The Importance of Business Strategy

The subject of Business Strategy is one that holds ambiguity and vast debate, party because of a lack of eduction or information, but perhaps more significantly because of its extensive depth and multiple perspective. It is sometimes difficult to know where to start in strategizing a company, and its outcome can often quite simply lead to success or failure. Every organization has a strategy. Some have multiple strategies, and some may even have a strategy and not know about it. Either way, having a well-defined and planned business strategy nursed by effective communication can create immense success and profitability.

An early perception of business strategy which proved to be very popular amongst the multinational corporations out was a strategic view prescribed by "Michael Porter." His view incorporates three areas of an attempt to gain and sustain competitive advantage. These are segmentation strategy, differentiation strategy and cost leadership. Michael Porters strategies are often viewed in relation to the overall scale of a given target market and the competences to which an organisation operates in.

Companies have been known to pick just one of these strategies, and exploit them using their resources. One examples of this is Primark, the low-cost clothes retailer. Despite obvious ethical issues in the way that they produce their goods, Primark has continued to sell their clothes on the market for incredibly low prices, actually changing the way people think about cheap clothing. A decade ago, the more affluent would certainly not be seen in Primark. Now, however, the social aura of shopping in Primark is much more acceptable. By picking a strategy and sticking to it, Primark are not only one of the most profitable retailers today, but they have managed to change consumer behavior and preference; a task that some business developers may originally venture only possible with multi-million pound marketing campaigns.

This being said, while most organizations try to focus on one strategy, there are some that focus on all three. Toyota is a prime example of this. It can be argued that Toyota cars have all three: quality/uniqueness (the Prius), low cost, and have many of the cars appealing to particular segments of the market. However, it is crucial to realize that Toyota is an incredibly well established and profitable multi-national corporation with over $15 billion spent on research and development; the point being made that not every organization in the market with perhaps limited resources can exploit all three of the generic strategies.

Another view to take is the resource based view. This view describes the strategic resources available to the firm in question. It is believed under this view that competitive advantage can be gained through the exploitation of these resources over a long period of time for it to become sustainable. When a firm uses this view to create their business strategy, it is firstly vital to identify the resources. This is usually done by comparing them to the VRIN criteria.

V – Valuable

R – Rare

I – In-imitable

N – Non-substitutable

Exactly as they sound, a resource must be rare and unique, create value, and not be easy to imitate or substitute. Once discovered, these resources must be cared for in a sustainable manor to create and increase organizational performance. It is important that an organization that wishes to succeed above competition in the market must at least attempt to define their strategy using these views, amongst many others, by creating sustainable, competitive advantage.