What is business strategy?
Bruce Henderson, founder of the Boston consulting group and one of the tribal elders of corporate strategy, connected the notion of strategy with competitive advantage, perhaps borrowing a concept drawn from economical comparative advantage . Henderson wrote that strategy is a deliberate search for a plan of action that will develop a business competitive advantage and compound it.
Michael Porter concept with Henderson’s idea of being different ‘Competitive Strategy’ is about deliberately choosing a different set of activities to deliver a unique mix of value.So what is strategy? Strategy is a plan that aims to give the enterprise a competitive advantage over its rivals through differentiation. It is about understanding where you are, where you want to be and most importantly how you plan to get there. A sound strategy skillfully implemented identifies the goals and direction that management and employees at all level need in order to define their work and make their organization successful.
Strategic Planning Process
Strategic planning process is a step by step process taken by a business or an organization to achieve its set goals. A small business strategy may involve the type of business to setup or market entering strategy.Strategic planning process includes the following:
A small business mission is its reason for being. The mission often is expressed in the form of a mission statement; the mission statement should guide the actions of the organization, spell out its overall goal, provide a sense of direction, and guide decision-making.
It provides "the framework or context within which the company's strategies are formulated which conveys a sense of purpose to employees and projects a company image to customers. In the strategy formulation process, the mission statement sets the mood of where the company should go. The mission statement normally set out the long term direction of a firm.
Example of mission statement is that from ASDA. ASDA's mission is: 'to be Britain's best-value retailer exceeding customer needs always'.
Objectives are concrete goals that the organization seeks to reach, for example, an earnings growth target. The objectives should be challenging but achievable. A business objective should be SMART.
SMART objective is an acronym used to set business objectives. A business must have SMART marketing objectives. A smart objective should be;
Specific- a business marketing objective must be specific.
Measurable- objective should be measurable and quantifiable.
Achievable- the set objective should be one within your reach. It should not be too much for you to attain.
Realistic- will the resources you have be enough to achieve the objectives?
Time- when do you want to achieve this marketing objective?
Let’s look at an example of SMART objective. This objective is in view of increasing the market share of BCU Ltd a company that sells African food. The company will state its objectives as; to gain 35% of the market shares of African food sales by December 2012.Situation Analysis
The situation analysis is the analysis of the "three c's" of the business. This is the analysis of the Customers, Company and Competitors. The situation analysis analyse where the business is at the present moment. It is a total analysis of the business.
The customers scan helps the business to see new trend in customer’s choice, taste and opportunity.
The company scan helps the business to know its own capability and weakness, the competitors scan help the business to see new treat, take advantage of competitors weakness and make internal changes. The business’s scan includes both its internal and external environment. Changes in the external environment often present new opportunities and new ways to reach the objectives. An environmental scan is performed to identify the available opportunities. The business also must know its own capabilities and limitations in order to select the opportunities that it can pursue with a higher probability of success. The situation analysis therefore involves an analysis of both the external and internal environment.
The external environment has two aspects: the macro-environment that affects all firms and a micro-environment that affects only the firms in a particular industry. The macro-environmental analysis includes political, economic, social, and technological factors which are also known as the PEST analysis.
An important aspect of the micro-environmental analysis is the industry in which the firm operates or is considering operating. Michael Porter devised a five forces framework that is useful for industry analysis. Porter's 5 forces include barriers to entry, customers, suppliers, substitute products, and rivalry among competing firms. Business usually uses the SWOT analysis to analyse itself.
Strategy formulation is the process of determining appropriate courses of action for achieving organizational objectives and thereby accomplishing organizational purpose. Once a business have carried out its situation analysis to know ‘where it is now’ it has to know where it want to be next and as such it has to formulate strategy to get her there.
As we have said earlier a sound strategy identifies the goals and direction that management and employees at all level need in order to define their work and make their organization successful
Michael Porter in his Porter generic strategies describes three types of strategy that are commonly used by business to achieve and maintain competitive advantage. These strategy are the cost leadership, differentiation, and market segmentation
For effective implementation of strategy, a business strategy has to be translated into more detailed policies that can be understood by the organization functional level. Business usually prepares a detailed step by step action plan for the implementation of its strategy.
This action plan usually detailed responsibility to individuals in the organisation for the performance of specific action. The action plan also include estimated resource, responsible person, scheduled time and due date including change management plan for the completion of each task in the action plan.
Control, includes establishing performance standards and quality control which are of course based on the business’s objectives. It also involves variance analysis i.e. the difference between budgeted and actual result and reporting of actual job performance. These analyses can be used by management to make proper forecast and budget for the future.
In an effort of solving performance problems, management should higher standards. Business managers should not compromise on company standards and quality of products or job performance. Management should know when to be flexible with its standard if need be but flexibility of stands should be in line with company or business objectives.
Effective and efficient management leads to success, the success where it attains the objectives and goals of the organizations. Of course for achieving the ultimate goal and aim management need to work creatively in problem solving in all the four functions. Dynamic and Continuous Process