strategic decision-making and analysis

8/11/2019 Strategic Decision-making and Analysis

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STRATEGIC DECISION-MAKING AND ANALYSIS

INTRODUCTION

Effective strategic analysis, strategic decision-making and translating those decisionsinto a strategy that can be communicated and planned is essential to the future

success of any organization. However, most firms become stuck in routine patternsof analyzing strategy and making strategic decisions on the past. The business media

abounds with examples of firms that have become trapped by their pasts, lapsinginto strategic drift, often accompanied by managerial hubris and over-reach in

strategic decision-making. n a world where the rate of change is greater than everbefore, failure to analyze and expose strategic alternative to sound decision-making

practice is at best shortsighted and at worst a prescription for disaster. !oundstrategic decision-making is about analyzing the environment, appraising the firm"s

basis of competitive advantage, and making decisions about where that advantagecan be leveraged to gain sustainable advantage in the future. n this programme you

will learn how to#

focus on core tools for strategic analysis and how to use them effectively to makestrategic decisions

develop a strategy that can guide your firm into the future. t will offer participants the chance to both examine best practice models fromother industries and also apply the techni$ues learned in their own industries

WHO SHOULD ATTEND?

%esigned for employees in all industries who are involved with the strategicplanning process for their unit or the whole organization, who want to improve theirstrategic analysis and decision making skills. This programme builds well upon the

&'nderstanding !trategy (" programme but can also be taken as a stand aloneprogramme.

PROGRAMME OBJECTIVES) *articipants attending the programme will#

'nderstand and apply a range of tools available for strategic analysis +nalyze the competitive environment and your firm"s position in it 'nderstand the resources and competences involved in different bases ofcompetitive advantage

+nalyze the core competences and basis of competitive advantage of your firm 'nderstand and apply the tools available for developing strategic options 'nderstand the characteristics of good strategic decision making 'nderstand common traps involved in strategic decision making that lead tofailure

ring strategic analysis and decision making together into a strategy for your firm roaden strategic analysis and decision making skills through considering a rangeof case examples outside your industry and applying the concepts in your own firm.


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Training Me!"#"$"g%

The most up to date training methodology is used to present this programme. Theprogramme is carefully designed to address all styles of learning and to engage

participants fully. ectures, videos and case examples are used to introduce core

concepts and give applicants a chance to apply these concepts in a range ofindustries. ases from outside the applicant"s industry are designed to broaden theapplicant"s strategic thinking. However, there will also be opportunities to examine

how core concepts apply in your own industry. +ll lectures are supported withdiscussion and powerful individual and group exercises. These exercises provide

opportunities for personal participation in real situations. %uring these exercises youdiscover that you can do what you are learning. This process makes the training fun

filled, fast-paced, challenging and empowering.

PROGRAMME SUMMARY

Organizational Impact

etter analysis of strategic issues etter strategic decision making /reater understanding of organizational competences and competitive advantage /reater flexibility in the organization mproved translation of strategic priorities into workable strategies

Personal Impact

!harper focus on the strategic challenges and opportunities of the future mproved analytic skills

roader strategic thinking and strategic visioning 0ore effective decision-making skills Enhanced understanding and communication of strategic priorities etter analysis of present and future operating environments

Competences Emphasized

!trategic analysis 1isionary thinking 2rganizational analysis !trategic decision making

!trategic leadership reative imagination *rioritizing strategies hange management

PROGRAMME OUTLINE


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SEGMENT 1 - Analysing the competitie enironment and !irm positioning

ntroduction to environmental analysis tools ) *E!TE, 3ive forces analysis,ndustry life cycle analysis and !trategic group analysis

dentifying trends affecting an industry dentifying the state of competition within an industry, the key competitors andthe key competitive positions

dentifying key success factors in an industry ase study analysis applying these concepts +pplying these concepts to your firm

segment " - Analyzing the reso#rces and competences #nderlyingcompetitie adantage

ntroduction to organizational analysis tools ) 4esource auditing,ore competences, 1alue chain analysis

0apping how organizational resources and competences strengthen or detract

from a firm"s competitive position

ase analysis# 'ndertaking a resource, competence and value chain analysis forfirms in different competitive positions

+pplying these concepts to your firm

Segment $ - %eeloping strategic options

ntroduction to tools for developing strategic options ) *ortfolio analysis,*roduct50arket analysis, *rotecting current advantage

%eveloping a range of strategic options Evaluating options and making strategic choices

