Developing a strategy

'Having A Workable Strategy... Is Half The Battle Won‘

‘How To Get In Front Of Your Competitors - And Make Sure You Stay There’

Murad Rattani

Murad Rattani

Strategy

Johnson and Scholes define strategy as follows:

• "Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations".

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Strategy is about• Where is the business trying to get to in the long-term (direction)

• Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope)

• How can the business perform better than the competition in those markets? (advantage)?

• What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)?

• What external, environmental factors affect the businesses' ability to compete? (environment)?

• What are the values and expectations of those who have power in and around the business? (stakeholders)

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Strategy at Different Levels of a Business

Strategies exist at several levels in any organisation - ranging from the overall business (or group of businesses) through to individuals working in it.

• Corporate Strategy - is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business. Corporate strategy is often stated explicitly in a "mission statement".

• Business Unit Strategy - is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc.

• Operational Strategy - is concerned with how each part of the business is organised to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc.

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A strategic management process has three main processes

StrategyA strategy is a holistic view of the organization’s purpose. It is

usually expressed in terms of:

• Long term objectives• Actions to achieve these• Resource allocations necessary to support

them.A strategy usually supports an over-arching ‘vision’ of the future,

linked to a mission statement. Beneath it will be detailed plans and details.

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Murad Rattani

Strategic Analysis

• This is all about the analysing the strength of businesses' position and understanding the important external factors that may influence that position. The process of Strategic Analysis can be assisted by a number of tools, including:

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Strategic Analysis• PEST Analysis - a technique for understanding the "environment" in which a business

operates• Scenario Planning - a technique that builds various plausible views of possible futures for a

business • Five Forces Analysis - a technique for identifying the forces which affect the level of

competition in an industry• Market Segmentation - a technique which seeks to identify similarities and differences

between groups of customers or users• Core Competencies- a technique which summarises the competitive strength of a

businesses operations in specific markets• Competitor Analysis - a wide range of techniques and analysis that seeks to summarise a

businesses' overall competitive position• Critical Success Factor Analysis - a technique to identify those areas in which a business

must outperform the competition in order to succeed• SWOT Analysis - a useful summary technique for summarising the key issues arising from

an assessment of a businesses "internal" position and "external" environmental influences.

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Strategic Choice

• This process involves understanding the nature of stakeholder expectations (the "ground rules"), identifying strategic options, and then evaluating and selecting strategic options.

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Strategy Implementation

Often the hardest part. When a strategy has been analysed and selected, the task is then to translate it into organisational action.

Developing a strategy

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VisionMission Statement

StrategyTactical Plans

The Vision

The vision is usually couched in very high-level terms, eg:

• Coca Cola wanted every customer to be able to buy its product anywhere in the world.

• Wedgwood wanted to sell crockery to every worker.• Henry Ford had a vision of everybody driving one of his cars.

The mission statement elaborates on this.

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MissionThe mission (a US term that has virtually been adopted worldwide) is a statement of what the organization’s

objectives are. It might be

• ‘To be the leading retail bank in the UK, as measured by market share, capital strength and profitability’.

It will then go on to state the high-level ‘hows’:

• ‘We will achieve this by increasing our telephone banking service and by reducing our branch network by: concentrating only on profitable customers; offering a personalized service; and offering a 24-hour banking; etc’

An then state the implication of this:

• ‘We will have excellent IT support; adequate training for staff; remuneration linked to performance; etc.’

It is within this framework that strategies and policies are set.

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A mission must be

• Market focussed.

• Based on core strengths/ competencies.

• Motivating.

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Gap Analysis

• Market

• Company

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Gap Analysis

• This involves taking the internal analysis and comparing it with the external analysis (from your research) to see how your company measures up and what is missing if you are to meet your objectives.

• Once this gap analysis has been carried out, you then need to take steps to close the gap.

• Selective benchmarking can often be of use here.

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Gap Analysis• You only close the gaps where the action required will deliver

substantial dividends, where it is cost-effective or where it is a fundamental issue.

