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7th Lecture - Planning and Business Strategy

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University of Toronto Mississauga
Dave Swanston

Chapter 7Planning and Business Strategy page 148173 Lecture 7 The Concept of Business StrategyThe development of an organizations business strategy is fundamentally one of the most important responsibilities of a senior management team or in the case of a small business the business owner 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 Interdependency of Strategy and TacticsThe longterm success of an organization and its ability to evolve and grow is predicated on two fundamental principles 1The ability to define and create a strategic direction and market position for the organization strategic plan and 2The ability to execute the core tactical initiatives within the plan in a manner that ensures the organizations successBusiness StrategyBusiness strategy is all about understanding what opportunities exist in the marketplace and which ones should be pursued Based on these conclusions managers then have to decide upon their path of action in pursuit of capitalizing on the opportunities chosen Strategy is summarized by the answers to two questions Where do we want to play and How do we plan to win Answers give the specific direction and actions we plan to take in order to guide our organizations decisions going forward Whether we can hold our course or are forced to change our direction is based on our abilities to execute our strategy given competitive actions and external market influencesCore Elements for AssessingBusiness StrategyDevelopment of a business strategy means making decisions and determining direction in six key areas1 Purpose refers to the mission of the organization and the vision its managers or owners have for the business Mission refers to the fundamental purpose the business has identified as being its predominant reason for existence 2 Markets refers to the specific markets or market segments the business sees itself competing in Managers and owners need to assess their success in existing markets and evaluate the potential of new markets Markets should be assessed in terms of their current and future profitability and growth potential Markets that have become unprofitable or marginally profitable and lack significant future growth will be evaluated in terms of market exit strategies or harvesting strategies reduced commitment3 Products and services refers to a review of the current products and services offered by a business as well as potential new productsservices that are to be added to the products portfolio This can be the result of technological innovation changes in consumer needs and tastes or new direct substitutes for existing products and services being offered by competitors A critical part of the strategy development process is to determine which products and related services are to remain part of a businesss portfolio as well as
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