Ensuring that strategic options fit the competitive environment, your firm"scompetitive position and develop sustainable competitive advantage

ase analysis

SEGMENT & - The strategic decision ma'ing process

'nderstanding the key characteristics of effective strategic decision making 'nderstanding common traps in strategic decision making ) hubris, over-reach,overly consensual

ntroduction to a range of tools for improving strategic decision making )%ialectic in$uiry, %evil"s advocacy, !cenario building techni$ues

+nalyzing the strategic decision making process in your firm, business division, or

work group

%eveloping a guideline for improving decision making in your firm, businessdivision, or work group

SEGMENT (- P#lling strategic analysis and decision ma'ing together in a

strategy

dentifying your core business proposition


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%eveloping a vision and mission statement for your core business proposition dentifying the key strategic priorities that your firm needs to meet %eveloping strategic ob6ectives 4eviewing the 7 day programme

RESOURCE PERSON

Kwame Bedu-Andor MA PGCE MCIPR

W!a i& &raeg%?

The American Heritage Dictionary defines strategy as "the science and art of militarycommand as applied to the oerall planning and cond!ct of largescale com#atoperations$" The military connection sho!ld not #e oerloo%ed$ &n many mar%ets' it(s all

o!t )ar among competitors$


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Some te*t#oo%s define strategic management "as the set of decisions and actions that

res!lt in the form!lation and implementation of plans designed to achiee a company(s

o#+ecties$"

However, the emphasis in both definitions on planning or a plan should

bear a warning. While some businesses, such asHonda

did, may findsuccess through a planned strategy [intended strategies], just asmany success stories have come from an unanticipated change incourse [emergent strategies] . An example of intended and emergentstrategies can be seen in the Honda minicase. !trategic planning

W!% #" 'ir(& engage in &raegi) *$anning?

They do so not to create strategies #!t to program the strategies they already hae, thatis' to ela#orate and operationali-e their conse.!ences formally$ Therefore' strategy is not

the conse.!ence of planning' #!t its starting point$

NOTPlanning for Strategy, YETStrategi-ing for Planning$

Planning helps translate intended strategies into reali-ed ones$ This is planning as

programming.Programming is a management actiity that translates decisions into

specific action patterns for implementation$ The steps are to/

0$ Codify strategy 1clarify and artic!late2

3$ Ela#orate 1into s!#strategies24$ Conert 1s!#strategies into ro!tines' o#+ecties' #!dgets2

Condiions o! "raegi# Programming

&t is not "the one #est )ay" for all firms in all circ!mstances$ &t )or%s #est )here/

0$ Sta#ility e*ists3$ &nd!stry is mat!re

4$ Capital intensity is high so that yo! cannot afford the ris%s associated )ith

dynamic enironments$ &f yo! cannot "see" sta#ility' then yo! "impose" it$ 15or

e*ample' "process" prod!ction t!rns o!t to #e more capital intensie than "mass"prod!ction$2

6$ 7arge si-e

8$ Ela#orated str!ct!re a firm that can #e decomposed to carry o!t planning$ The#est is a highly str!ct!red one$

9$ Tightly co!pled operations' especially in the operating core

:$ Simple operations )here the enironment and actiity m!st #e easilycomprehended$
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;$ E*ternal control )here infl!ences s!ch as goernments and head.!arters e*ert

control on s!#sidiaries' nationali-ed firms' etc$

Therefore' the "model" for this is one of

5AC&7&TAT&N< COND&T&ONS NECESSAR= COND&T&ONS

STRATE&Natri* can #e constr!cted !sing any pair of strategically releant aria#les s!ch as/

ind!stry gro)th rate' mar%et share' longterm ind!stry attractieness' competitiestrength' and stage of prod!ct?mar%et eol!tion$

There are seeral ma+or types of portfolio matrices$ Some of these are/ the $oston

%onsulting Grou( .usiness (ortfolio /atrix, the General Electric .usiness Screen, the

(roduct0/aret0industr evolution (ortfolio /atrix, or S!*3 (ortfolio fra/e"or


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Original Bcg Matrix

The Boson Consuling Grouptranslates differentials in !nit cost as a res!lt of the

e*perience c!re into differences in relatie mar%et share$ The original BCGconcept isill!strated #y the matri* sho)n inFigure 4-andFigure 4-5$

&t )as deeloped in 09: #y the Boston Cons!lting ar%s" are diested' andsometimes they are heaily inested in and transformed into "Stars"$

4 T(e >ogs$ These #!sinesses 1in the lo)er right .!adrant2 are clearly the great losers'

!nattractie and )ea%$ Typically' "Dogs" are diested or li.!idated$

T(e Mari) =uani!ied

&n this chart' gro)th rate and relatie competitie position are plotted on contin!o!sscales$ Each circle in the display represents a single #!siness or #!siness segment'

appropriately defined$


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To coney an impression of the relatie significance of each #!siness' si-e is indicated #y

the area of the circle' )hich can #e made proportional to either t!rnoer or assets

employed$

Relatie competitie position is plotted on a logarithmic scale' in order to #e consistent

