A strategy is a long term plan of action designed to achieve a particular goal. It is differentiated from tactics which incorporate short term activities Strategic management is the ongoing process of specifying the organization’s objectives, developing plans to achieve these objectives, and allocating resources to implement the policies and plans to achieve the organization’s objectives.
With regard to it’s etymologic origin the word “strategy” derives from the Greek word stratēgos, which derives from two words: stratos (army) and „Agein“ (ancient Greek for leading). Stratēgos referred to a ‘military commander’ during the age of Athenian Democracy. In its purest form, strategy dealt solely with military issues.
According to Michael Porter „Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.“ So the purpose of strategic management is to gain sustainable competitive advantages in the market.
The formulation of a sound strategy facilitates a number of actions and desired results that would be difficult otherwise. A strategic plan, when communicated to all members of an organization, provides employees with a clear vision of what the purposes and objectives of the firm are. The formulation of strategy forces organizations to examine the prospect of change in the foreseeable future and to prepare for change rather than to wait passively until market forces compel it. Strategic formulation allows the firm to plan its capital budgeting.
On the other hand, a firm without a clear strategic plan gives its decision makers no direction other than the maintenance of the status quo. The firm becomes purely reactive to external pressures and less effective at dealing with change. In highly competitive markets, a firm without a coherent strategy is likely to be outmaneuvered by its rivals and face declining market share or even declining sales.