The main goal of the company is to obtain a consistently high return on invested capital. For the profitability of investments to be higher than that of competitors, the competitive advantage over them must be sustainable; in other words, the quality of goods and services provided to consumers should be higher. For profitability to become sustainable, it is necessary to invest in the development of production capabilities that ensure the preservation of competitive advantage for the future. Strategy, therefore, depends on determining competitive advantage, on developing resources and capabilities that provide sustainable excellence in this volatile world.
In the process of developing a strategy, an idea arises of how to achieve a sustainable competitive advantage. The objective of strategic planning is to give managers a new vision of reality, existing dangers and opportunities, to develop a new understanding of the essential factors of competition.
The company’s strategy can be considered at three levels: corporate strategy, or a strategy of a set of business areas; competitive strategy, or strategy for individual business areas; a functional strategy, or a strategy within any line of business.
Corporate strategy
It is the definition of company values that are expressed for financial and other purposes. It relies on the identification, creation, or acquisition of key resources and production capabilities and entails decisions about which industries the company intends to compete in and how different business lines will be related. The corporate strategy establishes the procedure for distributing resources between different lines of business, and because of this, it becomes clear what should be done and what should be discarded.
A competitive strategy
It determines how a company intends to compete in a particular industry. A competitive strategy is how the company creates an advantageous position in the industry. This includes the definition (explicit or implicit) of the group of consumers that the company is targeting and methods of promoting goods and services to them. But a competitive strategy is more than a vision of consumers and marketing methods. It is also a combination of certain activities and processes that will allow the company to attract and retain the intended group of customers. Thus, the strategy also involves the coordination of various areas of the company’s activities, thanks to which all efforts are made to consistently strengthen the company’s potential advantages in the market.
Functional strategies
(Marketing strategy, financial, production, technological and research and development strategy) reinforce the company’s competitive strategy and determine the types of activities and processes that can benefit from them. A detailed description and analysis of functional strategies helps to determine how and to what extent they correspond to the competitive ones, and make it possible to focus on the coordination of various functions.