• The objective is to make your products acceptable in your target segments and, ideally, to make them more effective than your competitors’. For example, there has recently been an increase in the number of car manufacturer offering off-road vehicles and ‘people carriers’, reflecting the growing demand for these products.

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Developing new products and services

• Research/gap analysis might indicate that there are gaps between what you are offering and either what your competitors are offering or what your customers need and demand-or both.

• In this event, you need to develop new products, or improve your existing ones, to fill the gaps. This can take time depending on the nature of your business and must be factored into your planning and timing.

• Where products have a long lead time (eg: pharmaceuticals, aerospace industry) then you will need to develop an interim strategy until your new products are ready, and a further strategy to capitalise on these.

• Depending on your industry, you may need to develop new internet-specific products and services, which may contain different features (often simpler/cheaper) from those offered via more traditional channels.

Murad Rattani

Murad Rattani

Management Strategy

Different approaches to strategyUses of strategy

General environment of the organizationImmediate competitive environment of the organization

What is management strategy

Management strategy is a linking process between organizational variables and the environment. It seeks strategic fit between organization and its environment.

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Elements of Management strategy

• Involves consideration of environmental changes which bring new opportunities and threats.

• Concerned with assessment of internal strengths and weaknesses of the institution and using those exploiting opportunities and averting threats.

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Steps to setting-up• Analyse the environment (PEST)• Analyse the industry (Michael Porter’s five forces)• Analyse the markets (segmentation)• Analyse your company (organizational audit) {SWOT, BCG}• Conduct gap analysis (what is missing/poor) (weaknesses)• Conduct stakeholders’ analysis• Develop products where appropriate.• Evaluate the strategies• Undertake planning• Implementation

Murad Rattani

Murad Rattani

Environmental Analysis (PEST Analysis) Market Analysis

Competitive position Analysis (BCG, Michael Porter’s 5 forces

(identify players)

Organizational audit (Resource analysis, SWOT, Gap Analysis, FFA )

Stakeholders’ Expectation analysis

Strategy evaluation

Strategy Planning and Implementation

Uses and value of strategy• Helps in formulation of goals and objectives and enables them

to be modified in the light of experience and information.• It is a form of management control. A plan that guides

behaviour along a predetermined route. At the operational level it results in budgets and targets.

• Helps in allocation of resources and provides logic so that allocation of resources is perceived to be fair by the whole of organization.

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Uses and value of strategy• Helps the firm to identify key strategic issues that the firm

may face in the future and design appropriate actions.• Helps in guiding the action of different departments of the

firm and integrates their actions.• Helps in social change as strategy can be implemented by

training and modifying the behaviour of the employees and the managers.

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Environmental aspects of strategy

• General environment: it affects all the firms operating in a given business environment. It includes PEST.

• Immediate competitive environment: This has got direct bearing on the firm’s competitive position.

Analysis of both these environments will help the managers to assess the opportunities and threats for the firm.

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General environmentJohnson and Scholes, 2002 has classified the general

environment as follows;Simple and static: in this scenario, strategy could be designed

with the help of historical data and past records.Dynamic: manager should be sensitive to changes in the

environment but should not over react.Complex: this environment is faced by firms who deal with wide

range of product assortments. It can lead to divestment, mergers or acquisitions.

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Dynamic and complex environments

In case of dynamic and complex environments, firms may face various problems which could be resolved by

Collecting relevant information.Responding to environment by technological innovation,

coalition with other organizations by merger, takeovers, political lobbying, acquiring raw materials i.e. suppliers or retail outlets, training staff and so on.

New divisions or departments could be formed to deal with the competition.

Murad Rattani

Murad Rattani

References

• http://tutor2u.net/business/strategy/what_is_strategy.htm

• www.marketingteacher.com/.../lesson_ansoff.htm (accessed on 19-11-09)

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Further reading

David Needle, 2004, Business in Context, Anintroduction to business and its environment(ISBN: 978-1-86152-992-3), pgs: 754-756

Ian Marcouse, The Business Studies Teachers’Book (ISBN: 0340-73763-8), 1999