Types of Strategies
First and foremost, it is important to understand the meaning of the term strategy. A strategy is a long-term, highly efficient and consistent plan to achieve the goals set in the inconclusive and fast-changing environment. There are many strategy types today – military strategies, risk strategies, management strategies, etc. However, when ones talk about economics and management, it is important to concentrate on generic strategies, the basic strategies for most modern industries. Generic strategies can be applied to any industry and any business (“Porter’s generic strategies”, n.d.). The size and core activity of the company in this case can be neglected because of their exiguity. These strategies were developed in 1985 by Michael Porter and are still popular in the modern management society.
The strategies themselves are the cost leadership strategy, the differentiation strategy, and the focus strategy. The cost leadership strategy means a strong leadership in terms of cost. However, having the lowest cost level does not prove the company’s success. First of all, the business must choose whether or not it can maintain a leading position among other low-cost companies and “stay alive”. In most cases, companies that have successfully implemented this approach possess substantial technology investments and highly efficient logistics (“Porter’s generic strategies”, n.d.).
The differentiation strategy is a completely opposite approach. It implies making a company’s products different from the competitors’ products. When the industry is highly saturated, it is very hard for an organization to compete. However, if a company increases product’s functionality and durability, improves product’s features making it more attractive to the customer and unique in some way, there is a chance of success. To achieve this, the effective research should be conducted. In addition, there is a strong need in delivering high-quality goods and services as well as effective advertisement campaign.
The last type is focus strategy. In some aspect, it is acombination of both low-cost strategy and differentiation strategy. The point is that by using a focus strategy, the company concentrates on a particular market segment, usually a niche market. After conducting market analysis, the company develops unique strategy based on low-cost or differentiation approach.
To choose the right strategy, a company has to analyze the industry by using Five Forces Analysis. Further on, it must perform SWOT analysis to outline the basic strengths, weaknesses, opportunities, and threats of the business. By comparing the results, a company may choose what strategy to implement (“Porter’s generic strategies”, n.d.).
A strategic objective can be defined as an intermediate objective the organization must achieve to fulfill the primary strategy (“Strategic objective”, n.d.). Effective objective is impossible without evolutional and well-considered planning, as well as any other organizational activity.
According to Peter Drucker, a famous management expert, there are eight kinds of strategic objectives: market standing (market share change), innovation (new technologies and skill’s implementation), human resources (employees selection and development), financial resources (capital and its use, new sources of capital), physical resources (equipment and facilities), productivity (resources use effectiveness related to the output), social responsibility (responsiveness to outer environment, stakeholders), and profit requirements (financial growth) (“Strategic objective”, n.d.).
An example of strategic objective can be expenses reduction to seven percent. Another example can be the staff turnover decrease to five percent. One can provide several examples of strategic objectives, but the essence is clear – without small, gradual objectives, it is impossible to achieve the primary goal.
Generally, one can define three different objectives types – strategic, long-term, and short-term objectives. The first objective to come is the longest one. Long-term objective can be desccribed as a plan developed for a long time period, usually exceeding one year (Bradley, n.d). For example, revenues doubling within the four years period can be interpreted as a long-term objective. Another example is a new product development. As one can clearly see, the task is arduous. The next type is a strategic objective. This kind has been outlined before so there is no need to describe it anew, but it is important to stress the fact that a long-term objective is impossible without a strategic planning. Finally, the last type is a short-term objective. It concentrates on task and plans that can be achieved within one year period. In addition, these objectives must be easily measured and accountable (Bradley, n.d). The common thing about all types of objectives is that they must be realistic, accountable, and time bound. The interesting thing is that sometimes long-term objectives are referred to as goals. However, the point is that goals are broader and vague while objectives are concrete and precise. For instance, the goal is to broaden market horizons, while the objective is to outperform competitors and increase revenues.
Corporate governance is a complex system of various mechanisms to direct and operate the organization. The main and most important role of the corporate governance is to establish a policy and ensure that it is necessary for the company’s development (Wondra, J., n.d.). Overall, corporate governance can be described as an effective communication frame compounding different organization’s systems and ensuring their coexistence. In addition, corporate governance includes codes of ethics towards customers, shareholders, employees, etc. (Wondra, n.d.). When establishing the corporate strategy, the company’s board must clearly set its goal and eligible outcomes, as well as all constituents moving the company towards its purpose. To conclude, there is a vital need to emphasize that all objectives and strategies mentioned before are considered successful and effective providing that there is a main contributor of success – a wise manager.