What Is an Organizational Strategy and Why Does My Business Need One?

By Indeed Editorial Team

Published June 22, 2021

Organizational strategy is a tool to help businesses structure their resources in a way that supports their business activities. When used effectively, it can improve your decision-making process and help guide team members toward a common goal. If you're interested in finding ways to make your company operate more efficiently, you need to understand how to implement an organizational strategy. In this article, we define what an organizational strategy is, explain why your business needs one, discuss the key elements of an organizational strategy and provide a list of the different strategy types.

What is an organizational strategy?

An organizational strategy is a long-term plan that allocates how a company plans to use its resources to support business activities. It serves as guidance for how a company can achieve its objectives. Companies use these strategies to help them meet their goals and develop strategic plans. Organizational strategies often include detailed assessments outlining what the company needs to accomplish.

Related: 8 Strategies for Organizational Change

Why does your business need an organizational strategy?

Using an organizational strategy can help your business have guidance and consistency in its actions. This allows your team to prioritize its actions to meet a common goal. When everyone has the same understanding, cross-functional integration can occur with transparency and information flowing freely between departments. Organizational strategies also help businesses simplify their decision-making process by clarifying the best ways to reach their goals.

Related: Strategic Plan vs. Business Plan: What's the Difference?

Key elements of an organizational strategy

Some key elements of an organizational strategy include:

Specific

Organizational strategies are specific in stating what they hope to achieve. When creating your organizational strategy, provide a measurable achievement rather than using words like "better." For instance, instead of saying, "We want to sell products faster," consider saying, "We want to sell our products at a 25% increased rate over last year's numbers."

Related: How To Write SMART Goals (With Examples)

Measurable

Measurable organizational strategies help businesses determine whether they reached their goal. By setting a specific amount to work toward, companies can track their progress along the way. Organizational strategies often use percentages to show the amount of increase or decrease they desire, rather than simply saying they want to increase or decrease their metrics.

Realistic

In order to have achievable goals, make sure your organizational strategy is realistic. Consider what past achievements your organization accomplished when determining the potential to strive for. For example, if your company previously raised its profits from $400,000 to $600,000 last year, consider striving to raise the profits to $800,000, rather than $1,000,000, which may be beyond your current trends.

Limited

Organizational strategies are limited, or time-bound, meaning they have a deadline. Businesses choose an amount of time, such as three years, to dedicate to achieving a particular goal. This gives them a way to measure when they meet their target and helps make sure tasks get done.

Types of organizational strategies

Businesses select their organizational strategy based on their vision and position in the marketplace to find one that would give them a competitive advantage. Some types of organizational strategies include:

Focus

Focus strategy is a method involving finding a niche market group. Businesses using this approach target a small, select group. The goal is to provide high-quality products and customer service to generate customer loyalty. For instance, an almond milk company targets vegans and individuals who are lactose intolerant.

Related: How To Create a Focus Strategy

Low-cost production

Low-cost production, or cost leadership, is a strategy where a company offers the best price for its product or service. This encourages customers to purchase since it's more affordable than other companies. To provide low prices, a company has to minimize its cost of labor. An example of a company using low-cost production is a fast-food company that only offers a few items on its menu. They keep their prices low by paying their employees minimum wage and only offering drive-through options so they can keep their building small with low rent.

Differentiation

A differentiation strategy is an approach where a company strives to be the best in its industry. To do this, they offer innovative products and services with unique features. This involves in-depth research on the market to see what attracts customers. For instance, a company offering designer purses may create exclusivity and create a waiting list for those interested in buying their latest purse.

Related: Differentiation Strategy: Definition, Benefits and Creation

Growth

Growth strategies are ones in which a company looks to expand. This may include increasing their sales or the area they sell to. Another type of growth strategy is the acquisition or the buying of a competitor. An example of a growth strategy would be if a sneaker company decided to expand the products they offer and start selling sports attire.

Rationalization

Rationalization strategy is when a business chooses to reorganize to become more efficient. Often this includes reducing staff members and the number of outlets to focus on what's best for the organization. Companies typically use this strategy when their business gets complex after applying a growth strategy. For instance, a taco chain may decide to open 20 new locations but realize it's more profitable for them to focus on a lower amount. This may lead them to close some of their new locations and lay off employees.

How to create your organizational strategy

Here are some steps to follow when creating an organizational strategy for your company:

1. Know where you are

To create an organizational strategy, figure out your company's current situation. This involves conducting internal and external audits to gather a clear understanding of your customers and the current marketplace. It's also helpful to get an understanding of your competitors and weaknesses.

2. Figure out your values

Decide what you want your company to accomplish in the future so that you can set a vision and goal to work toward. For instance, a company may focus on presenting boldness to its clients. Once you have a core value, you can prioritize your activities with ones that will help your business.

Related: Examples of Core Company Values From Top Employers

3. Determine accountability

Divide up your organizational strategy into different steps and assign responsibility for who's working on each task. This involves communicating with employees what your priorities and objectives are. Also, create an open line of communication where team members can ask questions and express their concerns.

4. Consider your corporate culture

Another factor to consider in your organizational strategy is the corporate culture you want to have. Think about how you want others to perceive your brand and what sorts of employees to hire. For instance, a tech company may focus on having an innovative corporate culture and hire those who are analytical and progressive.

5. Review continually

Perform frequent reviews of your organizational strategy to ensure it works as intended. This includes evaluating what's working and find areas for improvement to make adjustments. Hold regular meetings with your team to discuss your company's goals and approaches to take.

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