The concept of strategy in business

SOME years back, I always heard people saying ‘business strategy’ but did not quite understand what they were talking about!

Strategy is a concept that is very important for anyone running a business to understand. In the context of business, it can be understood on three levels namely: Corporate strategy, Business strategy and Functional strategy.

Corporate level strategy is also called portfolio management. This is the highest level of strategy that concerns itself with determination of the business’ scope. It fundamentally answers the question: “which business are we going to participate in?”

In corporate level strategy, that’s where you find such decisions like mergers and acquisitions, vertical integration and divestitures.

Corporate level decisions are very key to the business because they shape the direction the business will be moving. It is at this level that unbundling or bundling of businesses is also done. In other words, removing other businesses from the portfolio because of their chronically poor performance.

The second level of strategy is termed Business level strategy. This level of strategy concerns itself with how to win and outclass others participating in the same markets. It is about creation of competitive advantage and sustaining that competitive advantage.

Competitive advantage is that attribute that you have, something that gives you an edge over rivals or others participating in the same markets.

There are many sources of competitive advantage, however, they come down to three fundamental sources: tangible assets, intangible assets and organisational capabilities.

The third and lower level of strategy is called functional level strategy. This refers to the strategy that the business pursues in its different departments such as: production and operations, human resources, finance, procurement and supply chain and marketing.

Functional strategy from a marketing standpoint would be the marketing mix popularly known as the 7 (seven) Ps. The business takes actions in those seven areas to deliver value to its target audiences. These variables are: Product, Place, Price, Promotion, People, Processes and Physical Evidence.

In summary, it is very important for any business to understand the concept of strategy at the three levels as everything has effects onto the financial profile of the business.

The financial profile is the collection of financial reports that the business makes with the view of revealing the financial conditions of the business.

These reports are: The statement of financial position which is also called the balance sheet, they also make the statement of comprehensive income (which was called the income statement), they also make the statement of cash flows and they also make the statement of changes in equity.

◆ Clemence Mutembo is a High- Impact Customer experience, sales and brand building consultant. He has done over 500 presentations to small, medium and large organisations. You may reach him on:-0778 994 994