41 Reading: Strategy and Tactics

Definitions

A strategy is a directed course of action to achieve an intended set of goals.^[1] A tactic is the means by which a strategy is carried out.^[2]

Background

Long before the word strategy had meaning in business, it was used in the context of war. In that context, it came to mean the battle plan devised by one side in order to gain an advantage or victory over an opponent. The term tactics referred to the specific short-term actions taken by soldiers on the battlefield to support the strategy.

Military strategy and business strategy have many things in common; both include uncertainty, making it more challenging to achieve desired results and often, there are many variables or factors that will interact in unpredictable ways. Finally, there is a combative or competitive aspect that drives both kinds of strategies: the participants keenly watch the events unfold and adjust their strategies and tactics along the way in order to win. Whether it’s a battle or an economic downturn, the complexity and unpredictability of events underscores the need for a broad strategy that factors in as many contingencies as possible.

A business strategy must take into account the changing environment and identify a plan that will use the company’s resources most effectively to achieve its mission and goals.

Differentiating Strategy and Tactics

Let’s look at some specific characteristics of business strategy and consider how strategy differs from tactics.

Strategy Identifies Where We Will Compete

The strategy determines which markets we will pursue, where we will sell our goods and services. It focuses efforts on a specific target market. Tactics indicate specific actions that we will take in those markets.

Strategy Describes the Unique Value for Customers

When developing a strategy, the aim is to identify unique benefits in the products or services that customers value and that differ from what competitors offer. A strategy should define and clarify the unique value. Tactics include the tasks of creating, delivering, and expanding the value.

Strategy Explains How the Company’s Assets Will Create Unique Value

How do the company’s activities interact and reinforce one another?  For an organization to define a strategy that creates a unique and valuable position, it must bring together and align the various capabilities and resources of the business.

Tactics are planned to reinforce this unique value. Effective tactics, or specific actions, must support the strategy in order for the customer to have a consistent experience with the product or service that aligns with the unique value that the company is seeking to deliver. Strategy determines how the company will sustain unique value.^[3]

Over time, competitors will try to eliminate the company’s advantage or copy the areas where it is successful. How will the company continue to provide unique value and protect or expand the areas in which it has an advantage? As the company refines its strategy to retain or expand its advantage, the tactics must also be adjusted to execute the strategy effectively.

Strategy and Tactics in Practice

In each case, strategy defines the high-level plan. Tactics include the steps taken to execute that plan. The following examples show how strategies and tactics are employed by real businesses.

Strategy and Long-Term Planning: Southwest Airlines

Background

Southwest Airlines Co., more commonly referred to as Southwest, is a major airline in the United States and the world’s largest low-cost airline.^[4] The company’s long-term planning and strategy is comparable to the Canadian airline WestJet.

Strategy

In its early days, Southwest Airlines’ strategy focused on being the low-cost airline of choice for leisure travelers. Prior to 2008, the company recognized that without expanding its target market, it could not sustain growth. The company expanded its target market to include business travelers, without compromising the low cost and inviting brand that appealed to leisure travelers.

Tactics

Two programs provided tactics to support this shift. The company began to offer a Business Select service, which includes perks such as early boarding, priority check-in, and a free alcoholic beverage for those purchasing a premium fare. Early Bird Check-in provides automatic check-in, which allows the customer to board early.

According to CEO Gary Kelly, Southwest does “Six percent or seven percent of our boardings by Business Select, [and] probably more than double that by Early Bird.” The combined direct revenues from the programs were nearly $295 million in 2013.^[5]