1.2 What is Strategy?

Strategy is the method that an organization uses to reach its goals. According to this definition, strategy is fundamentally a broad term. In the right context, almost any plan of action can be considered an organization’s strategy. Most academic papers on strategy, as well as this book, focus on competitive strategy. Competitive strategy is the way that an organization is going to compete for customers, profit, and resources within its industry. However, the tools and techniques of competitive strategy can be adapted to an organization’s quest for other goals. 

Since competitive strategy (by definition) is focused on competition, competitive strategy is often expressed in terms of sports, war, history, survival, and board games. This terminology is transferred to the field of strategy as a whole. For example, when a manager states, "What is our game plan?" the manager is asking for clarification about the organization's strategy. When an organization ‘crafts' or builds its strategy, it is specifically choosing the actions it will take in the marketplace, including how it is going to compete with and outperform other organizations.

Stakeholders can often observe an organization's chosen strategy by evaluating what the firm does in the marketplace and asking questions such as the following:

• What industry does the firm operate in?

• What products and/or services does the firm market and sell? Does the firm take an offensive or defensive position?

• What is the firm's target market?

• Does the firm invest in research and development? Why or why not?

• What product or services does the firm offer that are different from competitors?

• What makes the firm successful or unsuccessful?

• Where does the majority of the firm's money come from?

• What type of employees does the firm invest in?

• How does the firm choose to market its products?

• Why type of manufacturing does the firm use?

Stakeholders can also come to understand an organization's strategy by evaluating statements made by upper management. Often, these statements can be found in mission statements, newsletters, press conferences, employee meetings, and even a company's annual report to shareholders. For example, consider Microsoft's 2012 annual report by its CEO Steven A. Ballmer:

It is clear that Microsoft Corporation's strategy over the coming decade will be to capitalize on an emerging market that focuses on intuitive machine learning, touch and speech technology, cloud services, and life-changing improvements in how people learn, work, play and interact one with another.

In essence, Microsoft is experiencing a shift in its strategy - changing from being a producer of operating systems and Microsoft Office to an industry leader in cloud computing, machine learning, and other technologies. As part of its strategy, Microsoft is trying to develop products and services that will create a competitive advantage that will benefit Microsoft in the marketplace. When an organization has a competitive advantage, it has an ‘advantage' or ‘unique capability' that sets it apart from all other players in the market. A central part of any competitive strategy is the organization's ability to create a sustained competitive advantage.