Formulating a strategy is indeed tricky. Some people think the strategy is about companies and competitors. In a sense, we focus on what competitors are doing and how our strategy does it better.
Mintzberg offers a perspective to sharpen the definition of “Strategy” through the 5Ps of strategy. These five broaden our horizons in formulating competitive strategy so that they do not only focus on competitors.
Breaking down components 5Ps of strategy by Mintzberg
Mintzberg offers five concepts for understanding strategy, namely, strategy as:
A strategy is a detailed proposal about our actions to achieve goals. This element is similar to the concept of strategic planning. The plan identifies current and future opportunities and threats and formulates some alternatives to be taken. It gives everyone clarity about what they should contribute.
For example, airlines plan to focus on serving short-haul routes. The company sees passengers on these routes will be high along with the growth of satellite cities. Seeing this opportunity, the company developed various strategies to compete in short route flights.
Plans require action. And, because of uncertainty, activities are not necessarily according to plan. Therefore, evaluating the program is essential to reduce negative impacts or to focus action.
A good strategy must be consistent with past behavior. Past patterns are an essential input in formulating new strategies.
Not all past plans and actions lead to goals. Some of them are distorted. To that end, the company can take the initiative to realign its actions towards the desired future.
For example, a company switches to a cost leadership strategy after previously implementing a differentiation strategy. The first strategy did not succeed in making a profit because consumers began to be price-conscious.
When adopting a new strategy, employees might react differently to what the company wants. So it is with other stakeholders such as shareholders, investors, government, and others. They might be pessimistic about the new strategy. Therefore, companies need a “Plan” to convince them.
Strategy as a position is about how the company places its position in the market. Position may be related to the company’s image, product, or brand, relative to competitors.
Companies need to determine the right positioning strategy. For example, companies satisfy consumers with unique offerings while also promoting the concept of environmentally friendly business. All of this leads to a positive image for the company.
Strategies represent specific maneuvers to outwit competitors. To explain, let’s take the example of Walmart.
Many retailers choose locations in big cities because they are close to customers. But not Walmart. The company started its expansion in small cities first and therefore faced lighter competition.
Walmart helps local communities by providing good quality products at low prices. Because of little competition, the strategy allows the company to develop rapidly.
Then, companies gain momentum when the economy faces a downturn. Many people begin to want cheaper goods. Also, because people have become mobile, they move to small towns and suburbs and are willing to travel further to buy products at low prices.
This strategy made competitors unaware of Walmart’s threats. They feel Walmart is not disrupting their position because they have different target markets. As a result, Walmart is growing stronger and ready to compete with competitors in big city retailers.
As a perspective, strategy represents the way the company sees itself. It’s not only about the position chosen, but about a bigger view.
This element is about how the company builds a culture and values that are aligned with the company’s goals. Say, the company aims to produce innovative products. To achieve this, the company builds a creative culture. For example, companies create a culture of risk-taking and innovation so that employees can freely explore bright ideas.