)ith the e*perience c!re effect' )hich implies that profit margin or rate of cashgeneration differences #et)een competitors )ill tend to #e related to the ratioof their

relatie competitie positions 1mar%et shares2$

A linear a*is is !sed for gro)th' for )hich the most generally !sef!l meas!re is volu/e

gro)th of the #!siness concerned' as in general rates of cash !se sho!ld #e directly

proportional to gro)th$ The lines diiding the portfolio in fo!r .!adrants are ineita#lysome)hat ar#itrary$

As one of the$%G &atrix9soriginal p!rposes )as to help firms decide )hich #!sinesses

sho!ld gro) and )hich #!sinesses sho!ld e*it' the matri* has #een !sed in corporate

strategic decisions$

Ge Business Screen

Another and more comple* .usiness (ortfolio fra/e"or )as deeloped #y GeneralElectric)ith the help of&c:inse and %o/(an' a cons!lting firm$ There are nine cells

in theGE $usiness Screen$

The t)o composite al!es for %o/(etitive Position and Industr 6ttractivenessare theplotted to locate that #!siness(s position in the matri*$ On it' #oth ind!stry attractieness

and competitie position are composite meas!res determined thro!gh an analysis and

)eighting of a ariety s!#factors' incl!ding rate and mar%et share$ Some of the criteria!sed to determine ind!stry attractieness and #!siness strength are sho)n in 3a.le 4-;

Calc!lation of a score forIndustr 6ttractivenessper prod!ct or strategic #!siness !nit is

a fiestep process/

4 $irs' select the criteria !sed to eal!ate the ind!stry$ Some of the criteria !sed to

determine ind!stry attractieness and #!siness strength are sho)n in 3a.le 4-;$

4 "e#ond' )eight each criterion in accordance )ith the strategic decision ma%ers(+!dgment of the importance of the criterion to the firm(s o#+ecties$

4 T(ird' rate the ind!stry on each of the criteria selected in the first step' !s!ally )ith a

scale ranging from 0 to 8$

4$our(' m!ltiply the )eights from the second step #y the ratings from the third step toachiee a )eighted score per criterion$


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4$i!(' s!m the )eighted scores to find a total attractieness score for the ind!stry$ The

area of each circle is proportional to the si-e of the ind!stry' and the si-e of the pie slice

)ithin each circle reflects the #!siness(s mar%et share$

The follo)ing steps o!tline a methodology for !sing the ind!stry attractieness#!siness

strength matri*/

4 "ep 8'>e!iniion o! #rii#al inernal and e)ernal !a#ors$ The internal factors are

those )hich are controlla#le #y the firm$ The are mainly the f!nctional actiities that can#e deployed #y #!siness !nits to s!cceed against competition$ The critical e*ternal

factors' that are essentially !ncontrolla#le #y the firm' are #asic characteristics of the

ind!stry and competitie str!ct!re in )hich the #!siness operates and a host of otherfactors' s!ch as socio political' economic' legislatie' reg!latory' and demographic

factors$

4 "ep 9'Assessmen o! e)ernal !a#ors$ Once e*ternal factors are identified' )e hae

to determine each contri#!tes to the attractieness of the ind!stry to )hich the #!siness#elongs each factor is grated according to a fie point scale/

--E*tremely !nattractie

->ildly !nattractie

E Een attractie

? >iddle Attractie

??E*tremely attractie

&n the .!antitatie approach a )eighted aerage is comp!ted on the #asis of assigned

)eight and ratings for each factor$ Calc!lation of a score for Industr 6ttractiveness perprod!ct or strategic #!siness !nit is a fie step process$

First' select the criteria !sed to eal!ate the ind!stry$ Some of the criteria !sed to

determine ind!stry attractieness and #!siness strength are sho)n in 3a.le 4-;$

Second' )eight each criterion in accordance )ith the strategic decision ma%ers( +!dgment

of the importance of the criterion to the firm(s o#+ecties$

3hird' rate the ind!stry on each of the criteria selected in the first step' !s!ally )ith a

scale ranging from 0 to 8$

Fourth' m!ltiply the )eights from the second step #y the ratings from the third step toachiee a )eighted score per criterion$

Fifth' s!m the )eighted scores to find a total attractieness score for the ind!stry$

4 "ep @' Assessmen o! inernal !a#ors. Again a fiepoint scale is !sed 1Figure 4-112$

