Formulating a winning strategy is not an easy task. If not carefully crafted, strategies may turn out to be highly disastrous.
That’s why strategy-makers/strategists should follow several good strategy-making principles. Thompson and Strickland suggested 10 principles (they call them commandments) based on the lessons learned from companies’ strategic successes and mistakes.
These principles or commandments serve as useful guides for developing sound strategies.
A brief description of these commandments is given below.
9 Tips On How to Formulate a Winning Strategy
Placing top priority on long-term competitive advantage
If a strategy can strengthen a company’s long-term competitiveness, it would protect its long-term profitability. It is thus necessary to prioritize formulating strategies that enhance the company’s market position in the long term.
Being proactive
A company needs to be proactive and prompt in responding to changes in market conditions and other dynamic issues.
The strategy should be geared toward meeting ‘unmet’ customer needs, providing better products per customers’ wishes, adopting the latest technology, etc.
They should also be prompt in dealing with the new initiatives of competitors.
Investing in creating a sustainable competitive advantage
To achieve a competitive advantage for better profitability, a company needs to invest adequately in the concerned areas of business. A company may need to adopt an aggressive/offensive strategy to create a competitive advantage and an aggressive defensive strategy to protect it.
Avoiding an overly ambitious strategic plan
An ambitious strategic plan may be successful in optimistic circumstances.
However, such a plan overtaxes the company’s resources and capabilities and eventually may lead to failure in unfavorable market situations.
Thus, a company should avoid strategies that are capable of succeeding only in optimistic circumstances.
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.
Attacking competitors’ weaknesses rather than competitive strength
To craft a successful strategy, a strategy-maker should attack competitors’ weaknesses rather than strengths. Resourceful competitors might retaliate very strongly through price cuts or other measures if attacked.
If the attacker company lacks strong financial and other resources to combat the competitors’ counter-attack, it would be wise for the company to focus on competitors’ weaknesses only.
Pursuing a differentiation strategy meaningfully
A company should adopt a differentiation strategy only when it can create a meaningful gap in product features.
Customers may reject a differentiation strategy if the differences are negligible.
Avoiding a strategy of a middle course
Middle-course strategy (or, we can say, compromise strategy in the sense that the company compromises between lower costs and greater differentiation) does not usually work well.
It often fails to create a competitive advantage. A compromise strategy may lead to ‘average costs, average differentiation, an average image and reputation, and little prospect of industry leadership/
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.
Cutting down prices may allure the competitors to retaliate with deeper price cuts.