1. Forming a Strategy for your Business.
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Forming a Strategy for your Business.
Strategy refers to the plan that needs to be put in place to assist the business achieve its mission and objectives. Strategic planning is the business’ process of determining its long-term goals and identifying the best approach for achieving those goals. The firm must therefore engage in planning that clearly defines objectives and assesses both the internal and external situation to formulate
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strategy, implement the strategy, evaluate the progress and make adjustments as necessary to stay on track. Ultimately, business strategy will focus on improving the competitive position of a firm’s products or services within the specific industry or market segment that the firm serves.
Strategic planning can therefore be summarised as involving the following stages:
definite and precise strategic objectives are set
the organisation and environment are analysed
potential strategic options are generated and the optimum solution chosen
defined procedures for implementation and the achievement of the strategic objectives are developed
the strategy is made explicit in the form of detailed plans
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The strategic planning process is outlined below.
1. Identify the business’ strategic position.
This is also referred to as strategic analysis or environmental scanning and refers to the monitoring, evaluation, analysis and dissemination of information from the organisation’s external and internal environments to key people within the organisation.
The business is able to utilise a number of models to carry out this analysis of its strategic position (environmental scanning). The firm will need to analyse:
the environment (external to the firm)
competition - competitor analysis
the market- market analysis
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the regulatory environment
the suppliers
product or process discoveries or innovations
opportunities and threats.
The following models and techniques can assist in this process- PESTEL analysis, Porter’s Five Forces model, SWOT analysis, market position analysis (Strategic Group Analysis), market segmentation.
the strategic capability of the organisation (internal to the firm) i.e the firm’s resources, competences, strengths and weaknesses. The SWOT analysis may also be used to identify these. In particular the firm will need to identify what:
its threshold resources and competences are which allow it
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to compete in the industry or market
its core resources and competences which are those that cannot be replicated by other firms and therefore give it a competitive edge in the industry or market.
culture, beliefs and assumptions of the organisation. An appreciation of the culture of the firm will be needed so as to
formulate a strategy that is compatible with the firm’s culture. This aspect will need to be reconciled with the requirement to identify the most profitable strategy. The culture web is an ideal model for use here.
expectations and power of stakeholders. Key stakeholders (usually top management and majority shareholders or owners)
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will need to ‘buy into’ the adopted strategy as their co-operation and acceptance will be instrumental in the success of the strategy.
Stakeholder mapping using Mendelow’s Power/Interest matrix, for example, can help identify and resolve stakeholders’ conflicting demands and eliminate major stumbling blocks in the eventual adoption of appropriate strategy.
2. Choose and formulate the business strategy.
Strategy formulation is the development of long-range plans for the effective management of environmental opportunities and threats, taking into consideration the firm’s strengths and weaknesses.
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Strategy choice is the evaluation of alternative strategies and the selection of the best alternative. Potential strategic options are generated and the optimum solution is chosen.
This stage attempts to establish where the business wants to be and how it will get there. This process of choosing and formulating strategy will include:
generation of strategic options e.g. market growth, product development, acquisition, diversification, concentration pricing, etc. In identifying the appropriate strategy the following needs to be considered:
Which products should be developed?
What approach should be taken to gain a competitive
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advantage?
Which markets should be entered into?
A number of strategy models can be used to generate strategy options and could include any one or a combination of the following- TOWS matrix, Porter’s generic strategies, Ansoff’s product-market strategies, Bowman’s Strategy Clock or the Directional Policy matrix.
evaluation of options to assess their relative merits. Various strategic options will be assessed on the basis of the following criteria:
suitability or ‘fit for purpose’. TOWS analysis, for example,
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may be used to understand which of the strategic responses best fit in with the firm’s assessment of its strategic position as well as the organisation’s purpose.
In particular, the identified strategies should be able to deal with the specific strategic factors developed in the firm SWOT analysis i.e they should be able to take advantage of the internal strengths and external opportunities and also manage the internal weaknesses and external threats.
feasibility: Is the adoption of the strategies feasible given the financial constraints and targets identified by the firm? The use of financial criteria e.g. payback period, NPV, ROCE figures will become relevant here.
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acceptability: Are the identified strategies acceptable to the key stakeholders connected to the firm? Mendelow’s Power/Interest matrix may be used to assess the impact of the chosen strategies on the relationship between key stakeholders.
selection of the strategy to be adopted. The adopted strategy will be that which falls in line with the expectations and interests of the key stakeholders. Again Mendelow’s Power/Interest matrix could be instrumental here.
3. Implement the business strategy.
Strategy implementation is the process by which strategies and policies are put into action through the development of
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programs, budgets and procedures. This process might involve changes within the overall culture, structure or management system of the entire organisation or within all of these areas.
Before implementation top management must ensure that the firm is appropriately organised, implementation programs are adequately staffed, and activities are being directed towards the achievement of desired objectives.
Issues to be considered will include those relating to:
1. organisational restructuring
2. resource planning i.e. aligning organisational resources
to chosen strategy
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3. systems development/ improvement
Due to the changes within the organisation that may arise from the adoption of the identified strategy, change management becomes a critical part of the implementation process so as to manage issues that arise with regards to ‘buy-in’ of the strategy by employees and management.
The Change kaleidoscope model may assist in this process of change management.
4. Evaluate and control the business strategy.
This is the process by which the business’ activities and performance results are monitored so that actual
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performance can be compared with desired performance.
The process can be used by management to take corrective action and resolve problems and even identify weaknesses in the strategy. This last may necessitate a repeat of the entire strategic planning process where the identified weaknesses are considered to be significant.
Thus evaluation and control consists of the following steps:
I. determine what is to be measured
II. establish standards of performance
III. measure actual performance
IV. compare measured results to the pre-defined standards
V. make necessary changes
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