The fie points of the scale correspond to/


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--Seere competitie disadantage'

->ild competitie standing'

E E.!al competitie standing'

? >ild competitie adantage' and

??anagement can o#tain an oerall ie) of the corporate portfolio #y placing the present

an desired position of all #!siness !nits on the matri*$Figure 4-1; ill!strates the general

corporateleel strategies aaila#le to an organi-ation$


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The


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frame)or% for a systematic analysis that facilities matching the e*ternal threats and

opport!nities )ith the internal )ea%nesses and strengths of the organi-ation$

The TO@S >atri* indicates fo!r concept!ally distinct alternatie strategies' tactics andactions$ The process of strategy form!lation and the TO&"analysis is sho)n inFigure

4-1#in )hich (T( stands for threats' (O( for opport!nities' (&( for )ea%nesses and ("( forstrengths$

This process incl!des seen steps/

- Step 0' deals )ith some #asic .!estions pertaining to the internal and e*ternalenironments 1the %ind of #!siness' geographic domain' competitie sit!ation' top

management orientation2$

- "ep 9' concerns primarily the present sit!ation in respect e*ternal enironment factors

1social' political' demographic' prod!ct technology' mar%et and competition2$

- "ep @' deals )ith f!t!re sit!ation in respect to the e*ternal enironment 1forecast'

predictions and assessment of the f!t!re2$

- "ep ' concerns actiities to deelop alternaties$

- "ep ' deals )it actiities necessary to deelop strategies' tactics and more specific

actions in order to achiee the enterprise(s p!rpose and oerall o#+ecties$

- "ep ' concerns consistency of these decisions )ith the other steps in the strategy

form!lation process$

- "ep D' deals )ith prepare contingency plans$

The analysis starts )ith the e)ernal en*ironmen$ The e*ternal threats sho!ld #e listedin #o* "T" in Figure 14' and opport!nities sho!ld #e sho)n in #o* (($ Threats and

opport!nities may #e fo!nd in different areas' s!ch as economic' social' political and

demographic factors' prod!cts and serices' technology' mar%ets' and competition$

"&OT ANA3Y"I"

Organi-ational strategies are the means thro!gh )hich companies accomplish their

missions and goals$ S!ccessf!l strategies address fo!r elements of the setting )ithin)hich the company operates/ 102 the company(s strengths' 132 its )ea%nesses' 142 the

opport!nities in its competitie enironment' and 162 the threats in its competitieenironment$ This set of fo!r elementsstrengths' )ea%nesses' opport!nities' and threats

)hen !sed #y a firm to gain competitie adantage' is often referred to as a S@OT

analysis$ S@OT )as deeloped #y en Andre)s in the early 0:s$ An assessment ofstrengths and )ea%nesses occ!rs as a part of organi-ational analysis, that is' it is an a!dit

of the company(s internal )or%ings' )hich are relatiely easier to control than o!tside


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factors$ Conersely' e*amining opport!nities and threats is a part of enironmental

analysisthe company m!st loo% o!tside of the organi-ation to determine opport!nities

and threats' oer )hich it has lesser controlAndre)s(s original conception of the strategymodel that preceded the S@OT as%ed fo!r #asic .!estions a#o!t a company and its

enironment/ 102 @hat can )e do 132 @hat do )e )ant to do 142 @hat might )e do

and 162 @hat do others e*pect !s to do

The ans)ers to these .!estions proide the inp!t for an effectie strategic managementprocess$ @hile Andre)s( original conception of this analysis has #een deeloped and

changed to the more streamlined S@OT analysis that )e %no) today' his )or% is the

fo!ndation of this actiity$

Strengths' @ea%nesses'opport!nities' and Threats

Strengths' in the S@OT analysis' are a company(s capa#ilities and reso!rces that allo) it

to engage in actiities to generate economic al!e and perhaps competitie adantage$ A

company(s strengths may #e in its a#ility to create !ni.!e prod!cts' to proide highleelc!stomer serice' or to hae a presence in m!ltiple retail mar%ets$ Strengths may also #e

things s!ch as the company(s c!lt!re' its staffing and training' or the .!ality of its

managers$ @hateer capa#ility a company has can #e regarded as strength$

A company(s )ea%nesses are a lac% of reso!rces or capa#ilities that can preent it fromgenerating economic al!e or gaining a competitie adantage if !sed to enact the

company(s strategy$ There are many e*amples of organi-ational )ea%nesses$ 5or

e*ample' a firm may hae a large' #!rea!cratic str!ct!re that limits its a#ility to compete)ith smaller' more dynamic companies$ Another )ea%ness may occ!r if a company has

higher la#or costs than a competitor )ho can hae similar prod!ctiity from a lo)er la#or

cost$ The characteristics of an organi-ation that can #e strength' as listed a#oe' can also#e a )ea%ness if the company does not do them )ell$

