What Is Strategy and Why Is It Important?

Managers face three central questions in evaluating their company’s business prospects: What’s the company’s present situation? Where does the company need to go from here? How should it get there? Arriving at a probing answer to the question “What’s the company’s present situation?” prompts managers to evaluate industry conditions and competitive pressures, the company’s current performance and market standing, its resource strengths and capabilities, and its competitive weaknesses. The question “Where does the company need to go from here?” pushes managers to make choices about the direction the company should be headed—what new or different customer groups and customer needs it should endeavor to satisfy, what market positions it should be staking out, what changes in its business makeup are needed. The question “How should it get there?” challenges managers to craft and execute a strategy capable of moving the company in the intended direction, growing its business, and improving its financial and market performance.
In this opening chapter, we define the concept of strategy and describe its many facets. We shall indicate the kinds of actions that determine what a company’s strategy is, why strategies are partly proactive and partly reactive, and why company strategies tend to evolve over time. We will look at what sets a winning strategy apart from ho-hum or flawed strategies and why the caliber of a company’s strategy determines whether it will enjoy a competitive advantage or be burdened by competitive disadvantage. By the end of this chapter, you will have a pretty clear idea of why the tasks of crafting and executing strategy are core management functions and why excellent execution of an excellent strategy is the most reliable recipe for turning a company into a standout performer.