Simply stated, strategy is a game plan to win. But how are business strategies developed? A common approach is based on two factors: products (existing, new) and customers (existing, new). The basic idea is presented in Figure 1. To be successful, companies need to consider all four cells of Figure 1: Naturally, existing products for existing customers need to be strengthened -- this is a firm's base. However, firms cannot survive without introducing new products and attracting new customers. It is also desirable to expand existing customer base by selling existing products to new customers and also "upsell" by introducing new products to existing customers. The riskiest undertaking is when you are exploring new horizons by introducing new products for new customers.
The challenge faced by companies is to understand and exploit the confluence of trends in customers (e.g., speed of service demanded by the customers and appeal of self service), organizational trends (e.g., outsourcing and continued innovation), and technology trends (e.g., integration of user views and back-end systems, broadband and mobile networks, component-based software).
The main question is: which cell should a company focus on? A variety of models have been developed for establishing strategies. See [ McNurlin 2001] for more details. The best known models in this category are the Porter Models that are briefly reviewed here.