$ Opport!nities proide the organi-ation )ith a chance to improe its performance and its

competitie adantage$ Some opport!nities may #e anticipated' others arise !ne*pectedly$

Opport!nities may arise )hen there are niches for ne) prod!cts or serices' or )henthese prod!cts and serices can #e offered at different times and in different locations$

5or instance' the increased !se of the &nternet has proided n!mero!s opport!nities for

companies to e*pand their prod!ct sales$

Threats can #e an indiid!al' gro!p' or organi-ation o!tside the company that aims tored!ce the leel of the company(s performance$ Eery company faces threats in its

enironment$ Often the more s!ccessf!l companies hae stronger threats' #eca!se there is

a desire on the part of other companies to ta%e some of that s!ccess for their o)n$ Threatsmay come from ne) prod!cts or serices from other companies that aim to ta%e a)ay a

company(s competitie adantage$ Threats may also come from goernment reg!lation or

een cons!mer gro!ps$


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A strong company strategy that sho)s ho) to gain competitie adantage sho!ld address

all fo!r elements of the S@OT analysis$ &t sho!ld help the organi-ation determine ho) to

!se its strengths to ta%e adantage of opport!nities and ne!trali-e threats$ 5inally' astrong strategy sho!ld help an organi-ation aoid or fi* its )ea%nesses$ &f a company can

deelop a strategy that ma%es !se of the information from S@OT analysis' it is more

li%ely to hae high leels of performance$

Nearly eery company can #enefit from S@OT analysis$ 7arger organi-ations may haestrategicplanning proced!res in place that incorporate S@OT analysis' #!t smaller firms'

partic!larly entreprene!rial firms may hae to start the analysis from scratch$

Additionally' depending on the si-e or the degree of diersification of the company' itmay #e necessary to cond!ct more than one S@OT analysis$ &f the company has a )ide

ariety of prod!cts and serices' partic!larly if it operates in different mar%ets' one

S@OT analysis )ill not capt!re all of the releant strengths' )ea%nesses' opport!nities'and threats that e*ist across the span of the company(s operations$

7imitations of S)ot Analysis

One ma+or pro#lem )ith the S@OT analysis is that )hile it emphasi-es the importance of

the fo!r elements associated )ith the organi-ational and enironmental analysis' it does

not address ho) the company can identify the elements for their o)n company$ >anyorgani-ational e*ec!ties may not #e a#le to determine )hat these elements are' and the

S@OT frame)or% proides no g!idance$ 5or e*ample' )hat if a strength identified #y

the company is not tr!ly a strength @hile a company might #eliee its c!stomer sericeis strong' they may #e !na)are of pro#lems )ith employees or the capa#ilities of other

companies to proide a higher leel of c!stomer serice$ @ea%nesses are often easier to

determine' #!t typically after it is too late to create a ne) strategy to offset them$ A

company may also hae diffic!lty identifying opport!nities$ Depending on theorgani-ation' )hat may seem li%e an opport!nity to some' may appear to #e a threat to

others$ Opport!nities may #e easy to oerloo% or may #e identified long after they can #ee*ploited$ Similarly' a company may hae diffic!lty anticipating possi#le threats in order

to effectiely aoid them$

@hile the S@OT frame)or% does not proide managers )ith the g!idance to identify

strengths' )ea%nesses' opport!nities' and threats' it does tell managers )hat .!estions toas% d!ring the strategy deelopment process' een if it does not proide the ans)ers$

>anagers %no) to as% and to determine a strategy that )ill ta%e adantage of a

company(s strengths' minimi-e its )ea%nesses' e*ploit opport!nities' or ne!trali-e threats$

Some e*perts arg!e that ma%ing strategic choices for the firm is less important thanas%ing the right .!estions in choosing the strategy$ A company may mista%enly sole a

pro#lem #y proiding the correct ans)er to the )rong .!estion$

Using S)ot Analysis to Deelop organi-ational Strategy


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S@OT analysis is +!st the first step in deeloping and implementing an effectie

organi-ational strategy$ After a thoro!gh S@OT analysis' the ne*t step is to ran% the

strengths' )ea%nesses' opport!nities' and threats and to doc!ment the criteria for ran%ing$The company m!st then determine its strategic fit gien its internal capa#ilities and

e*ternal enironment in a t)o#yt)o grid 1see 5ig!re 02$ This fit' as determined in the

