Strategies help to ensure efficiency and consistency in the allocation and employment of resources. A business strategy sets the direction for the activities required to achieve the objectives of the enterprise. It is the catalyst and thrust of the business.

Effective strategy is an essential requirement of effective management. The need for strategic planning has increased with increasing turbulence in the external environment of business. Strategy formulation is essential for the long term survival and growth of an organization.

It enables the enterprise to take advantage of environmental opportunities and to combat environmental pressures. Strategies provide useful framework for guiding thinking and action

Essentials of a Sound Strategy:


The basic guidelines of an effective strategy are as follows:

1. The strategy must be consistent with the objectives, policies and other strategies of the organization. Internal consistency is an essential requirement of a good strategy as it identifies the areas where strategic decisions will eventually have to be made.

2. The strategy should be workable. It must be able to meet the needs of the particular situation. It must contribute to the progress of the organization.

3. A sound strategy must be suitable to the environment of the busi­ness. A strategy which is not consistent with the environment can put the organization in danger. It should also have the efficacy for the chang­ing environment.


4. The risk involved in the strategy must be reasonable in view of its expected payoffs. A high risk strategy may threaten the survival of the enterprise, if things go wrong.

5. The strategy should be designed in the light of available resour­ces. A strategic decision involves commitment of right amount of resour­ces to the opportunity and reservation of sufficient resources for unanti­cipated demands.

6. The strategy should be based on an appropriate time horizon. Time horizon of strategy depends on the goals to be pursued. The time should be sufficiently long to allow the organisation to make adjust­ mints and maintain certain consistency of strategy.