Three questions can be used to test the merits of one strategy versus another and distinguish a winning strategy from a losing or mediocre strategy:
-How well does the strategy fit the company’s situation?
- To qualify as a winner, a strategy has to be well matched to industry and competitive conditions, a company’s best market opportunities, and other aspects of the enterprise’s external environment. Unless a strategy exhibits a tight ft with both the external and internal aspects of a company’s overall situation, it is likely to produce less than the best possible business results.
-Is the strategy helping the company achieve a sustainable competitive advantage?
- The bigger and more durable the competitive edge that a strategy helps build, the more powerful and appealing it is.
–Is the strategy resulting in better company performance?
- Two kinds of performance improvements tell the most about the calibre of a company’s strategy:
- Gains in profitability and financial strength
- Gains in the company’s competitive strength and market standing.
Strategies that come up short on one or more of the above questions are plainly less appealing than strategies passing all three test questions with flying colors. Other criteria for judging the merits of a particular strategy include internal consistency and unity among all the pieces of strategy, the degree of risk the strategy poses as compared to alternative strategies, and the degree to which it is flexible and adaptable to changing circ*mstances.
CORE CONCEPT: A winning strategy must fit the enterprise’s external and internal situation, build sustainable competitive advantage, and improve company performance.
