To compete effectively in the market place you need a strategy. If there is no competition, there would be no need for a strategy. Joan Magretta, an author of Harvard Business Review Press said, “Strategy explains how an organization faced with competition will achieve superior performance.”
Why strategy is important? Strategy is a road map for a business to set a value proposition where they want to be in three to five years and how to get there. Strategy helps a business to understand how they can be different in the market place so they can get premium for their products and services. Michael Porter, professor of Harvard School of Business said, “Strategy is about being different.” He further discussed in his paper that a company should select a mix of different activities in a unique way that deliver value to a buyer, and that a mix of activities cannot easily be copied by a rival. It is important to note that if you are ahead of your competition and keep that distance you will earn profit. Once the competition catches you, then the margins will be squeezed and it usually results in price wars such as the ones we have seen in the airline industry. When one airline cuts the ticket price, the other airline follows suit.
Strategy should be reviewed on a regular basis and aligned with your business vision and mission. Once you have established a three to five year plan for your business, bring it back to 12 months and translate it into budgetary terms and then bring it back and translate into monthly activities. These monthly activities then should be measured and evaluated against the key performance indicators (KPIs) critical for those activities. One of the major issues with small to medium size businesses is not being able to convert a strategic plan into actions and/or implementing the plan poorly. In order to implement strategy corporate wide effectively, everyone should be on board, especially top management. Strategy should be reviewed constantly and if there is any change in the industry the exiting company may have to change its strategy accordingly. As there are new entrants in the industry, profit will be exploited more easily. Strategy provides choices on what to do and what not to do and how a company can position itself accordingly to gain the competitive advantage.