You are on page 1of 10

CHELSEA WHITAKER

Strategy is very hard to define. It is a very complex term but


what is certain is that it is multidimensional and situational.

This paper looks at strategy in more depth, discussing where


strategy has come from, what is involved in strategy and how
an organisation can create successful strategic decisions.

The role that strategy played in one of Xerox’s business


decisions is also looked at in more focus.

What is Strategy?

Since it’s inception in the 1960’s strategy has changed and evolved with time. The
traditional view of strategy is a coordinating mechanism. A decision making tool for
the allocation of resources. It assists in identifying not only what to do but also what
not to do.

Mintzberg (1999, p.29) believes strategy has emerged considerably since the 1980’s
because of four reasons:

- “New kinds of strategies emerge from collaborative contacts between


organisations. Firms cannot avoid learning and borrowing when they
trade and work together.

- The evolution of strategy is also pushed along by competition and


confrontation. In strategy, as in other areas, necessity is the mother of
invention, and, as elsewhere, new ideas and practices arise when
managers try to outwit or beat back powerful rivals.

- New strategies are often a recasting of the old. In a sense, old strategic

Page 1 of 10
ideas never disappear entirely. They go underground and infiltrate new
practices covertly.

- Finally, strategy is pushed along by the sheer creativity of managers,


because they explore new ways of doing things”

Strategy is not static; therefore it must be changed and shaped with that of the
environment and influences surrounding it.

What defines strategy?

The starting point for strategy is purpose! If you don’t know where you are going, any
road will take you there. Chaffe (1985) believes that strategy is all about making
choices, tough ones. Making the choice and understanding the reason allows you to
make better-informed decisions. Put simply, strategy is all about what we do, how we
do it, when do we do it and why do we do it. We make these choices based on
information from the market. “This process of asking questions, generating
alternatives and making choices that may prove to be the wrong ones is what strategy
is all about” (Markides, 1999, p.56). Whatever choice is made, it needs to be done so
consciously, informed by market information and made sure it is in line with the
organisation’s intention.

Chaffe (1985, p.89) states that “virtually everyone writing on strategy agrees that no
consensus on its definition exists”. He believes most authors agree on the basic idea
of thinking about strategy that the organisation and the environment go hand in hand,
you cannot consider one without the other. Because the environment and customers
are always changing, organisations’ need to ensure their strategy is always changing
to suit. No two firms strategy is going to be the same because they all have their own
competitive advantage and have different skills sets and competencies.
Two factors that are very clear about strategy are that it is multidimensional and
situational. Every organisation is different and strategy is so complex that the
organisation needs to make sure they know the market, the customers and what
direction the firm wants to go in, before the plans can be made.

Page 2 of 10
In order to execute a successful strategy firms need to create a market-oriented
organisation, this is the development of a marketing culture, i.e. how much the
organisation knows about their customers. The market is where strategy becomes real.
It all starts with the customer. Kotler (et al. 2007, p. 29) define market orientation as
“a situation in which a business has a strong customer focus and competitor
orientation supported by effective interfunctional coordination that enables the
business to deliver profitable customer value over time”. Successful “market
orientation emphasizes the ability of the firm to learn about customers, competitors
and channel members in order to continuously sense and act on events and trends in
present and prospective markets” (Day, 1994, p. 43).

We can simplify it to what do we know, what do we want to accomplish and how do


we go about doing it? Strategy comes down to those three things. It is a shared
understanding, an honest assessment of the organisation, its customers and the
environment. What risks can the organisation take with what resources and how can
they do it better than their competition?

Competitive advantage

“Do not try to imitate the strategic position of other competitors, or try to beat
competitors at their specialties, instead find a unique position and play a different
game – although no position is truly unique, the idea is to create as much
differentiation as possible” (Markides, 1999, p.58).

You need to use your own assets and capabilities to your own advantage. Make your
own competitive element. Look at what your firm is good at and what the customers
want and go from there. Do you have a low cost strategy or is it product uniqueness?
Is your target scope broad and industry wide or are you looking more narrow and into
a niche market? “The choice of which capabilities to nurture and which investment
commitments to make must be guided by a shared understanding of the industry
structure, the needs of the target customer segments, the positional advantages being
sought, and the trends in the environment” (Day, 1994, p.49). Organisations need to
make sure that their core competencies and assets of the firm are serving their chosen

Page 3 of 10
target market more effectively than their competitors.

Advantage creating resources need to contribute by providing value for customers,


being unique to the firm and are hard for competitors to acquire or imitate. If all three
of these factors are combined then the result is sustainable competitive advantage.

