10 Commandments for Formulating Winning Business Strategies

10 Commandments for Formulating Winning Business Strategies

Formulating a winning strategy is not an easy task. If not carefully crafted, strategies may turn out to be highly disastrous. That is why the strategy-makers should follow a number of good strategy making principles.

Thompson and Strickland suggested 10 principles (they call them commandments) based on the lessons learned from the strategic successes and mistakes of companies.

These principles or commandments serve as useful guides for developing sound strategies. A brief description is given below of these commandments.

1. Placing top priority on long-term competitive advantage

If strategy can strengthen a company’s long-term competitiveness, it would protect the company’s long-term profitability.

2. Being proactive

A company needs to be proactive and prompt in responding to changes in market conditions and other dynamic issues strategy should be geared to meeting ‘unmet’ customer need, providing better products as per wishes of customers, adopting the latest technology, etc. they should also be prompt in dealing with the new initiatives of competitors.

3. Investing in creating a sustainable competitive advantage

A company may need to adopt aggressive offensive strategy to create a competitive advantage as well as an aggressive defensive strategy to protect it.

4. Avoiding an overly ambitious strategic plan

Such a plan overtaxes the company’s resources and capabilities.

5. Adopting strategy capable of yielding good results in the worst of times

A company’s strategy works well if it is formulated after considering the anticipated unfavorable market situations.

6. Carefully taking into cognizance the reactions and commitment of competitors

Strategy-makers must not underestimate the competitors.

In response to a company’s strategy, the competitors may launch tough programs if their interests are threatened.

7. Focusing on competitors’ weaknesses

A strategy-maker, to craft a successful strategy, should attack the weaknesses of competitors rather than strengths. If attacked, resourceful competitors might retaliate very strongly, through price-cuts or other measures.

8. Pursuing differentiation strategy meaningfully

A company should adopt a differentiation strategy only when it can create a meaningful gap in product features. Customers may reject differentiation strategy if the differences are negligible.

9. Avoiding a strategy of a middle course

A middle-course strategy (or we can say compromise strategy) does not usually work well. It often fails to create a competitive advantage.

Compromise strategy may lead to ‘average costs, average differentiation, an average image and reputation, and little prospect of industry leadership.’

10. Adopting a low-cost strategy when cost advantage is prominent

A company should not opt for cutting down prices unless it can establish a sustainable cost advantage.

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