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Business Strategy

According to Michael Porter, "Almost no consensus exists about what corporate strategy is, much less about how a company should formulate it"[1]. This is due to a combination of factors that relate to strategy terms, concepts and principles – and their practical application.

This article is designed to provide executives with a better understanding of the nature and purpose of strategy and draws on Jack Welch's record at GE, as well as examples from other companies, to show how these strategy-related terms, concepts, and principles apply in practice.

The terms, concepts and principles of strategy

From my work as a strategy consultant, executive, and professor of strategy in graduate and executive programs, I have found that strategy can be best understood if it is viewed as an element of a troika that includes policy, strategy, and resources (the PSR Troika). I have also found that it helps to focus on two aspects of strategy: the causal relationship between strategy and the other elements of the PSR Troika; and the plurality of inputs, options, and outcomes that characterize strategy.

The elements of the PSR Troika

Policy is from the word for the Greek city-state, polis. In government, policy is the product of a legislature that delineates the goals, objectives and priorities of the state. In business, the term "policy" is used to define a company's principal goals and objectives and to prescribe the company's operational domain. Corporate policies define a company's reason for existing (to maximize shareholder wealth and/or fulfill one or more social or economic function), what the company does (design, develop, manufacture and/or market products and/or services), and where the company does it (by industry and/or geographical area). The responsibility for determining corporate policy rests with a company's legislative branch – its board of directors – under the leadership of the chairman of the board. Policy defines a company's raison d'être and...