A mission statement is an important addition to any organisation to help give the firm
a purpose and some structure. “A clear mission statement acts as an ‘invisible hand’
that guides people in the organisation so they can work independently and yet
collectively toward overall organisational goals” (Kotler, 2007, p. 80). Kotler (2007)
believes the mission or objectives and strategy of an organisation should include:
- Strategic intent (vision of what you want to be)
- Company values (guiding principles)
- Distinctive competencies (core skills)
- Competitive positioning (differential advantage)
- Market definition (customer targets)
These factors are all interlinked and have an impact on each other and the overall
impact of the strategy of the organisation.

Constant Innovation

Strategy is inherently relative; if there is only one person in a race then they will
always win. It must be measured against something else; you always have to have a
comparison. You can’t have competitive advantage without a reference point.
So this means that what the competitors are doing should be a constant focus of any
organisation. What offers better value today could well be standard tomorrow.

Innovation needs to be constant and always improving the offering of the organisation
so the advantage can be sustained. Industry structure is not fixed and so an
organisation’s assests and resources must be forever changing, they must be
constantly improved and developed. Resources can be anything, products or
processes, ones that can be exploited in the market place to create or sustain
advantage: a brand name, distribution or information.

Organisations should be forever questioning themselves as competitive advantage is

Page 4 of 10
never going to last forever. What is our current market share/where are we placed?
How is that relevant to our competitors? What do our customers think of where we
are placed? What capacity do we have to take advantage of new segments? What
resources do we have to exploit? Do we still have a competitive advantage?
Organisations should always expect the unexpected and protect themselves in case of
attack.

If an organisation is making a profit, other organisations will take note and want a
piece of this profit. This is when the market is susceptible to new entrants. Depending
on the level of turbulence, an organisation needs to make some decisions. Michael
Porter created a model which provides an “assessment of the strength of competitive
position of industry competitors and this in turn reflects on the individual industry
competitor” (Kotler, et al. 2007). There are five different types of forces in this
model, they are: industry competitors, buyers, substitutes, suppliers and new entrants.
All of these competitive forces have the ability to impact positively or negatively on
an organisations position.

Day (1994, p.48) discusses different techniques that should be used in order to
anticipate/decrease the effect of a competitor bringing in a strategic innovation.
These strategies are based around offering a superior product and creating customer
value in three distinct ways: operational excellence, customer intimacy and product
leadership. Recognising emerging needs from the operational/product side of things
as well as the customer side of things creates an overall focus and will lead to
organisational success.

Day (1994, p.63) states that “a company can prepare to take advantage of a strategic
change by developing the ability to recognise an innovation early, by promoting a
corporate culture that welcomes change, by developing process that allow
experimenting with new ideas, and by developing skills that allow exploitation of the
new position.”

Xerox Case Study

Page 5 of 10
In the 1960’s Xerox dominated the copier market by following a well-defined and
successful strategy. Xerox’s strategic focus was on high-end production and
commercial print environments and networked offices. This meant that their sales
force was direct and they had a big focus on the services they provided with the
copiers.

The Xerox strategy was clear and precise and had sharp boundaries. The company
was the leader in document technology and their focus on a high level of service
meant that they had long-standing relationships with their customers.

When markets appear to be successful and you become the leader in your market,
other companies take notice and want to have a bit of what you are having. Markedes
(1999) states that this is when IBM and Kodak came along trying to obtain some of
Xerox’s market share. Kodak entered the market introducing a high-quality, low price
substitute for the Xerox machines and it was aimed at the high-volume end of the
market. One of the reason’s Kodak failed was because they didn’t find their own
strategic position within the market, they just tried to copy Xerox.

Canon however came along prepared to find a gap in the market and fill it with their
own strategic position. Canon focused on smaller corporate businesses and the
individual too with their personal copiers. Cannon chose to focus on their price and
quality of their machines whereas Xerox emphasised the speed of theirs. Markedes
(1999) discussed how cannon successfully penetrated the copier market, and 20 years
later was the market leader in terms of volume. Cannons success came from their
well-defined strategic position, coming in to play a different game to Xerox.

Xerox failed to notice Canon coming through with their strategic innovation and
disruptive style of thinking. Xerox’s biggest mistake was failing to adapt their own
strategy in response to what was happening in the market. They did not anticipate the
threat of Canon and they did not protect their organisation.

Getting it right

Page 6 of 10
Understanding parts of strategy is not enough; the organisation has to understand the
whole, the synergy. A strategy’s whole is bigger than the sum of its parts.
Organisations need to make sure they have their ducks in a row. They need to ensure
they look after the details and every part of the organisation, not just the marketing
mix. Every interaction outside of the organisation, not just the customer ones, need to
be accounted for. The organistation’s mission statement must be adhered to make sure
the firm isn’t saying one thing and doing another. The customers, stakeholders and
suppliers are organisation’s partners to success. Having a strong cultural belief as an
organisation, followed not just by top management, but also by all members of the
firm, including staff and stakeholders will lead to success.

