The strategy of a single activity or company (also called business strategy to distinguish it from corporate strategy, which is the strategy of a multi-activity company) consists of:
- Define the company’s mission
- Define the overall competitive positioning of the company or business
- Set the overall ‘course’ and objectives: turnover, growth, profitability
- Determine the ways in which the major objectives will be pursued
- Break down the overall objectives into objectives relating to the market segments or products that generate the bulk of turnover, margins and future growth.
- Break down the overall strategy according to the company’s main functions
- Allocate the corresponding resources.
The time horizon of the corporate strategy is often three years with annual review or revision. The corporate strategy is usually translated into a “strategic plan” of very limited distribution, listing the main decisions and recalling the assumptions underlying them. It also includes a “What if?” section, which examines alternative scenarios and the adjustments that would result from them.
Like any strategy, the quality of a company’s strategy will be judged largely on the quality of its execution and its results, which will themselves depend largely on the capacity to adapt to the context, hazards and opportunities that may arise during the period.
Corporate strategy in practice
In practice, the business strategy consists essentially of:
- To take heavy, structuring decisions, the consequences of which the company will benefit or pay for a long time: this type of decision may concern, for example, heavy investments, acquisitions, technological choices or bets, geographical expansion (setting up in the USA or China, for example), but also the fact of ‘taking or not taking’ a very large contract which could jeopardise the whole company if it goes wrong during its execution.
- The quality of the managers and their ability to make the right decisions by correctly assessing the risks and opportunities is essential here. However, the economic situation may either favour or thwart the strategy initially decided upon.
- To integrate and make coherent a set of “sub-strategies” and to make resource trade-offs between these “sub-strategies”. It is easy to understand the need for coherence by imagining, for the sake of illustration, that the strategy of Rolls Royce in the automobile sector will be different from that of a generalist manufacturer in terms of mission, global positioning, R&D, products, industrialisation, marketing, etc., and that all these elements must be coherent with each other.
The main sub-strategies which must be made consistent with each other in the service of the same activity or company strategy will therefore be the R&D, product, industrial, marketing, sales, communication, HR and IT “strategies”.
The business strategy of technology companies
The specificity of technology companies in terms of business strategy essentially concerns the essential place given to R&D (or R&T) and technologies, to product policy, which are at the heart of the overall strategy. There is also a particular way of developing a marketing strategy linked to the customer portfolio and key accounts, as well as to business development and sometimes to projects if the company has a project or product-project business.
Some differences will be found between the strategy of a business within a group and the strategy of an independent company:
- An activity will benefit from resources decided at central level
- Some support functions may be centralised (e.g. R&T) but may or may not be replicated in each activity.
- The objectives and strategy of the activity will be discussed between the activity and the central level
- If its shareholding is family-owned, the independent company will frequently integrate into its strategy patrimonial objectives which may influence the company’s strategy.