grid' )ill indicate )hat strategic changes need to #e made$ The .!adrants in this grid areas follo)s/

as follo)s/

$igure 8

>uadrant 1internal strengths matched )ith e*ternal opport!nities,

>uadrant 2internal )ea%nesses relatie to e*ternal opport!nities,

>uadrant ;internal strengths matched )ith e*ternal threats, and

>uadrant 4internal )ea%nesses relatie to e*ternal threats$

>uadrant 1lists the strategies associated )ith a match #et)een the company(s strengthsand its perceied e*ternal opport!nities$ &t represents the #est fit #et)een the company(s

reso!rces and the options aaila#le in the e*ternal mar%et$ A strategy from this .!adrant

)o!ld #e to protect the company(s strengths #y shoring !p reso!rces and e*tendingcompetitie adantage$ &f a strategy in this .!adrant can additionally #olster )ea%nesses

in other areas' s!ch as in !adrant 3' this )o!ld #e adantageo!s$

>uadrant 2 lists the strategies associated )ith a match #et)een the company(s

)ea%nesses )ith e*ternal opport!nities$ Strategies in this .!adrant )o!ld address thechoice of either improing !pon )ea%nesses to t!rn them into strengths' or allo)ing

competitors to ta%e adantage of opport!nities in the mar%etplace$

>uadrant ; matches the company(s strengths and e*ternal threats$ Strategies in this

.!adrant may aim to transform e*ternal threats into opport!nities #y changing the

company(s competitie position thro!gh !se of its reso!rces or strengths$ Anotherstrategic option in this .!adrant is for the company to maintain a defensie strategy to

foc!s on more promising opport!nities in other .!adrants$

>uadrant 4matches a comppany(s )ea%nesses and the threats in the enironment$ Theseare the )orst possi#le scenarios for an organi-ation$ Ho)eer' #eca!se of the competitie

nat!re of the mar%etplace' any company is li%ely to hae information in this .!adrant$

Strategies in this .!adrant may inole !sing reso!rces in other .!adrants to e*ploit


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opport!nities to the point that other threats are minimi-ed$ Additionally' some iss!es may

#e moed o!t of this .!adrant #y other)ise ne!trali-ing the threat or #y #olstering a

perceied )ea%ness$

Once a strategy is decided on in each .!adrant for the iss!es facing the company' these

strategies re.!ire fre.!ent monitoring and periodic !pdates$ An organi-ation is #estsered #y proactiely determining strategies to address iss!es #efore they #ecome crises$

An e*ample of ho) a firm can deelop strategies !sing these .!adrants is as follo)s$atching


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e*ample' a firm can enter into a strategic alliance or merge )ith one of its competitors to

protect its operations from a rial firm$ >oreoer' the options to )ithdra) from a mar%et

or s!spend operations are al)ays present$

Business "raeg%

&(en Business "raegies $ail

It taes great courage to acno"ledge failure $ut "hen our .usiness strateg isn9t"oring, the .est thing ou can do is ad/it failure and tae a fresh loo at a ne"

a((roach

&t ta%es great co!rage to ac%no)ledge fail!re$

1article contin!es #elo)2

B!t )hen yo!r #!siness strategy isn(t )or%ing' crossing yo!r fingers and hoping for a

t!rnaro!nd )on(t improe the sit!ation$ Sometimes the #est strategy is to stop and ta%e afresh loo% at a ne) approach$

Een the most )ellcrafted #!siness strategy can(t g!arantee s!ccess in the mar%etplace$B!t !nfort!nately' )hen a strategy fails to achiee its stated goals some #!siness o)ners

resist ma%ing ad+!stments !ntil it(s too late$ &n an eerchanging #!siness enironment'

yo! can(t afford to set anything in stone incl!ding yo!r #!siness strategy$ &f yo!r

#!siness strategy is failing to delier the goods' here are some commonsense tips to helpyo! get #ac% on trac%$

"#(edule Regular E*aluaions

&f yo!r strategy is fla)ed' yo! need to %no) a#o!t it as soon as possi#le$ B!t that(s not

going to happen !nless yo! sched!le eal!ations at reg!lar interals$ Each eal!ationsho!ld #e #ased on .!antitatie #enchmar%s and sho!ld incl!de m!ltiple perspecties

from )ithin the #!siness$

Be Realisi#

@hen it comes to #!siness strategies' the line #et)een optimism and fantasy is easily

#l!rred$ At times' the temptation to ma%e decisions #ased on a #estcase scenario can #eoer)helming$ B!t since yo! can(t afford to )ear rosecolored lenses )hen yo!r strategy

isn(t )or%ing' yo! need to intentionally in+ect a strong dose of realism into yo!rassessment$

