s purpose and the fundamental reasons for its existence.
- Identify the organization’s goals and objectives – Once the organization’s vision and mission have been defined, the next step is to identify specific goals and objectives that will help the organization to achieve its vision. These should be specific, measurable, attainable, relevant, and time-bound (SMART).
- Conduct a SWOT analysis – A SWOT analysis is a tool that helps organizations identify their strengths, weaknesses, opportunities, and threats. This can provide valuable information that can be used to develop the organization’s strategy.
- PEST analysis – While developing the strategy, it is also important to consider the external environment. This means that businesses should take a look at their impact on political, economic, social and technological changes. These parameters cannot be controlled, but a business can plan for a safety net in challenging times while writing the strategy.
- Develop strategic initiatives – The next step is to develop specific strategic initiatives to help the organization achieve its goals. These initiatives should align with the organization’s vision and mission and be carefully planned and executed.
- Create an implementation plan – Once the strategic initiatives have been developed, the next step is to create an implementation plan that outlines how each initiative will be carried out. This plan should include specific tasks, timelines and resources that will be needed to successfully implement the initiatives.
- Monitor and evaluate progress – It is important to regularly monitor and evaluate the organization’s progress toward achieving its goals and objectives. This can help to identify any challenges or obstacles that need to be addressed and to make any necessary adjustments to the organization’s strategy.
Creating such strategies can be a challenging task for organizations – and unfortunately, most businesses are not good at making effective organizational strategies. There is a constant demand for qualified experts who can create organizational strategies for businesses. If you are interested in creating organizational strategies for businesses to succeed, a DBA degree online from Marymount University can help you develop the necessary skills and knowledge. This online degree can assist in expanding the understanding of business when innovation, data and technology come together.
Different theories of business organizational strategy
There are several leading theories of organizational strategy in business, including the following:
- The resource-based view of the organization emphasizes the importance of a business’s unique resources and capabilities in shaping its strategy and achieving a competitive advantage.
- The positioning school of strategy focuses on the importance of a business’s position in the market and the need to identify and target attractive market segments.
- The contingency approach recognizes that the best strategy for a business will depend on its specific circumstances and context and that there is no one-size-fits-all approach to strategy.
- The industrial organization (IO) perspective focuses on the role of market structure and competition in shaping a business’s strategy.
- The stakeholder approach emphasizes the need for businesses to consider the interests of all stakeholders, including shareholders, employees, customers and the broader community, in developing their strategy.
Overall, these theories provide different perspectives on organizational strategy in business and can be used in combination to develop effective strategies that are tailored to the specific requirements and conditions of individual businesses.
Types of organizational strategies
There are several different types of organizational strategies that a business can use to achieve its goals and objectives. Some common types of organizational strategies include:
- Cost leadership strategy – This strategy involves being the company offering the lowest-cost product in the industry. It is also referred to as a low-cost production strategy. It helps an organization focus on reducing costs to offer its products or services at a lower price than its competitors. In most cases, the cost can be lowered by minimizing the labor cost. For example, a fast-food chain maintains its low-cost production by offering only a few items on its menu.
- Differentiation strategy – This type of strategy involves offering products or services that are unique and different from those of its competitors. The organization focuses on creating and promoting the distinctive features of its products or services in order to differentiate itself from its competitors. It involves researching the market to explore what customers are looking for and what attracts them. For example, a company making exclusive wallets can create a waiting list of individuals who are interested in buying its limited-edition wallet.
- Focus strategy – This strategy involves focusing on a specific market or customer segment. The organization tailors its products or services to the needs of this specific niche or segment to gain a competitive advantage and build customer loyalty. For example, a plant-based meat company targets vegans and vegetarian individuals.
- Integration strategy – This type of strategy involves integrating the organization’s activities across different functional areas or business units in order to achieve synergies and efficiencies. For example, a business integrating its market research team with the production team can design goods that customers want, rather than independently creating standard products.
- Growth strategy – This strategy includes the expansion or increase in market share typically. For instance, a sports wearable company can grow by expanding its product range to include sporting goods in its production line.
- Rationalization strategy – This is, in a way, opposite to the growth strategy. For example, if a business following a particular growth strategy has become overly complex, then it is time to decrease the turnover and simplify the operations. Companies can, for example, lay off staff, discontinue products, and reduce the number of outlets to bring the focus back on the business and turn it profitable.
- Innovation strategy – This type of strategy involves developing new products or services or improving existing ones in order to gain a competitive advantage. The organization focuses on innovation and continuous improvement in order to stay ahead of its competitors.
Why is organizational strategy essential for all businesses?
Organizational strategy is essential for all businesses because it helps the organization achieve its goals and objectives. It provides a clear plan and direction for the organization, and helps to focus its efforts and resources on the most important initiatives. An effective organizational strategy can also help the organization to adapt to changes in its internal and external environment and to stay competitive in its market.
An organizational strategy can prioritize the activities that will make achieving the goals a reality. It gives the employees a direction and understanding about what they should focus on and what is more important. It can also drive alignment within the employees so that they work toward fulfilling a strategic objective, rather than working in other activities that aren’t as fruitful.
Along with streamlining the tasks and activities, organizational strategy can also simplify the decision-making process. As the majority of the decisions have been pre-decided while planning the roadmap of the business strategy, there is no need to spend resources on the decision-making process.
The bottom line
An organizational strategy is a great thing for a business. Regardless of the size and scope of the business, a robust business plan can take the organization to another level. Ultimately, the success of an organizational strategy will depend on its ability to align with the organization’s goals and objectives and effectively address the challenges and opportunities it faces.
