Developing a Business strategy

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University of Toronto Mississauga
Dave Swanston

Developing a Business Strategy The Concept of Business Strategy: For an organization to be successful over the long term, managers need to have a game plan as to where and how to compete in the markets in which they intend to serve. The long term success of an organization, its ability to evolve and grow, is predicted on two fundamental principles.  The ability to define and create a strategic direction and market position for the organization (strategic plan)  The ability to execute the core tactical initiatives within the plan in a manner that ensures the organization’s success Strategy can be summarized by the answers to two questions  Where do we want to play?  How do we plan to win? By answering these two questions we develop the seeds for what is called our intended or deliberate strategy. Core Elements for Assessing Business Strategy: 1. Purpose- Refers to the mission of the organization and the vision its managers or owners have for the business.  Mission- Organizations purpose or reason for existence  Mission statements- usually identify the broad goals around which a company was formed. They also can reflect on how an organization will get to where it wants to go. o Ex. Walmart’s mission is “helping people save money so they can live better”. o Mission statements when combines with ethics policies and statements of behaviour or values, guide the overall direction and activities of a business.  A vision statement is a forward-thinking statement that defines what a company wants to become and where it is going. o Ex. Walmart’s vision is to become the worldwide leader in retailing 2. Markets- refers to the specific markets or market segments the business sees itself competing in. Markets should be assessed in terms of their current and future profitability and growth potential.  Harvesting- is a strategy that reflects a reduced commitment to a particular market given its perceived weak future growth or profitability potential. 3. Products and services- refers to a review of the current products and services offered by a business, as well as potential new products/services that are to be added to the products portfolio. Over time, products and their related services can become obsolete or no longer desired by the organization’s customers. This can be result of  Technological innovation  Changes in consumer needs and tastes  New direct substitutes for existing products  Services being offered by competitors 4. Resources- refers to the allocation of a business’s resources in support of its strategic decisions. Businesses, like all of us, have only so many resources. There are capacity limitations as to the amount of products businesses can produce, the amount of money they can commit to projects, and the variety of tasks their workforce can handle at any given time. 5. Business System Configuration- refers to modifying the organization’s infrastructure and the way it does business to ensure the success of the plan. This could mean making changes to the organization’s distribution outlets, warehousing or product delivery, plants and facilities, manufacturing or assembly processes, marketing campaign, etc. 6. Responsibility and Accountability- refers to identifying who within the business will be responsible for each aspect of the strategic plan. For businesses, a strategic plan is the road map 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. The General steps associated with the development of a strategic plan include:  Revisit Our Purpose: “Who are we? Where do we want to go?”  Undertake an Internal/External (I/E) Analysis to Understand Our Environment o I/E Analysis is all about assessing business risk and change in 4 areas  Macro-economic: USE Pestel Analysis  Industry: Use Porter’s five forces  Competitor: Use SWOT (strengths, Weaknesses, Opportunities, Threats) Analysis  Company: Use SWOT and 3C Analyses  Assess our View of the World: Opportunities & Threats:  Choose a Direction  Implement Our strategy Strategic Model: What do we need to do? What can we do? What do we want to do?  Goal is to align these objectives and reduce strategic tensions Strategic Planning Process Model Competitive Advantage Identification:  A key outcome of the I/E analysis is identifying the competitive advantages an organization has compared to its competitors  The real measure of a competitive advantage is why a customer chooses to purchase your products over your competi
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