Rusq.org Explains What Strategy Means
- 1 Rusq.org Explains What Strategy Means
- 1.1 What is the definition of Strategy?
- 1.2 Strategic objectives
- 1.3 Competition scope
- 1.4 Core competencies
- 1.5 Customer Value and Competitive Advantage
- 1.6 Strategic Operation System
- 1.7 Build a strategy – do it yourself or hire a consultant
- 1.8 Conclude
- Welcome to Rusq.org, which aggregates all definitions of what is, and discusses and answers what the abbreviation stands for among young people, today we will learn a new concept that is What is Strategy? Meaning of Strategy. What is strategy? Key strategic questions.
What is the definition of Strategy?
- Strategy is a set of decisions about long-term goals and the means, ways and ways to achieve those goals. Distinguish between Strategy and Tactics. This is a concept of military origin. In the military, strategy is different from tactics, where tactics refer to the conduct of a battle, while strategy refers to how to link battles together. That is, it is necessary to coordinate battles to reach the ultimate military goal.
- So how a strategy will help businesses build such a position in the market? A business strategy must have four elements: strategic objectives, strategic scope, competitive advantage, and strategic activities and core competencies. These four elements require a consistency and fit together.
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What are strategic goals?
- A strategy should begin with defining the expected outcomes for which the business strategy is designed to deliver them. Strategic goals will serve as a guide for a business’s activities for a number of years.
- It is necessary to distinguish between strategic goals and the mission and vision of the enterprise. In fact, many businesses tend to confuse goals with the mission of the business. The mission of the business indicates the purpose or reason for the existence of the business, so it is often highly generalizable. In contrast, goals should be specific, quantifiable, and have a clear deadline.
- The choice of strategic goals has a great influence on the business. A business that chooses high profit as a strategic goal will focus on serving high-margin customer groups or market segments with products with high added value or superior cost performance. dominant. Conversely, choosing a growth target can lead a business to diversify its product lines to attract customers in many different market segments.
Common strategic goals
- Strategic goals generally fall into two categories: financial goals (revenue growth, profits) and non-financial goals.
- Although the majority of CEOs of businesses in the world (30%) still prioritize growth, in the long term, the most important goal that the business strategy is aiming for is high and sustainable profits. Strategic goals are usually measured in terms of return on investment (ROI) but can also be measured in terms of return on equity (ROE) or return on assets (ROA). Enterprises can also include other goals (non-financial such as product/service quality, customer value, capacity development, human resources, etc.)
- The choice of target depends on the industry and development stage of each business, but businesses must be very careful in choosing growth goals, stock value or annual accounting profit as a target. goals because it can lead the business in the direction of unsustainable development.
What is the scope of competition?
- An effective business strategy does not focus on satisfying all needs in all market segments because doing so would have to disperse resources and efforts. Therefore, businesses need to set limits on customers, products, geographies or value chains in the industry in order to focus and best satisfy customer needs – that is the scope of a good strategy. competitive scope. The scope of competition does not necessarily describe exactly what the business does, but it is important to define and convey to employees what the business will not do.
- For example, a well-defined bank does not provide credit to customers dealing in commodities with strong fluctuations in prices such as iron and steel, fertilizers. This is necessary so that middle managers don’t spend too much time on projects that will later be rejected because they don’t fit the strategy.
Common strategic scope?
Businesses can choose to focus on meeting one or a few needs of many customers such as:
- – Focusing on many needs of a small number of customers as in the case of An Phuoc providing many different products (shirts, trousers, ties, suitcases, shoes…) to corporate customers. people and offices with high income.
- – Businesses can also choose to focus on many needs of many customers in a narrow market area as in the case of opening a convenience store that sells essential, high-quality products to a residential community. have a good and high income in an area.
The selection of the strategic scope must be based on the principle that the market has a real need and the business really understands and can meet the needs. Businesses also need to avoid confrontation with strong competitors or are responding well to customer needs.
- An important point in the design of this operating system is to ensure the compatibility between activities and the same direction to create added value In the operating system, the enterprise must determine what is the core competence. directly contribute to the creation of an identified sustainable competitive advantage.
- Core competency is the ability to carry out activities with superiority to competitors in quality or performance, it is usually the ability to link and coordinate a group of activities or key functions of an organization. business and rarely within a specific function.
- This capacity can allow businesses to compete effectively and diversify products to. For example, Honda’s core competency is the ability to design and manufacture engines with outstanding durability and fuel economy, a core competency of a construction company could be construction management ( thereby ensuring progress, quality and cost). The elements of the strategy clearly do not exist independently, separately, but on the contrary, they must ensure alignment, consistency and compatibility with each other.
Customer Value and Competitive Advantage
- Instead of simply defining competitive advantage as low-cost or differentiated, a business must identify what its target customers really value and develop a customer value schema that represents The combination of factors that target customers are willing to spend money to buy products and services of the business such as price, quality, design, speed, safety, reliability ….
- The uniqueness or difference of the product or service is the way in which the elements are combined to best meet the target customers. Thus, competitive advantage is a combination of values, but in which there must be one or two outstanding values to help customers recognize your products among competitors’ products.
- Remember, defining and building customer value and competitive advantage is at the heart of the strategy.
Strategic Operation System
- After determining the competitive advantage suitable for the target customers, the strategy should answer the question: how can the business achieve competitive advantage? In other words, businesses must determine how to deliver differentiated value to customers.
- To deliver the desired customer value, management must design a system of business activities geared towards creating superior customer value. One of the most effective tools for designing operational systems is the value chain developed by M. Porter. Depending on the characteristics of each industry, the value chain of the enterprise will be different but will still include the main group of activities (such as procurement, operations, marketing, sales …) and the group of supporting activities ( such as human resource management, research and development, management infrastructure, IT, etc.).
Build a strategy – do it yourself or hire a consultant
- If the business can have enough market information and have good enough people, building a strategy is a good choice. However, because this only happens once every 3-5 years, and if the business needs to build a strategy based on methodical analysis, or the business does not have enough market information, hiring a strategy consultant is a good option. Not a bad choice. The actual cost of hiring a strategic consultant is insignificant compared to the benefits that a good strategy brings.
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