An operational strategy defines a company’s structure and production capabilities. Choosing the right strategy involves considering current capabilities, competition, and goals, as well as factors outside the company’s control. Shareholders and public opinion may also influence the decision.
An operational strategy is a series of strategic decisions made by the management of a company and defines the operational structure and production capabilities of the company. When choosing the best operating strategy, company leadership must consider the company’s current capabilities, the wishes of its owners or shareholders, and any other goals for the company, such as its commitment to the environment. Choosing the best corporate operating strategy is governed by the ultimate goal: strategically positioning the company for maximum efficiency and competitiveness.
In essence, an operating strategy is an action plan for running a successful business. Choosing the right strategy will involve revisiting previous decisions. Those decisions collectively created the existing structures and capabilities through which the company produces products or services.
In choosing the best operating strategy for current operations, company executives will first look at the company’s capabilities, competition, and structures. This review is likely to include a managerial assessment of the available workforce, technology and capital. The focus is on positioning the company to derive maximum benefit from its distinctive competencies.
Choosing the best operating strategy ultimately depends on the wishes of the business owners. For example, shareholders can exert enormous influence over operating strategy. For example, shareholders might express a preference for increased dividends over a corporate investment in infrastructure.
Factors outside the company’s control, such as government initiatives, also influence the choice of a competitive business strategy. For example, the passage of legislation that grants a favorable tax status to companies that increase hiring may tilt the choice towards a strategy that invests more in workforce development. Meaningful incentives could tip the balance towards some other strategies, such as focusing on increasing production capacity. If the company seeks rapid and sustained expansion, the emphasis on developing an operating strategy may be heavily focused on building capital capacity. It would be considered a business growth strategy
The management review process in selecting the best operating strategy may also consider public opinion. For example, choosing a business operating strategy that emphasizes a company’s commitment to environmental stewardship might be motivated in part by the competitive advantage it is believed to provide. If the company goes further in its commitment to embracing concern about its effects on the environment, it could craft a “green” corporate strategy in which environmental concerns infuse every aspect of the company’s operations.
Seeking to reap the benefits of a global economy, a company could develop an operating strategy that outsources production to other areas where labor costs are lower. At the same time, that same company may also be looking to open new markets in these geographies because it already has a presence there. This would likely lead the company to a global corporate strategy, which is a strategic operational choice of multinational corporations.
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