Business strategy

Business strategy should be designed to bring success and avoid failure. This can be done by capitalizing on the strongest capabilities of the firm, and exploiting the greatest opportunities, while reducing risk associated with company weaknesses, and environmental threats.

The early analytical stages of the strategic planning process set the stage for the more creative work of generating strategic options and selecting or designing the business strategy for the enterprise.

business-strategy

Analysis Paralysis

There is a danger in going too far with all of this research on strategic planning issues. Analysis paralysis can set in and get the planning process bogged down in detail. For some people the process becomes "strategic planning strategic analysis".

Analysis paralysis is a state where the opportunity cost of decision analysis exceeds the benefits that could be gained by deciding to commit to a course of action in the form of a business strategy. Sometimes the sheer quantity of analysis overwhelms the decision making process. This can lead to listing just too many strategic issues, and the planning team can't see the few trees that matter in the forest of detailed strategic analysis.

This presentation can include the SWOT analysis summarised in a Cruciform Chart, together with the targets, forecasts and gaps, and the short list of really big strategic issues in a table. This gives the raw material for the discussions on a possible business strategy.

This will help them to reach a very precise description of their organization's key strategic issues. There is sometimes only one of these, often two, sometimes as many as five or six, but never more.

With this summary of the specific requirements for strategies for the firm the planning team can gain a sense of the flavour of the business strategy or strategies needed by the organisation. This shared understanding of the overall strategic situation of the organisation gives a sound basis for strategic decision making.

What we are looking for:
requirements for a business strategy

The primary requirement for a corporate business strategy is that it should be developed to cover two main dimensions, bringing success and avoiding failure when things go wrong.

Therefor the business strategy must give the organization a very good chance of hitting Tsat and even exceeding it. At the same time, it must not expose the enterprise to such risks that its performance might fall below Tmin.

In addition the corporate strategy of a business must-

  • make full use of all the company's most impressive strengths.
  • correct or neutralize all major weaknesses. It must not be based on these weaknesses.
  • either eliminate or reduce the impact of all the major threats. exploit any highly rated opportunity.
  • be strictly practical and relevant to the precise strategic situation of the firm, and hopefully
  • imaginative in the sense of being able to engage staff in implementation, and stand out in the industry in some way, and not be a pale imitation of what everyone else is doing, so as to strengthen the competitive position of the enterprise.

Generating Options for Business Strategy

Framing a set of strategies to meet these general requirements involves generating a list of strategic options. These must address all the key issues surfaced in the preceding target setting and SWOT analysis stages of the strategic planning process, before moving to decise business strategy.

The planning team then short lists the strategic alternatives that show most promise, and then select the set of strategies that together will make up the firm's business strategy. Before the strategic decision making is complete however, the proposed set of strategies needs to be carefully evaluated against the criteria for achieving the intended performance results, within the range of risk the planning team considers manageable. Some methods for doing this will be made available under the Strategic Planning Tools section of this site.

Planning teams may discover that surprisingly few of the strategies they have listed would meet the very accurate specification they have now drawn up. They may find it helpful, therefore, to enhance this catalogue by employing creative techniques which sometimes draw attention to additional possibilities.

Possible strategies

In one sense the strategies available to organisations may seem endless. In the face of this some organisations defer to other enterprises and go along with what seems to be the strategy of the month.

Avoid the extremes of being overwhelmed with the possibilities and attempting to do too many things, or to avoid the hard work of strategic decision making by mindlessly borrowing or being caught up in the current trends and fashions in strategic thinking.

A range of tools is available to help come up with useful options to consider through the strategic decision making process.

However a few generic areas requiring strategic action keep recurring, and so it is worth checking them out as possibly relevant to the firm's strategic situation. Approaches like strategic portfolio management can also throw up options.

A popular framework with firms of many types is Porter Generic Strategies.

For manufacturing firms a product development strategy may involve developing new products or modifying existing products, bundling or unbundling products in combinations or packages to appeal to different market segments or customer groups. It is simple to state these obvious possibilities, and yet often there is nothing easy about effectively carrying out the process.

It requires focused attention to current and potential competitors and customer needs now and in the future. It also means anticipating impacts on the other functions of the business, including the financing of prototypes and manufacturing processes, and possible changes to marketing and distribution.