"a% $le)i1le

>any #!siness o)ners deelop a strong attachment to their #!siness strategy$ After all'

the reason they adopted in the first place )as #eca!se they tho!ght it offered their #est

chance for gro)th and profita#ility$ B!t the #ottom line doesn(t lie' so )hen yo!r strategy


35/38

fails to prod!ce the res!lts yo! had hoped it )o!ld achiee' it(s time to c!t the cord'

accept yo!r losses' and moe on to a more effectie strategy een if that means setting

aside a strategy that appeals to yo! personally$

"a% Tuned o (e Mar/epla#e

B!sinesses don(t e*ist in a ac!!m$ Sometimes #!siness strategies fail simply #eca!se the

mar%etplace itself has changed$ &f yo! loc% yo!rself in a room and attempt to ad+!st yo!r

strategy )itho!t ta%ing into acco!nt conditions in the mar%etplace' yo!r ne) strategy )ill#e doomed from the start$ &nstead' #egin the process #y gathering data a#o!t the

mar%etplace 1incl!ding the c!rrent competitie enironment2 and create yo!r ne)

strategy accordingly$

Ge Creai*e

&f yo! find yo!rself faced )ith the prospect of creating an entirely ne) #!siness strategy'

don(t #e afraid to get creatie$ A strategy that is restricted to the confines of past strategies)ill #e limited in its a#ility to achiee ne) res!lts$ The s%y(s the limit' so gather a team'

p!t on yo!r thin%ing caps' and start thin%ing o!tside the #o*$

"ee/ Ouside Perspe#i*es

7astly' it(s important to solicit o!tside perspecties in assessing the effectieness of yo!r

c!rrent #!siness strategy and deising a ne) strategy to meet the c!rrent demands of the

mar%etplace$ Since #!siness o)ners are often too close to the sit!ation to see the #igpict!re' the more perspecties yo! can garner the #etter$

Business "raeg%

Indusr% Anal%sis

3he e to defining a .usiness strateg is doing a thorough industr analsis and figuring

out "here the o((ortunities are Here9s ho" to conduct an industr analsis in a "a that

"ill hel( ou define the .est .usiness strateg

Effectie #!siness strategies aren(t created in a ac!!m$1article contin!es #elo)2

=o! need to #e informed a#o!t the mar%etplace and %eenly a)are of )here the

opport!nities lie$ B!t to do that' yo!(ll need to %no) ho) to cond!ct an ind!stry analysis$Here(s ho) to get started $ $ $


36/38

&t(s a simple fact of #!siness that some ind!stries are ripe for profit and some aren(t$

S!ccessf!l entreprene!rs are masters at analy-ing ind!stries and mar%ets to identify gaps

)aiting to #e filled #y their company(s prod!cts or serices$ Altho!gh the tas% of ind!stryanalysis can seem da!nting' yo! can learn a lot #y foc!sing yo!r attention on the iss!es

and areas faored #y professional analysts$

Barriers o Enr%

Barriers to entry are factors that ma%e it diffic!lt for ne) #!sinesses to enter a partic!larind!stry$ These #arriers often consist of things li%e significant loyalty to e*isting #rands'

high fi*ed costs' or restrictions imposed on ne) entrants$ &f yo!r #!siness is already

esta#lished in the ind!stry' then #arriers can )or% to yo!r #enefit #y limiting the n!m#erof competitors$ B!t if yo! aren(t already esta#lished' an ind!stry teeming )ith #arriers to

entry can ma%e yo!r +o# a long' !phill slog at #est$

"uppliers

&n some ind!stries' s!ppliers possess eno!gh po)er to impact the entire ind!stry$ 5or

e*ample' if there are fe) s!ppliers in the ind!stry and the cost to s)itch from ones!pplier to another is s!#stantial' yo! co!ld r!n into pro#lems trying to conince #!yers

to s)itch to yo!r prod!ct$ Also' if e*isting s!ppliers hae a high profit margin on their

prod!cts' they can create diffic!lties for ne) #!sinesses #y slashing prices to driecompetitors o!t$

