October 25th, 2013

Chapter 7- Developing a Business Strategy

The Concept of Business Strategy

Strategy Made Simple
The long term success of an organization is based on two fundamental principles:
1. Ability to create a strategic direction and market position (strategic plan)
2. Ability to execute the core tactical initiatives within the plan
Core Elements of Assessing Business Strategy
Development of a business strategy means making decisions and determining direction in 6 key areas:
1. Purpose
Mission- the organizations fundamental purpose/reason for existence; mission
statement identifies the companys broad goals
Example: Walmarts mission state is helping people save money so they can
live better
Vision- A forward thinking statement that defines what a company wants to become
and where it is going
Example: Walmarts vision is to become the worldwide leader in retailing
2. Markets
Specific markets/market segments the business sees itself competing in
Markets that represent opportunities for future growth and enhanced profitability will
receive greater managerial attention and resource support
Harvesting- Strategy that reflects a reduced commitment to a particular market given its
perceived weak future growth or profitability potential
3. Products and Services
Review of current and potential new products/services
Products/services can become obsolete due to technological innovation, changes in
consumer needs/tastes, or new direct substitutes for existing products/services
Determine which products/services are to remain part of a businesss portfolio, as well
as which are to receive additional R&D support, and which new ones are to be added
4. Resources
Allocation of businesss recourses in support of its strategic decisions
Make decisions on where to allocate limited resources and whether to acquire required
expertise for strategic planning process
5. Business system configuration
Modifying infrastructure and systems to ensure success of the plan
Examples: making changes to organizations distribution outlets, warehousing/product
delivery, plants and facilities, manufacturing/assembly processes, etc
6. Responsibility and accountability
Identifying the key objectives to be achieved and who is responsible for them
To meet objectives use SMART (Specific, measurable, actionable, realistic, and time
sensitive) goals
For businesses, a strategic plan is the road to success; it defines a specific route the business
intends to undertake, provides benchmarks to measure its success along the way, and identifies
where and how the organization will interact with its customers as it seeks to meet its overall
mission and vision

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The Strategic Planning Process

Strategic Model- Goal is to align these objectives and reduce strategic tensions:
What do we need to do? External environment and opportunities
What can we do? Internal competencies; what are we good
What do we want to do? What senior managers and owners want to do in terms of
strategic objectives; Conflict with this decision with what market wants them to do
Internal-External Analysis
I/E Analysis is all about assessing business risk and change in 4 key areas:
1. Macro-economic: Use PESTEL Analysis
2. Industry: Use porters five forces
3. Competitor: Use SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis
4. Company: Use SWOT and 3C analysis
External Analysis- Focuses on understanding what is influencing markets today and what will
influence them going forward; it is an assessment of the magnitude of change in a market arena
and associated shifts in business risk
Internal Analysis focuses on company competencies, resources, capacity and capabilities and
should include a full internal audit
Represents a form of enterprise risk management
Businesses need to anticipate and react to new initiatives and changes in strategy and market
positioning by their competitors
Customer Analysis focuses on identifying what shifts have taken place in the customer base in
terms of attitudes, values, and needs

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Competitive Advantage Identification

A key outcome of the I/E analysis is identifying the competitive advantages an organization has
compared to its competitors

Competitive advantages are either:

Strategic- First mover actions in a marketplace; the ability to see how your
organization can change the rules of the game in the market
Operational- Being more efficient and effective than competitors in transformation and
marketing processes (such as superior quality of customer support/response)
Four major areas where companies can seek to establish competitive advantages:

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Strategy Development
The next step after completing the I/E analysis and identifying the organizations competitive
advantages is to make decisions as to which opportunities to pursue and how resources will be
allocated in support of these market opportunities; formulated into strategic plan
The organizations strategic plan possesses 3 parts:
1. Corporate Level strategy- Defines what the organization intends to accomplish and where it
plans to compete (markets to be focused on); the big picture
2. Business level strategy- Defines how the organization intends to accomplish the corporate
level strategy within business units or different markets
3. Operating plan- Defines a detailed, immediate-term set of objectives and corresponding
tactics designed to achieve a specific business initiative and the business strategy
Fundaments to operating plan formation:
o Staffing, infrastructure, and process realignment requirements
o Market opportunity identification
o Value proposition and positioning analysis
o Revenue driver identification and sales forecast
o Upfront and ongoing cost commitment requirements
Prior to strategic plan, managers should review plan to confirm:
The operational activities within the plan are properly aligned to achieve the plans
objectives
The budget established, and the money to be generated, are realistic when
compared to sales forecasts
Resources needed to successfully execute the plan are available or can be acquired
A series of benchmarks or performance indicators have been established that will
enable the management team to effectively monitor the plans progress
Five Critical Questions to Review when Developing Strategy
1. Does your proposed strategy leverage your organizations resources and capabilities?
2. Does your strategy fit with current and anticipated industry/market conditions
3. Are the competencies that you plan to leverage considered to be sustainable for the
required period?
4. Are the key drivers of your strategy consistent with the organizations strategic objective
and position?
5. Do you have the ability and wherewithal to successfully implement the chosen strategy?
Strategy being recommended should define where and how organization intends to compete in
marketplace, which weapons of competitive rivalry it will leverage as its products/services battle
for market share, and the marketing and operating plans that will be required to effectively and
efficiently execute the plan
Strategy Execution
Directional Lock-in- The level of financial and operational commitment an organization incurs as
result of implementing the organizations strategies
A key requirement of the execution phase is for managers to continuously monitor the success
of the implementation of the strategy and to take corrective action quickly in the event that
things are not going well
To keep objectives on track:

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Small to Medium Sized Enterprises

(SMEs)
The need to plan strategically is just as important for a small business as it is for a major multinational
organization
Reasons: Managers have to multitask so no time, no knowledge on strategic planning
Strategic planning will enable SME owners to make better decisions as to how to allocate their
monetary, staffing, and operational resources but can prove to be difficult

Strategic Planning in the NFP (Not-forprofit) Sector (Social Economy)

Must also develop strategies and tactics that produce positive financial results for organization;
Run the risk of becoming unable to sustain their operations if they dont
Difference between profit and not for profit:
What drives the overall mission of the organization and whom, management team
needs to respond to
o For profit- overreaching objective of businesss strategy is focused on
profitability and maximizing gains on behalf of business owners/shareholders
o Not for profit- Challenged to succeed while balancing the effectiveness of their
economic activities (if they provide g/s for a fee) with social goal/purpose of
organization as shown in:

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Actions must respond to following:

Mission Balances- Maintain the balance between the need to create an effective
economic base for the NFP while ensuring that social mission and goals of the NFP are
met
Vitality- Enhance the vitality (refers to the ability of the NFP to grow and sustain its
member ship base and donor base) of the organization through maintenance and
growth of its membership or community support base
Collective Entrepreneurship- Ensures that the involvement of the community where an
organization is located and the population that it serves are reflected in the formulation
and implementation of the strategy
Rootedness- Refers to the extent to which the NFP is interwoven into the fabric of the
community that it serves and is supported by a broad representation of its
organizations, businesses, and citizens
Operational Effectiveness- Operate in a manner that demonstrates the
products/services offered by the NFP are priced at levels that ensure their accessibility
by the targeted social audience, and provide mechanisms for support for those who are
in need yet truly unable to pay