Many organisations may find that the issues faced by the company warrant an operational strategy. This helps to guide the choice of methods of producing goods or services offered by the enterprise to the customers.

A close relative of operations strategy can be strategic business process reengineering. Sometimes also known as business process redesign, business transformation, or business process change management, this can be a fundamental rethinking of the way a business carries out either or both its primary value creating activities or key support functions.

Another way to improve performance at the corporate level may be through business model innovation. This can be usefully considered in the context of corporate strategic planning using frameworks such as Value Chain Analysis and the Business Model Canvas. Innovation is also linked to cultivating entrepreneurship. Some firms, such as Apple, gain through a clear separation and linking of strategy and innovation.

This may lead sometimes to shifting the basis of competition. Moving into an area where there is currently little or no competition. A popular way of thinking through this possibility is the Blue Ocean Strategy.

Supply chain strategy is the systematic connecting up of the major business functions within a particular enterprise and across other businesses within the company's supply chain, to improve the long-range performance of the individual companies and the supply chain as a whole to the advantage of the firm in focus.

Moving beyond how the enterprise produces and delivers its products and services into the marketplace where it competes there is a range of market focused approaches to strategic decision making available to businesses. Corporate marketing strategy covers a range of considerations in terms of the basis of competing, and the scope of the target market, including the geographic scope, including for some firms an international strategy.

For some organisations the issues they face may call for a stronger focus on the customers, and they need to consider the various options for customer service strategies.

For some other enterprises the strategic issues are more to do with the way the organisation structures managerial accountability and so they may need to look at strategic planning and organizational design.

The strategic situations faced by organisations are many and varied However at some stage, most organisations may have to review how they are financing themselves. For businesses in particular they may have to reconsider financial leverage.

Although it has become popular for many organisations to have a human resources strategy, only in some cases will the strategic planning process issue identification lead to strategic human resources management being a corporate level strategic issue to be addressed in the overall strategic plan of the enterprise.

Similarly, in an age when the knowledge of those people may be a major asset, some firms may find it useful to have a specific knowledge management strategy.

And for many other organisations, they have been through a period when information and communications technology(ICT) was regarded as a major strategic asset, and the effort to align these ICT assets to the overall business strategy lead to the widespread development of strategic IT planning.

As the rate of business change, and globalization has increased the consequences for many companies of unforseen risk have had to be planned for and appropriate management structures and practices put in place. For some firms these consequences can be so severe that they certainly need corporate level risk management strategies.

In some cases where the credibility of the firm is as stake, the really important strategic issues may warrant a special strategy for reputation management.

Other organisations may need to come at some of these issues of risk and reputation from a different perspective, and manage the relationships they have with a range of interest groups more strategically. In recent times this has meant more attention being paid to the matter of corporate social responsibility strategy.

In theory there are as many strategies as there are strategic issues facing specific firms in particular situations at particular times, and so we can't deal with them all here.

However, in addition to the types of strategy already listed, there will be some generic strategies that many firms may consider before settling on the very few that they need to implement effectively to achieve their goals.

Among these would be strategies for productivity improvement, quality management, attitude and cultural improvement, size and rate of growth strategies, corporate governance, and so the list could be extended.

The strategic planning process being presented here will have ensured that the broad strategy proposals that will have now emerged are all highly relevant to the company's overall strategic situation. The team can be reasonably sure that, providing they honestly and bravely accept the truth about their company in the earlier stages, the general strategic direction they have now chosen will be relevant to the company strategic situation.

They do not know whether they have had their feet on the ground all this time; they do not know if the strategies are really practical; they do not know if they have the resources of money, management and skills to carry them out; they do not know how long it will all take.

The planning team will have completed the most significant part of their work when agreement emerges around the strategies that will be in the overall business strategy. However, they still have three more important tasks to perform. They must

  • evaluate the strategies,
  • put them into action and
  • they must monitor them.

However, they have not finished their work as managers. They need to show that these strategies will be powerful enough to lift the company's performance up to, and even beyond, the Tsat level they chose in Stage 2. They also need to assess what might happen to their company if, having adopted the proposed strategies, one of the threats or opportunities they expected to occur either occurred in a different form or not at all.

These tasks are explained in the area of the site under Strategic Management Process.

For a dictionary definition of business strategy, as well as definitions of other terms used in the strategy field try this source.

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