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Chapter 6

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COMM 103
Gary Bisonnette

Alexandra Hill COMM 103 – 006 Tuesday, October 18, 2011 Chapter 6: Developing a Business Strategy The Concept of Business Strategy - Most important responsibility of senior management team or business owner - Plan includes: where and how to compete in the markets in which they intend to serve - Long term success of an organization is based on two principles: o Ability to define and create a strategic direction and market position for the organization (strategic plan) o Ability to execute the core tactical initiatives within the plan in a manner which ensures the organization’s success - Understanding what opportunities exist in the marketplace and given these opportunities, which ones should be pursued - “Where do we want to play?” and “How do we plan to win?” o Answering these questions, develops the base of the intended or deliberate strategy Core Elements for Assessing Business Strategy - Managers must develop a business strategy and make decisions while determining the direction in six key areas: o Purpose  Mission of the organization and vision which its managers or owners have for the business  Mission: fundamental purpose which the business has identified as being its predominant reason for existence  Mission statements usually identify broad goals and can reflect on how the organization will get to where it wants to go  E.g. Walmart’s mission: “helping people save money so they can live better” Alexandra Hill COMM 103 – 006 Tuesday, October 18, 2011  When mission statements are combined with ethics policies and statements of behaviour, it guides the overall direction and activities of a business  Vision statement: forward thinking statement that defines what a company wants to become and/or where it is going  E.g. Walmart’s vision is to become the world-wide leader in retailing o Markets  Refer to which markets and/or market segments the business sees itself competing in  Managers must evaluate success in existing markets and potential of new markets  Assessed in terms of their current and future profitability and growth potential  Markets that represent opportunities for future growth and enhanced profitability receive greater managerial attention and resource support  Markets that are unprofitable and/or marginally profitable and lack significant growth will be evaluated by market exit strategies and/or harvesting strategies o Products and Services  Review of current and potential products and services offered by a business  Products and related services may become obsolete or no longer desired because: • Technological innovation • Changes in consumer needs and tastes • New direct substitutes for existing products and services being offered by competitors  Decide whether products and services remain in business’s portfolio, receive more R&D, or which new products and services should be added o Resources  Allocation of a business’s resources in support of its strategic decisions Alexandra Hill COMM 103 – 006 Tuesday, October 18, 2011  Managers must make decisions on where to allocate their limited resources, if they need to outsource, or if plan needs to be modified or redirected due to lack of competencies and/or technology within a business o Business System Configuration  Refers to modifications which are required to be made to the organization’s infrastructure and the way it does business in order to ensure the success of the plan  Includes changes to distribution outlets who may be selling the products and services offered, changes to the way warehousing and/or product delivery is set up new plant and facility additions and expansions, etc. o Responsibility and Accountability  Identifying who, within the business, will be responsible for each aspect of the strategic plan  Fundamental underlying element to success: identify key objectives to be achieved and who will be responsible for their attainment  Managers use initiatives within a strategic plan (built around SMAC – specific, measurable, actionable, and controllable) • Also use SMART (specific, measurable, actionable, realistic, and time sensitive) • Helps define customer segments, amount of money used for promotional budget, staff involved  Strategic plans must identify who is responsible for each element within the plan and also how accountability for the success of the plan will be measured - Competitors actions and resources an organization has at its disposal influence the business’s decisions on where and how to compete - Strategic plan 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 Strategic Planning Process - Process about observations, analyses, choices, and actions Alexandra Hill COMM 103 – 006 Tuesday, October 18, 2011 - Strategic Planning Process: o Revisiting our purpose  Assessing the fit of the current mission and vision of the organization o I/E Analysis  Assessing business risk and change in four key areas: • Macro-economic • Industry • Competitor o Identify anticipated moves by major up-coming competitors o Looking at operations, understanding how they intend to attack the marketplace, determining what message they will send to consumers as part of their positioning/ differentiation strategies and identifying what their perceived competitive advantages are o Assessing management team o Use SWOT analysis • Company  External analysis portion of I/E Analysis focuses on understanding what is influencing the markets and what will influence them in the future  Assessment of the magnitude of change which is occurring within a given market arena and what shift in business risk has occurred, or will occur as a result of such changes Alexandra Hill COMM 103 – 006 Tuesday, October 18, 2011  External - PESTEL, Porter’s Five Forces (rivalry among existing competitors, threat of new entrants, threat of substitute products or services, bargaining power of suppliers, bargaining power of buyers), Competitor SWOT, types of competition  Internal – Company SWOT, 3C Analysis (Competencies, Capabilities, Capacity) • Assess competencies of own organization and level of resources in order to determine their capacity and capabilities are • Internal audit (strengths and weaknesses) of financial resources, organizational competencies, operational capacities, human resource skills, and overall capacity • Represents form of enterprise risk management • Seeks to identify financial, operational, technological, and market risks if an opportunity was pursued • Measures ability of the organization to be able to respond to and manage risks prior to the implementation of these initiatives • Ability to define any temporary or sustainable competitive advantages which it has over competition  Customer – changes in attitudes, behaviour, needs • Takes into consideration demographic changes to customer base, shits in the desires of customers for the types of products and services which they are looking to buy, impact of the economic climate on both current and future demand for our goods and services • Assess existing customer base for new sales and revenue generation opportunities • Analysis attempts to identify opportunities to reach new customers through new market development (finding new market segments to serve), new product and/or service offerings, or potentially result of acquiring a company and its customer base • Analysis focuses on trying to identify what shifts have taken place in customer base in terms of attitudes, behaviours and needs o Our View of Our World Alexandra Hill COMM 103 – 006 Tuesday, October 18, 2011 o Strategic Choices o Strategy Implementation Competitive Advantage(s) Identification - Competitive advantage = “more value” - Ability to enhance the value of a product or service when measured against competitive offerings is what fundamentally entices a customer to select your product as the best solution to their needs - Reason why a customer chooses to purchase your product over those of your competitors - Can be strategic or operational - Strategic competitive advantages are “first mover” actions in a marketplace o Ability
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