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What is Strategy?

The never-ending literature about strategy creates confusion and ambiguity while refusing to
agree on one simple definition. This essay touches on aspects that I believe are important
when describing strategy and uses Coca Cola as a practical example. The dynamic nature of
strategy is highlighted as well as the controversial element of luck. The importance of
customer value and the ways in which competitive advantage can be obtained is described to
emphasise the impact these aspects have on strategy. The three models of strategy are
detailed and Porters Five Forces model of competition is also included to illustrate its
applicability in strategy.

Johnson and Scholes define strategy as “the direction and scope of an organisation over the
long-term: which achieves advantage for the organisation through its configuration of
resources within a challenging environment, to meet the needs of markets and to fulfil
stakeholder expectations". (Johnson et al 2008) Personally, I believe this definition is an
excellent summary of strategy by stating the importance of identifying what the business
wants to achieve in what time frame and in what market; how will the business achieve this
goal better than its competitors and what resources are available; what environmental factors
can affect the business and what are the expectations of those who influence the success of
the business. For example, the Coca Cola Company uses a strategy by looking and planning
ahead. They focus on trends and forces that influence their business and plan to overcome
them. Presently, they have a “2020 Vision” which is a “long-term destination” of where they
want their business to be in 2020. (The Coca Cola Company 2006-2009) This vision serves as
a road map or plan of important factors that need to be addressed to ensure their successful
business is still in existence in 2020.

Markides states that the essence of strategy is selecting one position in the market that a
company can claim as its own as there as several viable options that a company could
occupy. (Markides 1999) By choosing a distinctive and unique strategic position, the
business attempts to differentiate themselves from their competitors and therefore becomes
more attractive to their target market by reducing alternative options to their products and
services. The author suggests a company should use the “who-what-how” questions to work
out what their strategic position in the market should be, namely; who should the company
target as customers? What products or services should the company offer the targeted
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customers? And how can the company do this efficiently? (Markides 1999) By answering
these questions, developing alternative solutions to their competitors and select specific goals
and actions to undertake such alternatives, the company will succeed in positioning
themselves in a unique and differentiated location in the market.
Coca Cola had this unique and differentiated positioning in 1983 until they felt the pressure
from the emerging company Pepsi. They formulated the ‘New Coke’ which tasted very
similar to Pepsi and was almost an instant failure. Because Coca Cola did not remain faithful
to their originally successful market positioning and strategy and attempted to imitate Pepsi,
they lost a great deal of sales and revenue. However, by reintroducing Coke Classic, they
became the number one cola company once again and will forever remain a classic example
of strategic, or not so strategic, marketing.

It is also important to highlight the fact that industries change and therefore strategies need to
be modified to find solutions to new innovations and challenges. Although companies cannot
perfectly predict the future, Markides suggests there are two options businesses can take
when facing such uncertainty. Firstly, an organisation can become the innovator by
developing the next strategic innovation in their particular industry so they are the ones
implementing and directing the changes in the market rather than having to change their
strategies based on another company’s innovation. The second option is to exploit another
business’s innovation where an established company with brand reputation and customer
loyalty can take advantage of emerging innovations originating from unknown entrepreneurs
that are attempting to enter into the market. (Markides 1999) I agree with Markides dynamic
view of strategy as industries and market places are ever-changing and therefore strategies
need to be transformed to maintain a competitive advantage or even simply compete. With
the extreme rate of change in technology, new innovations are appearing every day. If
companies in industries that are highly influenced by technology are not planning ahead, they
will simply fail to exist.

