An organizational strategy is a tool that assists firms in structuring their resources to support their commercial activities. When utilized correctly, it can help you make better decisions and guide team members toward a common goal. If you want to improve the efficiency of your company, you must first learn how to apply an organizational strategy. In this article, we define what an organizational strategy is, explain why your business needs one, its example, and an overview of organizational strategy development as a whole.
What Is Organizational Strategy?
An organizational strategy is a plan of action for how a corporation will achieve its long-term objectives. Organizational strategies should be comprehensive and include the mission, goals, and core capabilities of the company or team; a strategy and schedule for achieving those objectives; and the allocation of resources required to do so.
Creating an organizational strategy should result in a business plan that is consistent with the company’s mission and aims. A strategic plan also clarifies the mission and ensures that all key teams are on the same page. An organization’s overall strategy can be divided into three levels: corporate, business-level, and functional. Each component is a crucial building piece for achieving strategic goals.
What are the Categories of Organizational Strategy?
There are three major types of organizational strategies:
#1. Corporate
Because it carries your overall corporate goals, this category is complex and extensive. Diversification, liquidation, expansion, distinctiveness, and low-cost production are examples of corporate strategy.
#2. Business
This category divides corporate strategies into departmental objectives. A profit-driven corporate plan, for example, can include sales upskilling and increasing their marketing budget as an organizational strategy.
#3. Functional
This category further deconstructs business concepts into actionable goals for your team. Assume your business plan is to undertake market research. In that instance, one functional strategy would be to create selection criteria for a market research firm.
Please keep in mind that these strategy organization categories describe your firm from the highest level down to the day-to-day operations that contribute to your success. Encourage every stakeholder in each category to provide feedback on your organizational approach.
What Are the Key Elements of Organizational Strategy?
A fundamental component of an organizational strategy is:
#1. Specific
Organizational strategies are explicit in stating their goals. When developing your organizational strategy, use quantitative outcomes rather than platitudes like “better.” Instead of saying, “We want to sell products faster,” say, “We want to sell our products at a 25% increase over last year’s numbers.”
#2. Measurable
Measurable organizational strategies assist organizations in determining whether they have met their objectives. Companies can track their success along the way by establishing a target number to work toward. Rather than just stating that they wish to grow or decrease their metrics, organizational plans frequently utilize percentages to demonstrate the degree of rise or drop they intend.
#3. Realistic
Make sure your organizational plan is realistic in order to have attainable goals. Consider your organization’s previous accomplishments while assessing the potential to strive for. For example, if your company’s revenues increased from $400,000 to $600,000 last year, try aiming for $800,000 rather than $1,000,000, which may be beyond your present trends.
#4. Limited
Organizational strategies are time-bound, which means they have a deadline. Businesses allocate a set period of time, such as three years, to accomplish a specific goal. This allows them to track when they reach their goals and ensures that tasks are completed.
Types of Organizational Strategies
Businesses choose their organizational strategy based on their vision and market position in order to get a competitive edge. Some examples of organizational strategies are:
#1. Focus
The focus strategy is a process that entails locating a specialized market group. Businesses that use this strategy target a limited, chosen group. The goal is to develop client loyalty by providing high-quality products and services. For example, an almond milk company caters to vegetarians and lactose-sensitive people.
#2. Low-cost production
Low-cost production, often known as cost leadership, is a business approach in which a company delivers the lowest price for its product or service. Customers are more likely to buy because it is less expensive than competing companies. To offer inexpensive prices, a corporation must reduce its labor costs. A fast-food restaurant with only a few things on its menu is an example of a corporation that uses low-cost production. They keep their rates low by paying their employees minimum wage and just offering drive-through options, allowing them to keep their building small and affordably priced.
#3. Differentiation
A differentiation strategy is a strategy in which a corporation aspires to be the best in its field. To accomplish this, they provide innovative products and services with distinct features. This entails conducting extensive market research to determine what draws clients. A company selling designer purses, for example, may create exclusivity and a waiting list for customers interested in purchasing their latest purses.
#4. Growth
A company’s growth strategy is one in which it seeks to expand. This could include expanding their sales or the geographic area to which they sell. A competitor acquisition or purchase is another form of growth strategy. A growth plan might be if a sneaker firm chose to expand its product line and begin offering sports apparel.
#5. Rationalization
A rationalization strategy is used when a company decides to reorganize in order to become more efficient. Often, this entails limiting the number of employees and outlets in order to focus on what is best for the firm. Companies often employ this method when their operations become complex as a result of implementing a growth strategy. For example, a taco chain may intend to build 20 new sites but later find that focusing on fewer locations is more profitable. This could force them to close some of their new locations and lay off workers.
Why Does Your Business Need An Organizational Strategy?
There are several reasons why your company should use organizational strategy, some of which are as follows:
#1. Sets Direction And Priorities
An organizational plan directs your company’s operations. Without that direction, your company may be flailing in the wind. You strive toward diversification one week and against no change the next (opposite organizational strategies). That’s a tragedy waiting to happen. An organizational plan, at the very least, provides stability.
