Strategy is a set of choices about where a firm will compete and how it will win. Operations is doing things well; strategy is choosing which things to do, and which to leave out. This article revisits the standard strategic management process: analyse, choose, implement and control.
1. Strategy and the strategic management process
Strategy exists at three levels:
| Level | Question | Example |
|---|---|---|
| Corporate | Which businesses should we be in? | A group deciding to enter retail or telecom |
| Business (competitive) | How do we win in each business? | Low cost vs premium |
| Functional | How does each function support it? | HR, marketing, IT policies |
The process: set direction (vision, mission, objectives) → analyse the external and internal environment → formulate strategy → implement → evaluate and control. In practice it is iterative: strategy emerges partly from deliberate plans and partly from what actually works (emergent strategy, Mintzberg).
Vision is the aspirational future; mission states purpose and scope; objectives are measurable targets. Strategic intent is a stretching long-term ambition (Hamel and Prahalad).
2. External analysis
| Tool | What it shows |
|---|---|
| PESTLE | Political, economic, social, technological, legal, environmental forces |
| Porter’s Five Forces | Industry attractiveness: rivalry, entrants, substitutes, buyer and supplier power |
| Industry life cycle | The stage and its implications |
| Strategic groups and competitor analysis | Who competes directly, and how |
| Key success factors | What must be done well to win |
The output is a list of opportunities and threats. (See Industry Analytics for detail.)
3. Internal analysis and competitive advantage
The resource-based view says advantage comes from firm-specific resources (assets) and capabilities (what the firm does well). Test them with VRIO: valuable, rare, hard to imitate, organised to exploit. Core competencies (Prahalad and Hamel) are collective learning that gives access to many markets, adds customer value and is hard to copy.
Tools: the value chain (primary activities and support activities) to see where cost and value arise; benchmarking; SWOT; and financial analysis. Dynamic capabilities are the ability to sense change, seize opportunities and reconfigure resources, which matters in fast-moving industries.
In the real world: Amazon’s core capability in logistics and technology let it expand from books to marketplace, cloud and devices; Toyota’s production system and supplier relationships are hard to replicate, which is a classic VRIO case.
4. Business-level strategies
Porter’s generic strategies:
| Strategy | Idea | Requirements | Risk |
|---|---|---|---|
| Cost leadership | Lowest cost in the industry | Scale, efficiency, tight control | Rivals copy; quality neglected |
| Differentiation | Unique, valued offer at a premium | Brand, innovation, service | Imitation; the premium is not worth it |
| Focus (cost or differentiation) | Serve a narrow segment better | Deep segment knowledge | Segment too small or attacked by larger firms |
| Stuck in the middle | Neither low cost nor distinctive | Weak position |
Blue ocean strategy (Kim and Mauborgne) creates uncontested space by combining differentiation and low cost through value innovation; the strategy canvas and the ERRC grid (eliminate, reduce, raise, create) help redesign an offer. Competitive dynamics: price wars, signalling, and first-mover advantage against the benefits of being a fast follower. Cooperation (alliances) can be as important as competition (co-opetition).
In the real world: Reliance Jio combined massive investment with very low prices in 2016, a cost and scale play that reshaped Indian telecom. Apple differentiates through design and ecosystem. IKEA pairs low cost with a distinctive in-store experience. Cirque du Soleil created a new space between circus and theatre.
5. Corporate-level strategy
| Option | Description | Example |
|---|---|---|
| Stability | Maintain current course | A profitable niche player |
| Growth: concentration | Deepen the current business (penetration, market and product development) | Ansoff’s first three cells |
| Vertical integration | Move upstream (suppliers) or downstream (distribution) | A manufacturer opening retail stores |
| Diversification | Related (shared skills) or unrelated (conglomerate) | A group spanning many industries |
| Retrenchment | Cut back, divest, turn around, liquidate | Selling non-core units |
Portfolio analysis: the BCG matrix and GE–McKinsey matrix guide where to invest, hold or divest. Parenting advantage: a corporate centre should add more value to a business than it costs; otherwise, the business is better held by someone else.
Mergers, acquisitions and alliances:
- Merger or acquisition (M&A): fast access to markets, technology or scale, but many fail because of high prices and integration problems, especially culture clash.
- Joint ventures and strategic alliances: share risk and capability without full ownership.
- Divestment and spin-off: unlock value from non-core units.
In the real world: the Tata Group is a diversified group where the centre provides brand, values and financial backing; the Tata Motors acquisition of Jaguar Land Rover (2008) was a bold bet for premium brands and global scale. Maruti Suzuki began as a joint venture of an Indian firm and a Japanese partner.
6. Global strategy
Reasons to go global: growth, scale, resource access and following customers. Strategic postures: international (export core offerings), multi-domestic (local adaptation), global (standardised, cost-driven) and transnational (global efficiency plus local responsiveness). Entry modes range from exporting to licensing, franchising, joint ventures and wholly owned subsidiaries; the choice weighs control, risk and speed. Political, currency and cultural risk must be managed.
7. Strategy implementation
A strategy fails more often because of poor execution than a poor idea.
| Lever | Questions |
|---|---|
| Structure | Does the organisation design (functional, divisional, matrix) fit the strategy? |
| Systems and processes | Budgets, planning, information and incentives aligned? |
| Leadership and culture | Do values and behaviours support the strategy? |
| People and skills | Right talent in the right roles? |
| Resources | Capital and capacity allocated to priorities? |
The McKinsey 7-S model (strategy, structure, systems, shared values, skills, style, staff) shows that all must fit together. Change management (see Organizational Behavior) and clear communication are central. Chandler’s dictum “structure follows strategy” captures the link, although structure also shapes what strategies are possible.
8. Evaluation and control
Strategic control checks whether the strategy is still valid, not only whether targets are met. Tools: the balanced scorecard (financial, customer, internal process, learning), KPIs and OKRs, scenario planning and contingency plans, strategy reviews and real options thinking. Types of control: premise control (are assumptions still true?), implementation control and strategic surveillance. Drift signs include rising costs, falling share and employee disengagement.
In the real world: Kodak invented the digital camera but protected its film business, failing to adapt as its market disappeared. Nokia misjudged the smartphone shift. Netflix repeatedly reinvented itself, from DVDs by mail to streaming to original content, showing continuous strategic renewal.
9. Ethics, sustainability and the modern view
Strategy must take account of stakeholders, ethics and sustainability: governance, ESG goals and licence to operate. Digital strategy (data, platforms, AI), ecosystems and agility are now central. Strategic thinking also asks “what business are we really in?” to avoid marketing myopia, and “what will we stop doing?”, since focus matters.
One-minute recap
| Topic | Key idea | Where you meet it |
|---|---|---|
| Strategy levels | Corporate, business, functional | Group vs unit decisions |
| External analysis | PESTLE, Five Forces, key success factors | Market entry |
| Internal analysis | Resources, VRIO, core competence, value chain | Competitive advantage |
| Business strategy | Cost, differentiation, focus; blue ocean | Jio, Apple, IKEA |
| Corporate strategy | Diversification, BCG, M&A, alliances | Tata, JLR |
| Global strategy | International, multi-domestic, global, transnational | Expansion |
| Implementation | Structure, systems, culture, 7-S | Execution |
| Control | Balanced scorecard, premise control | Reviews, renewal |
Next in MBA Revisited: Industrial Relations.
Written by Claude, Anthropic’s AI assistant, as part of MBA Revisited, a quick refresher of the PGDM subjects one at a time.