Bu%ers


37/38

5inally' yo!r ind!stry analysis needs to consider the leel of competition that c!rrently

e*ists in the ind!stry$ >any ind!stries possess no clear leader' #!t are instead

characteri-ed #y a highly competitie mi* of similarly si-ed #!sinesses$ &n theseind!stries' the fierce leel of competition limits profita#ility as companies +ostle to gain

an edge$ Sometimes these ind!stries hae een mat!red to the point of sat!ration'

restricting gro)th to c!stomers that can #e stolen from the competition$ Altho!gh it(s notimpossi#le to achiee gro)th in a highlycompetitie ind!stry' the leel of competitie

rialry is something that needs to #e ta%en into acco!nt$

$eed1a#/ Conrols' Anal%5ing "raegi# >e#isions

Feed.ac is an essential /eans for co/(anies to evaluate the effectiveness of their

strategic decisions 3hrough the use of .udgets, ratio analsis, audits, and o.?ectives,

co/(anies are a.le to /easure the (erfor/ance of /anage/ent, de(art/ents, and0or

individual .usiness units

After implementing a strategic decision' management needs a )ay to +!dge itsperformance$

Typically this inoles the comparison of the firm(s c!rrent financial performance against

its financial performances from past .!arters or years$ 5eed#ac% controls incl!de theinformation !sed #y the manager to alter their plans and strategies$ @hile n!mero!s types

of feed#ac% controls e*ist' fo!r are the most common/ #!dgets' ratio analysis' a!dits' and

o#+ecties and goals$

Budges

B!dgets allo) !pper management to monitor the e*penses and profits of an indiid!aldepartment or prod!ct gro!p$

Eal!ations )ill #e #ased on the ariations of the reen!e and e*pense acco!nts' and

management sho!ld inestigate any disparity #eyond reasona#le e*pectations$ Not onlysho!ld they in.!ire a#o!t rising e*penses' #!t rising profits as )ell$ Once the so!rce for

the increased profits is discoered' this %no)ledge might #e transfera#le to other prod!cts

or serices$ The so!rce for increased e*penses needs to #e discoered so the company canalter their operations accordingly$

Companies need to create a process' ho)eer' to eal!ate #!dgets )itho!t disco!raging

management from inesting in research and deelopment' training' and #eneficial capitale.!ipment$ >anagement sho!ld not #e p!nished for ma%ing longterm inestments thatare ital to the f!t!re s!ccess of the firm$ Adding #ac% these inestments' or the creation

of separate acco!nts' )ill proide a more ade.!ate comparison to past years$

Raio Anal%sis


38/38

Ret!rn on inestment'ret!rn on e.!ity' de#ttoe.!ity ratios' li.!idity ratios' and other

financial ratios offer relia#le meas!rements of company and indiid!al department

performance$

F!st li%e #!dgets' longterm inestments sho!ld #e added #ac% to aoid shortterm

orientations #y management$ 5irms need to #e caref!l )hen !sing financial ratios toeal!ate performance #eca!se they may not #e !sef!l for certain company str!ct!res$ 5or

instance' related diersified firms create cost efficiencies and competitie adantages #ycreating synergies #et)een their prod!cts$ Basing a re)ard system on ret!rn on

inestment fig!res enco!rages competition #et)een #!siness !nits$ Cooperation rarely

arises among competitors' and decreases the pro#a#ility of creating necessary synergies$

On the other hand' financial ratios are appropriate for !nrelated diersified firms to +!dge

the performance of indiid!al #!siness !nits and their managers$ These firms are not

concerned )ith creating synergies #eca!se their prod!cts and serices !s!ally lac%

commonality$ Therefore' separating and eal!ating indiid!al #!siness !nits is an

ade.!ate process for ga!ging manager performance$

Audis

A!dits allo) a company to meas!re its operations #ased on certain g!idelines to incl!de

financial' social' and c!stomer eal!ations$

5inancial a!dits foc!s on the acco!ntingsystems of the firm to ens!re their compliance)ith generally accepted acco!nting principles and goernment reg!lations$ @ith the

gro)ing e*pectations #y cons!mers for socially responsi#le companies' a!dits regarding

a firm(s ethical #ehaior and charita#le contri#!tions are common$ C!stomer s!reys can

#e considered c!stomer serice a!dits' and proide the company )ith al!a#le feed#ac%a#o!t cons!mers( perception of the firm$

Targe O1Fe#ions and Goals

Certain operating goals for indiid!al #!siness !nits and departments gie managers atarget for )hich to strie$ These goals' ho)eer' need to properly motiate managers and

employees$ &f the goals and o#+ecties are so high that they are ie)ed as !nattaina#le'

employees )ill not een try to meet them$ &f they are set too lo)' the a#ilities of

employees are not #eing ma*imi-ed #y the firm$
http://www.gaebler.com/Return-On-Investment.htmhttp://www.gaebler.com/Return-On-Investment.htmhttp://www.gaebler.com/Definition-of-Accounting.htmhttp://www.gaebler.com/Return-On-Investment.htmhttp://www.gaebler.com/Definition-of-Accounting.htm

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