Formulation of an effective strategy depends upon the approach to the three main players – the company, its customers, and the competition. This is collectively referred as the Strategic Triangle. In terms of this approach, strategy is defined as the way the company differentiates itself positively from its competitors, employing its own relative strengths and weaknesses to satisfy better the customer needs.
It is unfortunate that many companies do not formulate or have any strategy. There is no long term plan either. An immediate sale is what they are concerned about. The long term or the bigger picture is lost sight of. Here are the three important approaches to strategy.
Market based strategy: The secret of higher profits is to make the company`s proudcts stand out in the customer`s mind. Either the product must be most economically priced, or be the best in terms of value. But either of the above preposition is easy to implement in today`s competitive market. Competitors can easily copy the quality and also sell at a lower price. But the company should have a `difference` or an USP (unique selling preposition) to overcome competition.
Resource based strategy: While competitors can copy a new product, they may not have the capacity to replicate the resources within the company. That is why it is important to look at company`s internal strengths as a second approach to strategy. Market conditions are hard to predict, but if a company y knows its strengths, it can plan to manage risks and to adapt to whatever change comes in the way.
Customer based strategy: The third approach is `customer based`. A company must build relationships with its customers. A company can ask feedback on a product it is developing; or ask them what they need and based on this knowledge it can develop a product from scratch. Some companies, viz. Tesco, uses what it learns from the key asset, that is, customers; to decide what products and services to develop everything from DVD rentals, home based broadband, banking and insurance.
An organization or company may find either one or all the three approaches useful in formulating its strategy.