An organizational plan also identifies your company’s priorities. It defines success and demonstrates which activities should come first (and second, and third) in order to drive your company toward that objective.
#2. Aligns Teams And Departments In A Common Goal
Getting all of your departments and teams to work together is difficult enough. It is practically impossible without an organizational strategy.
When you establish your overarching plan, even if it’s something vague like boosting profits, you give all of your staff a shared purpose to rally around. This leads to alignment among departments (horizontally) and across your business (vertically).
#3. Clarifies And Simplifies Decision Making
Business decisions can be some of the most challenging you’ll ever have to make. However, with an organizational plan in place, you may decrease the number of decisions you must make and define which ones make the most sense in light of your objectives.
So, if your organization’s goal is to increase profits but your product has already saturated the market, you have just one or two options (e.g., diversify).
#4. Allows Your Business To Adapt
Do you turn around and go home if you’re traveling to work in the morning and find a detour? No. You take the detour (or, if you’re familiar with the region, you discover a better way around the construction) until you reach your goal.
That destination (getting to work) is your organizational strategy. If difficulties happen along the route, you do not give up altogether; instead, you adapt in order to keep advancing toward the final goal.
How To Develop A Good Organizational Strategy
The steps outlined below can assist corporate leaders in the development of an effective organizational strategy:
#1. SWOT Analysis
Understand your company by analyzing its strengths, weaknesses, opportunities, and strengths (SWOT). When you’re honest about your abilities, you can accurately appraise your organization and anticipate problems.
#2. PEST Analysis
Analyze your external business conditions to have a better understanding of your PEST (political, economic, social, and technical) environment. This research assists your company in planning for risks and interruptions that may endanger its success.
#3. Competitor Analysis
You can also conduct the same SWOT and PEST research on your competitors to better understand their market position. To preserve your competitive edge, use your strategic management abilities to convert their flaws and obstacles into strengths.
#4. Establish Accountability
While on the development of your organizational strategy, you should know which team members are responsible for which goals or duties when you develop your organization’s plan. Communicate your goals and incorporate comments as you steer your company toward strategic success.
#5. Determine Your Corporate Culture
Your corporate culture is directly defined by your strategy and organization. For example, if you want to develop a superior IT company, you must first select the correct staff. Furthermore, you must develop the ideal office environment to spark their innovation and provide competitive compensation to keep them engaged. All of these elements contribute to your organization’s strategy and influence its corporate culture.
#6. Monthly, Quarterly, And Annual Reviews
Check-in on a frequent basis to ensure that your quantifiable and specified strategic goals are on track. In order to comprehend your company’s position, involve your complete staff in strategy management reviews.
Example of Organizational Strategy
Consider the following example of a regularly utilized organizational strategy in business.
#1. Business Growth
When considering a corporate growth strategy, consider the following:
- Diversifying and increasing your products/services
- Increasing the sales of your current products
- Expanding to serve different locations
- Acquiring a competitor
Growth methods can be costly, which is why it is best to explore all choices before taking a leap of faith.
#2. Rationalization
Adhering too rigidly to a growth strategy can sometimes be damaging to other areas of the business. Sometimes rationalization to boost operational efficiency is more beneficial than strict adherence to the original plan. The goal here is to restructure the teams, reduce the number of physical stores, and streamline the business process in order to produce more profit.
What Are the 4 Organizational Strategies?
Product/Innovation, Revenue/Sales, Service, and Process are the four Organizational Strategies.
What Is an Example of an Organizational Strategy?
A business strategy is the most effective technique to establish credibility and trust with your consumers. A cloud-based US phone number, for example, is an excellent method to develop trust and simply communicate with your clients, and you can incorporate this into your organizational strategy.
What Are the Three 3 Different Forms of Organizational Strategy?
These three strategies — functional, business, and corporate — combined form the extremely broad, very general organizational plan that any company requires to succeed.
How Do You Create an Organizational Strategy?
The following steps are taken by businesses to develop an organizational strategy:
- Understand the organization’s current situation.
- Determine the organization’s values
- Maintain open communication
- Consider the corporate culture
- Review regularly
Why Is Organization Strategy Important?
An organizational strategy is significant because it allows firms to best use their resources in proportion to their goals. Your Organizational Strategy is one of your company’s guiding documents, and its creation should reflect its significance to your organization’s overall health.
Final Thoughts
Developing a good organizational plan is the first step toward steering your operations in the proper direction and ensuring that your company meets all of its key objectives. It is critical to have an adequate corporate-level strategy, business-level strategy, and core functional level strategy when establishing your organizational strategy.
Most essential, examine your organizational plan on a regular basis to verify that your organization is set up for success.
Related Articles
- COMPANY ORGANIZATIONAL CHART: Meaning, Types and Examples
- WORK GOALS: Top 20+ Professional Work Goals & Evaluation
- CORPORATE STRUCTURE: Meaning and The Different Types.
- ORGANIZATIONAL COMMITMENT: Definition & How To Improve It
- CORPORATE STRUCTURE EXAMPLE: Meaning, Examples & Difference
References