The concept of competitive advantage is fundamental in strategy. An emphasis on

competitive advantage through quality management (of both products and internal processes)
and product innovation is shifting to competing on superior customer value delivery.
(Woodruff 1997) It is suggested that an organisation should extensively learn about their
markets and target customers to understand exactly what their customers value and convert
their findings into superior performance. Therefore, a company’s strategy must directly align
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with what their customers value. However, Woodruff states that to compete on superior
customer value, an organisation may need to change the way it is managed, including
changes in organisational culture and procedural and learning barriers. (Woodruff 1997)
Although an organisation may want to make these changes, in some cases the question is
whether they have the resources and capabilities to do so. The author also states that this
outward, customer-focused philosophy for managing organisations has been present in
marketing thought for a long time, however it has been slow to appear in practice. Coca Cola
also focuses on the quality of their product nonetheless they emphasise the need to focus on
customer value in their 2020 vision as well as preparing to engage with customers by
listening, observing and learning about their needs and values. (The Coca Cola Company
2006-2009) This will enable the business to create new innovations that directly align with
customer values and develop successful strategies to implement new products into the market
place. If a company researches the needs and wants of their target customers and applies their
findings to their market offerings then why should they fail? The clear link between
competitive advantage and customer value is logical and evident and is a connection that too
many businesses fail to realise the importance of.

Piercy and Lane also discuss customer value and how corporate social responsibility impacts
on strategic marketing and customer value. The prevalent issue in today’s market place is the
image of being a good ‘corporate citizen’ highlighting key values such as moral obligation,
sustainability and reputation. (Piercy and Lane. 2009) It is also viewed that the emphasis of
sustainability not only improves corporate reputation but cultivates innovation as well as
cutting costs and opening new markets. However, the implications of corporate social
responsibility is the perception that these ‘good deeds’ are occurring for the sole purpose of
improving corporate image and reputation. A business needs to use corporate social
responsibility so it aligns with and enhances customer values that are associated with
corporate social responsibility initiatives. (Piercy and Lane. 2009) It is also vitally important
that these initiatives are consistent with the company’s objectives and values as the contrary
will result in unsatisfied customers that hold a sour and resentful attitude towards the
business. The authors state that the priorities of consumers are changing to value products
and services that correlate with their desire of ethical consumption and therefore businesses
need to take advantage of this knowledge and emphasise their genuine and sincere attitudes
towards their corporate social responsibility initiatives. . (Piercy and Lane. 2009)
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An element of strategy that is highly controversial is that of luck. Most academic work
minimises the role of luck with relation to company performance. Parnell and Dent undertook
research to introduce the distinction between scholarly and practitioner perspectives of luck
and examine the role luck takes in organisational performance. (Parnell and Dent 2009) The
authors highlight the difference between objective luck (the scholarly perspective) and
subjective luck (the practitioner’s perspective) illustrating that luck means different things to
different people. Their research also identified that the greater level of responsibility and
control a practitioner holds, the more willing they are to acknowledge the role of luck that
occurs in their successes. (Parnell and Dent 2009) Although Coca Cola completely failed
with their launch of New Coke, their re-launch of Coca Cola Classic less than three months
later was outselling both New Coke and Pepsi by the end of the year. (1985) This brand
revitalisation was arguably not due to strategic thinking or planning for this intended
outcome, but complete luck. I believe that luck is not necessarily an essential element of
strategy as individuals make decisions and undertake actions based on their own knowledge
or goals. If they fail, then they obviously did not acquire enough knowledge to make the
correct decision and if they succeed in reaching their goal they must have had the adequate
knowledge to make an informed decision. I understand why some may believe luck is an
important factor however it is something that cannot be relied on. In the case of Coca Cola,
was it luck that made their customers want Coca Cola Classic again? Or was it the customer’s
taste buds that wanted it?!

Chaffee touches on an important aspect about strategy – The inseparability of the

organisation and environment. (Chaffee 1985) Businesses use their unstructured and
unprogrammed strategy to manage the changing environment to enable their existence.
Every business is surrounded by an ever-changing environment and the importance of
focusing on their strategy and goals and transforming them to correlate with environmental
changes is vital for success. Chaffee also details three models of strategy; linear, adaptive and
interpretive. The linear model focuses on the planning aspect of strategy namely the
decisions, actions and plans that will set and achieve organisational goals. (Chaffee 1985)
This correlates with Johnson and Schloes definition of strategy by describing the ‘direction’
and scope’ aspect.
The adaptive model is concerned with matching the opportunities and risks in the external
environment and whether or not the organisation has the expertise and resources to take
advantage of such opportunities. (Chaffee 1985) This model draws a parallel with Markides
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and his dynamic view of strategy. It emphasises the importance of continually monitoring the
ever-changing environment and modifying strategies for success.
The interpretive model is still developing however it is based on corporate culture and
symbolic management as well as the reliance between the organisation and individuals to
cooperate in mutually beneficial exchanges. (Chaffee 1985) These exchanges connect with
Woodruff’s ideas about the need for organisations to provide superior customer value in
order to gain competitive advantage. These strategy models are completely logical and
summarise all aspects of strategy from planning and researching through to implementing.

