The Meaning and Importance of Corporate Strategy

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Corporate strategy is supposed to be the means by which an organisation achieves and sustains success. Yet, it rarely rises to that level, despite an abundance of corporate strategy theory and significant research from many organisations over the past few decades. The changes over the years are considered in the form of small, theoretical refinements, rather than large and significant steps required for further management transition (Papers4you.com, 2006).

What explains the relative failure of most organisations to create effective strategy? Part of the problem is that corporations and their managers have great difficulty clearly and consistently defining what corporate strategy is, and much of that struggle can be traced to their interpretation of the word strategy itself.

The original meaning of the word strategy derives from the Geek strategia, which is used in the military terms and represents the ability to employ available resources to win a war. This interpretation has generated problems when such concept is used in a business context because it implies the existence, even the necessity, of opponents.

As a result, most managers believed that a corporate strategy implies a strong focus on competition, since competition takes place almost exclusively at the offering level, most organisations concentrate their strategic efforts on constantly improving the goods and services they offer.

Aim for long term success

This overemphasis on the temporary success, however, can often obscure the kind of thinking and emphasis that would lead to sustained success, even a continuous repetition of temporary successes doesn’t equate to sustainable strategy.

In an effort to increase the value of single offerings, the organisation may be distracted from larger questions of structure, mission and objective (Papers4you.com, 2006).

In war, objectives can often be clearly defined, and so strategy is thought of as a means to a specific end. This view has persisted in the corporate world where strategies are conceived as plans to accomplish specific goals.

Although corporate strategy can be very goal-oriented, especially in the early stages of a company’s development, the very nature of goals implies temporary success. By contrast, sustainable success is not, and cannot be an end unto itself or a goal to achieve. Therefore, goal orientation becomes arguably inappropriate when success has to be indefinitely sustained.

Despite this, an overwhelming number of top executives and researchers make extensive use of objectives in their quest of lasting corporate success. Certainly, a number of factors contribute to this: the need of leaders with limited tenure to point to achievements, the tyranny of meeting the expectations of the financial markets and most management teams extensively rely on forecasting and planning. Still, the idea held by most managers that strategy itself is all about goal achievement only exacerbates the situation.

Therefore, it is important for strategists to remember that the more specific an objective, the further away it may potentially lead the organisation from its optimal big picture.

So how strategy should be redefined? Clearly it cannot rely too strongly on objectives nor can it focus too heavily on competition. A more fundamental concept is needed to guide an organisation in seeing its big picture, and such concept should be customer.

To create sustainable, long-term success, an organisation must first and fundamentally understand and relate to its customers. It is the ongoing encouragement of this understanding, based on neither specific competitors nor temporal objectives, which must be at the heart of any real strategy. And it is that from which all objectives should naturally flow.

Reference

Hosskisson, R.E., Hitt, M.A. Wan, W.P. and Yiu, D. (1999). “Theory and Research in Strategic Management: Swings of a Pendulum”. Journal of Management, Vol.25, Iss.3, pp.417-457.

Johnson, G. and Scholes, K. (2002). Exploring Corporate Strategy: Text and Cases. 6th ed. Prentice Hall: Harlow.

Porter, M.E. (2001). “Now is the time to rediscover strategy”. The Wall Street Journal, November.