Policy, Strategic Management, and Business Growth

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(uplifting music) These lessons will help you understand what strategic management is and why it's important for organizations to implement to stay competitive. You'll also learn how to identify the relationship between business policy and strategic management. The word strategy originates from the Greek word strategos or the art of the general. The main goal of every strategy and strategic planning is to win, beat the competition, and become a market leader. A good strategy should be able to answer the following questions. What is our market, or where do we compete? What makes us different, and what unique value do we deliver to the customer? What resources and capabilities do we utilize to deliver that value? And how do we sustain our capability to provide this unique value? The three major components of a good strategy are: analysis, formulation, and implementation. The first component, analysis, also called diagnostics, is performed on the challenges presented by the competition and is usually done by performing internal and external analyses of your company. The next component of a good strategy is to develop a guiding policy on how to deal with the competitive challenge. This is called formulation and usually presents overall corporate, business, and functional strategies. The final component, implementation, is the set of actionable items to carry out the company's guiding policies. All three components together represent the AFI Strategy Framework, which represents three interrelated actions that can assist management in developing a strategic plan and apply it. This can result in improved company performance and establish a competitive advantage. Strategy is the set of goal-directed actions a company takes to outperform the competition. It's actionable and executable, and it defines market challenges and how to deal with those challenges. A great strategy example is the furniture company IKEA. The company sells inexpensive furniture and has devised a strategy that it's competitors find difficult to imitate. This is because these competitors would have to completely change how they design and ship their furniture. What IKEA doesn't do, however, is compete in the high-end furniture business, and this is a good strategy for them. But what's a bad strategy? It's helpful to stay away from sweeping and general statements, like, "Our strategy is to be the best." "Our strategy is to be number one." Or, "Our strategy is to have the best customer service." Those aren't strategies, but work more as goals, tactics, and objectives, and they don't provide management with guidance for implementation. Having strategy discussions lays the groundwork for the study of strategic management. Strategic management integrates the AFI Framework to gain a competitive advantage and positions a company for better performance. But strategic management is a continuous process, so it doesn't end there. The process begins with answering the question: Why are our competitors getting more market share? To answer this question, your organization can continuously assess the business eco-environment where you're a player, analyze competition, modify your goals to respond to present and potential competition, and modify each strategy accordingly. Strategic management is also a change management process. It requires an understanding of how culture and the world changed, and how these changes can affect your enterprise.