The Idea in Brief

• There are two types of strategy: structuralist strategies that assume that the operating environment is given and reconstructionist strategies that seek to shape the environment.

• In choosing which of the two is most appropriate for your organization, you need to consider environmental attractiveness, the capabilities and resources you can call on, and whether your organization has a strategic orientation for competing or for innovating. Diversified companies should be comfortable using both approaches.

• Whichever type of strategy is chosen, success will depend on creating an aligned set of strategy propositions targeted at three different sets of stakeholders: buyers, shareholders, and the people working for or with the organization.

• Where the approaches diverge is in the nature of their proper alignment. Structuralist strategies require that all propositions focus on delivering either low cost or differentiation. Reconstructionist strategy propositions aim to deliver both, as exemplified by the cases of the city-state of Dubai, Apple’s iTunes, and the charity Comic Relief.

When executives develop corporate strategy, they nearly always begin by analyzing the industry or environmental conditions in which they operate. They then assess the strengths and weaknesses of the players they are up against. With these industry and competitive analyses in mind, they set out to carve a distinctive strategic position where they can outperform their rivals by building a competitive advantage. To obtain such advantage, a company generally chooses either to differentiate itself from the competition for a premium price or to pursue low costs. The organization aligns its value chain accordingly, creating manufacturing, marketing, and human resource strategies in the process. On the basis of these strategies, financial targets and budget allocations are set.

A version of this article appeared in the September 2009 issue of Harvard Business Review.