Embark to Understand — Strategy of a Company
As a software engineer who works for a corporate organization, it has always piqued my curiosity to know how companies that are really large at scale operate. I will be going through some commonly studied business concepts in a series of blogs. The general knowledge of these are gained from a specially curated course by Valentina Bogdanova which has immensely helped me understand how the world outside of my closed box operates.
A strategy is the means by which a company achieves its goals under conditions of uncertainty. This word was originally used in the military to which was recently adapted in the business world.
Strategy used to be well calculated in the earlier days but today, it’s a lot less predictable and requires analytical reasoning strategic position in the market.
Successful companies in all ages and days have 4 things in common:
- Simple, consistent and long-term goals
- Deep analysis of the competitive environment
- Objectively and effectively exploit company resources
- Strong-willed leaders with solid decision making
Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different.
- Michael Porter
The subtle distinction between Strategies
Strategy is of two broad paths,
- Corporate strategy which ideates where the company wants to compete
- Business strategy AKA Competitive strategy which ideates how a company needs to compete
Let’s take a small look at the differences between each of these strategies and see how they support in a company’s growth.
Corporate strategy
A company’s top management will entirely decide on this to purview the scope of the entire company. It contains but not limited to Vertical integration, Diversification, Merges & acquisitions, Capital intensive investments, Allocation of resources
- Which industry or industries should the company compete in
- What should be the geographical scope of operations
- Should the company diversify on business and to what level
- How should a company be organized and type of vertical integration within the company. When to use in-house and out-sourced resources
- Should the company enter alliances and/or acquisitions
Business Strategy
The decisions over here are headed by the business unit managers and divisional leads to gain a competitive edge.
- What sort of resources and capabilities should the company develop to gain a competitive advantage
- What is an efficient way to manage different business units to achieve strategic synergy
- How should the company monitor the industry environment to conform to market needs
As an example, Amazon as a company has their own Corporate and Business strategies which can be summarized as,
- Corporate: Largest online seller selling almost anything that can be sold, and continuously expanding their business into various geographies.
- Business: Cost-leadership technique with the lowest cost of operation in the industry to increase profit, while having a strong emphasis on technology as an added booster.
Importance of Mission, Vision, Goals and Value Statements
An excellent way to validate a company’s purposes and goals is to formulate vision and mission statements, and supporting value statements to keep the company in check.
Mission
- What is the fundamental reason for an organization to exist
Vision
- What does the organization want to achieve in the future
There needs to be a set of Goals to achieve the vision expressed as a percentage, and a set of Objectives to achieve the Goals. Goals are usually targeted at different areas of a business like profitability, efficiency, retention and growth.
For example, the company would come up with a goal to “to increase their revenue by 12% and decrease overheads by 6% in 2022”. To achieve this, a couple of objectives would be to “obtain 2 new customers per month” and “lease a low-cost space for the office premises”.
While trying to achieve goals, there is a chance of overdoing something in the name of maximizing profits, that could be unethical. This is why most organizations stay behind a set of principles AKA Value statements which defines the values and places constraints on how the organization will achieve its goals. Many recruits not only look at large remuneration packages but also wants to join a company that is socially-responsible and upholds ethics, integrity and diversity.
It is very important how you choose your statements of vision and mission. When it comes to vision statements, some follow a very focused statement while some may go for a statement that reflects their business strategy, and unfortunately some companies go for vague statements. Let’s take a jab at how some well-known companies have written down theirs,
- Clear and focused — Prezi: To reinvent how people share knowledge, tell stories, and inspire their audiences to act.
- State the business strategy — Warby Parker: To offer designer eyewear at a revolutionary price while leading the way for socially conscious businesses
- Vague — Zappos: Delivering happiness to customers, employees, and vendors
Similar to the vision, mission statements are also crucial in exhibiting the organization to the general public. Mission statements should be very clear, concise and motivating. Let’s see a couple of examples,
- Google — to organize the world’s information and make it universally accessible and useful
- LinkedIn — connect the world’s professionals to make them more productive and successful.
- Disney — to entertain, inform and inspire people around the globe through the power of unparalleled storytelling, reflecting the iconic brands, creative minds and innovative technologies that make ours the world’s premier entertainment company. (This is too verbose and difficult to remember)
A good set of value statements are written as a guiding principal to the employees and liaises what the company stands behind. Below are Sysco’s values,
- Rooted in Integrity
- Committed to Inclusion
- Drive Together
- Define Excellence
- Grow Responsibly
It is a very interesting avenue to look at how each company sees itself in its own eyes and how it exhibits itself to the public, how it conducts itself and what it tries to achieve.
As I progress learning more on this, so shall you. We shall meet soon with more business related content.