Success in strategy is not determined by the individual companies will to succeed, but
by the environment and the industry upon which the organisation is in. These days the
consumer is much more demanding, they want the augmented offer, what is your
benefit to them that will make them buy your product? Continual assessment of
customer satisfaction is key to a successful organisation. Show customers a reciprocal
value proposition, what do they get out of it, show them the benefits they receive.

Organisations have found that they need to demonstrate and value the social
components of people in which they interact. Corporate social responsibility delivers
competitive advantage to corporate organisations. Trust equals loyalty and
commitment to a brand over time and this in the long run could equal greater profit. In
the end what firms take to market is their value proposition and underneath this is
what customers will decide to do with your firm. They are the deciders of value.
Loyal customers and strong brand relationships are difficult things for other
organisations to copy.

Strategic Alliance

Strategic alliances have become much more important in the last decade. The reasons
behind this sudden growth in alliances is due to many factors but the driving forces
are:

Page 7 of 10
Market complexity and risk
- Changes in the customer, they are becoming much more demanding
- Blurring of market boundaries
- Supply chain management

Organisations are creating alliances to enable them to get further assets and
competencies of partner firms. Alliances offer access to new markets, access to
managerial competence, access to technology and access to economic benefits.
Strategic alliances are much more involved in their strategy. Organisations share
strategic goals, benefits and control, there is an expectation of equal contribution.
When firms collaborate and create an alliance, it takes market competition to a whole
new level.

What about future strategy?

You can’t assume anything about the future but you need to make assumptions in
order to make decisions. Organisations must learn to keep an eye on their competitors.
As a strategist you need to understand the industry to mitigate strengths and threats.
And have a contingency plan should an attack occur.

Strategy is not just about formulation and implementation. It is also about controls
and some form of measurement. What did you expect to happen? Did it happen and
why? If you have nothing to compare it to, no benchmark, then how do you know if
your strategy has been successful or not? The ability to reflect and make explicit the
assumptions that are implicit is the difference in understanding why and the ability to
go forward.

Because of globalization and easily accessible knowledge, strategy itself is changing.


Strategy is now about the worldwide solution, moving from a domestic focus to a
global focus. Moving from what should I do to what can I do?

Having decided on objectives and a course of action, the organisation now needs to

Page 8 of 10
consider other factors that effect market demand in the future. Organisations should
make an informed decision and forecast. “Only the intrepid who abandon the safety of
the familiar to venture into the unknown will have a future worth discussing” (Day,
1994, p 63),

An organisation without Strategy is an organisation without


direction. Strategy is purpose. Strategy is choice. Strategy is about what
we do, how we do it, when do we do it and why do we do it. To have a
successful strategy, organisations must find their competitive
advantage and satisfy their selected customers more efficiently and
effectively than their competitors. The market and environment is
always changing however, so adapting and continuing to innovate
and stay ahead of the competition drives great strategy. Creating
benefits and satisfying your consumers is very important as they
decide your organisations level of value. A firm must have all its
ducks in a row to successfully implement a strategy.

Page 9 of 10
References

Chaffee, E.E., 1985. Three Models of Strategy. Academy of Management Review,


10(1), 89-98. Available at:
http://search.ebscohost.com.ezproxy.otago.ac.nz/login.aspx?
direct=true&db=bth&AN=4277354&site=ehost-live&scope=site [Accessed March
30, 2010].

Day, G.S., 1994. The capabilities of market-driven organizations. Journal of


Marketing, 58(4), 37. Available at:
http://search.ebscohost.com.ezproxy.otago.ac.nz/login.aspx?
direct=true&db=bth&AN=9410316032&site=ehost-live&scope=site [Accessed
March 30, 2010].

Hofer, C.W., 1973. SOME PRELIMINARY RESEARCH ON PATTERNS OF


STRATEGIC BEHAVIOR. Academy of Management Proceedings (00650668), 46-
54. Available at: http://search.ebscohost.com.ezproxy.otago.ac.nz/login.aspx?
direct=true&db=bth&AN=4981180&site=ehost-live&scope=site [Accessed March
30, 2010].

Kotler, P., Brown, L., Adam, S., Burton, S. and Armstrong, G. 2007. Marketing 7th
Edition. Australia. Pearson Education.

Markides, C.C., 1999. A Dynamic View of Strategy. Sloan Management Review,


40(3), 55-63. Available at:
http://search.ebscohost.com.ezproxy.otago.ac.nz/login.aspx?
direct=true&db=bth&AN=1792757&site=ehost-live&scope=site [Accessed March
30, 2010].

Mintzberg, H. & Lampel, J., 1999. Reflecting on the Strategy Process. Sloan
Management Review, 40(3), 21-30. Available at:
http://search.ebscohost.com.ezproxy.otago.ac.nz/login.aspx?
direct=true&db=bth&AN=1792754&site=ehost-live&scope=site [Accessed March
30, 2010].

Page 10 of 10

You might also like