An important model used in strategy is that of Porter’s Five Forces model which suggests an
industry is influenced by five forces. These forces are Rivalry, Supplier Power, Threat of
Substitutes, Buyer Power and Barriers to Entry as seen in Figure 1.

Figure 1. Porter’s Five Forcers Model of Competition

Grundy argues that the five forces model is a vitally important concept and although it is not
widely used in a practical sense, he believes it should be. (Grundy 2006) The model can be
made more useful for practitioners by breaking it down segment by segment. This makes the
model more context-specific and able to be applied directly to the company’s situation. Using
Coca Cola as an example; they are already the largest and most successful company in the
market, their products are globally available and the majority of their suppliers most likely
depend on Coca Cola to survive - Their biggest threat is the threat of substitutes. The
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switching cost for buyers is no more than a can of coke as it is not a major decision for
customers to buy another brand of drink. The quality of the products available within the
industry varies however the customer preference is primarily based on their preferred taste.
The relative prices of the products differ depending on the amount or size of the product and
if the customer wants to spend that particular amount on their preferred taste or the cheaper
option at perhaps a greater volume of product. Coca Cola therefore depend on their brand and
product to deliver success. I believe the five forces model is very important in strategy as it
emphasises areas of significance that need to be addressed during the planning process. It
also outlines the environment that an organisation needs to monitor (Their competitors, their
suppliers, their customers, new innovations and entrepreneurs) to discover changes and the
need to modify their strategy.

Strategy is evident throughout organisations world-wide however the success of a business

depends on the degree to which their strategy is implemented. Usually, the main goal of a
strategy is to achieve some degree of competitive advantage which is gained by acquiring a
differentiated and unique positioning in the market. A business should invest in researching
their customer wants and needs and use their findings to provide superior customer value.
Corporate social responsibility initiatives can help improve customer value however the
initiatives need to align with the objectives and values of the business. Although luck is
arguably evident in business success, it can not be guaranteed and is highly criticised in
marketing literature. It is not something a business can rely on and therefore strategic
decisions and actions need to be undertaken to achieve success. The three models of strategy;
linear, adaptive and interpretive, illustrate the strategic process through planning and
researching through to implementation and provide a practical approach to developing
business strategy. Porter’s Five Forces model of competition can assist managers to assess the
business environment and highlight areas that need to be monitored for new innovations and
changes that may be of influence.
Although I have only touched on certain aspects of strategy, these elements are what strategy
means to me and help to explain why strategy is so vitally important for practitioners.
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References

Chaffee, E. E. (1985), Three models of strategy. The Academy of Management review, 10(1)
, 89–98.

Coca Cola Company (2006-2009) Mission Vision [online], available: http://www.thecoca-

colacompany.com/ourcompany/mission_vision_values.html

Grundy, T. (2006) Rethinking and reinventing Michael Porter’s five forces model. Strategic
Change 15(5) 213-229.

Johnson., G., Scholes, K., Whittington., R. (2008) Exploring corporate strategy. ed 8,

Financial Times Prentice Hall

Markides,C.C. (1999) A dynamic view of strategy. Sloan Management Review 40(3) 55.

Parnell, J.A., Dent, E.B. (2009) The role of luck in the strategy-performance relationship.
Management Decision 47(6) 1000-1021.

Piercy, N.F., Lane. N. (2009) Corporate social responsibility: impacts on strategic marketing
and customer value. Marketing Review 9(4) 335-360.

Woodruff, R.B. (1997) Customer value: The next source for competitive advantage. Journal
of the Academy of Marketing 25(2) 139-153.