When it comes to business, an organisational strategy means much more than a plan for a better future. If implemented correctly, an organisational strategy perfectly represents the organisation's resources, capabilities, vision and mission, and direction for its manageable future. Today, let's have an in-depth look into the concept of organisational strategy and its diverse types at workplaces.
The importance of organisational strategy
An organisational strategy is a long-term plan demonstrating how a company utilises its resources and capabilities to support business activities and attain business goals.
Organisations consider diverse organisational strategies to meet their goals and initiate strategic plans to choose the most suitable one for their business.
Often, the three most potent resources incorporated into an organisational strategy are capital, labour, and inventory. Besides, business activities include marketing, sales, production, finance, and infrastructure.
Why do organisations need appropriate organisational strategies? The reasons are vast.
Firstly, an organisational strategy can help organisations clearly define their business direction and set their priorities.
How can an organisational strategy set business directions and priorities?
For example, an organisational strategy focusing on expanding a company's market can keep the business focused on market expansion while setting market-related activities such as marketing and sales as the top business priorities.
Secondly, an organisation's strategy motivates all employees toward a common business goal. In other words, an organisational strategy can unite a company's workforce and align them with business targets.
How can an organisational strategy inform your employees?
An organisational strategy emphasising a boost in revenue can make profits the top goal in the minds of every employee across an organisation. Thus, a salesperson knows they should be more active in converting sales deals, while a product designer knows their responsibility in researching and developing competitive products.
Further, an organisational strategy can simplify the business's complex decision-making process as companies can prioritise their actions based on pre-determined strategic goals and plans. Besides, as the entire company knows what to strive and aim for, the chances are that they work more productively and are less likely to leave their projects.
Levels of organisational strategy
Essentially, there are three levels of organisational strategy, which are corporate-level strategy, business-level strategy, and functional strategy.
A corporate-level strategy represents the strategic plan for the highest corporate level, which can determine general business goals and specific goals for lower levels in the organisational hierarchy.
At one level lower than corporate level strategy, a business level strategy informs how a business plans to gain advantages in a specific market. For instance, a business-level strategy demonstrates a company's plan for competing, positioning, and mastering the market.
At an even smaller micro-level, departments such as the sales, marketing, or finance department within a company need their functional level strategy to steer their goals and directions.
Organisational strategy types
Nowadays, there are three organisational strategy components companies utilise to develop their strategy frameworks: innovation, cost minimisation, and imitation. Accordingly, there are three popular organisational strategy types corresponding to the three components: innovation strategy, cost-minimisation strategy, and imitation strategy.
Organisational Strategy: Innovation Strategy
Which strategy will your company use when it needs significant product and service innovation? Consider an innovation strategy that sets business goals in researching and developing superior new products and services.
Commonly, business innovations are based on technological advances. Yet, there are still successful cases of innovating business processes. Generally, there are four main types of business innovation: routine innovation, disruptive innovation, radical innovation, and architectural innovation.
Also, sometimes, big and breakthrough ideas do not simply happen in business. Instead, creativity and innovativeness often arise out of specific environments and procedures designed by companies.
How can companies implement an innovation strategy?
To implement an effective innovation strategy, companies may need to offer competitive salary packages to attract innovative UX and UI designers, create innovative hubs for research and development (R&D), or establish clear communication channels and long-term policies to attain employees.
Organisational Strategy: Cost-minimisation Strategy
If your company is undergoing a severe financial crisis or a phase of increasing its asset turnover, a cost-minimisation strategy turns out to be beneficial. A cost-minimisation approach involves minimising spending, tightly controlling business costs, avoiding unnecessary expenses, and reducing selling prices.
On the one hand, a cost-minimisation strategy can give companies various financial advantages such as lower unit costs, higher profit margins, higher total revenues, and better cash flows. On the other hand, a cost-minimisation strategy may make the business unable to deal with unexpectedly increasing demands or a weak competitive advantage in R&D.
How can companies minimise costs in real life?
In business, companies can cut costs by limiting their R&D activities, minimising their invested capital in economies of scale, or outsourcing non-core activities such as payroll or transaction processing.
Organisational Strategy: Imitation Strategy
As its name suggests, a company with an imitation strategy develops new products or enters new markets once other innovators have proven the products' or markets' viability. For example, a technology firm may consider entering the Asian market after witnessing the successful entry of other giant companies in the industry.
Compared to an innovation strategy, an imitation strategy saves companies more time and money invested in the R&D process. Further, an imitation strategy is less risky for businesses, given that market or product viability has been validated.
What if a company with an imitation strategy desires to benchmark the market?
In this case, the company can apply innovation in the re-engineering process to add differentiating factors to the imitative products before launching.
When implemented appropriately, an organisational strategy can create enormous advantages for organisations in improving operational excellence, guiding future directions, and benchmarking markets. While there is no best strategy for every business, the successful recipe lies in the wise alignment of the business' resources and capabilities with an appropriate strategy and the ability to execute such strategy eventually.
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